This article is an extract from GTDT Market Intelligence ESG Engagement & Litigation 2024. Click here for the full guide.

1 Which companies have ESG obligations in your jurisdiction, and to whom do they owe these obligations?

What is the source and nature of these obligations?

Listed companies and financial institutions

The Financial Supervisory Commission (FSC) is responsible for regulating the financial markets and supervising financial service industries, including banking, securities, futures and insurance. In March 2022, the FSC, the competent authority for financial markets and financial service enterprises, promulgated the sustainable development roadmap guideline that requires listed companies to check and verify their greenhouse gas (GHG) emissions before 2029. The guideline categorises listed companies into those over NT$10 billion, those between NT$5 billion and NT$10 billion and those under NT$5 billion by registered capital, and each category has different milestones for meeting the duties of GHG emissions check and verification. Moreover, iron, steel and cement companies whose registered capital is over NT$10 billion shall complete the investigation and verification of GHG emissions (direct and indirect emissions included) obligations before 2024 (see here).

In September 2022, the FSC proposed Green Finance Action Plan 3.0 (Plan 3.0) to guide financial institutions to support green and sustainable industries. The main measures for Plan 3.0 include:

  • carbon verification and risk management;
  • promotion and development of sustainable economic activities determination guidelines;
  • building and establishing an ESG and climate database;
  • strengthening sustainable financial professional training; and
  • encouraging the formation of a financial net zero work group.

In March 2023, the FSC announced two significant future directions related to ESG that are expected to be trends closely monitored by publicly listed companies going forward:

  • Action Plan for Sustainable Development of Listed Companies: this action plan is designed to guide companies towards achieving net zero emissions, fostering a culture of sustainable governance, enhancing sustainability information disclosure, strengthening stakeholder communication, and promoting ESG assessment and digitisation. Furthermore, since the FSC hopes to promote this action plan through collaboration between the public and private sectors, various entities beyond government agencies and publicly listed companies will play essential roles in it. This includes non-governmental organisations (NGOs), industry associations, banks, life insurance companies, securities firms, mutual fund and investment advisory associations, accounting firms, and third-party verification organisations.
  • Aligning with the International Financial Reporting Standards (IFRS) Sustainability Disclosure Framework: the IFRS has issued two sustainability disclosure standards: S1 ‘General Requirements for Sustainability-Related Financial Information Disclosure’ and S2 ‘Climate-Related Disclosures’. These standards provide globally applicable disclosure guidelines, enhancing the comparability of sustainability information and preventing greenwashing. After considering input from various stakeholders, the FSC has officially announced Taiwan’s plan to align with the IFRS Sustainability Disclosure Framework. It is expected to be implemented in three phases, starting from the 2026 fiscal year:
    • 2026: applicable to publicly listed companies with capital exceeding NT$10 billion;
    • 2027: applicable to publicly listed companies with capital exceeding NT$5 billion but not reaching NT$10 billion; and
    • 2028: applicable to all other publicly listed companies.

Business and manufacturing sectors

The Ministry of Economic Affairs (MOEA) is responsible for developing business, industry and international trade. In October 2022, the MOEA announced a report on the net zero transition path to 2030 for the business and manufacturing sectors (the Path to 2030), to guide these important sectors towards achieving the goal of net zero emissions (see here and here).

In the business sector, the MOEA found that, in 2020, emissions from electric power use constituted 87.4 per cent of the business sector’s total emissions. In light of this, the MOEA recommended the following GHG emission reduction strategies:

  • improvement of facilities or operation methods: specific measures include enhancing the energy efficiency of air conditioning and refrigeration installation equipment, optimising the air conditioning system and using highly efficient lighting equipment, such as LED lights;
  • use of low-carbon energies: specific measures include the motorisation of transportation, changing to highly efficient boilers and requiring bulk users to use green energy;
  • transition of business models: specific measures include the application of AI technology and intelligent devices, and the promotion of green consumerism; and
  • utilisation of green buildings: specific measures include adding or reinforcing the thermal insulation of the building’s outer structure.

The MOEA also offers assistance with the provision of professional consultation and advice, and subsidies for energy-saving performance and personnel training.

