Responsible Investment Management Mechanism
In response to the U.N.’s Principles for Responsible Investment, Fubon Financial Holdings has built an ESG investment mechanism that is implemented through Company policies and ESG action plans. The principles are applied not only to internal investment positions but also to foreign discretionary investment institutions and other financial institutions with which Fubon has business relationships.
ESG Investment Mechanism
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|Strengthen the Responsible Investment Management Guidelines at the financial holding company level||Implementation Focus||Guidelines’ Highlights|
|In 2019, the “Fubon Financial Holding Co., Ltd. Responsible Investment Management Guidelines” were revised to the “Fubon Financial Holding Co., Ltd. and Subsidiaries Responsible Investment Management Guidelines” to encourage the consistent compliance of the guidelines across the organization.||
Ensure that ESG issues are considered when using/investing/disbursing funds
Responsible investment strategy and action
The guidelines stipulate that the use of funds must comply with responsible investment principles and action plans must be provided that can be followed and adopted for each principle.
These include the six Principles for Responsible Investment and 15 ESG action plans (such as developing a list of high-risk countries and companies, adopting negative screening as part of the screening strategy) and actively engaging in thematic investment.
ESG Investment Action Plans
2019 ESG investment implementation highlights and asset classes covered
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|Focus of ESG investment action plan||Description||Coverage (% of AuM)|
|Pre-investment Checks||Setting ESG investment risk indicators||Indicators cover environmental, social and corporate governance factors; an assessment is conducted prior to any investment and the analysis is to be disclosed||100% coverage for newly added investment positions|
|Establishing a blacklist||
|Building an ESG asset pool of domestic equities||All stocks in the asset pool must comply with ESG rules; no investments may be made in targets not included in this pool of investment assets|
|Post-investment Checks||ESG checklist for bond investments||Company investments in foreign bonds||Indicators include environmental, social and corporate governance factors, and checks are conducted annually||100% coverage of existing investment positions|
|Company investments in overseas bond funds and ETFs||Check done annually to verify if the bond/ETF issuers are signatories of the U.N. Principles for Responsible Investment|
|Company investments in domestic bonds||Indicators include environmental, social and corporate governance factors; checks are conducted annually|
|Company investments in domestic bond funds and ETFs||Check done annually to verify the ESG practices of the fund/ETF issuers|
|Monitoring of Foreign Discretionary Investment Institutions||Verification of foreign discretionary investment institutions’ ESG practices||
Checks done to verify that
discretionary investment institutions are signatories of the U.N. Principles for Responsible Investment or requests made for reports of how their ESG principles are implemented
|100% coverage of newly added positions through discretionary investment institutions|
|Blacklist||Domestic discretionary investment institutions must comply with Fubon company blacklists|
|Support from Overseas Organizations||ESG-related information from outside sources or ratings agencies identify high-risk countries or companies||
||100% coverage of newly added investment positions|
||100% coverage of newly added investment positions|
In 2019, Fubon Life made 100% of its investments in domestic and foreign stocks and bonds based on related ESG mechanisms, and had an investment balance of NT$3.34 trillion at the end of 2019, up 10.1% from the end of 2018. All investments in domestic and foreign bonds and domestic stocks were also subject to the ESG negative screening mechanism, and investments in this category totaled NT$3.13 trillion at the end of 2019, up 10.1% from the end of 2018. Of that, the balance of investments subject to a human rights-related negative screening mechanism totaled NT$2.14 trillion at the end of year, up 4.1% from the previous year.
We plan in 2020 to create ESG performance indicators for sensitive industries to strengthen the ability of responsible investment mechanisms to find sustainable enterprises and maintain steady long-term investment returns.
Each subsidiary has set or revised internal management policies and rules to implement the Principles for Responsible Investment and comply with Fubon Financial Holdings’ Responsible Investment Management Guidelines. In line with these policies and rules, ESG actions, such as identifying, evaluating and measuring sustainability risks based on ESG checklists and indicators, are applied to every asset class.
At Fubon Life, for example, revisions to investment rules made in 2019 require an assessment and analysis of whether a potential investment target is applying responsible investment principles in such areas as anti-money laundering/combating the financing of terrorism, the environment, corporate ethics and social responsibility. They also required that if violations of the principles are discovered after an investment is made, they must be addressed. Responsible investment strategies and related action plans continue to be updated and strengthened on an annual basis.
Fubon Life, Fubon Insurance and Fubon Financial Holding Venture Capital have devised concrete ESG assessment protocols for both before and after investments are made based on the industry an investment target is in, its products, and its practices. These protocols apply not only to internal investment positions in stocks, bonds, funds, but also cover the ESG practices of foreign discretionary investment institutions. Because Fubon Life’s portfolio has a high concentration of foreign fixed income products, it established responsible investment procedures for such products to comply with the PRI when investing in them.
Taipei Fubon Bank has also set responsible investment rules within its sustainability risk management framework. They stipulate that a Sustainability Risk Assessment Checklist (for securities investments and transactions) with ESG indicators be used to identify, assess and gauge any securities investment and transaction’s sustainability risk. These reviews must follow standard procedures to avoid underwriting industries or companies that have serious adverse effects on environmental and social (including human rights) sustainability. For more details, please see the sustainability risk assessment procedures QR code.More About Sustainability Risk Assessment Procedures >
Fubon Asset Management has gradually incorporated ESG factors into its investment procedures. Before making an investment in any stock, it analyzes the industry involved, the company’s outlook, profit forecasts, financial situation, and ESG practices. At the same time, it also maintains a blacklist that takes into consideration a company’s financial statements, the shareholdings of board directors and supervisors, and ESG issues. If a stock is put on the blacklist, it cannot be an investment target. If an investment has already been made in a stock put on the list, it must be divested within a specific time frame.
|PRI Management Action Plans|
(Private equity funds)
such as hedge funds)
|Incorporate provisions for green building design into property development contracts, and prioritize companies with outstanding social responsibility records when outsourcing a project or appointing an engineering consultant.|
Responsible Lending Management Mechanism
Credit Risk Assessment Mechanism
Intent on managing credit risk effectively, Taipei Fubon Bank has based its credit business on the five fundamental principles of security, liquidity, the common good, profitability and growth and adopted the following mechanisms to assess credit risk:
Sustainability Risk Management – Lending
Under Taipei Fubon Bank’s management framework for sustainability risk, sustainability risk assessments involving credit have been incorporated into KYC (know your customer) and credit check processes. That means that sustainability risk is identified, assessed and weighed in all credit cases (including those that must meet Equator Principle guidelines and other project financing cases) based on sustainability risk assessment procedures and Equator Principle compliance within the existing credit risk management framework.More About Sustainability Risk Assessment Procedures >
Internal Sustainability Risk Training
Taipei Fubon Bank has taken several steps to strengthen the understanding of all employees in its business departments of Fubon’s sustainability risk management framework and the Equator Principles. They include holding occasional awareness-raising courses and incorporating the framework and Equator Principles into manpower development programs for entry-level institutional banking staff and into specialized courses for management associates (totaling 66 people in 2019). These measures are aimed at mitigating the adverse impact of financed projects on the environment and society and driving home the importance of environmental protection and corporate social responsibility to clients.