TAIPEI (Taiwan News) —The National Development Council published Taiwan’s Pathways to Net-Zero Emissions in 2050 (2050 Pathways) on March 30, 2022, and Taiwan aims to reach its zero emissions target by intensely focusing on environmental, social, and governance (ESG).
The Securities and Futures Bureau, Financial Supervisory Commission (FSC) announced the Corporate Governance 3.0: Sustainable Development Roadmap in 2020, and then further published the Sustainable Development Roadmap for Listed Companies in January 2022. These roadmaps aim to strengthen the reporting of ESG information and enhance listed companies’ GHG emission disclosure disciplines.
The Green Finance Action Plan 3.0 was also announced by the FSC in September 2022 to establish a foundation to promote the effective operation of green and sustainable financial markets, and Taiwan’s listed companies are now required to submit ESG reports. Taiwan has certainly hitched itself to the ESG wagon.
ESG in America
Unlike Taiwan, the “ESG” label has even become toxic in the U.S.
BlackRock Inc. CEO Larry Fink spent years positioning his firm as a leader in ESG investing, only to face outcries from Republican politicians who pulled more than $3 billion in state funds from Blackrock. On Sunday (July 2), Fink said he is retiring the “weaponized term” since it has been “misused by the far left and the far right.”
U.S. fund managers have grown weary of the growing political scorn aimed at the ESG label, and many have decided to call their funds something else to avoid the scorn. Thematic exchange-traded funds, ones that focus on stocks around a particular subject, have taken over as the most common way to launch products in areas like clean energy or gender diversity.
Even as some fund managers rebrand their ESG-related products, others are urging proponents to push back against those who decry so-called “woke capitalism.” However, anti-ESG funds have largely failed to draw major investor interest.
It seems that in the U.S., ESG is at an interesting inflection point. There are a lot of useful things that have been created, such as increasing and improving data, being able to measure environmental and social characteristics, and standardization of data reporting and comparison frameworks. Nevertheless, the U.S. can not quite adapt to the adoption of ESG.
One common argument in the U.S. is that ESG requires changes and that the push toward a more sustainable future is seen as inherently expensive. However, to dismiss ESG seems to put short-term profit ahead of the long-term public interest.
Some in the U.S. also believe there is no good reason to merge environmental, social, and governance metrics into a single metric. It is possible to see how this argument plays out, even if it may seem outdated. As an investor, you need data to make a good investment, but it is a question of just how much data you need and how you use it.
You might think a company’s gender policies are important, their emissions are important, along with their governance criteria, but U.S. investors, it seems, are not used to combining all this data in order to make their investment decisions. It seems that the chance of quick, pure profit remains the motivating metric.
Many U.S. investors also believe that ESG was created by marketing departments who saw an opportunity to come up with a single score that might be useful to a virtuous investor, and therefore view ESG as a marketing gimmick that will eventually fade from use. As a result, ESG has become a political bashing tool in the U.S.
Politics of ESG
Republicans, in particular, are often against ESG, citing concerns of greenwashing that were present in the early days of ESG adoption and can still occur in overly simple ESG score calculations. The result has been that at present, in the U.S., ESG funds are marketed to progressives and not conservatives.
Conservatives, being mostly Republicans, are actively pushing anti-ESG funds, and these anti-ESG funds are pro-carbon emissions, which seems so intuitively wrong in 2023, but some commentators believe that this polarization will take time to disappear. The cited reason is the extent to which the U.S. political system remains so heavily based on moneyed interests.
Political lobbying and spending in the U.S. have reached epic proportions, and the upcoming presidential election is seeing vast sums spent across the entire country and some of this expenditure plays into the ESG divide.
Presently, ESG does not seem to be working in the U.S. and some are seeing the creation of a societal rift, especially between the younger pro-ESG investors and the older, more cynical, in for a quick profit, investors. How this rift is closed remains an open question.
It seems the U.S. still has a long journey ahead of it, in the ESG space, as compared with Taiwan. Taiwan’s wholehearted adoption of ESG is unlikely to influence the U.S. but it will be interesting to see how long it takes before global pressure brings the U.S. to the ESG table if, indeed, it is possible.