More ESG fund launches expected in Taiwan

An overwhelming majority of asset managers operating in the market are planning to adopt a responsible investment policy, according to a Fitch report.

Out of the 71 fund launches in Taiwan last year, 11 or 15% of them had explicit ESG strategies, according to a report published by Fitch Ratings.

Comparing it to 2019, only three ESG-focused funds were launched out of the total 150 products rolled out.

While ESG mutual fund and exchange-traded fund (ETF) assets only account for 2% of total AUM locally, this was the highest in Asia as of the end of the third quarter in 2020.

Estimates from Morningstar show that ESG funds offered in Taiwan attracted $1.7bn last year, bring ESG fund assets to $2.9bn, which is 336% higher from 2019.

“Last year’s trend suggests that ESG is gathering momentum as an investment theme. More product launches based on ESG factors are likely in Taiwan this year,” the Fitch report said.

Asset managers in Taiwan have expanded their ESG product ranges in 2020 to include fixed income and balanced offerings, according to a separate Cerulli report.

Examples of ESG-integrated fixed income and mixed-asset products that were rolled out last year are the KGI Global ESG Sustainable High Yield Bond Fund and the Pinebridge ESG Quantitative Multi-Asset Fund.

Like Fitch, Cerulli said that more ESG-focused funds are expected to come, as the theme is a key priority for managers over the next two years, according to a survey of asset managers conducted by the firm in 2020. Global bonds featured as the top ESG-centric product managers plan to launch during the next two to three years.

The Fitch report added that a survey of Taiwanese asset managers found an overwhelming majority consider ESG factors to be important. Around 90% of respondents have or are planning to adopt a responsible investment policy. However, only around 25% offer ESG products.

Fitch noted that regulation is not yet a huge driver of ESG adoption in Taiwan. However, regulators are taking steps to help further the market’s development. For example, the Taiwan Depository & Clearing Corporation (TDCC), the central securities depository, launched a dashboard in 2020 providing market participants with ready access to ESG rating information.