European Union (EU) Social Taxonomy and Sustainability Transition
The theme of the third session was "European Union (EU) Social Taxonomy and Sustainability Transition", which was moderated by Sue-Ching Jou, Professor of Geography at the National Taiwan University (NTU). The session began with an introduction by Chien-Hung Tung, Deputy Minister of the Interior. The discussants included Chi-Jui Huang, Professor of Finance and Cooperative Management at NTU and Associate Professor Ping-Lung Hsin, Associate Professor of the Graduate Institute of National Development at NTU.
Deputy Minister Tung portrayed the framework of the EU Social Taxonomy and emphasized its reference value in promoting national sustainability transition with respect to Green Building Material Labeling System, corporate sustainable development, labor rights, and so on. Then, he analyzed the process, techniques, and energy-saving methods involved in promoting green construction in social housing.
In general, Taiwan faces the challenge of uneven population density, so the social housing policy is adopted to provide living spaces for young people to return to their hometowns. Therefore, young people have the opportunity to start businesses and develop careers at their hometowns. These housing programs not only meet the residential needs of the citizens, but also strengthen social and ecological resilience to create low-carbon living environments.
For instance, the Kaohsiung City Government invited Taiwan Semiconductor Manufacturing Company (TSMC) to set up a fab at Kaohsiung in order to drive the development of related industries. However, what followed was a shortage of labor and increased environmental pressure. In response to these problems, TSMC adopted green building construction methods and systematic architectural designs to control energy consumption and carbon emissions during the construction process. The core of green building design lies in energy conservation and efficient operations. In collaboration with the Ministry of Economic Affairs, TSMC improved the use of energy-saving equipment and scientific systems to reduce both fixed and operational carbon emissions. The application of smart meters and energy-saving equipment has decreased the operating cost of social housing while developing circular economy models. Therefore, social housing serves as a crucial node in developing a circular economy. Through resource sharing and system integration, the recognition of green climate or social bonds for green building material labels demonstrates the international impact of this strategy.
Next, Professor Huang Chi-Jui and his research team at the Center for Corporate Sustainability in the College of Business, National Taipei University examined the content and influence of the EU Social Taxonomy. Professor Huang noted that the EU launched a major legislative initiative in 2018 and released the Taxonomy for Sustainable Activities in March 2020, followed by the release of the Social Taxonomy in March 2022. The six environmental objectives of the Social Taxonomy includes climate change mitigation; climate change adaptation; sustainable use and protection of water and marine resources; transition to a circular economy; pollution prevention and control, and protection and restoration of biodiversity and ecosystems. Moreover, the Social Taxonomy also highlights that labor rights should not be sacrificed during environmental transitions. In other words, the EU Social Taxonomy emphasizes the basic rights of employees and workers, including employment rights, living standards, community inclusion and sustainability. These standards have been fully reflected in European regulations and are linked to the United Nations (UN) Sustainable Development Goals. Professor Huang suggested that it was essential for Taiwan to continuously avoid significant violations and refer to the EU labor rights standards. This approach can ensure that labor rights are protected during environmental transitions while both promoting social benefits and economic development.
In terms of labor issues, Professor Hsin commented that the EU Social Taxonomy and Sustainability Transition emphasize labor rights. The EU standards focuses on labor participation, the elimination of labor inequality, and improvements in the minimum wage while emphasizing the need for creating a healthy and safe work environment through labor participation. Taiwan has comprehensive labor regulation system compared to other countries, such as Labor Standards Act, Minimum Wage Act, Occupational Safety and Health Act, Employment Service Act, and so on. However, these regulations are not fully complied with in domestic business environment , because penalty mechanisms of these acts are not effectively designed to identify illegal manufacturers. A low probability of illegal companies businesses being investigated and punished creates a low cost of non-compliance. Professor Hsin stated that legal penalty mechanisms should be strengthened to raise the cost of violations.
