In early 2022, Taiwan announced its “Pathway to Net-Zero Emissions in 2050” plan, a comprehensive plan covering dimensions such as technologies, lifestyles, green finance, and just transition. This policy vision generated high expectations for Taiwan’s regional leadership on climate issues.
While Taiwan took an early stance on climate action in East Asia, however, it is now lagging in its response to green finance.
In 2022, the same year that the Net-Zero plan was released, Taiwan’s Legislative Yuan proposed that major government pension funds should incorporate corporate environmental, social, and governance (ESG) performance into their investment strategies. However, as of 2024, relevant authorities have yet to establish or adopt clear ESG standards for financial activities.
In fact, according to the World Benchmarking Alliance (WBA) 2025 Financial System Benchmark, Taiwan’s Bureau of Labor Funds has failed to keep pace with private corporations in the green transition. Despite its role managing the nation’s primary worker retirement assets, the Bureau scored zero in most key metrics for driving a sustainable economy, highlighting a critical gap in how Taiwan’s public funds address sustainability. This gap represents a dangerous vulnerability as global energy investments face volatility amid the China-U.S. trade war, geopolitical conflicts, as well as the urgent need to counter climate disasters.
As global energy investments remain in a state of uncertainty, the persistent stagnation of a sustainably green economy is particularly alarming. It is clear that countries remain cautious in advancing their green investment partnerships and investment frameworks in response to the volatile landscape, even though markets have already priced fossil fuels out. This hesitancy in developing energy-centric green finance policies demonstrates that transparent and comprehensive climate disclosure has become crucial to financing.
In regions like East Asia, where energy security is so deeply intertwined with geopolitical competitiveness, both stock markets and enterprises face higher climate risks. These countries’ energy sources are not just affected by market signals but increasingly situated within the broader framework of the China-U.S. strategic competition. As the United States expands its fossil fuel industry and seeks to export these resources to global partners, China is simultaneously scaling up its renewable energy and electrification sectors, using energy strategy to deepen its global influence.
For asset managers facing the urgency of climate-stranded risks and the complexity of the political-economic landscape, divesting from the fossil fuel industry is the best immediate choice – essentially excluding assets foreseeable to depreciate significantly in the near future. However, it’s less commonly understood that a rapid shift of massive capital toward net-zero targets might accelerate the stranding of fossil fuel assets. This could negatively impact the value of related assets, triggering market overreaction and chaos, thereby diminishing fund returns and impacting national fiscal health. In reality, among financial tools such as divestment, persuasion, and computing portfolio emissions, coalitions of investors offer the best opportunity for governance.
Regional peers like Japan and South Korea, once major global public finance investors in fossil fuels, illustrate the power of such collective action. Both countries have already pivoted by joining the coal-free alliance or forming a climate alliance with the Association of Southeast Asian Nations (ASEAN). Through these efforts, they seek a more proactive financial framework to secure a strategic foothold in the net-zero economy, while simultaneously offering green technology and investment alternatives to investors currently reliant on fossil fuels from China.
In contrast, Taiwan’s reliance on corporate self-disclosure and non-standardized local sustainability awards makes it difficult for fund managers to distinguish genuine decarbonization from selective reporting.
The fundamental absence of comprehensive carbon and climate risk data creates an information gap. It could increase the risk of misjudging the scale and timing of climate policy, undermining both industrial resilience and financial stability. Under the global net-zero transition, this challenge extends across emerging renewable energy manufacturing as well as Taiwan’s core electronics manufacturing industry, both of which require more robust green finance support.
For the Taiwanese government, the urgent policy priority is to dismantle the current mechanism of unsubstantiated reliance on vague ESG metrics. Regulators should require major public funds and their invested domestic enterprises to adopt internationally recognized frameworks such as the IFRS S2 issued by International Sustainability Standards Board (ISSB), or the Task Force on Climate-related Financial Disclosures (TCFD) as soon as possible. Also, managers of public funds should confront market trends and early warning signs by explicitly assessing and disclosing greenhouse gas emissions as well as climate and geopolitical risks, ensuring that the climate data used in investment decisions is accurate, comparable, and decision-relevant.
Beyond risk mitigation, strengthening Taiwan’s climate data governance is not merely a defensive measure. As global capital markets and international supply chains rapidly raise disclosure expectations across all tiers to counter the uncertainties inherent in the current global energy contest, economies with transparent and verifiable climate information will be better positioned to attract investment and develop climate-resilient infrastructure and advanced manufacturing that serve both local needs and the global market.
In this context, Taiwan’s public funds can actually play a transformative role by directing capital toward solutions that strengthen both economic competitiveness and societal resilience, safeguarding public savings today while positioning Taiwan for the next phase of global industrial reorganization.
