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Taiwan Futures Exchange to launch ESG, biotechnology contracts

By Asia Asset Management  
May 27, 2020

Taiwan’s futures exchange will introduce an environmental, social and governance (ESG) contract and a biotechnology contract next month, aimed at allowing investors to hedge against risks related to thematic or sector-based trading strategies.

The FTSE4Good TIP Taiwan ESG Index Futures and the TIP Taiwan Market Biotechnology Medical Care Index Futures are scheduled to be launched on June 8.

They will be cash-settled and traded at between NT$50 (US$1.66) and NT$100 per index, Taiwan Futures Exchange (TAIFEX) says in a statement on May 26.

The underlying benchmark for the ESG contract was compiled by global index provider FTSE Russell and Taiwan Index Plus Corp (TIP), a unit of the Taiwan Stock Exchange.

The FTSE4Good TIP Taiwan ESG Index tracks performance of socially responsible Taiwanese companies.

Introduced in 2017, it was adopted the following year by the Labor Pension Fund, Taiwan’s largest public pension plan, as the benchmark for its discretionary investment plan.

“With demand for ESG investment growing across the globe and in Taiwan, the need for hedging sustainability risks using ESG derivatives is increasing,” TAIFEX says.

The biotechnology index, which TIP introduced in 2017, mirrors performance of biotechnology and medical care companies listed on the island.

TAIFEX says the biotechnology contract will help investors manage volatility and hedge risk in the biotechnology market.