Professor Hsin also suggested that information disclosures, such as environmental, social and governance (ESG) reports, should be asked to guide investors and consumers to boycott companies that violate labor rights. Market forces can enforce companies to comply with labor-related regulations. However, the key lies in the content of the disclosed information and the degree of concern investors and consumers have for this information. Taiwan lacks strong labor unions, mainly because of a lack of labor education. Role conflict often exists between consumers and laborers; therefore, unions cannot be developed. Moreover, there are also issues related to migrant worker labor rights. Therefore, Professor Hsin argued that labor education should start at a young age to allow children to understand the social value of unions in promoting labor rights.
In the final comprehensive discussion of the session, Professor Sue-Ching Chou summarized that, from the EU Social Taxonomy and Sustainability Transition to labor relations, the process has undergone significant changes. As Professor Hsin mentioned, several issues, such as the split between workers and consumers, cannot be resolved solely through legal regulations. Professor Hsin suggested the need for in-depth exploration and improvements to adapt to the changing needs of the times.
Green Finance and Just Transition: The Financial Industry's Take on the Responsibility for Transformation
The theme of the fourth session was "Green Finance and Just Transition: The Financial Industry's Take on the Responsibility for Transformation," moderated by Wen-Chen Shih, Deputy Minister of the Environment. The session featured three speakers: a keynote speaker—Craig Churchill, Head of the Social Finance Program of the International Labor Organization; along with two discussants Bei-Ting Guo, General Manager of Taipei Fubon Bank, and Shi-Chieh Lin, Director of Center for Sustainable Finance Development, Taiwan Academy of Banking and Finance.
Mr. Churchill's presentation was titled "Just Transition Finance: Pathways for Banking and Insurance." He began by discussing the International Labor Organization (ILO), a UN branch that serves as a third party between governments, employers, and workers. The social finance program of ILO focuses on financial inclusion, sustainable investment, and impact insurance. Mr. Churchill discussed the appropriate work and social considerations related to climate transition and adaptation and emphasized the role of labor rights with respect to land and indigenous peoples' rights, social and employment co-benefits, skill enhancement and re-skilling, the provision of support for distressed workers and communities, and the protection of livelihoods and households. In addition, he stressed that the foundation of just transition finance lies in governance, participation, measurement, reporting, and completeness. Adopting just transition tools in banking and insurance activities and ensuring their compliance with the Net-Zero Transition Plan framework of the Glasgow Financial Alliance for Net Zero can provide practical guidance, connect relevant resources, and create a foundation for collaboration.
Mr. Churchill mentioned that just transition could promote an environmentally sustainable economy, as it involves maximizing social and economic opportunities, managing challenges faithfully, and considering social aspects, such as the effects on stakeholders, sectors, and vulnerable populations and regions. In addition, banks and insurance companies should enforce just transition policies to meet regulatory pressure, fulfill the expectations of investors and stakeholders, and avoid reputational damage. Furthermore, the core financial just transition activities in banks and insurance companies are to promote social dialogue and stakeholder engagement, which requires internal organizational understanding, commitment, and operational foundation, along with effective governance, comprehensive product offerings and processes, stakeholder and client engagement, and appropriate capital allocation for meeting local needs. Finally, banks and insurance companies need to measure and report their journey toward goals. They must effectively implement supportive strategies for just transition and monitor the processes and quality of clients and investment portfolios.
General Manager Guo presented the theme "Leading Green Finance to Create a Positive Cycle of Sustainable Finance." He began by outlining Fubon Financial Holdings' sustainability vision, which included four major strategies: decarbonization, digitalization, empowerment, and connection. The company has set a 2030 green investment goal to exert the impact of green financing and investments to accelerate the industry toward the national net-zero transition goal. At the policy level, the sustainability governance framework has been improved with senior managers setting top-down goal setting and bottom-up regular management and tracking mechanisms. A responsible finance team is in charge of implementing sustainability finance-related projects, with a dedicated green department being established to integrate the expertise and resources required for the exchange of sustainability knowledge and ESG education and training. In addition, regarding control, ESG screening and management mechanisms have been implemented for financing and investment operations to differentiated strategies and promote sustainability transitions. The differentiated strategies included proactively undertaking the business, encouraging transformation, and gradual withdrawal, such as establishing ESG review and assessment processes for credit operations to conduct ESG risk evaluations and credit investigations.