Regarding the manufacturing sector, the MOEA found that, in 2019, emissions from this sector constituted 51.4 per cent of Taiwan’s total emissions, and that emissions from electric power use constituted 64 per cent of the manufacturing sector’s total emissions, whereas the remaining percentages were 22 per cent from non-electric power-use and 14 per cent from process emissions. Emission-reduction suggestions included:

  • the improvement of manufacturing processes: specific measures include the acceleration of renewal and replacement of old facilities, the digitalisation of the systems used, the development of hydrogen technologies, and the promotion of reducing and replacing fluoride-bearing gases;
  • energy conversion: specific measures include converting the source of energy to natural gas, biofuel and green energy; and
  • circular economy: specific measures include replacing raw materials with energy-efficient ones, using waste as fuel, coordinating energy resources, and applying carbon capture and utilisation technologies.

2 Which regulators and other public bodies in your jurisdiction take an interest in ESG and related collective engagement and litigation?

What is the extent of their involvement in ESG issues?

Different government agencies are in charge of different matters related to ESG. In addition to the FSC and the MOEA, the relevant competent authorities include the National Development Council (NDC), the National Council for Sustainable Development (NCSD) and the Environmental Protection Administration (EPA). These agencies are all under the Executive Yuan, the supreme administrative organisation in Taiwan.

In 2023, the EPA underwent a major transformation and became the Ministry of Environment (MOENV). As part of this change, the MOENV established four key departments: the Climate Change Administration, the Resource Circulation Administration, the Chemicals Administration, and the Environmental Management Administration. The MOENV also set up the National Environmental Research Academy. This restructuring shows a clear commitment to addressing and prioritising the goals of the Pathway to 2050 policy, and more substantial involvement from the government regarding ESG issues may come in the near future.

NDC: the Pathway to 2050

The National Development Council was established by the Executive Yuan to promote and develop national policies. On 30 March 2022, the NDC published ‘Taiwan’s Pathway to Net-Zero Emissions in 2050’ (the Pathway to 2050), declaring the timetable for reducing carbon emissions and plans for 2050 net zero transition regarding energy, industry, lifestyle and society (see here). The Pathway to 2050 is based on the four major strategies of energy transition, industrial transition, lifestyle transition and social transition. There are also two governance foundations (technology R&D and climate legislation), and 12 Key Strategies. The substantive content of the 12 Key Strategies was announced in December 2022. The strategies include the following: wind and solar photovoltaic technologies; hydrogen energy; innovative energy; power systems and energy storage; energy-saving and efficiency; carbon capture, utilisation and storage; electrification of vehicles with zero carbon emissions; resource recycling and zero waste; natural carbon sinks; green lifestyles; green finance; and just transition. Together, these strategies provide guidance for developing plans to implement and realise the Pathway to 2050. The NDC has also set the nationally determined contribution goal for 2030 to decrease carbon emissions by up to approximately 25 per cent from 2005 levels, which is equivalent to 29 per cent of Taiwan’s total emissions in 2020.


The NCSD (originally named the Policy Guidance Group for Global Change of the Executive Yuan) was founded in 1994 in response to the global trend of promoting sustainable development. The Group was renamed as the NCSD in 1997.

The NCSD is an important organisation for inter-ministerial cooperation on sustainability issues. It proposed several leading documents on sustainable development, which were important cornerstones for Taiwan’s policies on this issue. The documents include:

  • the National Sustainable Development Strategy Guidelines of Taiwan ROC – Agenda 21 in 2000;
  • the National Sustainable Development Action Plan in 2002;
  • the Taiwan Sustainable Development Declaration and the Sustainable Development Indicators in 2003;
  • the Taiwan Agenda 21 – Vision and Strategy Guidelines for National Sustainable Development in 2004;
  • the Sustainable Development Policy Guidelines and the new Sustainable Development Indicators in 2009;
  • documents for promoting a green economy in 2015; and
  • the Taiwan Sustainable Development Goals in 2019.

Other achievements of the NCSD include publishing annual reports on national sustainable development and reviews on the matter, and the Voluntary National Reviews in 2017 and 2022. The annual reports and reviews systematically keep track of the sustainable development progress of Taiwan, while the Voluntary National Reviews focus on providing a thorough examination of Taiwan’s sustainable development efforts through the standards of the Sustainable Development Goals.

The NCSD also plays a crucial part in the Pathway to 2050 of Taiwan.

