Extreme climate changes, the COVID-19 crisis, geopolitical tensions, and global inflation, coupled with the international net-zero carbon emissions trend, have raised questions about the path toward sustainability in Taiwan. The Risk Society and Policy Research Center of National Taiwan University (NTU RSPRC), in collaboration with Fubon Financial Holding CO., Ltd. and Fubon Cultural and Educational Foundation, hosted the 2023 Fubon Forum on Sustainable Future, centered around the theme of "Key Transformations for Taiwan in the Face of Multiple Global Crises". Building upon the backdrop of the Global Risks Report 2023, which was recently released by the World Economic Forum, the forum examined the complex, multiple crises brought about by the COVID-19 pandemic, severe climate changes, geopolitical tensions, and global inflation, and explored how Taiwan can rethink its future positioning and build resilience in its society, economy, and energy under the pressures of net-zero transition and climate emergencies.
The opening speech was delivered by Chairman Daniel Tsai of Fubon Group on behalf of the hosting organizations. Tsai highlighted the multiple risks and challenges faced by Taiwan, and proposed solutions for all industries to address issues such as environmental justice, low-carbon, net-zero society, and just transition. Therefore, this year’s forum was renamed "Fubon Forum on Sustainable Future", which aims to forge social consensus and meaningful dialog in order to move toward a future of transformation. Vice Premier Wen-Tsan Cheng of the Executive Yuan expressed that since the Taiwanese government officially announced the "Taiwan's Pathway to Net-Zero Emissions in 2050" last year, it has been actively promoting four major transformation strategies in energy, industry, lifestyle, and society. The Executive Yuan and its affiliated departments have seamlessly worked together to establish a solid foundation for Taiwan's energy, industrial policies, and technological transformation, and they believe in leading Taiwan toward a future of net-zero transition. Vice President Ching-Te Lai gave the concluding remarks, emphasizing that climate change poses enormous challenges to Taiwan and the world, but it also brings opportunities. By combining technology research and development with climate legislation, Taiwan has launched four transition strategies for energy, industry, lifestyle, and society, as well as key strategies including wind power, solar power, hydrogen energy, advanced energy, energy storage, and carbon capture, utilization, and storage (CCUS), and aims to realize green business opportunities along the entire industry chain through cross-sectoral and cross-disciplinary collaboration.
The first session was titled "Green Finance Action Plan 3.0 -- Climate Change Risk Database" and featured four speakers, sequentially: Jean Chiu, Vice Chairperson of the Financial Supervisory Commission (FSC); Ching-Pin Tung, Professor of the Department of Bioenvironmental Systems Engineering, National Taiwan University (NTU); Chuan-Hsing Lin, Executive Vice President of and Adjunct Professor of the College of Management, National Taiwan University; and Tim Kuo, President of Taipei Fubon Commercial Bank. The session ended with a comprehensive discussion moderated by Dr. Ching-Cheng Chang, a research fellow at the Institute of Economics of the Academia Sinica.
Firstly, Vice Chairperson Jean Chiu provided an analysis of the FSC's current focus and future plans. She asserted that climate-related issues are currently a top concern for everyone and that there is great enthusiasm and action towards such issues. Net-zero emissions by 2050 is now a globally shared goal and value, and she expected that it can be accomplished through public-private collaboration. Chiu also underscored the significance of having systematic and accurate data as the source of knowledge and power. A scientifically managed database is required, especially for the Task Force on Climate-related Financial Disclosures (TCFD). The TCFD framework utilizes a precise and scientific process to transform the impact of companies in production and finance related to climate into actionable insights. Additionally, Chiu not only shared how the government and the FSC promote and assist sustainable practices in the financial industry and listed companies but also highlighted that while the financial industry's contribution to GDP is not high, its assets are five to six times the overall GDP. This also implies that the financial industry's assets are closely intertwined with other industries, thus risks are interconnected as well. In other words, changes in assets represent risks of the financial industry, and risks of companies are risks of financial institutions. However, if the financial industry can leverage its investment and financing capabilities to assist industries in positive development, it can create opportunities for the industry. Listed companies, as they are larger in scale, their operational direction and emission reduction goals can be understood through their carbon emission disclosure. Within the industry chain, larger companies can assist smaller ones, parent companies can assist subsidiaries, thus delivering better carbon management practices.