Mr. Guo also mentioned the ESG risk assessment process for investment operations with respect to ESG inspections and assessments. Moreover, Mr. Guo highlighted the importance of bilateral discussions between regulatory authorities and enterprises. This included participating in regulatory authorities' sustainability projects, assisting in the completion of climate risk management regulations, evaluating corporate clients' ESG practices and identifying their needs and weaknesses, organizing forums and lectures to help businesses build carbon-reduction capabilities, and offering corporate clients diverse sustainable financial products and services. These examples ranged from serving as the manager for the government's first sustainable bond, pioneering sustainable financing products in Taiwan, and undertaking the first green or social syndicated loan in Vietnam. Mr. Guo discussed how the Taipei Fubon Bank supported the rise of emerging energy technology, promoted industrial transformation and upgrade, and innovated financial products while leading Taiwan toward national net-zero goals and assisting the sustainability transition of industries with funds.
The bank has been recognized as the International Financing Review (IFR) Asia's best-syndicated loan arranger in Taiwan and Asiamoney's the best bank for ESG, to create a positive cycle of sustainable finance, the Taipei Fubon Bank has implemented goal management by setting short- and medium-term goals and long-term strategies.
The third presenter, Director Shi-Chieh Lin, mentioned that just transition involves not only energy needs but social transition for those disadvantaged groups. The context of just transition finance ranges from low-carbon transition to transition finance, addressing issues such as labor, employment, community, regional economic transformation, natural eco-environment, and social resource distribution. The structure of just transition finance includes four aspects: industry, environment, social resource allocation, and cognition. Moreover, it encompasses just transition funds from public sector funding, financing from banking products and services, and investments from the capital market, along with public funds, co-financing, and impact investments. In this approach, the goal is to integrate private and public efforts and address the risks in the sustainability transition.
Director Lin continued the discussion on operational strategies for banks to introduce just transition finance, which included incorporating organizational management and net-zero strategies of the just transition dimension, ensuring the attention and commitment of the board and senior decision-makers, and introducing various aspects of just transition into the financing design and financial product development, referencing relevant international standards to design internal processes and products, and constructing dynamic engagement among stakeholders while enabling due diligence, risk monitoring, information disclosure, and talent training.
Financing contract engagement involves designing financing conditions, developing performance-linked and dynamic engagement mechanisms, and setting interest rates. Moreover, sustainable financial assessments assist domestic financial institutions in promoting just transition by incorporating the principles of just transition finance into ESG-related evaluation indicators. This guides financial institutions to help their corporate clients move toward just transition and introduce just transition into the corporate culture of the financial industry from the top down. Finally, setting diversified evaluation indicators from economic, industrial, and social perspectives can guide corporate clients and the financial industry with capital.
Climate-Related Financial Disclosure Survey: Key Actions for and Challenges in Industry's Net-Zero Transition
The fifth session, "Climate-Related Financial Disclosure Survey: Key Actions for and Challenges in Industry's Net-Zero Transition," was moderated by Jia-He Lin, Associate Professor of Law, National Chengchi University, with the discussants being Hou-Cheng Wang, Director of Comprehensive Planning Department, Ministry of Labor, Han-Bang Su, Vice President, Taiwan Research Institute, and Hsin-Hsuan Sun, Researcher, Environmental Rights Foundation.
Director Wang analyzed the challenges and opportunities of the brown economy supply chain. He noted that transition finance is a crucial driver for Taiwan to meet the net-zero emission target by 2050. He highlighted that the EU Carbon Border Adjustment Mechanism (CBAM) will lead to Taiwan's export manufacturers experiencing challenges related to carbon emissions and environmental human rights. Additionally, CBAM will offer new challenges and opportunities to supply chain companies. Director Wang further explained that, under the trend of net-zero sustainability, traditional brown economy supply chains are facing transition pressure. Thus, as an export-oriented economy, Taiwan must address carbon footprint verification of major markets, such as the EU and the United States of America (USA), while paying attention to avoid environmental and human rights risks.
