【TEJ Dictionary】” Green Finance Action Plan 3.0 “. Promote sustainable finance through five directions!
In 2020, the European Union took the lead in publishing the “EU Taxonomy, “which details sustainability-related categories and norms to promote sustainable development in the country. Taiwan’s neighboring countries, Singapore, Japan, and Hong Kong have also established organizations and regulations to accelerate the growth of sustainable finance. Taiwan has released the “Green Finance Action Plan “to keep up with the world, and now it has gone from the initial 1.0 to 3.0, and what are the contents of the latest “Green Finance Action Plan 3.0”?
Preface
With the adoption of the United Nations Sustainable Development Goals (SDGs) and the Paris Agreement in 2015, the world has become increasingly concerned about sustainable development and climate change. At the UN Climate Change Conference 2021 (COP26), the Glasgow Declaration was issued, indicating a more aggressive approach to the Paris Agreement targets, which brings the 2050 net zero carbon emissions target closer to us. Although Taiwan is not a party to these agreements, this is a goal that Taiwan should work towards together. In 2021, President Tsai announced that Taiwan will also reach the goal of 2050 net zero carbon emissions, and in 2022, the National Development Council published “Taiwan’s Pathway to Net-Zero Emissions in 2050”. The 2050 net-zero emissions pathway focuses on promoting industrial transformation and climate regulation, and “green finance “is also an important measure.
Highlights
📍 Why is green finance critical?
📍 What is the current status of green finance development in Taiwan?
📍 “ Green Financial Action Plan 3.0 “? What is the difference from 2.0?
📍 What are the five driving directions?
Why is green finance critical?
Compared to the petrochemical and energy industries, the financial sector does not significantly impact the environment in terms of carbon emissions, pollution, and waste. However, if the financial sector’s investments and other actions are based on “eco-friendly,” financial institutions can make a significant impact on the sustainability of their businesses through capital. Through responsible credit, banks not only consider the Bank 5P but also monitor the effect of the money on society and the environment to achieve the goal of reducing external costs. Through responsible investment, Investment Trust and Consulting Professionals can select enterprises in the green energy industry, carbon reduction, or energy transformation as investment targets to encourage their carbon reduction transformation and fund their development.
In addition to this support for green and sustainable development, the risks posed by climate change to the financial sector have also recently become an issue of concern. According to the World Economic Forum (WEF) Global Risks Report, the risks posed by climate change top the list, leading more and more companies to adopt the Task Force on Climate-related Financial Disclosures (TCFD) recommendations for managing and disclosing climate risks. Since the financial sector’s impact on the environment is indirect, managing climate risk, an indirect type of governance, is even more critical. The governance and management recommendations mentioned by TCFD are goals that many financial institutions are currently following and actively promoting.
What is the current status of green finance development in Taiwan?
Many large companies have made good progress in implementing sustainable development. Apple has announced that it expects to be carbon neutral by 2030, and Microsoft has proposed to achieve negative carbon emissions by 2030. As an export-oriented country, Taiwan must maintain its competitiveness internationally, so it follows international standards and trends. Promoting “green finance “significantly contributes to Taiwan’s sustainable development.
Under the promotion of the Green Finance Action Plan, Taiwan’s sustainable finance has gradually begun to be implemented. From the initial “green” to the current “ESG,” all aspects of sustainable finance are becoming more and more sophisticated, such as the integration of “永續發展專項資金債券,” the disclosure of ESG, and the cultivation of talents related to sustainable finance. However, there are still many difficulties to overcome in the development of sustainable finance.
