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Sustainable Finance Workshop — Moving Toward Sustainable Finance One Step at a Time

On 10 December, the Financial Supervisory Commission (FSC) held a "Sustainable Finance Workshop" at the Taiwan Academy of Banking and Finance, inviting representatives from various central government agencies and other entities to share information on what they have done to promote sustainable finance. By providing a platform for persons from industry, government, and academia to share views, the Workshop has helped build consensus. By tapping into the power of the public and private sectors, the FSC hopes to move forward one steady step at a time in promoting the development of sustainable finance in Taiwan.

Over 200 persons were invited to attend this Workshop either in person or online. The participants included representatives from various central government agencies (Office of Energy and Carbon Reduction; Ministry of Finance; Environmental Protection Administration; Industrial Development Bureau) and research bodies (Chung-Hua Institution for Economic Research; National Science and Technology Center for Disaster Reduction), as well as financial industry professionals.

In remarks, FSC Chairperson Tien-Mu Huang stated that the quest to achieve sustainable finance and respond to global climate change is an undertaking that cuts across multiple cabinet agencies, multiple specialties, and even multiple countries, and is currently an important priority, so if financial authorities and financial institutions want to go far, they just have to keep moving ahead one steady step at a time in a persistent effort to implement sustainable finance and respond to climate change. Chairperson Huang said that the matters discussed at the Workshop – such as databases, disclosure regulations, and climate change stress tests – are all important current issues within the financial industry, so the event was of great significance. He also advised financial institutions not to take short-cuts or follow cookie-cutter formulas, and quoted an old Chinese saying which reminds us that "a journey of a thousand miles is taken one step at a time, and the rivers and seas fill up drop by drop." The Chairperson closed by urging: "Let us take to the task with determination and keep working away at it so we can achieve our goal of promoting sustainable finance."

Dr. Alan Lin, Deputy Executive Director of the Executive Yuan's Office of Energy and Carbon Reduction, stated in prepared remarks that while the COVID-19 pandemic has badly hurt the global economy, we are fortunate to have an antidote in the form of vaccines. On the other hand, we unfortunately have no antidote for global warming. In addition to sharing information on the proceedings at the recently concluded COP26 climate change summit, Dr. Lin also mentioned that all industries face transition risks, and the Executive Yuan, in order to assess pathways to net zero and devise a net zero roadmap, has set up five work teams, each of which focuses on one of the following issues: non-carbon energy resources; industry and energy efficiency; green transport and electrification of vehicles; negative carbon technologies; and governance. Green finance is a critical element. We hope to take an interdisciplinary approach and work together with like-minded parties to achieve the goal of net zero emissions.

The Sustainable Finance Workshop featured both speeches and panel discussions. The following are some of the key focal points of the event:

1. Keynote speeches:
(1) Measures to promote sustainable finance, and prospects for success: Chairman Wu Chung-Shu of the Taiwan Academy of Banking and Finance stated that climate change has had a significant economic impact. Economic losses caused by extreme weather events are rapidly rising, and totaled US$2.48 trillion from 2011 through 2020. Chairman Wu suggested that Taiwan should establish a comprehensive system for assessment and management of climate risks, as has been done by some overseas institutions. He also noted that the idea of incorporating sustainability into the management of financial assets has now come into the mainstream, and explained that the establishment of sustainable finance taxonomies provides the infrastructure for promotion of sustainable finance. The idea is to guide industry to take concrete steps to reduce carbon emissions and build a sustainable financial ecosystem.

(2) Challenges and opportunities associated with climate change, and how to respond to climate change: Dr. Tsai Ling-yi, Director of the Department of Environmental Sanitation and Toxic Substance Management at the Environmental Protection Administration, stated that data from the United Nations show that climate disasters and economic losses in 2020 exceeded the average for the previous 20 years, and the future effects of climate change will be even more severe. There is now a global consensus regarding a need to achieve net zero carbon emissions by 2050. Taiwan's carbon emissions per capita are higher than the world average, but figures from the US Environmental Protection Agency indicate that Taiwan's carbon intensity is actually lower than the international average and the second-lowest in Asia. A draft amendment to the "Greenhouse Gas Reduction and Management Act" prepared by Taiwan's Environmental Protection Administration sets out a goal of net zero by 2050, and provides for the collection of a carbon levy on greenhouse gases. In the future our government will adopt a system of differential levies and establish a carbon levy fund that is subject to specific restrictions on how the fund is to be used. For carbon stock takes by small and medium enterprises, the amended provisions will simplify procedures and align with international practices.

