Responsible Finance Results

Fubon Financial Holdings has been active in fighting climate change as the issue has gained increasing attention in the international community, backing businesses that help mitigate global warming. It has rolled out green credit and green bond initiatives, supported green energy companies, stipulated green building designs in contracts for real estate development projects and continued to make low-carbon investments. The Company will take a step further in 2020 by taking inventory of domestic high-emission businesses it is involved with, reflecting the robust implementation of Fubon’s responsible finance strategies and its desire to increase gradually the proportion of responsible finance-related assets in its portfolio.

TCFD High Carbon Emission Assessment

Assessing Exposure to Domestic High Carbon Emitters

The Taiwan GHG Emissions Registry (set up under the “Greenhouse Gas Accounting and Registration Regulations”) has published a Designated Emission Sources List of companies with annul direct emissions from fossil fuel combustions exceeding 25,000 tons CO2e and that fall under one of six categories of energy-intensive or high-energy-consuming industries (Electric generation, Iron and steel, Refining Cement, Semiconductor, TFT-LCD) Based on that list, Fubon Financial Holdings takes inventory of the exposure to risk of its businesses and investment positions.

Exposure to High Carbon Intensity Sectors in Domestic/Foreign Credit Business

A survey on the exposure of Taiwan’s financial sector to environmental and social risks found that among the 10 biggest borrowers served by Taiwan’s 15 biggest domestic banks, nearly 40% were in high carbon intensity sectors. Growing calls for carbon pricing could have a significant adverse impact on highcarbon businesses in the future, especially in terms of their financial structures and ability to repay loans, which would increase the credit risk faced by banks. Although the international community has yet to come up with a consistent definition of a high carbon intensity sector, Fubon Financial Holdings and Taipei Fubon Bank plan to take stock in 2020 of their exposure to clients in such sectors financed through their domestic and foreign credit businesses. Those results will be used to assess and identify carbon pricing risk and guide the management of high-carbon clients, a process that will strengthen Fubon’s credit risk management capabilities and the ability to encourage or help those clients to transform their operations.

Green Finance

Thematic Investment and ESG Funds

Thematic Investment

In its efforts to achieve the United National sustainable development goals (SDGs), Fubon Financial Holdings has put a high priority on encouraging inclusive and sustainable economic growth, including by investing in businesses dedicated to people’s health and well-being and green energy companies. In 2019, the Company continued to look for ESG-themed opportunities, and its investment in basic infrastructure or companies with strong ESG performances or involved in the government’s 5+2 innovative industries plan rose compared to 2018 levels. The Company also began taking inventory of its low-carbon investment in May 2019, and subsequent monthly inventories have found it to be on the rise, a reflection of Fubon’s efforts in implementing its responsible investment strategy.

Overview of thematic investment in 2019

Unit: 100 million

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SDGs Action Plan Results
Unit: NT$ 2018 2019 %
Continue to invest in businesses developing new drugs and biotech therapeutics to achieve the goal of good health and well-being Invested in drug development and biotechnology companies Stocks 11.9
Bonds 75.9
Continue to invest in green energy or alternative energy enterprises to ensure access to affordable, sustainable and clean energy Invested in alternative energy enterprises Investments in shares of solar power plants and alternative energy companies 6.8
Invested in green bonds Total amount invested (end-year) 6.7
Low-carbon investment Outstanding balance 1.2604
Continue to invest in green energy or alternative energy enterprises to ensure access to affordable, sustainable and clean energy Invested in planned property developments with energy-saving designs Total budgeted amount for property development 52.0
Searched for basic infrastructure investment opportunities Amount invested in foreign infrastructure funds 8.0
Expand ESG screening methods and invest in Taiwanese enterprises with strong ESG records; invest in enterprises covered under the 5+2 innovative industries plan, in basic infrastructure and in social enterprises to encourage inclusive and sustainable economic growth Invested in companies rated as good ESG performers Amount invested in Taiwanese companies with strong ESG records 186.5
Invested in the 5+2 innovative industries, basic infrastructure and social enterprises Amount invested in 5+2 businesses, basic infrastructure and social enterprises 348.5

Note: The formal accounting (inventory) of low-carbon investment began in May 2019, and therefore the figure shown is cumulative through May 2019

ESG Funds

In May 2017, Fubon Asset Management issued the Fubon TWSE Corporate Governance 100 ETF, which tracks the Taiwan Stock Exchange’s Corporate Governance 100 Index. It was Taiwan’s first domestic equity ETF to focus on corporate governance as the main investment focus and enables investors to support companies with good corporate governance practices and create virtuous circles in capital markets.

Promotion of Policy-driven Loans

Taipei Fubon Bank has long been committed to helping the government foster economic development, support small and medium-sized businesses, strengthen national competitiveness, and finance high-quality education for the next generation. To achieve those goals, the bank has leveraged the financial sector’s influence and wide range of financing services and used its understanding of customers’ needs developed over many years to initiate policy-driven loans. Among them: financing for established companies and startups, loans for people to buy or renovate a home, special loans for energy-saving equipment, and student loans for studying abroad.

