Taiwan FSC Officially Launched the Roadmap for the Sustainable Development of Listed Companies

April 2022

Teresa Huang and Eddie Shih

To cope with the impact of climate change and sustainable development issues and accommodate the 2050 net zero carbon emission goal, the Financial Supervisory Commission released the Roadmap for the Sustainable Development of Listed Companies.

1. Highlights of the Roadmap for the Sustainable Development of Listed Companies 

To promote sustainable development, the Financial Supervisory Commission (hereinafter, the “FSC”) successively amended the “Regulations Governing Information to be Published in the Annual Reports” of public companies, financial holding companies, banks, and bills finance companies on November 30, 2021.^[1]  To further carry out the responsibility of a board of directors for sustainable development, the FSC released the “Roadmap for the Sustainable Development of Listed Companies” on March 3, 2022 (hereinafter, the “Roadmap”), requiring listed companies to disclose information about their greenhouse gas inventory and conduct verification for quarterly submission to the board of directors for the sake of control.  The Roadmap is highlighted below:

(1) Scope of disclosure and verification

Listed companies are required to take the inventory of greenhouse gases by 2027, and the inventory information shall be identical in scope to that of their consolidated financial statements.  To wit, listed companies are subject to compulsory disclosure of information about their domestic and overseas consolidated subsidiaries.

All listed companies are required to complete the verification of greenhouse gases by 2029, which means the inventory information shall be verified by a third party and disclosed in a scope identical to that of their consolidated financial statements.

(2) Content of disclosure

Listed companies are required to disclose the direct emission amount of greenhouse gases (Category 1) and the indirect emission amount of greenhouse gases from the use of energy such as electricity ( Category 2).^[2]

(3) Disclosing entities

Based on the amount of paid-in capital of listed companies, there are four stages of greenhouse gas inventory from 2023 to 2027 and four stages of greenhouse gas verification from 2024 to 2029, except for the steel and cement industries with high carbon emissions and listed companies with paid-in capital of NT$10 billion or more, to this Roadmap will apply on a prioritized basis from 2023 onwards. The timeline for the inventory and verification is detailed in the table below:

 2. Points to note in the future

In recent years, the ESG issues have received significant attention from governments and enterprises, and how to assist enterprises to meet their carbon reduction targets as early as possible and align with international norms such as the Carbon Border Adjustment Mechanism (CBAM) of the European Union are particularly important aspects.

Regarding the timeline for inventory and verification, the FSC has considered the number of consolidated subsidiaries (including overseas subsidiaries) and verification agencies, and requested high carbon emission industries and companies with a paid-in capital of NT$10 billion or more to apply this Roadmap from 2023 onwards, and all individual listed companies are required to complete the disclosure of information about greenhouse gas inventory in 2026 (or 2027 in the case of consolidated subsidiaries).  The laws and regulations and timeline (commencement of reporting from 2023 onwards and implementation in 2026) of the EU CBAM have been considered for reference.

With regard to the applicable standards for inventory and verification, the FSC stated that the domestic aspect follows the standards announced by the Environmental Protection Administration of the Executive Yuan, while the foreign aspect follows the requirements of local countries, and if the local countries do not have any requirements, the international standards should be followed.

As to how listed companies handle matters related to inventory and verification, the FSC has planned the release of relevant operating guidelines:

In summary, the scope of greenhouse gas inventory and verification conducted according to this Roadmap extends to the parent companies of all listed companies and domestic and overseas subsidiaries.  The inventory information includes amounts of greenhouse gas emissions from direct and indirect emission sources and shall be verified by third-party organizations.  The inventory and verification standards should vary by domestic, foreign, and international standards, but also require the board of directors to plan the timeline and exercise quarterly control.

Listed companies must pay close attention to the operating guidelines released by the relevant authorities, and whether penalties are imposed or the score of corporate governance evaluation is affected due to the violation of the timeline of this Roadmap and relevant operating guidelines, and the companies shall prepare well in advance.

[1] Please refer to the newsletter of Lee, Tsai & Partners titled ” Partial Amendments to the Regulations Governing Information to Be Published in Annual Reports of Public Companies by the FSC” (January 2022).

[2] Please refer to the newsletter of Lee, Tsai & Partners titled “Taiwan plans to enact carbon pricing into Climate Change Response Act” (December 2021).