In 2021, the NCSD established the Task Force on Climate Change and Net Zero Emissions Transition, in the hope of successfully achieving Taiwan’s pathway to net zero emissions by 2050. The Task Force is staffed by the EPA, while the secretarial duties are performed by the NDC.

In the recently passed Climate Change Response Act (CCRA), the NCSD was designated as the competent authority to coordinate the government’s climate change transition guidelines and cooperation between agencies. This arrangement may further the NCSD’s purpose and achievements to promote and supervise sustainable development within Taiwan.

The CCRA draft bill

The Greenhouse Gas Reduction and Management Act (the GHG Management Act) was enacted in 2015 and requires industries’ central competent authorities to periodically propose and review their emission control action programmes for GHGs, and for carbon emissions to be reduced to under 50 per cent by 2050.

The EPA takes charge of environmental regulation, including climate change, air pollution, groundwater pollution and soil contamination. To tackle climate change and provide environmental sustainability, the EPA proposed amending the GHG Management Act (the amends were named ‘the draft bill of CCRA’) and the Executive Yuan approved the draft CCRA bill in April 2022.

On 10 January 2023, the draft CCRA bill passed the Legislative Yuan’s third reading, during which time its text was adopted. The CCRA includes several vital reforms:

  • it changes the title of the GHG Management Act to the CCRA;
  • it stipulates that the goal of net zero emissions by 2050 is part of the law, and the competent authority shall draft a national action plan in response to climate change, which shall be reviewed at least once every four years, while each periodic goal shall be five years in term and renewed two years before expiration accompanied by a public hearing and the collection of comments from all fields;
  • it values just transition and reinforcing information transparency and the means of civic engagement, which includes requiring competent authorities to respect human rights and consult with communities affected by the net zero emissions by 2050 policy before implementing relevant measures, adopting provisions that protect intergenerational equity and vulnerable groups, and requiring competent authorities to disclose yearly outcome reports;
  • it designates the NCSD as responsible for coordinating the government’s climate change transition guidelines and agencies’ cooperation, and clarifies responsibilities by stipulating the competent authorities for different matters;
  • it adds a specific sector for climate change accommodation, which stipulates matters that the government should promote in order to build capacity for accommodation to climate change. This includes conducting research and development on climate change and its related risk assessment, publishing results reports and establishing alert and monitoring systems, and drafting action plans that can be adapted to local conditions and needs, while also realising goals for information transparency and civic engagement;
  • it collects carbon fees from domestic emission sources and provides preferential rates and offset of carbon fees from emissions reduced through industries’ ‘voluntary emission reduction plans’ as an economic incentive (conditions required to apply for the preferential rates include the following: transitioning to low-carbon fuels, using negative emissions technologies, enhancing energy efficiency and using renewable energy). The carbon fees are earmarked for GHG emission-reduction purposes, which include the development of low-carbon or negative emissions technologies, and industries and subsidies for investment in GHG emission reduction technologies;
  • it implements carbon border adjustment mechanisms upon imports;
  • it allows the transfer and trade of carbon credits derived through voluntary reduction; and
  • it extends producers’ responsibility by authorising the competent authority to require certain products’ manufacturers, importers or sellers to apply for approval on matters regarding carbon footprint and labels.

The government plans to implement over 30 laws and regulations complementary to the CCRA. The EPA has noted that 12 of these laws and regulations are deemed to be priorities, with the goal of formulating or amending them within six months of the adoption of the CCRA. These complementary laws and regulations include the following areas: carbon verification, management of certification authorities, collection methods and rates of carbon fees, preferential rates and offset of carbon fees from voluntary emission reduction plans, and mechanisms for trading carbon credits derived through voluntary reduction.

Following the restructuring of the EPA into the MOENV in August 2023, some steps were taken to improve the management of GHGs:

  • The 2024 Carbon Levy Collection Plan Schedule was announced: in the initial phase of planning, the targets for carbon levy collection in 2024 will be the manufacturing and electricity industries with annual emissions exceeding 25,000 tons. Carbon levies will be calculated based on 2024 emissions and due for payment in 2025. Announcing the carbon levy collection plan in advance allows the targeted industries to review their GHG emissions early and engage in various reduction efforts. Related regulations are expected to be drafted by the end of 2023, and discussions will be scheduled with various industries to mitigate the impact on them.
  • The GHG Regulations were updated: the MOENV has recently introduced new measures known as the Greenhouse Gas Emissions Inventory Registration and Inspection Management Measures. These measures bring some important changes to how GHG emissions are regulated. They now separate the deadlines for registration and inspection, specify the methods for calculating emissions, outline the contents of inspection reports (including confidentiality provisions) and establish penalties for violations. This update aims to make the process of tracking and managing GHG emissions more efficient and transparent.