  • Supporting SME Development

Note:Total business loans = bank’s total outstanding loans minus loans to financial institutions and personal loans

Taipei Fubon Bank supports the development of small and medium-sized enterprises in several ways, including contributing to the government’s SME Credit Guarantee Fund (contributions totaled NT$55.52 million in 2019) and providing loans to small businesses. The bank’s outstanding loan balance to SMEs at the end of 2019 was NT$171.0 billion, up roughly 14%, or NT$20.6 billion, from a year earlier, and SME loans accounted for 31.03% of all business loans.

  • Supporting Corporate Development, Strengthening Industrial Structure

Taipei Fubon Bank offers several types of preferential loans in support of government policies to strengthen Taiwan’s competitiveness that help support corporate development, improve Taiwan’s industrial structure, and lift up startups. Here is a summary of the different types of these policy-driven loans disbursed in 2019:

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Description 2018 2019
Credit Guarantee Fund Guaranteed Loans Loan targets are SMEs eligible for loans guaranteed by the Credit Guarantee Fund. Taipei Fubon Bank forwards loan applications from eligible SMEs to the Fund for approval and then issues the loan based on the credit limit and conditions approved by the Fund. Customers:7,376 Outstanding loan balance:NT$14.59 billion Customers:7,010 Outstanding loan balance:NT$15.77 billion
Preferential Loans to the Cultural and Creative Sectors Loan targets are companies in industries listed in the Development of the Cultural and Creative Industries Act. This program, aimed at upgrading the sector and solidifying its structure, helps clients obtain interest subsidies from the Ministry of Culture and reduces their interest burden. Customers:5 Outstanding loan balance:NT$4.5 million Customers:5 Outstanding loan balance:NT$9.6 million
Special Loans to Returning Overseas Taiwanese Businesses Loan targets are Taiwanese companies in China that have received approval letters from the Ministry of Economic Affairs to return to Taiwan to invest. The program is aimed at boosting domestic industrial and business development, accelerating economic growth, and lowering unemployment. Active customers:1 Outstanding loan balance:NT$232 million Customers:12 Outstanding loan balance:NT$6.085 billion
Special Loans to Accelerate Investment by Companies in Taiwan Loan targets are vendors certified as eligible by the Ministry of Economic Affairs; goal is to encourage companies that have deepened their presence in Taiwan to expand their manufacturing capacity, help them grow, and increase job opportunities. Customers:1 Outstanding loan balance:NT$183 million
Overseas Investment Financing Loan targets are Taiwanese companies that have been approved by a regulatory authority to invest overseas. Loans are to support the New Southbound Policy and help Taiwanese businesses in ASEAN countries, South Asia, and New Zealand and Australia develop new products, expand markets and build up their overseas networks. Customers:1 Outstanding loan balance:NT$60 million
  • Note 1:The outstanding balance of guaranteed loans under the Credit Guarantee Fund rose 8% in 2019 from a year earlier, reflecting Fubon’s increase in support for small and medium-sized enterprises.
  • Note 2:Taipei Fubon Bank actively supports initiatives by the government to boost investment in Taiwan. Its outstanding loans to returning overseas Taiwanese businesses soared in 2019, and it also participated in two new programs to promote investment in Taiwan and overseas.

  • Helping the Next Generation Be More Competitive

Taipei Fubon Bank has been providing Taiwanese youth student loans since 1976 to ensure fair access to a high-quality education. In 2008, the bank initiated a loan program for overseas study in partnership with the Taipei City government, and it initiated its own financing services for students studying abroad to give them the chance to pursue their dreams. Here is a summary of student loan activity in 2019 compared with the previous year:

2018 2019
Student Loans Year-end outstanding balance: NT$24.44 billion
Year-end loan customers: 135,300
Year-end outstanding balance: NT$24.10 billion
Year-end loan customers: 133,145
Overseas Study Loans Year-end outstanding balance: NT$5.87 billion
Year-end loan customers: 6,920
Year-end outstanding balance: NT$6.07 billion
Year-end loan customers: 7,696

Note: The number of people applying for loans to study in Europe rose in 2019, helping push the outstanding balance for overseas study loans up 3% from the previous year.

Talent Cultivating Program

Fubon Asset Management has worked closely with universities in recent years to nurture new talent. In 2019, it continued to participate in the National Taiwan University College of Management’s “Talent Cultivating Program,” which is aimed at cultivating potential managers in the asset management field. There were three main types of instruction – “special lectures,” “project reports,” and “case studies.” The instruction focused on having students analyze the Fubon TWSE Corporate Governance 100 ETF product, showing them how funds are put together and exposing them to the concept of corporate sustainability. In 2019, 30 students participated in the program.
Fubon Asset Management will continue in the future to use industry-academia partnerships to promote sustainability concepts and nurture elite financial and management talent.