TWSE Market Insights

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In recent years, as global climate change, energy transition, and corporate sustainability governance issues have attracted increasing attention, ESG (Environmental, Social, and Governance) has gradually evolved from a corporate social responsibility concept into a core factor influencing capital markets and investment decisions. Governments, regulators, and international organizations around the world continue to promote sustainable finance policies and disclosure frameworks, driving the rapid growth of global ESG investment products, including ESG ETFs, green bonds, sustainable funds, and climate-transition-related products, all of which have become major development trends in financial markets in recent years.

However, as the ESG market has expanded rapidly, the market has also increasingly faced challenges such as inconsistent standards, uneven disclosure quality, and “greenwashing.” As a result, the global ESG market has gradually shifted from an early-stage development model focused on concepts and labels toward a more mature stage emphasizing substantive investment content, financial materiality, and measurable sustainability outcomes. Regulatory policies and market development trends have also diverged across regions. Europe continues to strengthen its regulatory framework and disclosure standards, while the United States has entered a period of adjustment influenced by political and market factors. Meanwhile, the Asia-Pacific region has become one of the world’s fastest-growing markets, driven by net-zero transition policies and rising energy demand.

Against this backdrop, this article explores the latest global ESG product market trends, differences among major regional markets, and key ESG product development themes for 2026. It further analyzes the current status and future outlook of Taiwan’s listed ESG ETF market as a reference for observing developments in international sustainable finance and Taiwan’s alignment with global trends.

According to the Global Sustainable Investment Review 2024 published by the Global Sustainable Investment Alliance (GSIA), global sustainable investment fund assets amounted to approximately USD 16.75 trillion as of 2024 under the stricter Responsible & Sustainable Investment (R&SI) fund disclosure standards. If all fund assets within the surveyed regions are included, total assets reached approximately USD 61.7 trillion.

GSIA specifically noted that the 2024 figures are not directly comparable with the approximately USD 30.3 trillion in global sustainable investment assets reported for 2022, primarily due to changes in methodology. In 2024, a stricter approach based on fund disclosures and legal documentation was adopted, significantly narrowing the statistical scope. Although this does not necessarily indicate an actual contraction of the ESG market, the revised figures are considered more representative and reliable.

From a regional perspective, Europe remains the world’s largest sustainable investment market, with ESG/R&SI assets totaling approximately USD 14.3 trillion in 2024, accounting for the vast majority of global sustainable investment assets. The United States accounted for approximately USD 1.6 trillion, Canada approximately USD 420 billion, and Australia and New Zealand approximately USD 366 billion.

1. Europe: Leading Through Regulation

In terms of regional distribution, Europe remains the world’s largest and most mature ESG market. According to the GSIA report, Europe’s sustainable investment assets reached approximately USD 14.3 trillion in 2024, ranking first globally. In recent years, the European Union has established the world’s most comprehensive sustainable finance regulatory framework through initiatives such as the Sustainable Finance Disclosure Regulation (SFDR), the EU Taxonomy, and the Corporate Sustainability Reporting Directive (CSRD). These measures have standardized ESG disclosure requirements while enhancing market transparency and comparability.

Over the past five years, the global sustainable finance regulatory framework has continued to evolve rapidly. As the ESG market expanded, regulators shifted from broad principle-based approaches toward greater emphasis on decision-critical information and anti-greenwashing measures. In particular, both Europe and the United Kingdom have strengthened rules governing ESG fund naming and disclosures.

In 2024, the European Securities and Markets Authority (ESMA) issued its Guidelines on Funds’ Names Using ESG or Sustainability-Related Terms, establishing unified ESG fund naming rules across the European Union. The purpose of the guidelines is to reduce greenwashing risks and enhance investor protection. Under the rules, funds using terms such as ESG, Sustainable, Green, or Impact in their names must allocate at least 80% of their investments to assets aligned with ESG characteristics or sustainable investment objectives. Such funds must also exclude certain industries and companies, including those involved in controversial weapons, tobacco, fossil fuels, or violations of the UN Global Compact principles. Furthermore, funds using stronger sustainability-related terminology such as “Sustainable” are subject to stricter investment restrictions and exclusion criteria to ensure consistency between fund names and actual investment content.

At the end of 2025, ESMA published a research report analyzing the impact of these naming guidelines on the European fund market. The study covered approximately 4,000 European funds using ESG or sustainability-related names and nearly 1,000 shareholder notification documents to examine how fund managers responded to the new rules.

