Promoting Leading Investment

領航投資

1. Fubon Financial Holdings has taken a three-pronged approach to promote responsible investment which takes into account organizational, policy, and management factors. An overview of the results of our responsible investment policies is provided below:

Establishment of Working Teams

Fubon has a well-established organizational framework in place for promoting responsible investment that allows the Company to proactively achieve various strategic goals. In 2015, Fubon Financial Holdings established the Corporate Governance and Sustainability Committee, under which the ESG Task Force was set up and overseen by independent directors, and the Investment Management Group reports to the Responsible Finance Team of the ESG Task Force. Meanwhile, senior executives from the Investment Management Group are selected to serve as working team committee members where they complete various tasks on a regular basis, such as summarizing the latest implementation status of responsible investments executed by the investment teams of Fubon's subsidiaries and reporting their findings to the ESG Task Force. Each subsidiary's investment team also designates personnel to undergo training and instruction which enables them to help incorporate ESG principles into the investment procedures of their respective team.

Formulating Effective Management Policies

Before committing to making an investment, Fubon Life and Fubon Insurance first take into account whether the targeted company adequately meets ESG standards. Then, after an investment has been made, inspections are conducted on a regular basis to determine whether the targeted company remains compliant with ESG criteria by incorporating ESG principles into their relevant investment policies, internal regulations, and standard operating procedures. This meticulous process entails the exercising of stock rights, creditor rights, and shareholders equity for companies based in Taiwan and other countries and constitutes the main guiding principles for formulating Fubon's responsible investment policies. Moreover, Fubon has adopted the six principles for responsible investment codified by the Principles for Responsible Investment (PRI) Association — an investor initiative in partnership with the UNEP Finance Initiative and UN Global Compact — as the basis for disclosing company information to outside parties.

Promoting Strong Management Practices

In order to effectively implement ESG management policies, the investment teams of each subsidiary have set up various management mechanisms based on the specific features of each investment product that are continuously refined and adjusted. Prior to making an investment, our investment teams conduct an assessment based on various ESG indicators and screen out unsuitable investments according to an internal blacklist and other indicators. After an investment has been made, the investment teams carry out regular inspections and engage in principled shareholder activism practices.

Risk control indicators for domestic investments allow Fubon Lifeto determine whether an enterprise has been involved in an incident that endangers public safety, life, and property, violated environmental human rights, or faced serious labor-management disputes. The risk control indicators are used to establish a blacklist, and the Market Observation Post System (MOPS) is closely monitored for the posting of material information. Companies or industries which are found to have violated ESG principles are added to the blacklist, and no new investments may be made in them. In addition to eliminating unsuitable investment targets through negative screening, the Investment Management Group went a step further in 2016 by formulating the "leading investment" strategy to accommodate our "Fubon ESG Visioning Project", a strategic blueprint drafted by Fubon Financial Holdings based on the sustainable development goals (SDGs) announced at the 2015 United Nations Sustainable Development Summit. The “leading investment” strategy aims to seek out investment targets which promote health and well-being, advance the development of green energy and infrastructure projects, and promote inclusive and sustainable economic growth.

In addition, by excluding unsuitable investment targets of fund companies and carefully monitoring the implementation status of ESG principles for discretionary investments institutions, Fubon Financial Holdings is doing its part to ensure that environmental, social, and governance criteria are adopted on a wider scale within the financial industry as a whole.

