TAIPEI (Taiwan News) — The opening of Taiwan’s carbon trading company on Monday (Aug. 7) is indeed good news for the domestic ESG market.

In a move clearly aimed at realizing carbon neutrality by 2050, the Taiwan Carbon Solution Exchange (TCSE), which is funded by the Taiwan Stock Exchange (TWSE) and the National Development Council (NDC) will provide services for carbon credit trading and other emission offset mechanisms for domestic businesses. All essential services in the environmental, social and governance (ESG) market. It will also introduce cross-border carbon transaction services that enlist accredited international organizations.

Cross-border carbon transaction services are certain to be of interest, especially with countries within the European Union (EU) and other countries that have active ESG markets and similar support from their governments.

The primary objective of cross-border carbon transactions is to avert "carbon leakage" and it refers to a phenomenon where a manufacturer moves carbon-intensive production to countries outside with less stringent climate policies. Hence, the need for proper accreditation, the details of which are at present unclear.

However, Taiwan has little time to rest on its ESG laurels as the Monetary Authority of Singapore (MAS), Singapore's primary financial regulator, announced a highly competitive ESG FinTech Grant scheme on the same day as the TCSE was announced.

The MAS ESG FinTech Grant was launched as part of the Financial Sector Technology and Innovation (FSTI) scheme to spur the financial sector's adoption of ESG technology solutions. These solutions will be utilized to empower financial institutions (FIs) in addressing their key ESG data and infrastructure challenges, supporting their mobilizing of capital toward sustainable activities and tracking of their net zero transition plans and programs. The FSTI scheme is valid until March 2026.

The ESG FinTech Grant is only open to eligible applicants who are Singapore-based FIs (although it is possible that some of Taiwan’s numerous FIs would qualify if their entity is incorporated in Singapore, as opposed to being a branch of the Taiwan FI). If that is the case, then those applicable Taiwanese FIs should certainly consider the potential benefits of this MAS initiative.

Projects will need to demonstrate the innovative use of technology to address FIs' business needs in the areas of ESG data and ESG infrastructure, and/or pioneer use cases in the financial services industry across other ESG FinTech verticals. ESG verticals include, but are not limited to, ESG RegTech, ESG Risk and InsurTech, Carbon Services, ESG Investment Management, ESG Lending, and ESG Payments. This opens up the potential market considerably to possible applicants and demonstrates the clear understanding of the MAS on the challenges posed by ESG.

Projects should also seek to establish a strong nexus to Singapore's ESG FinTech ecosystem which would encompass technology and sustainability. As with Taiwan's commitment to the Pathway to Net Zero emissions by 2050, Singapore is also strongly committed to its Project Greenprint, which is a collection of initiatives that aims to harness technology and data to enable a more transparent, trusted, and efficient ESG ecosystem to enable green and sustainable finance.

The ESG FinTech Grant is capped at S$500,000 (NT$12 million) or up to 50% of qualifying expenses. Qualifying expenses are those incurred in direct relation to the project and are limited to basic personnel costs, professional services, hardware/software infrastructure and licenses, IP rights, and external audit costs. Funding is also capped for a period of 18 months.

Taiwan needs to seriously consider matching these types of initiatives if it does not wish to lag in the Asia Pacific ESG sphere. Once again, Singapore is taking a strong lead in ESG in the Asia Pacific market and leaving others to follow.

The comparison between Taiwan’s TCSE initiative and Singapore’s ESG FinTech Grant is in no way intended to belittle Taiwan’s efforts and progress. However, within the ESG world, qualified professional resources are limited. FinTech is the way forward and the market and its resources will move to wherever the greater incentives or benefits can be enjoyed.

Taiwan must continue with its ESG initiatives. It should assume a more competitive stance, and be prepared to compete for ESG market share.