TWSE Press Release
Stewardship of institutional investors more important than ever with ESG investing becoming mainstream
Publish Date︰2017/03/08 14:38
The Taiwan Stock Exchange (TWSE) teamed up with SinoPac Securities, the Pension Fund Association, R.O.C., KPMG, and Hermes Investment Management co-organized the ESG Investing Forum on February 22. The Stewardship Principles were explored along with knowledge and ESG investing experiences shared during the forum. It was attended by 150 institutional investors and representatives of listed companies. TWSE President Chi-hsien Lee, PFA Chairperson Rui-Zhu Lee, and SinoPac Securities Chairman Wei-Lung Chen all spoke at the event.
ESG investing refers to the practice of measuring the environment, society, and governance performance or impact when making investment decisions. Many studies have proven that focusing on ESG can lead to higher returns. The practice is becoming mainstream in the industry, effectively replacing simple financial and technical analyses.
Niven Huang, General Manager of KPMG Sustainability Consulting, was first to point out that there were many ways to implement ESG investing, and it was not a zero or one choice but, ignoring ESG would be ignoring the associated risks and opportunities. In the Volkswagen emissions scandal, for example, signs started appearing in irregular corporate governance practices years ago. NCCU Professor Li-Ling Wang urged investors to consider the impact on the environment and the society as a result of injecting funds into a business and to take the initiative to improve corporate governance practices. Meanwhile, Cheng-Hui Tang of Towers Watson & Co. reported on the progress of ESG implementation in other countries. He proposed that the key was supporting important sectors and identifying and following important ESG issues. Australia, for example, is rich in timberland and minerals, and so the investors pay particular attention to the impact on the environment and society caused by certain industries.
In the process of advocating ESG investing, institutional investors play a crucial role because they work with large funds and are equipped with professional knowledge and expertise. Their influence over a company's value cannot be underestimated. Dr. Christine Chou of Hermes said that institutional investors engaged in ESG investing not only should collect data and perform quantitative analysis, but also must fulfill the requirements of stewardship and engagement and face challenges in ESG investing in an open, positive manner. It is the only way to connect the data points and understand the significance behind it in order to provide professional opinions and assistance. Successful engagement does not simply refer to meetings, but to something that contains the three key elements, "purposeful dialogue", "predetermined goals", and "bringing about change". By conducting careful studies and setting clear goals for each stage, Hermes has been working for several years to help businesses improve their existing approaches and enhance the performance of their investment teams Dr. Chou emphasized more than once the importance of considering communication from a stakeholder's perspective. The board of directors, the management team, and even partners along the supply chain would be excellent participants in a discussion. Communication should not target only the senior managers. It is also equally important to listen to feedback regarding the company during a discussion rather than just asking investors for the information they want.