New ESG Risk Trends in Taiwan 2025: From Climate Change to Natural Capital

The year 2025 will mark a new watershed for Taiwanese companies in disclosing ESG risks. While many firms have already begun addressing issues such as carbon emissions and energy use, global trends indicate that focusing solely on single environmental topics is no longer sufficient to meet broader sustainability requirements.
According to the latest insights from the Big Four accounting firms and the International Sustainability Standards Board (ISSB), natural capital, biodiversity, and water security are rapidly emerging as new focal points in ESG-related financial risk assessments.
This article examines the latest international regulations, practical case studies, and corporate response strategies to help Taiwanese companies understand the key disclosure areas of these “non-carbon risks” and to develop corresponding financial management approaches.

Beginning in 2023, the EU’s CSRD formally requires companies to disclose their “double materiality” with respect to the environment—meaning not only the financial risks they face from climate change, but also the tangible impacts they have on ecosystems. While the ISSB’s S1 and S2 standards focus primarily on climate-related disclosures, their public statements explicitly note that future standards will expand to cover a broader range of natural capital issues. In addition, the Taskforce on Nature-related Financial Disclosures (TNFD), under the United Nations, released its final framework in September 2023, calling on companies to disclose their dependencies and impacts on natural resources such as forests, land, freshwater, and oceans. This is becoming a new source of pressure for corporate financial disclosures.

According to a BloombergNEF sustainability report, more than 65% of major European investment institutions incorporated natural capital into their investment decisions in 2024. These considerations include risks related to agricultural supply chains, dependence on water resources, and sources of raw materials. If companies are unable to provide such information, it will directly affect their ratings, financing costs, and partnership opportunities.

Most Taiwanese companies’ current ESG reports focus on carbon inventories and energy management, but they lack systematic assessments and disclosure bases for issues such as biodiversity, water risks, and land use. Companies need to evaluate whether the TNFD framework is applicable to them, or integrate natural resource dependencies and impacts into their existing risk management structures and financial reporting.

If upstream supply chains involve agriculture, forestry, fisheries, mining, or water-intensive industries, a company may not be the direct source of environmental impacts but could still be classified as high risk by rating agencies due to inadequate disclosure. Companies need to conduct risk categorization of key suppliers, update procurement requirements, carry out regular reviews, and disclose their due diligence processes in their reports.

Unlike carbon emission data, which has relatively clear calculation methods, the quantification of natural capital remains subject to debate and technical barriers. Most Taiwanese companies have yet to establish information such as water footprints or biodiversity risk maps, and they also lack internal control processes to integrate these into financial statements. Companies need to gradually build capacity starting from data sources, boundary definitions, and supporting documentation.
 

Companies can begin by leveraging their existing Enterprise Risk Management (ERM) structures to assess dependencies on natural resources—such as water and land use—and potential impacts. They can then establish corresponding KPIs and response measures. Explicitly incorporating nature-related financial risks into risk control processes will facilitate more reasonable and consistent disclosures in the future.

Companies should create a cross-departmental mapping table that links potential natural risk items in supply chains, production activities, product design, and operational processes with the responsible departments and available data sources. This table will serve as a key tool for preparing TNFD or other sustainability reports in the future, and it will also enable quicker responses during audits.

Companies can gradually explore incorporating natural capital costs—such as environmental restoration expenses and water resource allocation costs—into the notes of financial disclosures, linking them to items like capital expenditures and operating costs. This approach not only helps investors better understand the tangible impacts of corporate sustainability efforts but also allows companies to prepare early for the potential introduction of environmental taxes and nature-related financial liabilities.

From carbon emissions to natural capital, these challenges can never be addressed by a single reporting function alone. To cope with the rapidly evolving landscape of sustainability disclosures, companies must establish an institutionalized chain of responsibility and an integrated information framework across finance, compliance, operations, and procurement departments.
Yaofeng CPAs recommends that companies use the ESG Financial Diagnostic Table for a preliminary assessment to understand their maturity in areas such as natural capital, climate risk, and ESG institutionalization, and then develop short-, medium-, and long-term improvement roadmaps. We will also continue to provide analysis of regulatory trends and guidance on building institutional frameworks, helping companies confront the global sustainability wave not merely with compliance, but by identifying the true points where long-term value can be created.


 

Fill out the ESG Financial Diagnostic Form to quickly understand your company's current ESG financial standing and receive tailored recommendations.

Hall Chadwick Taiwan has extensive experience in ESG financial consulting and can assist your company in building a sustainability reporting framework that aligns with the latest regulatory requirements.
If you have any questions regarding the 2025 ESG financial disclosure requirements, feel free to contact us.