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FSC Launches the “Green Finance Action Plan 2.0” for Joint Creation of a Sustainable Finance Ecosystem by Public and Private Sectors

2020-11-02
The “Green Finance Action Plan 2.0” announced by the Financial Supervisory Commission (FSC) on 18 August, 2020 was created to use financial mechanisms to increase the awareness of companies and investors of environmental, social, and governance (ESG) issues, to foster a positive cycle of investments and the industry’s pursuit of sustainable development, and to facilitate cooperation between the public and private sectors to attain Taiwan’s carbon reduction and sustainable development goals.
 

The FSC had previously formulated the “Green Finance Action Plan 1.0,” which was approved by the Executive Yuan on November 6, 2017.  The Action Plan 1.0 includes a total of 25 measures that cover the following 7 aspects: credit, investment, capital market fundraising, professional development, promotion of further development of green financial products and services, information disclosure, and promotion of the concept of green sustainability.  Under the concerted efforts of the FSC and relevant central authorities in the past two years, the Action Plan 1.0 has attained major achievements. Examples include the assistance provided to green energy operators to help them obtain funds required for business operations, development of a green bond market, and cultivation of green finance professionals.

The FSC has identified sustainable development as a core value for the world and Taiwan.  Financial institutions take in funds from the public, and manage and utilize those funds by undertaking activities such as lending and investment. They hold enormous assets and play the role of allocating social resources. They are a key force in steering public attention toward sustainable development. Hence, governments around the world have been employing financial market forces to promote sustainable development. In the early stage, their promotional efforts emphasized green or environmental issues, but they have now moved on to pursue sustainable finance, which additionally emphasizes environmental, social, and corporate governance (ESG) concerns. Sustainable finance is the core consideration in financial policy in many countries.

To ensure that Taiwan’s financial system plays its role of encouraging the society to pursue sustainable development, the FSC (making reference to international practices and recommendations provided by related government agencies, experts, scholars, and non-profit organizations) has reviewed the areas that require improvements in the current Green Finance Action Plan 1.0 and proposed the “Green Finance Action Plan 2.0”. The FSC adopted short-term and medium-term objectives, and will amend the Action Plan each year to establish frameworks and foundations for promoting effective green and sustainable financial markets. Key measures include: (1) enhancement of ESG information disclosure quality and transparency; (2) establishment of definitions and classification standards to determine the scope of what qualifies as green and sustainable firms, and encourage financial institutions to expand their financing to and investment in green and sustainable projects from merely to green energy industry, and (3) make financial institutions more resilient to climate change risks.

Short-term and medium-term objectives have been established for the Green Finance Action Plan 2.0 including 3 core strategies, 8 major aspects to be addressed through the implementation of 38 concrete measures (of which 17 measures are a continuation of Plan 1.0 while 21 have been newly added for Plan 2.0). The main contents are as follows:

I.Objectives:

1.Short-term objectives:  Build a framework and the foundation conducive to the effective operation of green and sustainable finance market, increase information transparency, and channel funds to support green and sustainable development industries.

2.Medium-term objectives: Guide the financial market on addressing the potential risks of climate change and capitalize on associated opportunities and strengthen the competitiveness of our financial industry and market, and furthermore, raise the awareness of businesses and investors to ESG issues through the financial mechanism to bring about a healthy cycle of investment and sustainable development.

II.Core Strategies:

1.Facilitating effective information disclosure for effective business decision- making.

2.Pushing financial institutions to address climate change risks and capitalize on associated opportunities.

3.Using market mechanism to steer the economy toward sustainable development.

III.Implementation Aspects:

1.Credit: The FSC will implement 8 measures that aim to encourage, through incentives and support programs, financial institutions to grant credit and loans to green energy industries and sustainable development projects and to adopt measures in line with international norms.

2.Investment: The FSC will implement 5 measures that aim to advocate responsible investment by amending relevant rules and guidelines and encourage financial institutions and government agencies to invest in sustainable development projects.

3.Capital market fundraising: The FSC will implement 2 measures. One is to keep promoting green bond issuance and investment, and the other is to develop sustainability bonds to diversify the financial products and financing channels in our capital market.

4.Professional development: The FSC will implement 1 measure pertaining to cultivating financial professionals with expertise in green and sustainable finance in the hope to build capability for developing sustainable finance.

5.Promotion of further development of green financial products or services: The FSC will implement 7 measures that aim to encourage financial institutions to develop innovative green financial products or services that will meet the financial demands of businesses and investors pursuing low-carbon transformation and sustainable development.

6.Information disclosure: The FSC will implement 5 measures that aim to improve the quality, consistency, and transparency of corporate ESG disclosure by amending related regulations and establishing integration platforms so as to provide the financial market participants with comparable, reliable, and comprehensive information.

7.Prudential supervision: This aspect is a new aspect added to the Action Plan 2.0 that aims to prompt financial institutions to examine climate-related risks they may be faced with and their ability to address such risks, and furthermore, build resilience and grasp opportunities. A total of 2 concrete measures have been proposed.

8.International connections and incentive mechanisms: The FSC will implement 8 measures pertaining to studying the scope (taxonomy) of sustainable finance in reference to international practices, and through incentives such as evaluation, public commendation, and rewards, education, and propagation, encouraging financial institutions, businesses, and investors to seek sustainable development and continue to participate in international activities and align with international trends so as to boost Taiwan’s visibility in the international community.

IV.Implementation Means: The promotion of green finance and sustainable finance takes place on multiple levels and involves many different professional fields. The FSC will use inter-agency cooperation for execution and it will also foster cooperation between the public and private sectors and integrate the resources of related associations, self-regulatory organizations, and firms for joint execution.

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  • Update: 2020-11-02
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