衝擊投資觀點|Sustainability and development: Great bedfellows

(原文由唐鳳政委刊載於天下雜誌

Through ESG, more and more Taiwan companies have become the new force of sustainable development. At the same time, the challenges are ever increasing. How can the government promote green economy post-epidemic?

In my last column, I introduced the “Quintuple Stimulus Voucher.” By the end of October, the total number of paper and digital vouchers issued exceeded 19 million. Now that pandemic control measures are gradually easing, shops around Taiwan are filled with customers.

At the same time as spurring consumption, we are working out how to transform the turbulence brought about by the pandemic into a new impetus to shepherding the economy towards sustainability. One solution shown to work in Taiwan, which combines industrial innovation and sustainable development, is the rapidly developing ESG and impact investment.

ESG means incorporating “environment,” “social responsibility” and “corporate governance” into an evaluation criteria ensuring business operations have a positive impact on society and individuals. Over the past decade, ESG has become an indispensable part of corporate development. In 2020, the Taiwan Financial Supervisory Commission built upon this foundation in successively promoting the “Corporate Governance 3.0-Sustainable Development Roadmap” and “Green Finance Action Plan 2.0” to accelerate the sustainable development of Taiwan industry from the perspective of corporate governance and financial investment.

Ching-te Lai, the vice-president of Taiwan, participated in CommonWealth Magazine CSR Award 2021. (Source: Ming-Tang Huang)

The measures adopted by the roadmap include renaming the current corporate social responsibility report to “Sustainability Report or ESG Report,” promoting the publication of all reports in English and strengthening third-party certification from 2023 onwards. In addition to the existing food, chemical, finance and insurance industries, as well as listed companies with capital exceeding NT$5 billion (US$179.9 million), all listed companies with capital exceeding NT$2 billion will need to produce a sustainability report.

The plan, which expands the development of green financial products and services, is an important step taken by Taiwan to promote ESG. In May 2021, the Taiwan OTC Buying Center established a special board for the “Sustainable Development Bond” system. In conjunction, Taiwan’s first batch of socially responsible bonds were issued and listed on the OTC. Social performance and ESG information revealed that all public equity banks will issue green/social responsibility/sustainable development bonds within four years.

Through ESG, more and more Taiwan companies have become the new force of sustainable development. At the same time, the challenges are ever increasing. From coronavirus and climate change to the mental health of the younger generations, the world’s major risks include a variety of environmental and social issues.

This year marks the World Economic Forum’s (WEF) 51st anniversary, and its theme “The Great Reset” indicates the gathering of stakeholders and cross-domain cooperation to establish “stakeholder capitalism.” It is heartening that via the efforts of Taiwan’s public sector and participants from all walks of life, the rapid rise of the ESG concept in recent years is one of the acts bringing industry and stakeholders together.

(Source: SERT’s website)

One example is the “Social Enterprise Revolving Trust” (SERT) initiated by Taiwan’s private sector. SERT boasts a value of NT$200 million, and is Taiwan’s first charitable trust to invest in social enterprises. It also helps social entrepreneurs obtain seed capital for entrepreneurship. In the past five years, SERT’s total investment and sponsorship has surpassed NT$15 million. In addition, it has made equity investments in five social enterprises (SEs) and has supported numerous social innovators through sponsorships, action projects and scholarship programs.

During this process, SERT has observed that SEs often have additional communication costs due to gaps in social missions, as well as the perception of company operations whilst facing market pressures. This year, SERT and its strategic partner KPMG have jointly designed the “Social Impact Preferred Stock (SIPS).”

The investment mechanism of SIPS aims to utilize the ability of “special stocks” to negotiate investment conditions. Furthermore, in order to secure the active participation of stakeholders, the company’s articles of association lock in its social objective and add an influence item to the board meeting agenda so as to assure the tracking of the social mission’s achievement. In July, SERT successfully launched its first “Social Impact Special Unit” investment.

As the saying goes: “If you are not a part of the solution, you are a part of the problem.” Through ESG and impact investment, Taiwan is getting to the heart of the matter in charting a new post-pandemic course through which sustainability and development play an equally important role.

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