- Inadequate ESG information
The inventory of carbon emissions in the financial sector is still very inadequate. Carbon emissions are divided into three scopes, of which scope 3, “indirect emissions from business activities, not owned or controlled,” is the most critical information to be disclosed by the financial sector. However, carbon emissions data are still not readily available, which makes it challenging to grasp the carbon emissions of financial investment and financing companies (Scope 3). - Difficulties in integrating ESG information
At present, ESG information is disclosed by each company individually, and there is still a lack of an integrated platform for ESG-related information. Therefore, collecting and organizing the information is very inconvenient; the consistency and comparability of data are also a problem. These problems make it difficult for financial institutions to compare when executing investment and financing. - The definitions of “green” and “sustainable” are not clear enough
Taiwan does not yet have a clear “green” and “sustainable” classification. Although green bonds, green loans, and Sustainability Linked Loans can be categorized according to the purpose of the funds, a more detailed categorization is needed. A lack of precise categorization can lead to the abuse of “green” and “sustainable,” resulting in the phenomenon of “Greenwash.” - Professional Talent Shortage
In addition to policy reform, promoting professionals is essential in promoting sustainable finance. Currently, ESG-related training for enterprises is still inadequate, leading to a lack of professionals in sustainable finance. - Climate risk management implementation
In recent years, the results of the Global Risks Report have made companies pay more attention to the risks hidden by climate change. The recommendations made by the TCFD group have become the direction for many financial institutions to implement. Currently, most companies are using SASB as the standard for ESG-related information disclosure and governance, and the implementation of TCFD-related risk management is still very imperfect.
“Green Financial Action Plan 3.0 “? What is the difference from 2.0?
As the world moves forward with the goal of sustainable development, Taiwan is not far behind and is actively promoting many initiatives. In 2017, the FSC prepared the “Green Finance Action Plan 1.0 “to promote green finance. The Green Finance Action Plan 1.0 was to promote the development of green energy and power, encourage the financial industry to pursue sustainable development, and help the development of green energy through the financial market.
Three years after its implementation, in 2020, the FSC drafted the “ Green Finance Action Plan 2.0 “, expanding from the original “green” to “ESG.”The Green Finance Action Plan 2.0 adds new social responsibility and corporate governance elements, hoping to promote sustainable development through financial institutions rather than focusing on “green” only.
This year, to achieve the goal of 2050 net-zero carbon emissions. In addition to the “Taiwan’s Pathway to Net-Zero Emissions in 2050” released by NDC, FSC also improved the measures of the “Green Finance Action Plan 2.0” and launched the “Green Finance Action Plan 3.0”, hoping to utilize the power of capital to help accomplish the “Net Zero” goal through the financial industry. “The Green Financial Action Plan 3.0” also includes a new section on “climate” because, on the one hand, enterprises are not sufficiently aware of climate risks. On the other hand, climate risks are becoming more dangerous than before.
【Extended Reading】
What is green finance? “Green Finance Action Plan 2.0 “promotes sustainable development in Taiwan!
What are the five driving directions?
The Green Finance Action Plan 3.0 can be divided into five significant directions, which can be optimized from different approaches to achieve the overall development of sustainable finance.
- Deployment
To improve the financial industry’s shortcomings. For example, the planning and testing of carbon inventories in Scope 3, the development of medium and long-term carbon reduction strategies, and the stress testing of climate change in individual financial institutions. - Funding
Financial sector Investing capital in green and sustainable industries. Like publishing “永續經濟活動認定指引” to assist companies in carbon reduction and transformation and financial sector investment and financing activities. - Data
It is integrating and optimizing climate change and ESG-related information to make it more accessible to the financial industry in the future. This includes establishing an ESG information platform, a climate change-related database, and a Sustainable Finance Website to consolidate relevant information and regulations. - Empowerment
The concept of sustainable finance is deeply embedded in financial institutions from the top down. For example, financial institutions strengthen training and planning for sustainable finance-related licenses. - Ecosystem
Promote cooperation among financial institutions to facilitate their active examination of climate change and ESG-related risks. These include the formation of sustainable finance-related organizations or alliances, the planned expansion of the “Corporate Governance Evaluation System” into the “Sustainable Finance Evaluation System,” and the organization of thematic promotions on “green fintech.”
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We cover all enterprises above the public offering and a wide range of public information sources. - Diversity of data types
Regarding the SASB, there are over 40 sub-categories containing over 600 subjects. - Analytic Data
Derivative and additive statistics are performed for different data orientations to facilitate peer analysis and comparison. - As regulations evolve with the times
Local manufacturers keep pace with Taiwan’s regulations.
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