3 How do minority shareholders engage with public companies to ensure that they comply with their ESG obligations?

Minority shareholders can engage with the governance of ESG with a shareholder’s proposal. Based on paragraph 1, article 172-1 and paragraph 5, article 172-1 of the Company Act, shareholders who hold 1 per cent outstanding shares are entitled to put forward a proposal about fulfilling social responsibilities and promoting public interests at a regular shareholders’ meeting. The shareholders can submit their plans for improving the company’s implementation of ESG under this scheme. The legislative reasoning states that paragraph 5, mentioned above, encourages companies to fulfil their social responsibilities, including environmental protection and pollution issues. Failure to include the proposal in the list of proposals may be subject to a fine. Paragraph 7, article 172-1 of the Company Act reads:

The responsible person of a company who violates the provisions set out in Paragraph Two, Four or the preceding Paragraph shall be imposed with a fine in an amount not less than NT$10,000 [approximately US$330] but not more than NT$50,000 [approximately US$1,651]; for a public company, the responsible person of a company shall be imposed by the competent authority in charge of securities affairs with a fine in the amount of not less than NT$240, 000 [approximately US$7,923] but not more than NT$2,400,000 [approximately US$79,231].

Although minority shareholders have the right to propose, the MOEA also states the number of proposals provided by minority shareholders should not exceed one for the sake of securing the efficiency of regular shareholders’ meetings (as given in MOEA Letter Chin-Shan-Zi No. 10700105410, dated 9 January 2019).

4 When significant breakdowns in ESG cause loss to a company’s investors, what regulatory, litigation and other mechanisms are available to the investors to hold the company to account?

Companies are encouraged to take actions that will promote the public interest when conducting business. Paragraph 2, article 1 of the Company Act provides that companies are expected to follow the laws and business ethics and to undertake social responsibilities.

In practice, a few cases opined that corporate social responsibility (CSR) is a legal obligation for companies and their management to follow. In the Taiwan High Court 96 Zong-Shen-Zi No. 145 Civil Judgment, the civil high court stated that when a board of directors decides to merge with another company, they should not only consider stakeholders’ interests – other interested parties should also be assessed to pursue the best interests of the company.

Cases in criminal court involving CSR are commonly related to the offence of breach of trust. In the Taiwan High Court 102 Shen-Su-Zi No. 1797 Criminal Judgment and 105 Chin-Shen-Su-Zi No. 40 Criminal Judgment, the Court adopted the CSR theory and emphasised that shareholders’ interests are not the only criterion for determining whether a responsible person has breached their duties, and the relevant parties’ interests (eg, shareholders, employees, debtors, clients and the neighbouring area to the company location) should also be taken into account.

Although so far there has been a lack of cases discussing ESG, the above reasoning and opinion of the courts may be referred to, and a similar conclusion may be expected from the court.

Liability for the violation of duty of good faith

According to paragraph 1, article 23 of the Company Act, the responsible person of a company shall conduct the business operation with the due care of a good administrator. When the responsible person acts in a way that is contrary to this provision, they are liable for the damages.

If a director violates paragraph 1, article 23 of the Company Act and their unreasonable business judgement causes loss to the company, the shareholders are entitled to resolve to institute an action against the director in the shareholders’ meeting under article 212 of the Company Act. Subsequently, the company shall, within 30 days from the date of the resolution, file the complaint for damage. Meanwhile, pursuant to article 214 of the Company Act, a shareholder who has been continuously holding 1 per cent or more of the outstanding shares over six months could individually request the supervisors to institute an action against a director of the company.

Also, there is an extra-organisational mechanism to account for the director who breaches their duty. The Securities and Futures Investors Protection Centre (SFIPC) was set up in 2002 to protect investors, and the SFIPC can request that the company sue a supervisor or director when they have been found to violate laws and have caused serious damage to the company in accordance with article 10-1 of the Securities Investor and Futures Trader Protection Act (the SFITP Act).