(3) Preliminary benefits yielded by sustainable finance taxonomies in Taiwan: Wen Lih-Chyi, Research Fellow & Director of the Center for Green Economy at the Chung-Hua Institution for Economic Research, stated that Taiwan has adopted preliminary sustainable financial taxonomies for 22 types of economic activity and 12 types of cutting-edge economic activity in three sectors: (a) manufacturing; (b) real estate, construction, and architecture; and (c) transportation and storage. Ms. Wen recommended that, prior to policy implementation, pilot projects should be carried out, legislation governing sustainability disclosures should be revised, other types of sustainable finance taxonomies should be adopted, incentives and related measures should be provided, and any policy should be gradually implemented one step at a time.

2. Panel discussions:
(1) Climate, industry, and ESG databases: With enterprises facing an increasingly urgent need for climate data, Taiwan's Joint Credit Information Center has established a query platform for data on the amount of water and electricity used by corporations, and fines they have received for major pollution problems. In the coming year the platform will be expanded to provide data on water conservation, power conservation, carbon reduction, green buildings, and three other matters. The National Science and Technology Center for Disaster Reduction can provide historical climate data and future climate projections, and will continue to assess the feasibility of adopting a more fine-grained regional space scale. Academia Sinica intends to establish a platform for access to data on climate risks facing industries in order to act as a bridge between the providers and users of data. In the future, public access to this data will be provided for free. The Taiwan Depository and Clearing Corporation also has an ESG data platform that investors and enterprises can access free of charge in order to incorporate ESG data into their policymaking processes. If an enterprise is to accurately calculate its carbon footprint, it must be able to carry out a carbon stock take on the basis of consistent standards.

(2) Information disclosures – sustainable finance taxonomies, TCFD disclosures, and the SASB standards: The panelists felt that there is not a big difference between SASB requirements and the types of disclosures required in Taiwan, so the future adoption of SASB standards will not have a big impact. CSR report disclosure requirements currently apply only to large enterprises listed on the TWSE or TPEx, but as the volume of data demand rises, for certain types of information Taiwan could make disclosure requirements applicable to small and medium enterprises. This would result in collection of a wider range of ESG-related information and expand the scope of sustainable finance. TCFD disclosures should make boards of directors more aware of the importance of climate risks, and could spur them to use technology to assess such risks. Enterprises can also consider the possibility of incorporating TCFD disclosures into their current risk management systems. Taiwan's sustainable finance taxonomies are first being applied on a trial basis to leading corporations, and our suggestion is that they be further applied in a second phase to small and medium enterprises. In addition to having a capacity building effect, the feedback could also be used to make improvements.

(3) Climate change scenario analysis and stress tests: In response to climate change, the United Kingdom and the Netherlands have adopted a series of financial guidances and devised various climate change scenarios in order to guide financial services firms in their efforts to analyze and assess physical risks, transition risks, transition opportunities, and the direction of future investments. Climate change stress tests differ mainly from the stress tests of the past in that they require an enterprise to consider climate factors during the course of their assessments. The purpose of scenario analysis, as well, is to make boards of directors identify risks, understand what fields they need to pay attention to, and take early action to formulate strategies.

Participants actively shared information on how sustainable finance is practiced overseas, how it is being promoted and practiced in Taiwan. The Workshop has helped financial services firms better understand the importance and the urgency of our need for sustainable finance, and has contributed to the building of a consensus, which will in turn lead to a serious planning effort and active implementation. The FSC will continue tapping into the power of the public and private sectors to move forward one steady step at a time in promoting the development of sustainable finance in Taiwan.

Contact: Mr. Chu Ching-hung, Section Chief, Department of Planning, FSC
Telephone: +886 (02) 8968-0082
Please direct all correspondence and inquiries to: FSC Feedback Mail
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  • Update: 2022-01-03