2. Description of Major Accomplishments in 2016 Based on the Six Principles of Responsible Investment:

Six Principles of Responsible Investment Results of Fubon Financial Holdings' ESG Policies in 2016
Incorporate ESG criteria into investment analysis and decision-making processes. Prior to making a securities investment, Fubon Life and Fubon Insurance take into consideration the specific features of the investment product and assess whether the targeted company adequately meets ESG standards. For example, a blacklist has been created for domestic debt and equity investments that is monitored on a regular basis. Companies or industries that are found to not adequately meet ESG criteria are added to the list, and no new investments may be made in them. By the same token, prior to making an investment in any underlying securities managed by Fubon Life, an assessment must first be made to check whether they meet the established ESG review guidelines (for instance, whether a major environmental incident has occurred within the past year).
Incorporate ESG criteria into Fubon's ownership policies and practices. In order to engage in principled shareholder activism and effectively monitor the ESG practices of companies in which Fubon has made investments, Fubon Life has rules in place that prevent them from supporting proposals at domestic annual shareholders meetings that violate ESG principles.
Seek appropriate disclosure of ESG information from institutions in which investments have been made.
  • When Fubon Life makes a domestic investment, it first examines the corporate social responsibility (CSR) report of the targeted company and request the investment trust company responsible for issuing the fund to provide a Statement of ESG Compliance or other standardized form which will allow the investment target to be checked for ESG compliance on an annual basis.
  • Furthermore, foreign corporate bonds and financial bonds which are held by Fubon Life must also be assessed according to ESG review guidelines.
Promote acceptance and implementation of PRI within the investment industry.
  • All companies that have issued foreign funds and ETFs held by Fubon Life and Fubon Insuranceare signatories of the United Nations Principles of Responsible Investment (PRI).
  • Discretionary investment institutions are requested to provide a summary of their ESG activities.
Cooperate to reinforce implementation of PRI criteria Fubon continues to pay close attention to topics and issues relating to ESG by participating in ESG forums with companies in which weinvested.
Individual Reports on PRI Activities and Current Progress
  • The Responsible Finance Team compiles a status report which analyzes the current progress of investment teams of each subsidiary regarding their responsible investment activities and submits reports to the ESG Task Force on a regular basis.
  • The importance of responsible investing is highlighted in Fubon Financial Holdings' annual CSR report, underscoring Fubon's public commitment to PRI guidelines.
  • In 2016, Fubon once again participated in the Corporate Sustainability Assessment — a survey conducted for the Dow Jones Sustainability Index (DJSI) — by holding in-depth discussions and drafting a response to questionnaire items. Becoming involved with the DJSI will enable Fubon to more acutely identify discrepancies between the Company's operations and international norms and standards, thereby enabling Fubon to further fine-tune its responsible investment policies.

3. In the future, Fubon will continue to formulate additional responsible investment policies which apply to every level of the Company's subsidiaries, and all subsidiaries will establish responsible investment strategies for front office investment procedures based on each individual type of investment product. Furthermore, aside from continuing to implement our negative screening procedures, Fubon will reinforce pre-investment evaluations using external resources or auxiliary tools, including establishing a list of high-risk industries and countries and a list of positive investments, along with implementing responsible investment procedures, taking follow-up actions, and analyzing the results of inventory-taking operations. In the future, if an adverse environmental or social incident occurs that involves a company in which we invested, we will take steps to maintain open lines of communication concerning ESG issues by contacting the company and getting to the bottom of the situation.

Signed a Compliance Statement for the "Stewardship Principles for Institutional Investors" in 2016

On August 10, 2016, Fubon Asset Management signed a compliance statement for the "Stewardship Principles for Institutional Investors" announced by the Taiwan Stock Exchange Corporation in 2016, underscoring Fubon's active commitment to supporting and engaging in the principles of good corporate governance and ensuring that Fubon's asset managers fulfill their long-term stewardship duties on behalf of investors. On November 25, 2016, Fubon also promulgated the "Conflict of Interest Management Policy" and "Stewardship Policy," which apply to all employees within the company.

One of our core policies is to actively communicate and engage with the companies in which we invested. During 2016, we conducted on-site inspections of approximately 285 companies listed on TWSE and TPEx and participated in annual shareholders meetings of 202 companies, including casting votes.

Fubon is committed to standing behind the "Stewardship Principles for Institutional Investors."Our aim is to hold conference calls and in-person meetings, and participate in investor forums and annual shareholders meetings on a long-term basis in order to maintain closer dialogues and interaction with the companies in which we invested. In taking these actions, we are also helping to draw greater attention to and support for environmental, sustainability, and governance issues. Moreover, we strive to make use of our core competencies and lend assistance to companies in which we invested by helping them implement ESG guidelines. This not only creates long-term investment benefits for customers and beneficiaries, but also leads to a win-win situation for investors and investees.