If supervisors, the board of directors or the company fails to bring a suit within 30 days of receiving the request, the SFIPC may lodge a lawsuit on behalf of the company.

Recent examples

In practice, the company (or ‘violator’) might receive an operation suspension order from the local EPA for violating the Water Pollution Control Act, which could paralyse the global production chain.

If the violator makes parts that could not come from other suppliers, its operation suspension could gravely upend the buyer’s production line. Meanwhile, there may be a powerful penalty clause in the contract basing calculation of profit loss on the number of hours of delay on the supplier’s part, to guarantee the supplier’s on-time delivery.

Article 63 of the Water Pollution Control Act stipulates that, before resuming full operation, a suspended company must first submit an improvement plan to be reviewed and approved by the local EPA for a partial resumption of operations (trial run, not full resumption). Since there is no statutory limit on how long the local EPA may take to review an improvement plan, it is uncertain when the violator might resume full operation. A protracted suspension might enervate the violator to the point of being moribund.

The worst outcome for the violator could be the triggering of the penalty clause because of stalled deliveries, and the obligation to compensate the buyer for breach of contract. The violator could sustain catastrophic losses or even go bankrupt. In that case, or where a company has violated its ESG obligations, the investor may be entitled to sue the company in accordance with the above provisions of article 214.

5 When significant breakdowns in ESG cause loss to a company’s customers, what regulatory, litigation and other mechanisms are available to the customers to hold the company to account?

Article 28 of the Civil Code, paragraph 2, article 184 of the Civil Code, article 188 of the Civil Code and paragraph 2, article 23 of the Company Act provide the basis for customers to claim compensation and pursue joint liability against a company when a responsible person from the company violates any provision of the applicable laws and regulations and causes damage to the customer.

However, ESG is a novel and developing concept in Taiwan and will be subject to further observation of the judicial attitude. Challenges may appear when customers try to pursue the company’s liability owing to a significant breakdown in ESG.

So far, there is a lack of explicit clauses in laws for the customers to claim their loss to the company on the ground of violating ESG. Further, since ESG obligations vary and ESG is still a developing concept in Taiwan, whether all these obligations constitute the ‘laws or regulations aiming to protect others’ under the Civil Code or the Company Act will be subject to further judicial review.

Another possible challenge for the customers’ claim is the difficulty in proving causality. Under the Civil Code in Taiwan, a tort is based on the causality between the defendant’s action and the injury, and the plaintiff bears the burden of proof in principle. Customers may encounter difficulty in proving causation between the loss suffered and the company’s action or inaction in violating the ESG.

6 What developments are there likely to be in ESG collective engagement and litigation in your jurisdiction in the next five years?

Enforcement and further development under the Pathway to 2050

In the next five years, the Pathway to 2050 will still be Taiwan’s highest and most critical goal for ESG. In general, the Pathway to 2050 expects the government to boost Taiwan’s transition in the aspects of energy, industry, lifestyle and social (civic engagement) by developing green technology and creating climate legislation. Relevant government measures, reports and plans can be expected to be announced in the coming years.

The passage of the CCRA

The passage of the CCRA is necessary to achieve the goal of net zero emissions by 2050. CCRA regulations include carbon pricing and carbon fees. However, carbon fees are also the most controversial issue in the Act. The CCRA has received criticism that it lacks details regarding how the carbon fee rate should be decided and does not include carbon tax regulations. Environmental groups are also unsatisfied that the CCRA does not contain a clause on environmental suits.

According to the EPA, the details of the carbon fee collection process will be stipulated in a complementary law and will be collected through different phases, the first of which is expected to be implemented in 2024 and which will target industries that emit over 25,000 tonnes of CO2e. For the fee rate, a research team commissioned by the EPA has recommended that the fee should be at least US$10 per tonne of emissions. However, the specific rate has yet to be determined. As for whether carbon taxes are necessary, the EPA has stated that this issue will be further discussed in the future after the results of the carbon fee collection are assessed.

Whether the CCRA, along with its complementary laws and regulations that have not been stipulated, is sufficient to control GHG emissions and achieve the Pathway to 2050, as well as what possible disputes may arise, is an important topic to be observed in the coming years.

