【TEJ Finance Research Institute】TEJ Licensed by SASB

TESG Rating is the first officially licensed ESG evaluation method by SASB.

Preface

In order to intensify the sustainability and the competitiveness of the capital market, the Financial Supervisory Commission R.O.C. (FSC) launched the Corporate Governance 3.0 — Sustainability Development Blueprint in August, 2020. The blueprint showed great intention that it would follow the regulations announced by TCFD and SASB to fortify the reveal of information in ESG Reports. In addition to the fact that domestic enterprises had to have great insight of the TCFD reveal regulation and SASB guidelines, report readers and stakeholders who have to evaluate the implementation of industry sustainability must know the international ESG rules to perform better evaluations.

Highlights

📍 What is SASB?
📍 TEJ has been licensed by SASB
📍 Conclusion

What is SASB?

SASB (Sustainability Accounting Standards Board) is a global non-profit organization founded in San Francisco in 2011. SASB established the SASB regulation to help enterprises and investors reach consensus by formulating more detailed and both quantitative and qualitative revealing standards.

SASB announced the Materiality Map that covers 5 aspects, 11 main industry categories (including 77 sub-industry categories), 26 universal ESG issues. It listed the ESG issues that have great possibility of influencing firms’ financial condition and operating effectiveness.

According to the statistical data on SASB official webpage, there were 1,311 firms worldwide that adopted the SASB regulation to make their 2020 reports by the end of 2022, and Taiwan accounted for 29 of them. With the FSC’s promotion and IFRS planning on cooperating with SASB, the ESG related information presented on future financial reports will coordinate with the SASB regulations. It is visible that SASB has a crucial spot, that’s why TEJ developed ESG related solutions in terms of sustainable finance.

TEJ has been licensed by SASB

The main target of the TESG index is not only to be the exclusive ESG index in Taiwan, helping domestic sustainable finance’s development, but also to expect that Taiwanese enterprises will be seen by the world through international ESG standards. Thus, we adopted 3 crucial factors from SASB regulations to the TESG indicator:

1. SASB industry classification
The importance and value of E、S、G depends on the specific industry. That will be the reason why we chose to split different firms into groups, instead of categorizing them by the exchange. We introduced the ESG rating exclusive category: SASB industry category, which split Taiwanese firms by SASB’s 11 main industries and 77 sub-industries. At the same time, we gave different weighting scores to different industries.

2. Regulation Structure
The ESG structure in SASB includes 5 aspects: environment, social capital, manpower capital, business model and innovation, leadership and governance. This contains 26 issues, and TESG founded 3 aspects (environment, social governance, governance) by following the SASB structure, which includes 16 issues. Each of the 16 has a couple of representative measuring variations, which not only are qualified to the international ESG regulations, but also take Taiwanese firms’ properties into account.

For example, many hallowing cases derived from the deviation of controlling power. Thus, TESG counts the issue of “Controlling Power and Attendance” into the G factor. Meanwhile, with the government promoting friendly infant policies, the application of parental leaves and the following reinstatement condition are both considered in the S aspect variation.

3. Materiality Map
After splitting Tawainese public companies according to SASB’s industry category, we can see that there will be different standards faced by different industries due to different events.

For example, TCC ( 台泥 ) belongs to the Refining and Mineral Manufacturing category under SASB’s standards, it’s carbon emission or the using extent of resource will not be the same as Cathay Financial Holdings, which belongs to the Finance category. To compare the different two, they will be using different weighting scores to calculate on the aspect of E. TESG refers to the Materiality Map of SASB to give different weighting scores to different issues.

Conclusion

TEJ has started the research of governance and ESG related study since 2002. In 2005, TEJ referred to the OCED and Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies to launch the Governance Database. As time passes, social responsibility has gained its importance among countries, TEJ released the CSR database and the Visualizing Analysis ESG Dashboard. With these databases being the foundation, we finally released the TESG Sustainability Indicator in 2022.

TEJ was officially licensed by the strictly audited SASB, this makes TESG an influential promoter of ESG in Taiwan.

• The very first ESG evaluation rating to evaluate public companies licensed by SASB in Taiwan.
• Scaling Taiwanese enterprises with international regulations.
• Prepared for IFRS setting ESG information revealing standards for global financial markets one step ahead.

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TESG Rating

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