Taiwan

A. ESG Reporting

1. Are there legal or regulatory requirements for companies to make ESG disclosures in your jurisdiction?

Yes.

2. What are the key legislative and regulatory sources for ESG disclosure requirements and to whom do they apply?

The Climate Change Response Act (CCRA) provides that businesses announced by the Ministry of Environment (MOE) (formerly the Environmental Protection Administration) are required to report their GHG emissions each year by submitting relevant data to the registry of the MOE, and the data submitted must be verified by a certified verification institute. The MOE has announced the businesses which are in-scope: Businesses Subject to Accounting and Registration of Greenhouse Gases Emission Sources (List of Regulated GHG Emission Sources), - see section A.7 below for more detail.

Previously, the CCRA provided for the implementation of the accounting and reporting of GHG emissions in two phases, in which specific fields of businesses were regulated in turn. With the amendment of the List of Regulated GHG Emission Sources on 31 May 2023, all businesses stipulated in the List of Regulated GHG Emission Sources that meet the relevant threshold (i.e., 25k tonnes of GHG emissions) are subject to accounting, reporting, and verification requirements. Under the Regulations for Management of Inventory, and Registration of Greenhouse Gases amended on 14 September 2023, the regulated businesses are required to submit GHG emissions accounting report by 31 March of each year and the verification of the GHG accounting results by 31 October of each year. The reported data is publicly accessible on the MOE’s Platform on GHG Emission Amount.

The Taiwan Stock Exchange’s Corporation Rules Governing the Preparation and Filing of Sustainability Reports by Listed Companies and the Taipei Exchange’s Rules Governing the Preparation and Filing of Sustainability Reports by Listed Companies require listed companies (in phases) to submit ESG reports (including GHG emissions data) on an annual basis (by 31 August of each year starting in 2024) subject to a verification and certification process.

Listed companies and financial institutions are also required to disclose their climate-related information in their annual reports.

The Financial Supervisory Commission (FSC) has promulgated the Guidelines of Climate-Related Financial Disclosure for Domestic Banking Institutions and the Guidelines of Climate-Related Financial Disclosure for Insurance Institutions that require the domestic financial institutions to disclose their climate-related financial risks every year from June 2023.

3. Are the requirements mandatory or do they apply on a comply-or-explain basis?

The ESG disclosure requirements are mandatory. Failure to submit the ESG reports would trigger an administrative fine ranging from NT$10,000 to NT$30,000.

4. Which aspects of ESG do the requirements focus upon?

Listed companies are required to specify in their ESG reports various sustainability-related factors based on the FSC's requirements by industry, and must also indicate the response measures and their progress in respect of the risks and opportunities as a result of climate change (such as the short, medium-term and long-term plan for the operation and strategy of the company, financial impact of the climate change on the company, and GHG emission data, etc.). The reporting generally covers all the commonly seen ESG elements.

5. Are the disclosure requirements based on international standards? If so, which one(s)?

The mandatory ESG reporting requirements in Taiwan incorporate the standards of GRI, TCFD and SASB.

Based on the Roadmap for Taiwan Listed Companies to Align with IFRS Sustainability Disclosure Standards released by FSC on 17 August 2023, starting in 2026, listed companies that reach a certain threshold of paid-in capital will be required to apply the ISSB Standards for the preparation of their annual reports. Such required disclosure will be based on both IFRS S1 and IFRS S2. See section A.11 below for more detail.

6. How do the disclosure requirements approach materiality (e.g. single or double materiality)?

The FSC guidelines adopt a single materiality approach.

7. Are there requirements for the disclosure of GHG emissions? If so, please specify the scope (e.g. Scope 1, Scope 2 and/or Scope 3), to whom they apply and whether there are requirements on the measurement methodology.

Further to section A.2 above, in the case of entities subject to the List of Regulated GHG Emission Sources, mandatory disclosure of GHG emissions applies to Scope 1 and Scope 2 emissions, whereas disclosure of Scope 3 emissions is encouraged but not mandatory. Entities subject to the List of Regulated GHG Emission Sources include the following: (i) all businesses in Taiwan whose Scope 1 GHG emissions reach 25k tonnes per year, and (ii) all manufacturing businesses in Taiwan whose Scope 1 and Scope 2 GHG emissions altogether reach 25k tonnes per year.

The accepted measurement methodologies under the Regulations for Management of Inventory, and Registration of Greenhouse Gases include emission factors method, mass balance method, direct measurement, and any other measurement methods approved by the MOE.

8. Are there requirements to obtain independent assurance of any ESG disclosures? If so, what is the scope of such requirements?

The sustainability indicators reporting and the Scope 1 and Scope 2 emissions reporting in the ESG reports submitted by the listed companies must be assured by certified institutions.

9. For companies not subject to mandatory or comply-or-explain ESG reporting, are voluntary ESG disclosures customary?

No. However, as ESG is becoming commonplace in the corporate world, the incorporation of ESG and other non-financial considerations into investment strategies have been gradually gaining momentum in Taiwan as more investors realise that ESG investing is able to boost their portfolios and profitability.

10. Has your jurisdiction issued or adopted a taxonomy on sustainable activities? Is it mandatory and what is its scope of application?

Yes. In December 2022, various regulators jointly promulgated the Taiwan Taxonomy Guidelines for Sustainable Activities that include 16 types of regular economic activities (e.g., transportation and logistics) and 13 types of forward-looking economic activities (e.g., CCUS technologies). It is not a mandatory requirement, but financial institutions are encouraged to refer to said Taxonomy Guidelines when making investments and issuing financial instruments labelled as “sustainable”.

11. Are there plans to adopt or incorporate the ISSB’s IFRS S1 and/or S2 standards? If so, please indicate the extent of alignment, to what extent the standards will be mandatory, to whom they will apply and the timeline.

In July 2023, the FSC announced that the government plans to adopt the ISSB Standards in the annual reporting requirements applicable to listed companies.

Starting from 2026, listed companies that reach a certain threshold in paid-in capital will be required to prepare reports based on both IFRS S1 and IFRS S2. The FSC proposes to apply the requirements in three phases starting in 2026 (for listed companies with a paid-in capital of NT$10 billion or more), 2027 (for listed companies with a paid-in capital of at least NT$5 billion but no more than NT$10 billion), and 2028 (all listed companies). The specific dates for the requirement to take effect have not been confirmed by the FSC.

12. Other upcoming developments / direction of travel

With the legal framework of ESG reporting now in place, it is expected that the regulators will focus on implementation and strengthen the enforcement of listed companies' mandatory ESG reporting.