The study found that approximately 64% of the funds chose to revise their names, primarily by removing ESG or sustainability-related terms, suggesting that some funds believed their investment strategies could not meet the new requirements. In addition, approximately 56% of the funds adjusted their investment policies, including adding fossil fuel exclusions and strengthening ESG screening mechanisms, indicating that some funds chose to modify their portfolios in order to retain ESG-related names.

The report also noted that funds with higher fossil fuel exposure were more likely to remove ESG labels, while funds retaining ESG-related names reduced fossil fuel exposure at a significantly faster pace than general funds. This suggests that ESMA’s rules have effectively encouraged funds to adopt higher sustainability standards in their investment strategies. Overall, ESMA concluded that the guidelines help improve consistency between fund names and actual investment content, reduce greenwashing risks, and strengthen investor confidence in ESG funds.

In addition, international regulatory priorities have gradually returned to the concept of materiality. Following the International Sustainability Standards Board’s (ISSB) release of climate and sustainability disclosure standards in 2023, the ISSB proposed further amendments in 2025 aimed at lowering implementation costs and improving practical feasibility. This reflects a broader shift in global ESG regulation away from broad disclosure requirements toward a stronger focus on substantive information such as financial impacts, climate risks, and corporate transition capabilities.

Overall, Europe’s ESG market has evolved from an early-stage emphasis on product quantity and ESG labels toward a more mature phase focused on information quality, climate transition capability, and measurable sustainability impact.

2. United States: Significant Political Influence

The United States remains the world’s second-largest ESG market, but in recent years its development has been significantly influenced by political, regulatory, and market factors, resulting in slower growth momentum compared with Europe.

According to GSIA, U.S. sustainable investment assets once reached approximately USD 17 trillion in 2020, representing a substantial share of professionally managed assets in the country. However, after regulators reassessed ESG fund definitions and disclosure standards and adopted stricter methodologies, U.S. sustainable investment assets were recalculated at approximately USD 8.4 trillion in 2022.

In recent years, the U.S. ESG market has gradually shifted away from an earlier focus on ESG labels and conceptual marketing toward greater emphasis on actual investment processes, financial materiality, and disclosure quality.

Unlike Europe, where market development has largely been regulator-driven, the U.S. ESG market has become highly politicized. Some Republican-led state governments argue that ESG investing may deviate from purely financial return objectives and have consequently restricted public pension funds from adopting ESG strategies. They have also pressured large asset managers participating in climate initiatives.

States such as Texas, Florida, and West Virginia have restricted government business with certain financial institutions on the grounds that those institutions adopted policies unfavorable to the fossil fuel industry. In addition, the U.S. Congress and state governments have increasingly investigated issues related to anti-greenwashing, antitrust concerns, and climate alliances, making ESG investing a focal point in broader political and ideological debates.

Regarding fund flows, U.S. sustainable funds have continued to experience capital outflows in recent years. According to Morningstar, U.S. sustainable funds recorded net outflows of USD 8.8 billion in the first quarter of 2024, with full-year net outflows expanding further to approximately USD 19.6 billion.

By 2025, U.S. sustainable funds had recorded net outflows for a third consecutive year, totaling approximately USD 21 billion and setting another historical record. In contrast, European sustainable funds continued to record net inflows during the same period, highlighting the growing divergence between the U.S. and European ESG markets.

Market analysts note that the outflows from U.S. ESG funds were driven not only by political factors but also by higher interest rates, rising energy prices, and the dominance of large technology stocks in market performance. Since ESG funds generally allocate larger portions of assets to renewable energy, clean technology, and growth-oriented companies, they faced relatively greater pressure during the interest rate hiking cycle, causing some funds to underperform traditional large-cap technology funds.

At the same time, growing market concerns about greenwashing have prompted investors to reassess whether ESG funds genuinely align with their sustainability claims. In response, the U.S. Securities and Exchange Commission (SEC) has strengthened oversight of ESG fund disclosures and naming practices, requiring funds to provide clearer explanations of ESG investment methodologies, investment processes, and measurement standards to reduce the risk of misleading investors.

Furthermore, the U.S. ESG fund market has experienced a clear trend toward consolidation and repositioning. According to Morningstar, only nine new sustainable funds were launched in the United States in 2025, while 91 funds were closed during the same period. Several funds also removed terms such as ESG, Sustainable, or Impact from their names. This reflects the market’s transition from a period of rapid expansion and large-scale product issuance toward a phase focused more on performance, regulatory compliance, and substantive sustainability impact.