Disclosing carbon emissions is crucial and requires accuracy, which can only be attained by complete assurance. The disclosure must be presented in the annual reports or sustainability reports, the former being a legal requirement and the latter being mandatory for OTC securities exchanges. The financial industry, as a leading sector, plans to conduct TCFD-aligned disclosures at the end of June every year since 2023. These data should be collected and compiled by the government. Meanwhile, FSC is also continuously promoting the assessment of sustainable finance to help the financial industry better understand its major risk coverage items, further improve its ESG management, and assist in the transformation of other industries. Chiu also pointed out that the financial industry has the capacity to design products, such as perpetual bonds and sustainability-linked loans (SLL), which can help reduce corporate carbon emissions. In terms of databases, the government can integrate report data and credit-related data of the financial industry, which will enable future investment analysis to be made on a scientific basis. This assists with risk management in the supply chain on the one hand, and on the other, enables the public to understand the current development path on the same benchmark through data disclosure. As climate risk management is a massive undertaking, every department needs to play a role in assisting data access, making the data transparent, and maintaining consistency in format and standards to allow smooth execution of risk management across industries.
From an academic perspective, Professor Ching-Pin Tung analyzed the data requirements for climate risk assessment. Unlike scientific research, the practical application and actions associated with climate change cannot be repeatedly experimented on. Therefore, the quality and format of data, as well as how data is generated and connected to industries, are crucially important. To assess risks, data not only needs to be obtainable and verifiable, but also requires the existence of national databases and an integrated system for data comparisons. This corresponds to the global demands and development trends for climate change risk databases. The contents of the database can be divided into four levels: data, information, knowledge, and intelligence. The tool for data conversion and integration into corporate governance still requires the establishment of interdisciplinary methodologies. Tung used the insurance industry as an example and pointed out that addressing climate change is not like preventing a natural disaster. With no prior experience as a reference, its impact could be more severe than expected. Due to insufficient historical experience, only scientific methods can be used for estimation, yet such estimation data remains scarce and have not been integrated in Taiwan.
Tung also pointed out that most hazard information and scenario estimation data currently require government to carry out the integration. If there is neither consistent data and methods nor a common database for comparison, then only procedures can be audited, whereas performance and results cannot be ascertained. Therefore, data and information must flow smoothly across sectors and be systematically integrated in the transmission process in order to make Taiwan's transformation more effective. Tung also emphasized the need to distinguish the physicality, interdependence, and corresponding scenarios of the transformation risk and physical risk when adding scenario analysis to the TCFD strategy. Taiwan's overemphasis on corporate inventory is also open to question, especially when the focus of transformation in European and American countries lies in carbon inventory or carbon footprint of products (CFP). This not only involves the emission coefficient of the electric power but also the carbon inventory or carbon footprint from raw materials to products. The government should also promptly promote the type III environmental product declaration (EPD) to provide a good architecture for future database systems. In terms of how data can enter each industry, besides considering information security issues, the format and transmission of the data are also important. Tung added that the third National Climate Change Adaptation Action Plan should also begin to consider how relevant authorities can help companies produce data and provide customized data for corresponding industries.
