Taiwan FSC Issues “Guidelines on Anti-Greenwashing by Financial Institutions”

On May 30, 2024, the Financial Supervisory Commission of Taiwan (the “FSC”) issued the “Guidelines on Anti-Greenwashing by Financial Institutions” (the “Guidelines”). The Guidelines provides guidance for financial institutions to avoid “greenwashing” in their sustainability-related statements, actions, or declarations, including providing unclear or exaggerated information, selectively disclosing positive impacts, or making sustainability claims without evidence, which can potentially mislead consumers, investors, or other market participants. According to the Guidelines, sustainability-related statements made by financial institutions should adhere to the following principles:

1. The statements should be truthful, accurate, and supported by publicly verifiable evidence. In addition, financial institutions should regularly review the accuracy of their content.

2. The statements should be expressed clearly and simply, avoiding the use of obscure terms or vague language.

3. The statements should be comprehensive and balanced, without omitting or hiding important information. Selective disclosure is not recommended. If the statements are only applicable under certain qualifications, financial institutions should clearly explain these qualifications or limitations.

4. When making comparative statements, it is important to clarify the comparison methods and ensure that comparisons are made with similar financial products or services to guarantee fairness and comparability. If a financial product or service only meets the minimum legal standards, it should not be presented in a way that misleads financial consumers or investors into believing its sustainability features are superior to those of other competitors.

5. Statements should comply with sustainability-related regulations.

It is praiseworthy for the FSC to propose the Guidelines at a time when greenwashing has become an issue of international concern. Currently the Guidelines are administrative guidance without clear legal consequence. However, they target the highly regulated financial sector and thus, we believe they would have de facto impact on the behaviors of the financial institutions regarding their green statements. Nevertheless, the standards for “balanced disclosure” and “avoiding selective disclosure” outlined in the Guidelines are unclear. For instance, it is yet to be determined how a disclosure should be made to meet the criteria for balanced disclosure in practice. Additionally, it is worth monitoring whether the Guidelines might impact other industries, such as whether other law enforcement agencies might reference them in their enforcement in the future, or whether the FSC would like to extend such guidance to other sectors. Moreover, regulations against greenwashing may also involve the Fair Trade Act, which prohibits businesses from engaging in false advertising. As such, Taiwan Fair Trade Commission (the “TFTC”) Vice Chairman Andy Chen recently stated to the media that the TFTC can initiate investigations as long as evidence of “false advertising” is presented, and the TFTC will collaborate with other agencies if necessary. ^[1]

Therefore, for businesses, even those outside the financial industry, it is advisable to keep a close eye on and proactively adopt both domestic and international anti-greenwashing regulations. This approach will facilitate timely and accurate communication with investors or stakeholders, ensuring they understand the company’s actions and reducing the risk of potential violations.

[1]  Economic Daily News, “Net-zero emissions have become a prominent Topic. FTC: The maximum fine for Greenwashing is $25 million”, May 27, 2024, https://money.udn.com/money/story/5648/7989910 (Last viewed: July 17, 2024).