Taiwan Stock Exchange Corporation’s (TWSE) Amendments to the “ Taiwan Stock Exchange Corporation Rules Governing the Preparation and Filing of Sustainability Reports by TWSE Listed Companies ”

November 2022

Elva Chuang and Tina Lee

To encourage companies to pay attention to Environment, Social and Governance (ESG) issues, the Taiwan Stock Exchange Corporation (hereinafter, the ” TWSE “) included environmental issues as a disclosure item in the former Corporate Social Responsibility Report (CSR) on December 7, 2021, and will rename the ” Taiwan Stock Exchange Corporation Rules Governing the Preparation and Filing of Corporate Social Responsibility (CSR) Reports by TWSE Listed Companies ” to the ” Taiwan Stock Exchange Corporation Rules Governing the Preparation and Filing of Sustainability Reports by TWSE Listed Companies ” (hereinafter collectively, the “Rules”).

Under Article 2 of the current Rules, the following companies are obligated to prepare and submit a sustainability report: (1) the food industry; (2) the chemical industry; (3) the financial and insurance industry; (4) those whose revenues from food and beverage account for no less than 50% of their total operating revenues in the most recent fiscal year; and (5) those with paid-in capital of NT$2 billion or more in the most recent fiscal year (hereinafter collectively, the “Specific Industries”).  However, it should be noted that listed companies with a paid-in capital of less than NT$5 billion are permitted to begin the preparation and submission of sustainability reports from 2023 onwards.

For certain industries (listed companies in the food industry or those whose operating revenues from food and beverage account for no less than50% of their total operating revenues, the chemical industry, and the financial industry), the disclosure of sustainability indicators shall obtain a CPA’s letter of opinion issued according to the rules published by the Accounting Research and Development Foundation, ROC.

The current Rules were amended on September 22, 2022 to expand the industries that should disclose sustainability-related indicators that are significant to the industries and of interest to investors, including 14 industries such as the cement industry, the plastics industry, the steel industry, the oil, electricity and gas industry, the semiconductor industry, the computer and peripheral equipment industry, the optoelectronics industry, the communications and network industry, the electronic parts and components industry, the electronic distribution industry, and other electronic industries.  If the paid-in capital of an operator in a new industry ranges between NT$2 billion and NT$5 billion, the application of the Rules may be deferred to 2024.

Another important highlight of these amendments is the requirement that the Specific Industries shall disclose climate-related information in a special chapter of the sustainability report and implement the inventory and verification of greenhouse gases in three stages according to the industries and the amount of paid-in capital of each listed company.  For further details of the items and timelines to be implemented by listed company can be referred to the “Sustainable Development Roadmap for listed companies” announced by the Corporate Governance Center of the TWSE (link of the website: https://cgc.twse.com.tw/responsibilityRoadMap/listCh).

It is worth noting that the verifiers of newly required disclosure of sustainability indicators and climate-related information are not limited to CPA .  Instead, the relevant provisions of the Guidelines for the Administration of Verification Institutions of the Sustainability Reports of Exchange-Listed and OTC-Listed Companies, which will go into effect in 2024, will be followed to enhance the regulation of the institutions and personnel that issue verification opinions on sustainability reports.  The TWSE stated that the guidelines will be released in the fourth quarter of 2022.  Since the content of the guidelines will surely affect the preparation and submission procedures of sustainability reports, their development is worthy of continued attention.

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