2020 Taiwan Sustainable Investment Survey

Numerous Financial Institutions Participate to Enhance the Transparency of Sustainable Investment Information

The Survey investigated the situation of sustainable investment in Taiwan, including 99 institutional investors. There were 26 insurance companies, 59 securities investment trust and consulting companies, and 4 government funds, which were commissioned by the Financial Supervisory Commission (FSC), the Securities and Exchange Commission (SEC), and industry associations to assist in communicating with institutional investors. The survey returned 59 valid questionnaires, of which 37 companies provided the total asset value of their sustainable investments.

Further analysis of the ratio of total sustainable investments to institutional assets under management (AUM) by responded institutional investors, the result showed that the overall sustainable investment ratio was approximately 31.7%, with the insurance industry having the most investments, with over $12 trillion, government funds with nearly $1 trillion, and the securities investment trust and consulting companies with nearly $600 billion. The team explained that the relatively small amount of sustainable investments made by securities investment trust and consulting companies was also related to the fact that less than half of them couldn’t provide the sustainable asset ratio. We will communicate with the industry again in the future, hoping that the survey results will provide a more complete picture of sustainable investment practices in Taiwan.

Consider the Trend of International Sustainable Investing

In terms of sustainable investment methods, the research team referred to the definitions of sustainable investment provided by various organizations, including GSIA (Global Sustainable Investment Alliance). Sustainable investments were categorized into eight approaches to investing: negative/exclusionary screening, best-in-class/positive screening, norms-based screening, ESG integration, sustainability themed/thematic investing, impact investing and community investing, shareholder action (voting rights exercise), and corporate engagement. Nearly 80 percent of investments are negatively excluded, in line with international trends in sustainable investment.

Although consistent with international investment strategies, the research team believes that negative/exclusionary screening is a more passive approach to sustainable investment, and suggests that when developing their sustainable investment approach, institutional investors can adopt more active investment approaches such as ESG integration and sustainability themed/thematic investing, which are linked to financial performance. This will not only help create a win-win investment outcome of financial performance and ESG performance,  but also meet the trend of sustainable investment in North America.

Institutional Investors should Increase the Proportion of Sustainable Investments to Exert a Positive Impact

In addition, in terms of various types of asset investment, the survey found that foreign bonds account for the largest proportion of Taiwan sustainable investment targets, with an amount of over $8 trillion, followed by Taiwan stocks. However, in terms of the proportion of sustainable investment in AUM, Taiwan's sustainable investment in Taiwan stocks accounts for less than 5% of AUM. In this regard, the team suggests that the government should promote more investment institutions to focus on sustainable investment targets in Taiwan stocks so that sustainable investment can have a greater positive impact on Taiwanese companies.

Chi-Jui Huang, the host of the project team and professor at the Department of Finance, said that the study cooperates with the FSC's Green Finance Action Plan 2.0 and Corporate Governance 3.0 policies, and is conducted using a methodology recognized by international institutions. The results of the study can be used as a reference for domestic and international sustainable investment stakeholders to evaluate institutional investors in Taiwan. He forecasted that in the future, the team will conduct annual tracking surveys and publish them regularly, in the hope of promoting the steady and positive development of sustainable investment in Taiwan and creating a more friendly environment for sustainable investment in Taiwan together with relevant institutions.

2021 Sustainable Investment Survey

Numerous Financial Institutions Participate to Enhance the Transparency of Sustainable Investment Information

The Survey investigated the situation of sustainable investment in Taiwan, including 99 institutional investors. There were 36 insurance companies, 39 securities investment trust and consulting companies, and 4 government funds, which were commissioned by the Financial Supervisory Commission (FSC), the Securities and Exchange Commission (SEC), and industry associations to assist in communicating with institutional investors. The survey returned 58 valid questionnaires, with 59% of questionnaire recovery rate.

Consider the Trend of International Sustainable Investing

According to the results of the Survey, the total amount of AUM was about NTD 17.6 trillion, where insurance companies accounted for the most investment with NTD 15 trillion, governmental funds accounted for 1.2 trillion, and securities investment trust and consulting companies accounted for 1.3 trillion. The most methods that Taiwanese institutional investors used was still the passive way, negative/exclusionary screening, with NTD 12 trillion, ESG integration was followed with 9 trillion, and the third method  used was sustainability-themed investing with over 3 trillion. Although investors in Taiwan focused on the passive and easy way to make sustainable investment, the amount of impact investment has tripled, which showed that investors were concentrating on the positive impact of the investment that affected the community or environment. In terms of investment targets, foreign bonds were the most of all with 56%, and the main investors were life insurers. The second largest investment target was Taiwanese stocks with 19%, and the main investor was 4 governmental funds and life insurers. It may result from Taiwan in the bull market during 2020 with an amount of investment growth of 47%. As for securities investment funds trust and consulting companies, they mainly invested in foreign stocks and Taiwanese stocks.

