Labor Funds hold to the principle of long-term investment with stable returns, and continuously diversify their asset allocation into stocks, bonds, and alternative investments. In addition, the Bureau of Labor Funds (BLF) has planned the “Global Climate Change Equity” foreign investment mandate program to guide trends toward sustainable investing.

　　According to the BLF, as vaccination rates rise worldwide, coronavirus restrictions have gradually been lifted. Coupled with continuous fiscal and monetary stimulus policies this year, the global economy has bounced back since the 2020 recession. However, factors such as the spread of COVID-19 variants, China’s energy shortages and surveillance policies, and inflationary pressure have all led to market instability. Although investing has become more difficult, labor funds were still able to use market timing and dynamic diversification strategies to create stable investment income. As of the end of October, labor funds have generated a return of 7.47% this year.

　　According to the World Economic Outlook published by the IMF this October, the global economy is estimated to have grown 5.9% in 2021 and will grow 4.9% in 2022. The IMF also indicated that supply disruptions caused by COVID-19 and rising consumer prices will lead to pitfalls in the economic outlook, and global economic growth is projected to slow down after mid-2022. However, although major central banks started reducing their bond-buying due to inflationary pressure, their monetary policy remains relatively loose. Moreover, healthy enterprise earnings and a positive economic outlook will continue to provide momentum for the market, which is beneficial to the performance of the stock market. On the other hand, even though a rise in the yield rate will reduce the attractiveness of bond investment, given that bonds have the characteristic of fixed income, they are still an indispensable part of the long-term asset allocation of funds. In summary, the asset allocation plans of labor funds next year will still diversify into bonds and stocks, with stocks as the main focus of allocation. Taking the Labor Pension Fund (the New Fund) as an example, domestic and foreign stocks account for 47% of its allocation. In addition, the BLF will continue with alternative investing, which has a lower correlation with traditional equity and bond assets, to diversify the investment risk.

　　The BLF has been committed to socially responsible investment for many years. The BLF has integrated Environment, Society, and Governance (ESG) into fund investment processes while maintaining returns. When selecting securities domestically, factors such as whether the enterprise publishes a Social Responsibility Report as well as the evaluations of independent institutions with professional expertise and credibility are taken into consideration. Moreover, the BLF puts shareholder activism into practice by proactively attending shareholder meetings and institutional investor conferences of the investee companies. We also communicate with their senior management about issues related to labor rights, environmental protection, and corporate governance. In 2021, the BLF attended more than 300 institutional investor conferences and provided recommendations about ESG issues. The BLF also attended more than 300 shareholder meetings and voted at 100% of them. To protect the employment of people with disabilities, the BLF issued official letters to more than 10 companies that failed to hire a certain number of employees with disabilities. It is hoped that enterprises will implement their social responsibility through the influence of the capital market. Additionally, when mandating investments, the BLF makes ESG investments by tracking ESG-related indexes and selecting them as benchmarks. To encourage domestic enterprises to take their corporate social responsibility seriously, this year we also completed the “Socially Responsible Investment of the Absolute Return Equity” domestic mandate, which amounts to NT$48 billion and is aimed at companies who published CSR reports.

　　In terms of overseas investment, while pursuing global diversification, labor funds are also continuously strengthening their socially responsible investment. The BLF has completed many ESG-related indexation investment mandates. As the impact of climate change has increased in recent years, reducing greenhouse gas emissions has become a global target. In 2022, the BLF will embark on the “Global Climate Change Equity” foreign investment mandate program, which will select Paris Aligned climate related indexes for the benchmark indexes. Basically, the amount will be US$2.3 billion. The announcement will be published on the BLF website in 1Q2022 and selection procedures are expected to be carried out in 2Q2022. The BLF also indicates that this program with Paris Aligned climate indexes will be the first of its kind in Asian pension funds. Furthermore, the BLF expects this program will encourage other institutional investors to emphasize environmental sustainability. In this way, we can do our best to achieve environmental sustainability together.

　　Due to international political and economic factors and the COVID-19 pandemic, the volatility of the financial market has continued to increase in recent years. Furthermore, there have been differences in the economic cycles and performances of different countries. However, the BLF will continue to strategically adjust its asset allocation through regional and portfolio diversification. By creating investment opportunities under reasonable risks, we expect to achieve long-term robust performance for funds.