Going forward, the U.S. ESG market is expected to focus more heavily on themes closely tied to financial materiality, including climate transition, energy security, AI-driven energy demand, and corporate governance, rather than the broader ESG concept investing that characterized earlier stages of market development.

3. Other Markets: Asia-Pacific as the Fastest-Growing Region

In contrast, according to the GSIA report, the Asia-Pacific region has become the fastest-growing ESG market globally. Markets such as Japan, Australia, Singapore, Hong Kong, and China have actively promoted sustainable finance policies in recent years, driving rapid growth in ESG funds and green bonds.

In Japan, ESG assets have expanded rapidly since 2016 under the leadership of the Government Pension Investment Fund (GPIF), with sustainable investments increasing from approximately 3% to more than 18% of professionally managed assets. Australia and New Zealand have also consistently ranked among the regions with the highest ESG investment penetration rates globally.

The primary drivers of growth in Asian markets include net-zero carbon policies, energy transition demand, and rapidly increasing needs for infrastructure and climate financing in emerging markets.

According to Morningstar’s report 5 Sustainable-Investing Trends to Watch in 2026, the global ESG and sustainable investment market is entering a new stage of “recalibration” in 2026. Influenced by geopolitical conflicts, ESG politicization, and tightening regulations, sustainable investing is shifting away from concept-driven and marketing-oriented approaches toward a model emphasizing substantive investment content, climate transition capabilities, and financial resilience.

Although global ESG funds recorded rare net outflows in 2025, total ESG fund assets remained at elevated levels, demonstrating that sustainable investing still retains strong long-term growth foundations. Future ESG product development is expected to focus increasingly on transition strategies, energy security, and measurable sustainability outcomes.

1. Climate Transition Products Remain the Core Market Theme

Climate transition will remain one of the most important ESG investment themes in 2026. Market attention is no longer focused solely on low-carbon exposure but increasingly on whether companies possess credible net-zero transition strategies and long-term competitiveness during the energy transition process.

Currently, the proportion of companies genuinely aligned with net-zero pathways remains relatively low, and demand for climate transition ETFs, net-zero thematic funds, and low-carbon transition investment products is expected to continue growing.

In addition, as extreme climate events become more frequent, investors are paying greater attention to climate adaptation-related investments, including infrastructure, water resource management, agriculture, insurance, and healthcare. ETFs and funds focused on these themes are expected to continue expanding.

2. Rising Demand for Energy Transition and Renewable Energy Investments

Renewable energy and energy transition-related products are expected to continue benefiting from growing global electricity demand. Morningstar notes that AI data centers, high-performance computing, and industrial electrification trends will further increase global energy consumption, making energy security and clean energy supply critical investment themes.

Beyond solar and wind energy, markets are increasingly focusing on opportunities related to power grid upgrades, energy storage systems, and critical mineral supply chains, including lithium, cobalt, nickel, and rare earth materials.

As countries strengthen energy independence and supply chain security, energy transition ETFs, infrastructure funds, and private market investment products are expected to continue expanding.

3. Sustainable Bond Markets Shift from Scale Growth to Quality Enhancement

The global sustainable bond market has gradually matured, with market development shifting from emphasizing issuance scale toward greater focus on use of proceeds and measurable sustainability impacts.

In the future, products such as green bonds, social bonds, sustainability bonds, and sustainability-linked bonds will place greater emphasis on measurable carbon reduction or social benefits.

At the same time, financing demand for high-carbon industry transitions is expected to increase. Transition bonds related to industries such as steel, aviation, and energy are anticipated to continue developing. ASEAN markets, due to their substantial energy transition needs, are also viewed as important future growth regions for sustainable bonds.

4. Rapid Rise of Biodiversity and Natural Capital Products

Biodiversity-related investments are increasingly viewed as an emerging growth area within ESG markets. Morningstar points out that although global natural capital disclosure and regulatory frameworks are still under development, investor attention toward ecological risks and natural capital issues has increased rapidly.

In recent years, markets have gradually introduced products such as biodiversity-linked bonds, blue bonds, and nature finance products. As international frameworks for measuring and disclosing natural capital continue to develop, biodiversity-themed funds, natural capital investment strategies, and related ETFs are expected to increase further.

