Taiwan FSC Tightens Rules for ESG-themed Funds

Asset managers are required to set one sustainability goal and explain how their investments help achieve that goal.

Taiwan’s FSC (Financial Supervisory Commission) has enhanced its disclosure requirements for ESG-themed funds to prevent “greenwashing” in the asset management sector.

According to Taipei Times, the FSC has requested that asset management firms set at least one sustainability goal for each of their ESG-themed funds and explain to regulators how their investment would help achieve that goal.

To date, 21 ESG-themed funds have been launched, and five additional funds have been approved but have not yet launched. Each of these funds has six months to disclose this information, otherwise they will no longer be recognised as ESG funds, the FSC said.

“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,” said Kuo Chia-chun, Deputy Director of the FSC’s Securities and Futures Bureau.

Asset management firms must set at least one sustainability goal, and each goal should tackle ESG issues at the same time. Once the goals have been set, the asset managers 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 the FSC will not intervene in or regulate the sustainability goals that are set by asset management firms. However, regulators encourage asset management firms to refer to the Paris Climate Agreement or the UN’s Sustainable Development Goals – which encompass themes such as gender equality, affordable and clean energy, clean water and industry innovation.

In tightening its requirements, the FSC considered and made reference to recent disclosure guidance released by the Hong Kong SFC (Securities and Futures Commission), as well as the EU’s SFDR (Sustainable Finance Disclosure Regulation).

The FSC’s new rules for ESG funds are outlined here.