The third speaker was Chuan-Hsing Lin, Executive Vice President of KPMG. He firstly introduced the trends of TCFD framework in the international and Taiwanese contexts, and then shared practical cases and applications. According to KPMG's biennial survey and research on the publication and content of global sustainability reports, Taiwan has achieved good results in implementing the Global Reporting Initiative (GRI) standards, stock exchange regulations, and the Sustainability Accounting Standards Board (SASB) standards under the government's drive. Taiwan has also seen significant progress in the introduction of the TCFD framework: in the 2022 survey, 67% of companies adopted the guidelines of the TCFD framework. Among the top 100 companies, 43% of them declared that they follow TCFD framework on climate-related risk disclosure. However, among those who disclosed based on Regulations Governing Information to be Published in Annual Reports of Public Companies, only 8% used scenario analysis and 1% included quantitative analysis of financial impact, indicating that there is still room for improvement compared to the top 250 companies globally. Lin also pointed out that the assessment of climate-related risks is mainly related to scenario analysis and remains at a stalemate both domestically and internationally. In addition, regarding the nine climate-related data disclosure items that listed companies are required to follow, the overall implementation is still mainly focused on compliance.
Moreover, scenario and financial quantification analysis remains a crucial focus in practical application, and is an unavoidable issue in discussing climate change databases. Climate change databases can address the practical difficulties faced by the financial industry, and the implementation criteria encompass data quality, feasibility, manageability, consistency, and transparency, among which data quality is particularly important. Data quality can further be divided into primary and secondary data. The former is self-researched data, while the latter can be obtained through databases. In the face of multiple risks that necessitate database usage, it is imperative to consider how to integrate and satisfy management implications. Climate change risk databases can be used not only for risk management to avoid or reduce risks, but also to explore green opportunities, e.g., investment credentials and opportunities such as green revenue, low-carbon transition scores, and patent analysis of low-carbon technologies. Lin emphasized that in implementing the use of databases, attention should be particularly paid to green opportunities. In addition, evidence from business cases, the FTSE sustainability index, and the MSCI Climate Value-at-Risk (CVaR) illustrate that a single database cannot cover all analytical content. Finally, Lin reminded about the importance of biodiversity to companies and the attention devoted to Task Force on Nature-related Financial Disclosures (TNFD) in the international arena, suggesting that Taiwanese companies should pay timely attention to TNFD and simultaneously note the interactive application of the database on TNFD and TCFD.
The final speaker was Tim Kuo, the President of Taipei Fubon Commercial Bank (hereinafter referred to as “TFB”). First, he discussed the three lines of defense against climate risk, which are commonly used in the governance framework of the financial industry. His started from the report production by credit and investment business units, to the inspection of the correctness and applicability of data by legal compliance and risk management units, and finally to the regular audits of the processes by the board of directors. The governance framework not only connects with performance but also needs to be incorporated into the management mechanism. For example, the results of ESG implementation need to be reported to the board of directors every six months, and the progress of ESG goals of various units will also be tracked through regular meetings every quarter. In terms of short-term goals, in addition to the green loans growing to over 19% this year, TFB will also be launching its first TCFD report this year. As for medium- and long- term goals, Kuo expects the company to achieve the goal of the Science Based Targets (SBT) by 2030, commit to using 100% renewable energy (RE 100) by 2040, and achieve net-zero carbon emissions by 2050.
In guiding green finance, TFB mainly implements climate action from four aspects: improving climate risk management, promoting low-carbon transition in finance, establishing a low-carbon operation model, and exerting climate influence. In practice, TFB continues to exert influence through green bond issuance, green investments, and green financing. In terms of risk management assessment and identification, the company has formulated relevant climate risk management policies and designed a set of green due diligence (GDD) to understand customers’ green investment and facilitate engagement strategy. This practice will no longer provide loans for high-polluting projects in carbon intensive industries, unless they are used for industrial transformation, green energy development, carbon reduction, and other similar initiatives. Kuo mentioned that through dedicated and specialized audit processes and a professional team, combined with the GDD and ESG rating systems, TFB can effectively use its financial influence to assist and guide companies in their transformation. However, currently there are no climate-related rating agencies in Taiwan. Therefore, the establishment of such agencies in the future would help in the execution of investment and financing in the financial industry. In addition, there is still room for improvement in the frequency and quality of climate-related data disclosure. If companies improve the quality and frequency of climate-related data disclosure, it will not only enhance their own understanding in conducting financial carbon inventory, but also that of their clients.
