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Taiwan’s FSC to unveil disclosure rules for new ESG funds

FSC
By Hui Ching-hoo   
April 16, 2021

Taiwan’s financial regulator will soon introduce new rules to prevent greenwashing of environmental, social and governance (ESG) funds.

Fund managers will have to comply with a set of disclosure guidelines for launching new ESG funds, says Chen-Shan Chang, director general of the Financial Supervisory Commission’s (FSC) securities and futures bureau.

The new rules “are to prevent public misconception that ESG funds and greenwashing are the same thing”, he says in a statement on April 14.

Greenwashing refers to the practice of making exaggerated and unsubstantiated claims about how environmentally friendly a fund is to lure investors.

The FSC will announce details of the new rules in July. Chang says the regulator may follow Hong Kong’s ESG disclosure initiative.

Hong Kong’s Securities and Futures Commission issued a consultation paper last October on a code of conduct for fund managers to improve their handling of climate-related risks in four areas – governance, investment management, risk management and disclosure.

The FSC is also studying the possibility of categorising ESG funds based on their risk and geographical exposures.

“For example, ESG funds may be required to allocate a minimum of 60% investments to sustainable assets, adopt international ESG benchmarks, and disclose ESG risks during their investment processes,” Chang says.

The FSC has been promoting green financing in Taiwan’s capital market since 2017, with measures such as bolstering the quality and transparency of ESG disclosures to facilitate issuance of green bonds, and cultivating local talent for sustainable investing.

According to figures from the Securities Investment Trust and Consulting Association, as of December 2020, there were 20 ESG funds in Taiwan with combined assets of around NT$101 billion (US$353.2 million).