The announcement by Taiwan’s Bureau of Labor Funds (BLF) of a tender for a $2.3 billion global climate change equities mandate that tracks benchmarks related to the Paris climate accord is another step to fulfilling its offshore assets allocation target and focus on equities.
A statement from the fund on December 24 said it was requesting a proposal for its Global Climate Change Equity mandate, scheduled to be issued in the first quarter of 2022, with selection procedures planned for the second quarter.
“The pension recorded a stable return for the past few years and now has more room to explore more types of mandates and pave the road for diversification,” Donna Chen, president at Taiwan-based Keystone Intelligence, told AsianInvestor.
BLF reached a 7.03% return as of November last year and had NT$5,521 billion ($200 billion) in combined assets.
Taiwan’s equity market saw huge returns last year, Chen added. She believes investors should be more cautious about adding more to their portfolio in Taiwan and instead should try to capture more offshore opportunities, noting that the fund would use the global equity mandate to diversify its risk.
The latest tender is in line with the fund's long-term target to raise offshore assets to 60% by 2025, its deputy director general outlined in an interview with AsianInvestor in May 2020.
Last year, major global stock indices finished up in general. Vietnam, India, and Taiwan were the three best performing stock markets in Asia - the Taiwan Weighted Index was up 24%.
Since 2019, Taiwan stocks have gained more than 20% for three consecutive years, with a three-year cumulative gain of more than 90%, according to market data.
ESG STEP UP
The Taiwan pension fund hopes the global equity mandate will encourage other local institutional investors to emphasise environmental sustainability. “In this way, we can do our best to achieve environmental sustainability together,” the Taiwan pension fund said, adding that it has been committed to socially responsible investments “for many years” by integrating environmental, social and governance (ESG) factors into its investments.
In November, it hired six fund managers for its NT$48 billion ($1.73 billion) corporate social responsibility absolute return domestic investment mandate.
John McCareins, head of Northern Trust Asset Management, APAC, told AsianInvestor that asset owners globally want to use more sustainable investing and multi-asset strategies to achieve better returns and diversification.
“Sustainable investing and factor investing, in particular, have been generating significant interest, and I think probably 80% of our business growth is at the intersection of quantitative investing and sustainable investing,” he said.
“We're also seeing increasing interest in the integration of ESG into fixed income and multi-asset solutions alongside equity, and most of the demand that we've seen today tends to be more for global mandates as opposed to regional mandates,” he continued.
A North Asian sovereign wealth fund awarded "a bespoke global equity mandate" to Northern Trust Asset Management in 2021 “that has a combination of negative screening and carbon reduction targets and very specific factor content exposures,” McCareins told AsianInvestor.
He added that the mandate adopts a different approach versus a series of products the firm recently registered in Singapore that are more focused on climate change. “In those cases the design is really more about underweighting or avoiding companies adversely impacted by climate change and overweighting those that will benefit from the transition to a low carbon economy,” he said.