The Taiwan Monthly
ESG
Taiwan Stock Exchange enhances the governance of sustainability reports of listed companies, to improve the quality of sustainability information
In recent years, the global response to the climate change crisis and the trend toward pursuing sustainable development have led various sectors to attach increasing importance to the content and quality of sustainable information. Investors and financial institutions, among other stakeholders, expect to understand the ESG and climate-related risks and opportunities faced by enterprises, as well as their strategies and actions on ESG issues, in order to serve as important references for investment and financing decisions.
In order to continue promoting sustainable development practices and enhance information disclosure, the Financial Supervisory Commission (FSC) issued the “Sustainable Development Action Plans for TWSE- and TPEx-Listed Companies (2023)” on March 28, 2023. The TWSE actively cooperated in policy promotion, launched an ESG digital platform to assist companies in disclosing ESG information, and will continue conducting education and advocacy to help companies cultivate sustainability talents. At the same time, the TWSE will strengthen the internal control of sustainability information management in enterprises, review the sustainability reports prepared by enterprises, and examine the major topics and impacts identified by listed companies as well as their disclosure of industry sustainability indicators to avoid false or exaggerated information, in order to guide enterprises to augment the disclosure of their sustainability information.
The measures to enhance sustainability information are divided into four aspects, as explained below:
1. Deepening the culture of sustainable governance in enterprises and incorporating sustainability information management into internal control systems:
i. A reference example for the organizational regulations of the Sustainable Development Committee has been established to guide listed companies to establish a Sustainable Development Committee (Sustainability Director), and listed companies are encouraged through the Corporate Governance Evaluation to have the sustainability reports that they prepare and file approved by the board of directors, in order to strengthen the supervisory function of the board of directors on sustainable governance.
ii. In order to enhance the ability and quality of listed companies to collect, utilize, and prepare sustainability information, the FSC revised the “Regulations Governing Establishment of Internal Control Systems by Public Companies” on April 22 this year, requiring listed companies to incorporate sustainability information management operations into their internal control systems and include them as necessary audit items in the annual audit plans. The TWSE will revise the “Reference Items for Judging the Effectiveness of Internal Control Systems of Public Companies” to help companies establish internal control systems for sustainability information based on practical situations, in order to improve the reliability of sustainability information.
2. Improving the disclosure quality of sustainability reports and strengthening assurance institution management:
i. The review results and suggestions for the sustainability reports for 2022 and 2021 have been announced on the Corporate Governance Center for reference by enterprises, in order to drive forward the completeness, comparability, and consistency of sustainability information disclosure. At the same time, certified public accountants’ assurance working papers on the industry’s sustainability metrics were sample-checked to verify whether the assurance procedures comply with regulations, in order to strengthen the management of assurance personnel.
ii. Starting this year, the TWSE plans to expand the number of sustainability reports to be reviewed and use a risk-based approach to select review targets. The review will focus on four aspects, including compliance with GRI standards, identification of major topics, climate-related information, and industry sustainability metrics. In addition, for listed companies that have experienced significant ESG events, an immediate review will be conducted to examine and track the disclosure of their major topics, in order to better the quality of sustainability information through a review mechanism and avoid false or exaggerated information. Regarding the deficiencies of sustainability reports found in the review process, in addition to requesting via letter that listed companies make corrections and improvements, those who fail to comply with the regulations may be fined for breach of contract. In the most serious cases, their securities trading methods may be changed or their securities may be suspended from trading. When necessary, listed companies will be required to develop improvement plans for the sustainability report preparation process and complete certain employee training hours. These may be used as a reference for point deduction in the Corporate Governance Evaluation to guide enterprises to advance the disclosure of sustainability information.
3. Launching an ESG digital platform to assist in disclosing sustainability information:
Recently, a new version of the ESG digital platform has been launched. In addition to expanding ESG indicators and integrating ESG information of listed companies, to meet the requirement that all listed companies prepare their sustainability reports by 2025, the TWSE will launch the upgraded sustainability report preparation function next year to assist enterprises in generating reports and strengthening market services while also reducing their burden of information disclosure.
4. Actively holding training and advocacy, plus cultivating sustainability talents:
In the second half of this year, the TWSE expects to hold advocacy meetings and training courses related to sustainability information and greenhouse gas inventory, and provide relevant guidance and disclosure reference examples for the practical operations of enterprises in preparing sustainability reports, in order to help listed companies prepare sustainability reports that meet the expectations of all sectors.
The TWSE will continue striving to strengthen the quality and transparency of sustainability information disclosure by listed companies, in order to enhance the sustainability and international competitiveness of Taiwan’s capital market.
For further information, please contact Mr. Chang at 1364@twse.com.tw.