The 2023 Released Survey on Taiwanese Companies' Actions on TCFD-aligned Disclosures--Challenges of carbon intensive industries in achieving net-zero transition

Difficulties arise with companies' net-zero commitments! Less than 20% of companies follow TCFD to disclose climate-related financial risks

As the impacts of climate change continually intensify, company stakeholders and investors have increasingly turned their focus toward the Task Force on Climate-related Financial Disclosures (TCFD). The Risk Society and Policy Research Center (RSPRC) of National Taiwan University has conducted a survey to investigate this crucial issue. On 23 May, 2023, the "TCFD Survey Report: Challenges of Carbon Intensive Industries in Achieving Net-zero Transition" was published.

The survey findings are as follows: less than 10% of Taiwanese companies have set net-zero targets, less than 20% of companies comply with the TCFD framework to disclose climate-related financial risks, 80% of companies lack professional evaluative work units or employees, half of the companies reported have not experienced pressure to make a transition in their energy use, and only less than 20% of companies are engaged in low-carbon innovation. It is therefore evident that companies must be more proactive in establishing sustainable development as an area of competitive strength and that the government must strengthen its policy guidance on industrial low-carbon transition.

As of May 11, 2023, there were over 4,400 global organizations or companies participating in the TCFD initiative, and 130 of these were from Taiwan. This highlights the successive response to and voluntary adoption of climate-related financial disclosure proposals, with participants taking responsibility for sustainable development as a member of the global community. Additionally, the International Sustainability Standards Board (ISSB), which was established at the 2021 United Nations Climate Change Conference (COP26), further considered the Sustainability Accounting Standards Board (SASB) and TCFD frameworks. In 2022, it released the draft of International Financial Reporting Standards (IFRS) S1 and S2, and ultimately developed a global standard for the disclosure of sustainability-related financial information for investor requirements. This indicates that there is a shift from voluntary to mandatory disclosure of a company's resilience in facing climate change risks; moreover, such disclosure has become a crucial competitive advantage for companies wanting future success.

Following the first TCFD survey of Taiwanese companies last year in 2022, the RSPRC this year expanded its sampling range and continues to conduct this survey. This survey was conducted from February to April 2023 and focused on Taiwanese companies with an annual revenue of over NT$100 million. 900 companies from key industries (manufacturing, construction, transportation/storage, real estate, and financial services) were selected through proportionate stratified random sampling. The perception of these companies toward the climate change and their progress in climate-related financial disclosures were analyzed, along with their practical action regarding energy, low-carbon, and sustainable transition strategy, to propose a recommended direction of net-zero strategy for Taiwanese companies.

Kuo Ya-Ting, a postdoctoral fellow from the RSPRC, noted that compared with the previous year's survey, after conducting this year's stratified sampling survey on companies from key industries, the proportion of Taiwanese companies making TCFD-aligned disclosures has risen from 8.7% to 14.3%, though still less than 20% (129 companies) had made TCFD-aligned disclosures. Additionally, the majority of them are grouped or listed companies, indicating that they are more willing to follow international trends. Conversely, the vast majority of Taiwan's small and medium-sized enterprises (SMEs) have not yet responded to the sustainability crisis stemming from climate change. It is proposed that the government must take further steps to help SMEs understand and establish metrics and targets for sustainable disclosure in the face of climate change, and provide guidance on how to take stock under the TCFD framework.

Director of the RSPRC, Chou Kuei-Tien, further explained that in the dimension of risk management, over half of the companies making TCFD-aligned disclosures do not use map information when assessing physical risks, and less than 10% implemented internal carbon pricing to assess transition risks. This demonstrates that most companies lack the capabilities to provide short-, medium-, and long-term sustainable strategies. It is suggested that companies should not rely on the standardized models from strategic partners but should adopt more proactive action on their own strategy, further disclosing the qualitative impacts of climate-related risks and quantifying financial impacts. This is the only way to effectively respond to potential crises such as asset impairment or supply chain interruptions under extreme climate conditions. This also allows companies to meet consumer expectations for low-carbon products and acquire the ability to sustain long-term profits.

The survey also found that companies engaged in TCFD-aligned disclosures are more likely to adopt low-carbon strategies, but overall, less than 20% of respondents have made low-carbon innovations in their products, processing, marketing, or organization. Facing the rise of a low-carbon economy, the biggest issue facing Taiwan's future transition toward low-carbon is the lack of existing government funds or policy support. Kuo Ya-Ting emphasized the need for substantial investment in capital and talent for low-carbon innovation, and suggested collaborative efforts between upstream and downstream supply chain operations, aiming for collective carbon reduction. Establishing product carbon footprints, from raw material inputs, through intermediate manufacturing processes to product packaging and transportation to develop low-carbon management strategies, and to avoid exclusion from the low-carbon supply chain and seize new profitable business opportunities.

Additionally, after the RSPRC team conducted a weighted grading of the TCFD framework, it was discovered that only half of the traditional carbon intensive manufacturing and financial industries complied better with the TCFD framework. Moreover, 80% of surveyed companies lack professional personnel to assess climate risks and tend to train existing employees rather than recruit new talent. This demonstrates that on the path toward net-zero emissions, most companies still need to strengthen internal talent cultivation to effectively implement the specialized TCFD framework, disclose climate-related risks and opportunities, entrench climate action into their organizational culture, and build climate-resilient strategies.

This survey also gained a deeper insight into the situation facing the transition toward renewable energy within these companies. Chou Kuei-Tien stated that the survey on corporate energy transition revealed that policy is indeed a primary pressure, but that around half of the companies still feel no pressure to transition toward renewable energy use. It is suggested that the government should tighten the Large Electricity Consumer Clause, expand the definition of large electricity consumers and increase obligatory capacity, enabling companies to actively assume their responsibility in the energy transition. After companies assess climate risks and opportunities, they are also more willing to adopt low-carbon energy measures or set targets. Evidently, climate-related financial disclosure is an urgent task for companies to catch up with, in order to accelerate their efforts in addressing relevant risks and opportunities, and to work together to achieve the goal of net-zero emissions by 2050.

Although Climate-related financial disclosure and the trend toward low-carbon are urgent issues for companies, the survey results indicate that less than 10% of Taiwanese companies have set net-zero targets. Therefore, the RSPRC calls upon companies to promptly incorporate the TCFD framework and disclosure governance mechanisms, actively train relevant talent, implement climate-related incentive mechanisms, conduct carbon inventories in scopes 1, 2, and 3, and set reduction targets. This will help companies evaluate their climate resilience and low-carbon transition capabilities, and establish key competitive advantages through sustainable development.

• For more information regarding the publication of the 2023 TCFD survey report, please refer to the live video on the official website, "TCFD Survey Report: Challenges of Carbon Intensive Industries in Achieving Net-zero Transition," the second session of the Fubon Forum on Sustainable Future on May 23.
• For the 2022 TCFD survey report, please refer to the "Risk Society and Policy Research Center (RSPRC) of National Taiwan University releases first report on survey of climate-related financial disclosure (TCFD) for Taiwanese companies."

Issue date: May 22, 2023