In the face of the impacts of climate change, ‘green sustainability’ and ‘2050 net-zero emissions’ have become international trends and are central to Taiwan’s current policies. In March 2022, the National Development Council announced the ‘2050 Net-Zero Emissions Pathway,’ identifying ‘green finance’ as one of the twelve key strategies for achieving net-zero emissions.
In September 2022, the Financial Supervisory Commission released the ‘Green Finance Action Plan 3.0,’ aiming to start with financial institutions themselves to place importance on climate change issues. By leveraging the investment and financing power of financial institutions and connecting the supply chain, it aims to influence clients and industries. Through collaboration, it seeks to build a consensus on net-zero, bringing positive changes to the financial industry and other sectors, deepening sustainable development, and moving towards the goal of a net-zero transition.
According to the World Economic Forum (WEF), green finance provides financial solutions that satisfy both ‘environmental protection’ and ‘capitalism.’ Its main purpose is to channel funds (such as corporate loans, general investments, financial institution-issued financial products, etc.) into sustainable development-related businesses. This allows financial investments to not only gain tangible returns but also reduce their negative impact on the climate.
What are Green Finance Products
In simple terms, green finance products are innovative financial products and services launched by financial institutions to help businesses and investors pursue sustainable development and low-carbon transitions. In recent years, the financial industry has continuously introduced green finance products, such as green industry financing, sustainability-linked loans, green bonds, green funds, green insurance products, and green deposits. Below, we primarily introduce ‘green industry financing,’ ‘sustainability-linked loans,’ and ‘green deposits.’
Green Industry Financing
Financial institutions offer financing projects for environmental protection-related industries, providing comprehensive financial assistance mainly for setting up factories, updating or purchasing energy-saving and energy storage equipment, and developing renewable energy. This helps businesses and individuals develop green sustainability and transition to energy-saving and carbon reduction.
Sustainability-Linked Loans
Green industry financing is ‘earmarked for specific purposes,’ meaning funds can only be used for green energy and low-carbon equipment, and cannot be used for other ESG-related sustainability performance indicators. Thus, ‘sustainability-linked loans’ were introduced. These loans have no restrictions on the use of funds. As long as financial institutions and borrowing companies agree on sustainability-related key performance indicators beforehand, the funds can be used freely. Financial institutions will adjust loan interest rates based on whether companies achieve these indicators during the loan period to encourage companies to jointly strive for sustainability.
Green Deposits
Green deposits, also known as green fixed deposits, involve businesses or investors placing fixed-term deposits into financial institutions, helping these institutions use the funds for green-related financing projects, such as renewable energy, pollution prevention, green buildings, etc.
For a long time, Kedge has focused on issues like environmental change, circular economy, energy saving and carbon reduction, and green sustainability, supporting and protecting the land through actions that implement sustainable environmental concepts. By investing funds into green deposits, one can not only earn interest but also support ESG sustainable development. Since 2023, Kedge has responded to the green or sustainable deposit initiatives of seven banks: Taiwan Cooperative Bank, Land Bank of Taiwan, E.Sun Bank, Mega International Commercial Bank, Hua Nan Bank, Chang Hwa Bank, and KGI Bank. By the end of 2023, Kedge’s green or sustainable fixed deposits with financial institutions totaled NT$1.6 billion. By engaging in green deposits, it aims to jointly exert influence for environmental sustainability and net-zero transition.
Additionally, since 2023, Kedge has gradually worked with financial institutions to integrate ‘sustainability key performance indicators’ into credit conditions for linked loans and guarantee limits. It has signed and planned sustainability-linked financing agreements with First Bank, Mega Bank, Chang Hwa Bank, and Taiwan Cooperative Bank. Achieving these goals will effectively reduce financial costs, including but not limited to linking third-party certified water use, electricity use, greenhouse gas/carbon emission reduction, corporate governance rankings, and other ESG sustainability indicators, combining the power of banks to strive for a net-zero sustainable future. More support from financial institutions will continue to be sought in the future.