Yuanta Securities Investment Trust Co (Yuanta SITC), the largest ETF manger in Taiwan, has launched the island state’s first environmental, social and governance (ESG) ETF, allowing more local individual investors to access responsible investing.
The so-called Yuanta FTSE4Good TIP Taiwan ESG ETF was launched on the Taiwan Stock Exchange (TWSE) on August 23. The product is benchmark against the FTSE4Good TIP Taiwan ESG Index, which was compiled by FTSE Russell and Taiwan Index Plus Corp (TIPS), a subsidiary of the Taiwan Stock Exchange, in 2018.
The index is designed to mirror the performance of 73 locally listed companies that comply with international ESG guidelines.
The underlying benchmark was used by the Bureau of Labor Funds (BLF), the supervisory body of local labour pensions, earlier this year as the benchmark for the pension’s five-year passive mandate with US$1.4 billion.
The ESG ETF is believed to further broaden the usage of the index in terms of diverting more capital from local retail investors, who currently have limited access to responsible investing, into ESG space.
Social responsibility has become increasingly popular in Taiwan. Taiwanese companies’ ESG performance ranking rose to fourth in Asia in 2016 from sixth in 2014, according to the Asian Corporate Governance Association.
From the indexation perspective, the TIPS has also been taking steps to diversify its social responsible index families to complement the trend. Apart from the FTSE4Good TIP Taiwan ESG Index, the index provide has launched several indexes tracking local social responsibility such as the Taiwan Labour Rights Index.
On the product side, Yuanta’s primary rival Fubon Fund Management has been active in sustainable investing. The company launched the island’s first corporate governance ETF, Fubon TWSE Corporate Governance 100 ETF, in 2017.
Recently, other smaller-sized players such as Taiwan Corporative Securities Investment Trust Co have also delved into the space to launch active ESG fixed income funds.
According to ETF.com, investors have poured US$4.7 billion into social responsible ETFs globally. In Asia, South Korea is currently the most advanced market with the listings of six ESG ETFs. Taiwan is putting more effort to catch up its regional rivals.
The ESG ETF has drawn positive market response with 7,600 transaction in its first trading day, one of the most actively traded ETFs in the bourse.
Yuanta Huang Chief Executive Officer Alex Huang comments the ESG ETF will play a key role to facilitate the development of ESG funds in Taiwan, and believes ESG will be the one of the major themes in global ETF market.
“With more than US$9 trillion global pension funds incorporating ESG factors in their portfolios, we believe Taiwan’s government, enterprises and pensions will follow the trend more closely to place more emphasis on ESG investing,” says Mr. Huang.
Taipei-based Yuanta SITC had around NT$520 billion (US$16.5 billion) of total assets under management as of June 2019.
There are currently 184 ETFs listed in Taiwan with total AUM of NT$1.31 trillion (US$417 million), according to the Securities Investment Trust and Consulting Association.