The mismatch between labor supply and demand and the lack of skilled professionals pose major challenges in the transition process, particularly for vulnerable groups, such as women and the elderly. Decent work is the core focus of the Ministry of Labor, and the insufficient social dialogue mechanisms and low unionization rates are current issues that need to be addressed urgently, especially in small and medium enterprises. The Ministry of Labor should actively encourage green talent training and transition and collaborate with academic institutions to establish green talent cultivation centers and offer relevant courses. These initiatives aim to enhance employees' skillsets and their adaptability to changing work environments while ensuring opportunities for on-the-job training and career development and avoiding structural unemployment resulting from the transition process. In the brown economy supply chain transition, Taiwan must emphasize work quality, green talent training, and green energy technology development to meet the target of so-called "Leave no one behind".
Vice President Su stated that improving corporate information disclosure is crucial for promoting global sustainable development, particularly with respect to carbon emission costs, the cost gap due to information asymmetry, and the green supply chain, while learning from the EU's scientific management approach. Mr. Su pointed out that internalizing carbon costs is essential to achieve global carbon cost consistency.
The EU controls carbon emissions through the CBAM and requires imported products to meet carbon emission standards. Information asymmetry is another major challenge for enterprises, resulting in wrong decision-making and the risk of climate litigation. Strengthening corporate information disclosure can reduce these risks and enhance the transparency and efficiency of the capital market. Taiwan is an export-oriented economy, and international trade is crucial for its economic momentum. Over 60 % of the world's top 2,000 companies have established carbon management mechanisms. If Taiwan's companies do not actively transition to a circular economy, they risk being excluded from the supply chain. Furthermore, Taiwan's green supply chain relies on corporate information disclosure and green competitiveness to maintain its international status and ensure sustainable development in the export market. The EU highlights the importance of scientific management for achieving its sustainable goals through data-driven approaches and rolling reviews. The EU developed a sustainability taxonomy and internalized it into business operations and financial markets to ensure that companies adhere to green standards. This systematic management approach is a significant reference for Taiwan. However, Taiwan needs to strengthen its systematic management rather than merely develop an outline for its vision. Effective carbon management and information integration can be essential tools for maintaining green competitiveness in the context of Taiwan.
Researcher Sun discussed the challenges and opportunities of the brown economy supply chain. He explained that the initial vision of sustainable growth was a thriving electric vehicle market without pollutant emissions. However, in reality, electric-vehicle batteries depend heavily on high-pollution nickel mines, e.g., in Indonesia's nickel ore industrial areas. This has sparked social discussions on true sustainable development.
The EU has recognized these issues and has responded with strict legal measures. For example, the EU's Corporate Sustainability Due Diligence Directive, passed in March 2024, requires companies to conduct thorough due diligence on all parts of their supply chains to ensure the implementation of environmental protection and human rights standards. The directive imposes stringent regulations on companies within the EU and global enterprises in trade with the EU. This urges companies to establish communication mechanisms that allow stakeholders to actively request and obtain relevant information. This mechanism helps companies understand supply chain issues and take appropriate measures. As an export-oriented economy, Taiwan must face the challenges posed by these international regulations, and domestic companies must improve information disclosure and green supply chain management to maintain competitiveness in the global market. Learning from the EU's scientific management approach and adopting systematic management rather than merely outlining sustainability visions is crucial for Taiwan to address these challenges. Furthermore, Taiwan should draw on the EU's experience to strengthen corporate information disclosure and scientific management and enhance green competitiveness.
In the comprehensive discussion, Associate Professor Lin summarized that in the future, enterprises will be required to disclose information and manage green energy and carbon emissions in their supply chains, which will drive Taiwan's overall enterprise green transition. He stated that strengthening corporate information disclosure will help the country address important issues, such as carbon costs and information asymmetry, and play a crucial role in promoting true sustainable development and ensuring the protection of environmental and human rights.
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