The comprehensive discussion of this session, moderated by Professor Ching-Cheng Chang, can be summarized into two aspects: firstly, starting with the establishment of a climate change risk database, discussing how the government can play a role in developing the roadmap for promoting Green Finance Action Plan 3.0.; secondly, from an academic perspective, exploring how to strengthen data quality and its applications. The first aspect is a process of moving from nothing to something, making data available, affordable, and accountable; the second aspect is approached from the perspective of industry application and governance, which includes multiple experiences in quality improvement, integration, analysis, and comparison of disclosed data. Moreover, it explores how companies in the financial industry can issue green bonds, undertake green investment and financing, establish growth targets, and construct effective evaluation systems. These methods and practices targeted toward the database are a process of moving from something to something better.
Chang further questioned the guest speakers on the ways to improve data quality while ensuring platform interoperability and data integration through government and academic efforts. He asked about the analytical tools, metrics, comparisons and other methodologies that could be utilized. Furthermore, he inquired about how the government and academia can assist companies in achieving data interoperability. As an example, he asked that in terms of regulatory or value-added requirements, what else needs to be reinforced during the transformation process.
Firstly, Jean Chiu responded that from concept to practical action, having a solid foundation of data is essential. Although the industry and financial sector have some experience in risk management, climate risk management is a long-term issue with insufficient historic data for reference. For instance, when estimating climate risk for 2050, every country has expressed difficulty due to the lengthy timescale and limited data available, making it difficult to use the estimation as a source for financial capital calculation. In other words, estimation and stress tests can only serve as reference materials for scenario analysis. This clearly shows that the data-driven refinement process requires industries to take time to adapt. As we pursue sustainable transformation, it is important to begin with the data available, voluntary disclosures, national data from relevant authorities, and inputs from industries and think tanks as sources for scenario analysis. We can then gradually move toward achieving data adequacy and accuracy. This is an essential adjustment process. Once voluntary disclosures become regulated, more credible data can be added to databases.
Ching-Ping Tung responded by pointing out that everyone is talking about net zero, but the immediate risk at present is actually carbon neutrality. Therefore, clear and distinct definitions need to be established before policies can be further influenced. For example, carbon should be viewed as an indicator rather than the basis of any indicator. In terms of data construction, it is also important to distinguish whether it is used for disaster prevention or climate change. Different definitions of data will result in different outputs. Any application of data should be based on science, but different models or data may generate different results, making consistency vital. In conclusion, for the development of a database, correctness, scientificity, consistency, comprehensiveness, and internationality are all indispensable. Tung added his insight that databases are not only helping industries, but they themselves are also becoming an industry.
Chuang-Hsing Lin responded by emphasizing the importance of data quality. For example, the quality of the data for calculating investment and financing can generally be classified into two categories, namely, the disclosure items that have been acquired and the ones that are still unavailable. The former mainly relies on the actual data in the database, while for cases where no data is available and estimation is required, there are different levels of estimation in practice. These are all integration work for companies and must be accompanied by internal operational specifications to ensure that the time, scope, boundaries, calculation methods, and other elements of the data are consistent.
Finally, Tim Kuo expressed his views from the perspective of a professional in the financial sector, stating that traditional risk models have already been established and structured to some extent, but there is still room for improvement when it comes to estimating future climate risks. Particularly, how to incorporate potential risks in Taiwan and around the world into comprehensive assessments remains an unresolved issue that will continue to impact the operations of banks in the future. Therefore, he looks forward to collaborative efforts with all sectors to jointly optimize the risk model.
Chang concluded that we are currently facing multiple risks, with climate risk being the priority concern. From the presentations in this session, we have gained insight into how to utilize data effectively, whether starting from scratch or improving existing databases. With this knowledge, we can effectively apply databases in the face of multiple global risks, working toward a collective transformation and even creating new opportunities for innovation and commerce.
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