The Financial Supervisory Commission (FSC) yesterday enhanced disclosure requirements for environmental, social and governance (ESG)-themed funds to prevent “greenwashing” in the asset management sector.
The commission has requested that asset management firms set at least one sustainability goal for each of their ESG-themed funds and explain how their investment would help achieve that goal, Securities and Futures Bureau Deputy Director Kuo Chia-chun (郭佳君) told a videoconference in Taipei.
Companies operating 21 ESG-themed funds that have been launched, or five funds that have been approved, but have not been launched, must disclose the information in the next six months, or the funds would not be officially recognized as ESG funds, Kuo said.
Photo: Kelson Wang, Taipei Times
“In Taiwan, more securities investment and consulting firms have been offering products whose largest selling point is sustainable investment, but we noticed that many failed to provide sufficient information as to how their funds address sustainability issues,” Kuo said.
The firms should set at least one sustainability goal, and each goal should tackle environmental, social and governance issues at the same time, she said.
Once the firms set their goals, they need to ensure that 60 percent of the money under management is allocated for investment in companies whose operations are in line with their goals, Kuo said, adding that 70 percent would be a better ratio.
For example, if an ESG fund focuses on energy transition, the fund’s portfolio should include companies operating in green energy, electric vehicles or other renewable energy technology, Kuo said.
The commission would not intervene in or regulate the sustainability goals that can be set by asset management firms, she said.
However, it urges asset management firms to refer to the Paris Climate Agreement or the UN’s Sustainable Development Goals, such as gender equality, affordable and clean energy, clean water and industry innovation, Kuo said.
Asked if firms need to target net-zero carbon emissions like some financial conglomerates, Kuo said that it would be an ambitious goal, as asset management firms targeting net-zero emissions must convince the commission that the companies their funds invest in have net-zero carbon emissions.
If a recipient of an ESG fund were to be embroiled in a corporate scandal, the asset management firm supplying the fund would not be asked to withdraw its investment, she said.
However, it must review the attribution of the scandal, the date when the alleged malpractice took place and whether the company invested in has resolved its governance issues, Kuo said.
The commission referred to tightened regulations released last month by the Hong Kong Securities and Futures Commission, and the Sustainable Finance Disclosure Regulations released by the EU in March.
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