Situation of institutional investors’ questionnaire response

To sum up, institutional investors who disclosed their sustainable investment accounted for about only 70%, and there were still 30% of investors with no will to disclose their total amount of sustainable investment. Taiwan institutional investors still have room for improvement in  information disclosure of sustainable investment. Institutional investors abided by Stewardship Principles made by Taiwan Stock Exchange were much better than in 2019, with 90% of compliance. In addition, compliance of international norms was improved in great extent compared to 2019, with institutional investors who followed PRI achieving 90%. However, corporate engagement was still in the minority, only accounting for 4% of total investors. However, institutional investors made 19,182 times of corporate engagement, which increased over 10 times than last year, and it showed that corporate engagement was getting more and more attention than before.

Suggest Institutional investors to pay attention on development of ESG financial product 

The Survey also added some questions about preference of investors. We found that there were 80% of investors paying more attention to ESG products. The level of attention paid by institutional investors on ESG-themed financial products increased by 90%, and investors between 30 to 60 years old attach greater importance to ESG products compared to other age groups. We suggest that financial institutions follow the trend by launching ESG-related financial products.

《2023 Taiwan Sustainable Investment Survey》Full Report

In 2022, global inflation–exacerbated by the Russia–Ukraine War has prompted the Federal Reserve Bank to raise its interest rates, which in turn has reduced hot money flows, increased the volatility of the global stock market, and lowered market performance. Furthermore, due to the surge of local COVID-19 cases, Taiwan domestic pandemic-related insurance claims reached NTD 211.6 billion, which simultaneously reduced the amount of assets under management (AUM) and sustainable investments in 2022. Despite these setbacks, the proportion of sustainable investments in Taiwan has generally continued to grow.

A higher percentage of institutional investors are engaging in sustainable investing as well as the proportion of sustainable investments

According to the results of the 2023 Taiwan Sustainable Investment Survey, institutional investors engaging in sustainable investing accounted for 80% of the total respondents. For the first time, the percentage of the total amount of sustainable investments in Taiwan exceeded 40%. In particular, the proportion of securities investment trusts and consulting companies engaging in sustainable investing was 33% this year, up 14% from last year’s survey, suggesting that both types of firms have a significantly higher awareness toward sustainability-related issues. However, due to the impacts of the macroeconomic environment, the total amount of AUM was NTD 49.5 trillion this year, a 4% drop from last year’s NTD 51.3 trillion; the total amount of sustainable investment assets was NTD 19.9 trillion, a 2% drop from last year’s NTD 20.3 trillion. The overall trends were consistent with the Japan Sustainable Investment Forum’s (JSIF) survey results.

A higher percentage of institutional investors in compliance with climate change initiatives, with climate change management included in the investment decision-making processes

According to this year’s survey, the percentage of institutional investors in compliance with climate change initiatives was significantly higher than that of the previous year, with the Task Force on Climate-related Financial Disclosures (TCFD) being the most popular initiative at 60% (38 investors), followed by the CDP (formerly the Carbon Disclosure Project) at 41% (26 investors), Partnership for Carbon Accounting Financials (PCAF) at 35% (22 investors), and Science Based Targets initiative (SBTi) at 33% (21 investors). Moreover, the number of institutional investors who included climate risks in their investment decision-making process was 77% (13 investors) higher than in last year’s survey. In response to climate risks, 82% (55 investors) adopted measures such as measuring the carbon emissions of their investment portfolio, negotiating and voting on climate change-related issues with investee companies, disinvesting in upstream and downstream industries related to fossil fuels, investing in climate change-related themes, and investing in green bonds. These changes in number show that institutional investors have attached greater importance to environmental sustainability issues.

Negative/exclusionary screening and ESG integration remain the mainstream method of sustainable investing in Taiwan, followed by stakeholder action and corporate engagement, while impact investing has the most significant growth

Survey results over the past three years have shown that the most common method of sustainable investing used by Taiwanese institutional investors was negative/exclusionary screening, followed by ESG integration. Although sustainable investments in Taiwan have gradually aligned with global trends in recent years, according to the 2022 GSIR report, major countries, such as the U.S., Japan, and New Zealand, have switched to stakeholder action and corporate engagement as their primary sustainable investing methods, while Canada’s primary method was ESG integration. These results suggest that global sustainable investment trends have shifted from passive negative/exclusionary screening to active stakeholder action and corporate engagement. Therefore, we suggest that, in addition to negative/exclusionary screening, Taiwanese institutional investors should consider active approaches to sustainable investing, such as stakeholder action, corporate engagement, ESG integration, and impact investing.

Furthermore, comparing the variation in the amount of sustainable investments by method over the last two years, due to the low base period in the in the previous year, the amount of impact investing this year rose by 2360% from last year. Interestingly, this marks the first time that some institutional investors had publicly disclosed the process of impact assessment alongside the monitoring results, and adopted internationally recognized methodologies to evaluate the outcomes of the impacts and management approaches.

A 10% growth in the amount of sustainable investments in foreign bonds from last year, accounting for more than 60% of the nationwide proportion of sustainable investments

The survey results revealed that the amount of sustainable investments in foreign bonds was 10% higher than last year, accounting for 61% of the nationwide percentage of sustainable investment assets. Foreign bonds were the primary sustainable investment asset held by Taiwanese institutional investors, followed by Taiwanese stocks. Due to the volatility of the global stock market, there was a significant decrease in the scale of sustainable investments in stock-type assets, within the volatility, Taiwanese stocks were the most impacted, with a reduction of 37% from last year’s amount, as well as an 8% reduction in the overall percentage.