The dilemma of being behind schedule

The original goal, set in 2020, was to decrease carbon emissions by 2 per cent and the government has already admitted failure to achieve this goal. The officer of the MOEA also stated that it is highly likely that the government will not be able to achieve the goal of reducing carbon emissions by 43 per cent before 2030, as suggested by the Intergovernmental Panel on Climate Change. How the government plans to catch up with the schedule and what to do when the government fails to meet the 2050 net zero goal established by the CCRA will become a serious topic in the coming years.

Potential ESG legal disputes in the future

With some recently decided cases, we estimate that ESG legal disputes are going to increase in the future within four potential trends, as follows:

  • First, it is quite possible that there will be more administrative lawsuits being filed by citizens and environmental NGOs against the government in the near future. Citizens and ecological NGOs are increasingly focused on how the government will accomplish the goal of net zero emissions on time. With pressure from citizens and NGOs, the authorities might adopt stronger and stricter means to accelerate the progress of the plan in the coming years. In line with a global trend where NGOs and individuals are turning to legal action to push government agencies towards achieving net zero emissions, there is a notable lawsuit that was filed in 2021. Greenpeace and the Environmental Jurists Association filed a lawsuit against the MOEA, arguing that the agency’s GHG regulations would clearly fall short of the net zero emissions goal. However, the court dismissed the case on procedural grounds in 2023, stating that the plaintiffs did not have the legal standing to sue the government for regulatory changes (Taipei High Administrative Court Ruling 110-Su-134). Although the lawsuit did not succeed in changing the regulations, it did manage to draw significant public attention to ESG issues, increasing the pressure on authorities to develop more robust and stringent regulations.
  • Second, the harsh and demanding manner of promoting ESG might also lead to disputes between enterprises and government authorities. When authorities enforce ESG strongly on enterprises, shareholders’ interests are likely to be eroded, which might drive enterprises to file lawsuits to protect their rights or ensure the rule of law.
  • Third, ESG issues could potentially lead to contract disputes among private parties, resulting in more civil litigation cases. Policies related to environmental sustainability could make conditions of contracts that parties originally agreed upon unfeasible. In previous cases, the court found that owing to the fact that the government banned sand and gravel mining and caused a surge in sand and gravel prices, the principle of changed circumstances under article 227-2 may be invoked to adjust the original contractual duties or conditions (Taiwan High Court Taichung Branch Civil Judgment 93-Jian-Shang-33). Similarly, if the government prohibits mining in a specific area, causing the minimum guaranteed quantity of coal originally agreed upon between private parties to become objectively impossible, the court also found such government policy to constitute the changed circumstances under article 227-2 (Taiwan Taichung District Court Civil Judgment 102-Chung-Su-69). It will be interesting to see whether the court will also find the application of changed circumstances under article 227-2 in the case of climate change policy and contract conditions adjustment.
  • Lastly, we have noticed that the concept of ESG has not only become a new basis for legal action but has also started to influence traditional criminal cases. In particular, in pollution disputes where a company has violated environmental regulations (eg, Waste Disposal Act), judges might now refer to the ESG concept when determining the sentencing. They emphasise that the offending company failed to fulfil its duty to protect the environment and promote sustainable development while profiting, causing long-lasting and irreparable harm to the environment. This could lead to higher criminal fines being imposed, as seen in cases like the Tainan District Court Criminal Judgment 108-Su-411 and the Taiwan High Court Tainan Branch Criminal Judgment 110-Shang-Su-1028, both of which were rendered in 2022.

The Inside Track

How has your work in relation to ESG, collective engagement and litigation developed over the past five years?

In the early years, our ESG clients were mostly those facing heavy administrative penalties or environmental criminal lawsuits; Lee and Li has frequently helped clients with ESG due diligence self-checks to control ESG risks. However, more recently, we have also observed companies initiating ESG-risk self-examinations not spurred by litigation, which can be read as a sign that the concept of ESG risk management is gaining currency.

What was the most noteworthy ESG matter that you have worked on recently and what features were of key interest?

In countless ESG due diligence checks, we have found that what our clients need is uninterrupted technical support, plus an online monitoring system and complex data management – this enables C-level executives to have a better grasp of ESG risks. Lee and Li has developed a software platform called ESGoal to help clients with day-to-day regulatory compliance. We foresee that the types of legal services we offer will continue to be shaped by our interactions with clients through online legal consultation.