5. AI Development Creates New ESG Risks and Investment Opportunities

Rapid AI development has also become a major ESG issue in 2026. Morningstar notes that AI industries consume significant amounts of energy and water, and future data center electricity demand is expected to increase substantially.

As technology companies accelerate AI development, balancing carbon reduction commitments with energy efficiency will become a key concern for investors. Consequently, while AI-related investment products will continue to expand, markets will also place greater emphasis on AI governance, cybersecurity, misinformation risks, and energy efficiency as ESG issues.

Investors are expected to pay closer attention to whether companies possess robust AI governance frameworks in order to mitigate long-term operational and reputational risks.

Taiwan’s listed ESG ETF market has demonstrated steady growth in recent years, supported by international ESG investment trends and domestic sustainable finance policies.

In terms of the number of products, the market expanded from only one or two products in 2017 to a period of accelerated growth after 2021. The number of ESG ETFs reached 16 in 2023, increased further to 19 in 2025, and remained at elevated levels in early 2026, indicating continued expansion of ESG ETF product offerings and a transition into a mature growth phase.

At the same time, assets under management have shown a long-term upward trend. Market size grew from only several tens of billions of New Taiwan dollars in earlier years to more than NTD 190 billion in 2022, approximately NTD 348.3 billion in 2023, over NTD 530 billion in 2024, and NTD 652.8 billion in 2025. By April 2026, total assets had approached NTD 748.3 billion.

This continued expansion reflects not only the increase in product numbers but also rising market valuations and asset prices.

The growth drivers of Taiwan’s ESG ETF market have evolved over different stages. Between 2020 and 2023, rising global ESG investment trends, aggressive product launches by asset managers, and growing investor interest in sustainable investing and corporate governance drove rapid growth in both the number of products and assets under management, propelling the market into a high-growth phase.

Product offerings also evolved from early themes focused mainly on corporate governance and low-carbon concepts toward more diversified strategies, including green energy, low-carbon transition, and sustainable investment themes.

After 2024, growth in the number of products slowed, while overall market expansion increasingly reflected gains in Taiwan’s stock market capitalization and ETF net asset values.

ETFs with clearer strategic positioning, alignment with market trends, or attractive income characteristics achieved relatively stronger growth. In particular, ETFs whose constituent companies successfully translated sustainability transformation into competitive advantages and stronger financial performance became more attractive to investors.

This reflects a broader shift in investor behavior, with ESG investing moving beyond earlier concept-driven passive allocation toward deeper emphasis on performance, industry trends, strategic differentiation, and substantive sustainability value.

Despite increasing global divergence in ESG standards and tighter international regulations, Taiwan’s ESG ETF market has continued to demonstrate resilient expansion. Market size has continued to rise while product structures have gradually improved, indicating that ESG investing has evolved from an initial adoption stage into an important component of medium- to long-term asset allocation.

Future growth momentum will increasingly depend on improvements in product quality and alignment with international standards.

Overall, the global ESG product market has evolved from an early stage characterized by rapid expansion and concept-driven growth into a more mature phase emphasizing information quality, substantive investment value, and regulatory consistency.

Europe continues to strengthen market standards through regulatory frameworks and disclosure requirements, while the United States has entered a period of recalibration influenced by political and market dynamics. Meanwhile, the Asia-Pacific region has become one of the world’s fastest-growing markets due to energy transition and net-zero policy demands.

Future ESG product development will increasingly shift away from ESG labels and marketing toward themes with greater financial materiality, including climate transition capability, energy security, natural capital, AI governance, and measurable sustainability outcomes.

From a product perspective, climate transition ETFs, energy transition infrastructure funds, sustainable bonds, biodiversity investments, and AI-related ESG products are expected to become key market themes in the years ahead.

At the same time, regulators worldwide continue to strengthen disclosure and naming requirements, indicating that future ESG products will place greater emphasis on transparency, consistency between investment content and marketing claims, and measurable real-world impact. The market is gradually shifting from focusing on “whether a product carries an ESG label” toward “whether it genuinely delivers sustainable value.”

For Taiwan, the ESG ETF market has continued to maintain stable growth in recent years, demonstrating that sustainable investing remains an important direction for medium- to long-term asset allocation. However, as international markets increasingly emphasize product quality and regulatory sophistication, future development of Taiwan’s ESG products will need to focus more heavily on differentiated investment strategies, disclosure quality, and alignment with international sustainability standards in order to enhance market competitiveness and investor confidence amid the continued evolution of global sustainable finance.