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Governance 7 min read Published Updated Credibility 40/100

Compliance Briefing — August 14, 2020

Updated roadmap explainer detailing FSC Corporate Governance 3.0 priorities for board accountability, ESG metrics, assurance, and phased milestones through 2023.

Zeph Tech Research Lead

Research lead, Zeph Tech

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Executive briefing: Taiwan’s Financial Supervisory Commission (FSC) launched Corporate Governance 3.0 – Sustainable Development Roadmap in August 2020 to harden board accountability, embed environmental, social, and governance (ESG) disclosure discipline, and deepen investor stewardship. The initiative expands prior Corporate Governance Roadmaps by aligning listed-company obligations with international norms and by sequencing mandatory changes through 2023 so issuers can budget for board refreshment, assurance, and data tooling. This update distills the rules and timetables that compliance officers, sustainability leads, and directors must operationalize to avoid enforcement risk and investor friction.

Governance priorities and board accountability

The FSC roadmap sets explicit expectations for board structure, independence, and competence. Listed companies must disclose gender composition and independence ratios in annual reports beginning in 2021, with large-cap issuers expected to outline measurable diversity targets and succession plans. Boards of systemically important financial institutions are urged to appoint at least one director with climate or sustainability expertise to oversee transition and physical risk analysis. The roadmap reiterates that at least one-third of directors on TWSE- and TPEx-listed companies should be independent; where firms fall short, chairpersons must explain remediation timelines in shareholder meeting materials.

The FSC also strengthened the audit committee’s remit. Audit committees must oversee related-party transaction controls, cybersecurity risk assessments, and internal audit staffing sufficiency, and they are directed to receive quarterly briefings on whistleblower investigations. For issuers without audit committees, supervisors are expected to demonstrate equivalent oversight and document their review of internal control statements. Compensation committees now need to connect variable pay structures to compliance and sustainability milestones, including clawbacks when material misstatements or control failures occur.

Board evaluation practices are standardized to raise transparency. Beginning with fiscal year 2021 reports, listed companies must describe board performance evaluation criteria, frequency, and external evaluator engagement where used. The roadmap encourages triennial third-party assessments for firms in sensitive industries such as semiconductors, banking, and petrochemicals. Outcomes of those reviews—such as identified skill gaps or meeting effectiveness issues—should feed into director training plans and nomination criteria.

ESG metrics, disclosure upgrades, and assurance

Corporate Governance 3.0 integrates ESG disclosure more tightly with financial reporting. From 2021, the top 100 companies by market capitalization and firms in food processing, financial services, and chemical manufacturing must publish standalone sustainability reports following the Taiwan Stock Exchange (TWSE) Principles for the Preparation and Reporting of Sustainability Reports. The FSC recommends alignment with the Task Force on Climate-related Financial Disclosures (TCFD) for scenario analysis, metrics, and governance descriptions, and it has signaled that TCFD-based disclosure will become mandatory for listed financial institutions from 2023.

Quantitative climate metrics are prioritized. High-emission sectors must report Scope 1 and Scope 2 greenhouse gas (GHG) inventories beginning in 2021, with Scope 3 category disclosures encouraged by 2023 as data quality improves. Companies must explain calculation boundaries, emission factors, and verification approaches to support investor comparability. The roadmap also elevates water stewardship disclosures for electronics manufacturers and recommends that firms publishing Science Based Targets indicate validation status and interim milestones.

To curb greenwashing, the FSC urges independent assurance of key ESG indicators. Sustainability reports of the largest issuers should include assurance statements aligned with ISO 14064-3 or AA1000AS, with the assurance scope clearly labeled. Beginning in 2022, assurance of GHG emissions is expected for listed financial institutions and systemically important electronics manufacturers, and assurance providers must be rotated periodically to preserve independence.

Implementation schedule and compliance sequencing

The roadmap staggers milestones so companies can phase investments. The 2021 cycle focuses on foundational transparency: gender and independence disclosures in annual reports, publication of sustainability reports by large-cap and sector-priority firms, and board evaluation narrative requirements. Companies are expected to appoint sustainability liaisons to coordinate data collection across finance, operations, and investor relations. The FSC has indicated that enforcement reviews will prioritize whether companies have mapped applicable requirements and assigned accountable executives.

In 2022, enforcement shifts to depth and reliability. Financial institutions must integrate climate stress testing into risk management frameworks and disclose methodology assumptions. Listed issuers in high-impact sectors are encouraged to undergo limited assurance for GHG data and to file remediation plans for control deficiencies uncovered during audit committee reviews. The FSC also plans spot checks on stewardship code reporting by institutional investors to ensure voting policies reflect updated governance expectations.

