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Taiwan’s PSPF puts emphasis on ESG in investment mandates

PSPF
By Hui Ching-hoo   
March 25, 2022

Taiwan’s Public Service Pension Fund (PSPF) is putting greater emphasis on environmental, social and governance in investment mandates and manager selection, according to Ting-shi Wei, vice chairman of the NT$711 billion (US$25 billion) fund’s management board.

PSPF’s last investment tender was in 2021, when it hired BlackRock Inc and UBS Asset Management for a $400 million factor-based ESG mandate.

For this year, Wei says the fund will stay focused on active ESG strategies, including global ESG equity mandates.

“We leverage our external managers’ bespoke ESG models to have a better estimation on the investment outcome and the integration of sustainable investment factors with our investment processes,” he says in an interview with Asia Asset Management.

PSPF prefers to use broadly represented social responsibilities as benchmarks for its ESG mandates.

For internally managed investments, the pension fund takes into account the ESG assessment results of individual companies. “This will help stabilise the fund’s long-term investment return, and create positive effect to society,” Wei says.

PSPF registered a record investment gain of NT$79.5 billion in 2021, equivalent to a 11.85% return year-on-year.

Wei expects global markets to be volatile this year amid supply chain disruptions, rising inflation, and normalisation of major central banks’ monetary policies.

PSPF will focus on fast-growing sectors with strong fundamentals and high profitability. It will also continue to diversify its investment options and risk exposure to bolster overall investment performance.

As for non-mainstream investments, Wei says the fund aims to increase the share of internally managed alternatives to 0.8% of total assets this year from 0.6% in 2021, and the outsourced share to 7% from 6.5% previously.

We will keep a sharp eye on the economic conditions and the fund’s operations to adjust the exposure to alternative assets appropriately,” he says.