Taiwan's Bureau of Labour Funds (BLF) has been expanding its remit amid volatile and highly priced markets. It's also increasingly focused on environmental, social and governance (ESG) measures in its investing, according to director general Tsay.
The pension fund recently handed out a five-year NT$42 billion ($1.4 billion) ESG investment mandate to promote the development of these principles among the society and investment community. This is BLF’s first ever domestic ESG mandate.
An advocate of ESG investing, Tsay said BLF issued the mandate because the concept of responsible investing is particularly gaining credence with millennials.
“There will be a new type of consumerism in the future and it belongs to the younger generation,” he said. “When they make consumption, they care a lot about environmental issues and social justice. This is a consumption behavior that most people have not noticed but I think it will prevail in the coming one or two years.”
The investment tracks the FTSE4Good TIP Taiwan ESG Index, which was jointly launched by FTSE Russell and Taiwan Index Plus, a wholly-owned subsidiary of Taiwan Stock Exchange (TWSE). The float-adjusted index is the first ESG index on the island and is designed to measure the performance of 64 constituent companies on the TWSE that meet globally recognised ESG standards.
BLF’s passive equity mandate was subsequently awarded to seven investment managers, each of which will oversee NT$6 billion. The winning managers were Cathay, Taishin, Capital, Prudential, Allianz, Fuh Hwa and Uni-President, BLF told AsianInvestor after the interview.
Tsay said he believes that younger people will prefer producers that consider the environmental and social impacts of their business, and focus on companies that do a good job in ESG.
“These companies will have a lot of potential. Their business performance may fare better [over the long term], and so will their share prices.” Tsay has strategic reasons for embracing ESG too; the mandates can encourage more investors and companies to engage in ESG.
“As a retirement pension fund, BLF’s ESG investment can lead the trend in the society and raise the awareness,” Tsay noted.
In order to do so, BLF is set to look at target companies’ corporate social responsibilities when its in-house staff screening invested companies, in addition to trying to influence the behaviour of asset managers through external mandates.
BLF will continue to practice shareholder activism. When its invested companies face important issues, the pension fund will voice opinions as a shareholder, said Tsay.
“We hope to direct corporates to fulfill their social responsibilities through the capital market.”
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Please click here to read the first part of this exclusive interview with BLF's director general, which was taken from the April/May edition of AsianInvestor magazine.