Since the Paris Agreement came into effect and the United Nations Sustainable Development Goals were released, in the wave of global sustainable development, governments around the world have successively introduced policy tools for low-carbon transformation based on the original voluntary environmental labeling system, in order to promote the substantial transformation of economic activities to a greater extent. In line with this trend, political and economic leaders as well as business operators are eagerly responding to the Paris Agreement, and making sustainable development declarations to showcase their strategic vision and maintain competitiveness. Many enterprises and financial institutions claim to have incorporated ESG factors into their daily operations and product development processes, and have established an overall corporate “sustainability profile” through sustainability information disclosure to enhance their bargaining power in the production and sales value chain, which can even help raise capital in the capital market that values ESG.
However, in the capital market where sustainable reporting and sustainable financial products (including but not limited to green bonds) are gradually gaining popularity, the public, citizen groups, and capital market participants are also beginning to pay attention to whether the sustainability images disclosed by companies are truthful, or whether there are situations of greenwashing. The core of sustainability information disclosure lies in the authenticity of the sustainability information and whether the information claiming to have sustainable characteristics/sustainability is truthful and conforms to credibility standards or guidelines; once there is a significant violation of the principles above, it is likely to constitute greenwashing. The occurrence of greenwashing in the capital market may result in negative effects of economic inefficiency, such as the resource crowding-out effect of greenwashers’ recipients of funds, loss of confidence in sustainability transformation among financial institutions and investors, and inability of enterprises interested in promoting sustainability transformation to effectively obtain necessary funds for transformation.
To avoid the negative impact of greenwashing, it is particularly important for capital market regulatory authorities to manage and prudently supervise sustainability information. As an example, the European Union (EU), a global leader in sustainability initiatives, released the Sustainable Finance Disclosures Regulation (SFDR) in 2019 to define the framework of sustainability information that financial market participants and financial advisors must disclose to avoid the erroneous flow of funds to greenwashing enterprises. This helps investors evaluate how sustainability risks are incorporated into their investment decision-making process. In 2020, the EU developed the world’s first sustainability classification standard (EU Taxonomy), which defines economic activities that can support sustainable development and guide capital investment correctly. The Corporate Sustainability Reporting Directive (CSRD), which was re-issued by the EU in 2021, requires companies to provide accurate and comprehensive sustainability information and limited assurance from third-party organizations to enhance transparency in information disclosure.
Referring to the EU Taxonomy, in order to effectively guide capital flows toward sustainable economic activities, the Financial Supervisory Commission (FSC), together with relevant government agencies, released the “Reference Guidelines for the Recognition of Sustainable Economic Activities” in 2022, and released its second version at the end of 2024 to assist industry entities and the financial industry in communicating in a common language and identifying sustainable economic activities, thus enabling financial institutions and investors to make correct investment and financing decisions. On the other hand, to prevent greenwashing and avoid confusing investors’ judgments, the FSC released the “Reference Guidelines for Financial Institutions to Prevent Greenwashing” in 2024 which defines “greenwashing” as including false content, exaggeration, selective disclosure of positive effects or the hiding of important negative information, etc., and explains the principles that financial institutions themselves or the financial products and services they provide should comply with when making statements related to “sustainability” or “green” to the outside world. In addition, the FSC revised the “Regulations Governing Establishment of Internal Control Systems by Public Companies” and the “Criteria for Evaluating the Effectiveness of Internal Control Systems of Public Companies” in 2024. Starting from 2025, TWSE and TPEx listed companies are required to include the management of sustainability information in their internal control systems, and make it a necessary annual audit item to improve the quality of sustainability information disclosure, in order to strengthen relevant accountability mechanisms.
According to the author’s observation, although sustainability information disclosure in Taiwan has flourished under the policy expectations of various industry regulatory authorities, international supply chain competition pressure, and social expectations for sustainable development, there have been phenomena such as a lack of significant and substantive disclosure of information, and only making written statements for sustainability evaluation without deepening sustainability management. Although measures such as internal control and external third-party assurance can be expected to curb greenwashing in the future, given that the interpretation of sustainability information involves a wide range of economic, environmental, and social affairs and requires a certain level of expertise (including but not limited to understanding sustainability management practices, understanding the significance of the industry, and even key technologies for sustainability transformation in specific industries), and that the term green is only an adjective rather than a performance language, it cannot be ruled out that there may be subjective doubts when interpreting sustainability information in the absence of scientific or consistent performance standards.
Based on the viewpoints above, the author suggests that the government should continue to encourage the disclosure of basic information on sustainability activities and performance, while working toward reducing the incentives and channels for greenwashing. The suppression measures may include promoting the in-depth construction of sustainability information capabilities, such as understanding the carbon reduction technology roadmap defined by specific industry levels of sustainable economic activities, expanding reference guidelines for identifying sustainable economic activities and deepening technical details, encouraging enterprises to reduce symbolic declarations of green adjectives, and disclosing substantive environmental performance and impact data, in order to facilitate cross-enterprise comparisons. These measures are beneficial for enterprises to focus on improving their actions that truly contribute to sustainability transformation, and also provide guidance for financial institutions’ in-depth engagement in investment and financing activities such as providing financial products or funds, in order for Taiwan to achieve a positive cycle of demand and supply of funds for sustainability transformation.