Administrator: Bureau of Labor Funds MOL Website: www.mol.gov.tw
Officer in Charge: Liu Li-Ju, Deputy Media contact: Mr. Chu Wu-Chi
Director General Tel: 886-2-8590-2935
Tel: 886-2-3343-5897 Mobile: 886-910-234-533
To establish a corporate social responsibility oriented investment and to respond to a low-rate environment, the Bureau of Labor Funds (“the Bureau”) will embark on two separate mandate programs: an USD 2.4 billion “Global ESG Quality Mix Equity Indexation Mandate,” and an USD 3.6 billion “Absolute Return Fixed Income Mandate.” Details of the programs will be published on the Bureau’s website by the end of this year, and the manager selection processes are expected to be initiated and completed in the first half of 2017.
Socially responsible investing is a methodology of investment which factors in environmental, social, and governance (ESG) aspects. Domestically, the Bureau has been investing while taking ESG as crucial criteria. To illustrate, the Bureau adopts CSR investment indices, e.g. TWSE RA Taiwan Employment Creation 99 Index, and TWSE RAFI Taiwan High Compensation 100 Index, and practices shareholder activism. The Bureau is among the first institutions signed the Stewardship Principles for Institutional Investors – a TWSE initiative – as well.
This is the first time the Bureau’s foreign mandate program land in the socially responsible investing territory. The designated asset managers shall consider ESG factors as investment decision criteria, meaning that certain “sinister” industries – e.g. tobacco, alcohol, arms, gaming, and pornography – shall never be invested under this program. Meanwhile, firms with doubtful or controversial records in environment, customer, human rights, labor rights, supply chain management, and/or corporate governance areas, will be prevented from the portfolio as well. In the volatile investment environment nowadays, to optimize portfolio return, mitigating down-side risk, and communicate our concerns for the ESG factors, the Bureau introduced a mixed index which blends smart-beta indices including high-quality, low-volatility, and enhanced value.
The Bureau indicates that as a pension fund manager, given the environment of raised international financial market volatility, combined with non-traditional monetary policies, even negative interest rates, carried out by major central banks after the 2008 financial crisis, causing lowered or sometimes negative yields on bonds, fixed income securities still play a crucial role in asset allocation. Thus, the Bureau established an absolute-return mandate program in the realm of fixed income. The program adopts an absolute-return type index as benchmark, while expecting the asset managers apply active management with delicate and swift maneuvers to enhance return and to control risk in a possible rate-hiking cycle.
The Bureau will enrich its overseas ESG positions, both in the hopes of leading a trend of ESG investing in Taiwan, and to ensure the financial soundness and retirement welfare of the workers and fellow countrymen by creating robust revenue in the low-rate environment.