By 2023, the roadmap expects mature integration. Mandatory TCFD-aligned disclosure begins for listed financial institutions and large emitters, with scenario analysis extending to 2050 baselines. Companies should evidence how board oversight structures influence capital allocation, including capex for low-carbon transitions and investments in resilience. Regulators will examine whether compensation committees are applying ESG and compliance metrics in pay outcomes and whether clawbacks are being executed when triggers occur. At this stage, issuers are expected to maintain consistent assurance coverage and to explain variances in year-over-year ESG metrics.

Investor stewardship and market discipline

Corporate Governance 3.0 complements issuer obligations with expectations for institutional investors. Asset managers and insurance companies must publish stewardship policies that detail voting guidelines on board diversity, climate risk management, and capital allocation proposals. They are encouraged to articulate escalation protocols—ranging from engagement letters to voting against directors—when investees fail to meet roadmap milestones. Investors should also disclose aggregate voting rationales and engagement statistics annually, enabling beneficiaries to assess stewardship effectiveness.

Proxy advisors operating in Taiwan are encouraged to align their guidelines with the roadmap, particularly on director independence thresholds and sustainability oversight structures. The FSC has highlighted the role of international investors in accelerating adoption, noting that firms seeking cross-listings or inclusion in sustainability indices should map roadmap metrics to global frameworks such as the OECD Principles of Corporate Governance and the G20/OECD Corporate Governance Factbook. Companies that proactively align can reduce cost of capital and mitigate activist campaigns.

Controls, training, and data architecture

Issuers will need disciplined controls to meet the roadmap’s expectations. Internal audit teams should extend testing to ESG data flows, including energy, emissions, workforce diversity, and supply chain audits. IT and security teams are expected to maintain audit trails for ESG metrics and to enforce access controls on sustainability reporting systems. Because the roadmap expands whistleblower protections, companies should refresh policies, update anonymous reporting channels, and track investigation timelines to demonstrate responsiveness.

Director and executive training is another focal point. The Taiwan Corporate Governance Association and TWSE offer programs on climate risk, digital transformation, and stakeholder engagement; boards should schedule annual training and document attendance. For sectors facing rapid technology change, such as semiconductor fabrication and financial services, training curricula should address operational resilience, data privacy, and responsible AI use to satisfy regulator expectations on competence.

Practical steps for compliance teams

  1. Gap assessment: Map current governance structures, disclosures, and assurance practices against the roadmap. Identify gaps in board diversity, independence ratios, ESG reporting coverage, and TCFD alignment.
  2. Roadmap ownership: Assign accountable executives for board composition, ESG data, assurance, and stewardship reporting. Establish a cross-functional steering group that reports quarterly to the board.
  3. Data and controls: Standardize data definitions, select emission factors aligned with local EPA guidance, and implement automated collection where possible. Ensure audit committees review control design and testing results.
  4. Board refresh and training: Launch search processes for independent and sustainability-qualified directors where needed. Adopt a three-year training calendar tied to roadmap milestones.
  5. Disclosure and assurance: Draft sustainability reports using TWSE and TCFD structures. Plan for limited assurance of GHG metrics and expand to reasonable assurance as data quality matures.
  6. Stewardship alignment: Update voting guidelines, publish engagement outcomes, and document escalation triggers. Coordinate with proxy advisors to ensure policy alignment.

Implications for multinational groups

Multinationals with Taiwan listings or supply chains must harmonize the roadmap with other regimes such as the EU Corporate Sustainability Reporting Directive and Japan’s Corporate Governance Code. Companies should reconcile taxonomy differences for emissions scopes, director independence, and assurance levels to avoid duplicated work and inconsistent messaging. The FSC has indicated it will recognize equivalent disclosures when they match or exceed local requirements, giving multinationals an incentive to apply their highest standard across markets.

Supply-chain leaders should expect Taiwanese vendors to request emissions factors, product footprints, and sustainability certifications to meet their own reporting obligations. Providing auditable data in machine-readable formats will accelerate compliance and strengthen commercial relationships.

Bottom line

Corporate Governance 3.0 signals that Taiwan is tightening oversight of board effectiveness and sustainability performance. Companies that act early—refreshing boards, fortifying controls, and aligning disclosures with TCFD and OECD guidance—will be better positioned to satisfy regulator exams and investor expectations. Delayed action risks enforcement scrutiny, constrained access to capital, and reputational damage in global supply chains. Compliance teams should treat 2023 milestones as a hard deadline and integrate the roadmap into annual planning now.

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