1. Financial Rules Are Being Rewritten
The EU’s CSRD took effect in 2023, obligating large companies to submit assured sustainability reports. Japan’s Financial Services Agency has issued guidance aligned with TNFD and ISSB, while Taiwan’s Financial Supervisory Commission has launched the “Sustainable Finance Blueprint 3.0,” requiring listed companies to gradually align with international standards. These regulations are rapidly accumulating, pushing companies and financial institutions to adjust governance and operations. As banks must disclose the sustainability performance of their portfolios, firms unable to provide credible data face higher financing costs.
2. Global Trends and Regional Comparison
In the international arena, Europe is at the forefront. CSRD imposes strict reporting standards, and under SFDR financial institutions must disclose the ESG risks and impacts of their investments. Suppliers lacking robust carbon accounting systems struggle to maintain business with European clients.
Japan is taking a more gradual approach. The FSA has issued guidance on ISSB and TNFD, requiring Prime Market listed firms to progressively disclose climate-related information. Major banks such as MUFG, Mizuho, and SMBC have introduced sustainability-linked loans and transition finance, tying lending terms directly to emissions reduction progress. This shows that sustainability is already embedded in Japan’s financial evaluation framework. Yet, small and medium-sized enterprises remain at the basic compliance stage, with disclosure rates still low.
Taiwan is moving quickly to catch up. From 2026, listed firms with paid-in capital above NT$10 billion must report in line with IFRS S1/S2, with full implementation scheduled for 2028. The Climate Change Response Act has also taken effect, with supporting regulations for carbon fees finalized in late 2024. Emissions from 2025 will be subject to fees, payable in 2026. Taiwan’s SMEs are known for agility and quick compliance, but the lack of standardized formats and assurance systems undermines credibility in global markets.
Overall, Europe drives the market through high standards, Japan emphasizes institutional design but progresses slowly, and Taiwan demonstrates flexibility yet lacks deeper integration. These differences shape each financial environment and affect how Japanese and Taiwanese firms adapt when working across borders.
3. Challenges for Japanese and Taiwanese Companies
Sustainable finance is reshaping corporate–financial institution interactions. As banks and investors must disclose portfolio-level carbon and sustainability performance, companies are compelled to deliver reliable data. Both Japanese and Taiwanese firms face structural difficulties, though with different characteristics.
Japanese conglomerates have relatively robust systems, from ISO certifications to internal governance, but such structures are concentrated at headquarters. SMEs tend to aim only for minimum legal compliance, with limited updates or third-party assurance. Public documents suggest that SMEs often depend on parent company oversight, leaving supply chain integrity vulnerable under international scrutiny.
Taiwanese companies, by contrast, struggle with data consistency. Many SMEs, supported by government programs, have completed initial carbon inventories, but standardization and verification mechanisms are lacking. When international clients request comparable data, inconsistencies arise. Even accurate numbers risk losing credibility without standardized formats—an issue especially acute in sectors like electronics and metalworking.
Financial institutions add further pressure. Japan’s major banks now require concrete emissions-reduction KPIs, with interest rates rising if targets are missed. In Taiwan, sustainability-linked loans are emerging as financing tools, but both banks and firms are still building experience. KPI design and verification processes remain under development, requiring companies to invest additional resources.
4. From Compliance to Competitiveness
Sustainable finance has raised the bar for corporate management. For banks and investors, ESG has become a core criterion. Whether companies can provide transparent, assured data directly determines their cost of capital.
Japan and Taiwan face different realities. Japan benefits from institutional experience but lags in SME adoption. Taiwan is agile but hampered by weak standardization and assurance. These differences highlight the potential for cooperation. Japan could provide expertise in institutional frameworks and financial products, while Taiwan contributes data tools and on-the-ground cases—together establishing a mutual recognition system across the Asia-Pacific and extending into Southeast Asia.
The importance of professional services is growing in this process. Accountants and consultants are evolving from report preparers to governance designers, embedding sustainability information into financial management. Once emissions data and financial indicators are integrated, sustainability becomes a common language of finance and governance.
The momentum of sustainable finance continues to accelerate. Over the next decade, whether Japanese and Taiwanese companies can seize this trend depends on treating compliance as a starting point and transforming data burdens into a foundation of trust. With this foundation in place, the two countries can become benchmarks in the region and maintain steady competitiveness in global markets.