Taiwan’s giant Bureau of Labor Funds awards $2.4bn passive ESG mandate to four firms

BLF taps Northern Trust, State Street, BlackRock, and Deutsche

Taiwan’s $124bn Bureau of Labor Funds (BLF), the supervisory body for the country’s labour pension funds, says it has awarded a $2.4bn passive ESG mandate in four tranches to Northern Trust, State Street, BlackRock, and Deutsche.

Tenders for the passive Global ESG Quality Mix Equity Indexation (global ESG) were announced late last year by the BLF, with the deadline for applications passing in January. It’s believed to be a first for the country.

The BLF told RI it received more than 20 tenders.

The mandate marks the first time the BLF has issued a foreign ESG mandate (link).

It confirmed that each of the four selected managers will now manage $600m – of which $250m will be on behalf of the Labor Pension Fund, the largest defined contribution retirement scheme supervised by the BLF. And $150m will managed for the Labor Retirement Fund, and $100m each will be managed for the National Pension Insurance Fund and the Labor Insurance Fund.The new ESG mandate, which uses MSCI’s ACWI ESG ex Selected Sub-Industries Quality Mix E Series Capped Index as its benchmark, selects companies with the highest ESG Ratings from each sector and region of the parent Index, and will also exclude stocks of companies in the tobacco, alcohol, arms, gaming and pornography industries, as well as firms that have doubtful or controversial records in areas that include the environment, human rights, labour rights, supply chain management, and corporate governance.

Referencing the index, the BLF’s website states that in “the volatile investment environment nowadays, to optimize portfolio return, mitigating down-side risk, and communicate our concerns for the ESG factors, the Bureau introduced a mixed index which blends smart-beta indices including high-quality, low-volatility, and enhanced value”.

A spokesperson for the Bureau told RI that the funds for the new mandate is “new money” from the country’s funds, adding the allocation marks a first not only for the Bureau but also the country.