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November 2022
AAM Magazine
November 2022
Back to 2021 Best of the Best Awards Supplement

Leading the pack in ESG innovation

By Elizabeth Dooley   

As a signatory to the UN Principles for Responsible Investment and with a track record of embedding ESG analysis into its investment processes, PineBridge is well placed to offer ESG investment products. In January 2020, PineBridge launched the first Global ESG Quant Bond Fund in Taiwan. The fund was recognised in the 2021 Asia Asset Management (AAM) Best of the Best awards as Most Innovative Product (Taiwan).

Investors in Taiwan are increasingly aware of the concept of sustainability and recognise that environmental, social and governance (ESG) risks can have a material impact on their expected returns, believes Ann Yang, CEO at PineBridge Investments Taiwan (PineBridge).

“The move by global pension funds and other large institutions to include ESG in their selection process has had a ripple effect across the investment industry and there is no going back on this trend,” she says.

However, ESG investment is mainly supported by institutional investors. Retail investors in Taiwan, Yang admits, don’t fully understand what ESG is and question how they can benefit from ESG investments.

That said, sustainability issues, including those relating to climate change, equality and diversity, have finally risen to the top of corporate and governmental priorities, and for Yang this means the timing is right for retail investors to access ESG investing opportunities for their long-term benefit.

“We believe we have delivered a blockbuster product that truly satisfies investors’ needs,” she tells AAM.

First ESG Quant Bond fund

The story starts in mid-2019 when PineBridge Taiwan’s product development team initiated a plan to innovate a brand new ESG bond product. The fund was approved by the regulator in Q4 2019, and having raised US$350 million during its IPO, has been so successful that it has more than doubled its AUM in less than one year.

Using the firm’s exclusive and effective alpha generator – the PineBridge Fixed Income Quantitative Strategy – which has been delivering consistent track records to institutional clients, Yang says the launch of the fund has allowed the firm to meet the retail market’s demands for yields and total returns, while efficiently transforming the firm’s in-house ESG capabilities into factor investments.

Through the strategy the fund aims to maximise total returns by investing in the investment grade portfolio of higher yielding bonds with higher ESG scores than its global corporate index.

And while the Covid-19 global pandemic broke out soon after the fund’s IPO, data complied by the Securities Investment Trust & Consulting Association of the R.O.C. (SITCA), shows that as of December 31, 2020, the fund size exceeded US$860 million (NT$24.5 billion). Categorised by SITCA as an International Investment-grade Bond Fund, it is now the largest global investment-grade bond fund in Taiwan.

“The fund demonstrates PineBridge Taiwan’s non-stop innovation ability. We strongly believe that only as an innovator in the industry can we enjoy first mover advantage. We also believe that the whole industry will benefit in the long term, too,” says Yang.

A robust ESG selection process

She adds that sustainability has risen on everyone’s agenda and investors recognise the impact of ESG on their investment returns. However, there are few ESG products available in Taiwan.

“Taiwan investors are seeking higher returns in a global environment of ultra low to negative yields. The fact that we successfully brought to the market the first global ESG quant bond fund that offers a fixed income portfolio which seeks better returns through a quant process that embeds a robust ESG securities selection process is a real achievement.”

Asked whether she sees ESG becoming more mainstream for Taiwan investors, both retail and institutional, she says that going forward she expects local investors to continue to embrace ESG investing over the long term.

“For our part, we will continue to focus on identifying investors’ needs and thinking out of the box to satisfy those needs. We believe this is key to future growth.”

For Yang, creating products that use a unique quant-based bond model and robust investment process, which have a highly experienced team behind them, and can take a core, long-term position in PineBridge’s clients’ portfolios can only be positive. As such, she expects them to continue to attract investors over time.

“Given our early mover advantage, we believe we have helped to set the tone for the industry in terms of product features and marketing.”

And while she expects more competitors to launch ESG-related products she is quite confident that PineBridge’s value proposition adds strong value to its investor base.

“In this dynamic market, we will continue to explore new product ideas and potential enhancements to our existing products while responding to the needs of our investors.”