Responsible Investment
As an institutional investor, SinoPac Securities leverages its expertise and influence to implement various stewardship actions that aim to enhance investment value. The company incorporates Environmental, Social, and Governance (ESG) sustainability issues into its considerations, with the goal of promoting the long-term interests of clients and shareholders.
On July 16, 2018, SinoPac Securities signed the "Statement of Compliance with the Stewardship Principles for Institutional Investors." Following the signing, the company publishes an annual stewardship report, referencing the "Stewardship Principles for Institutional Investors" and the United Nations' "Principles for Responsible Investment." Additionally, based on the parent company SinoPac Holdings' "Sustainable Finance Policy," "Responsible Investment Management Guidelines," and "Climate-Related Risk and Opportunity Management Guidelines," SinoPac Securities has established its own "Responsible Investment Management Guidelines." These guidelines provide the framework for the company's investment and asset management operations, integrating ESG issues and related risks into the decision-making process. The company has developed tools and regulations for assessing ESG risks to facilitate responsible investment practices.
Since 2022, the parent company SinoPac Holdings has planned to gradually exit from financing and investment in thermal coal and unconventional oil and gas. The company regularly reviews its decarbonization scope and progress, and SinoPac Securities has revised its "Responsible Investment Management Guidelines" accordingly. In 2024, high climate risk industries will be categorized as sensitive industries, and the decarbonization policy will be refined to include restrictions on underwriting fixed income products related to thermal coal mining and power generation, as well as overseas enterprises related to unconventional oil and gas. Additional business restrictions will be imposed on overseas investments in thermal coal mining and power generation, as well as domestic and overseas investments in unconventional oil and gas that have not yet been included in the decarbonization scope. The ESG risk assessment form will also be updated to include climate risk assessment questions, new criteria for compliance with the Sustainable Economic Activities Reference Guidelines, and assessments related to biodiversity.
Furthermore, the "SinoPac Securities Stewardship Policy" has been revised to enhance the prevention of conflicts of interest or improper transactions in domestic equity investments. New principles for managing conflicts of interest between related parties and clients have been added, along with enhancements to the voting policy. The voting support/opposition principles will be differentiated based on the three ESG factors, with specific examples included. Additionally, the policy will specify priority engagement topics and targets related to ESG issues, as well as principles for addressing situations where engagement activities do not meet expected goals. The company will also reference the 12 key strategies from the National Development Council in its investment strategy. By the end of 2024, the company plans to have allocated 60% of its long-term equity investments in proprietary assets, focusing on "Sustainable and Forward-Looking Energy," "Electrification of Transportation," "Resource Circulation and Zero Waste," and "Just Transition" as strategic pillars. Furthermore, 55% of the underwriting equity portfolio (excluding emerging stocks) will have been strategically allocated to "Carbon Capture, Utilization, and Storage" and "Wind/Photovoltaic Energy" to optimize investment opportunities.
SinoPac Securities Responsible Investment Process
SinoPac Securities adheres to the United Nations' "Six Principles for Responsible Investment" and refers to the "Responsible Investment Management Guidelines" of its parent company, SinoPac Holdings, as well as its own "Responsible Investment Management Guidelines." In known situations, it prohibits engaging in investments in controversial industries and carefully evaluates sensitive industries and economic activities. The internal control systems of SinoPac Securities, including "Self-Operated Business CA-12110 Centralized Self-Operated Trading Decisions" and "CA-22110 Concurrent Futures Self-Operated Trading Decisions," have been updated to incorporate ESG considerations into trading decisions. These system amendments have been approved by the Board of Directors and are subject to annual audits according to internal auditing procedures.
During investment evaluations, SinoPac Securities references guidelines and standards from international organizations such as the International Finance Corporation (IFC), the World Bank, and the United Nations. It also includes ESG factors related to negative news, climate change, human rights, and corporate governance into its risk assessments. Additionally, through company visits and by referencing information from the Taiwan Stock Exchange, Taipei Exchange, and the Securities and Futures Institute's "Annual Corporate Governance Evaluation," as well as the "Integrated Investor Relations Platform" from the Central Depository & Clearing Corporation, SinoPac Securities conducts ESG risk assessment processes based on different asset classes and continuously conducts comprehensive risk assessments of investee companies.
Incorporating ESG Factors into the Wealth Management Product Review Process
The wealth management product review process includes ESG principles in the evaluation items for product issuers, and also incorporates ESG factors into the product review process. After comprehensively evaluating other items, the Company prioritize products with ESG-related investment concepts or with relatively positive impact, in order to fully implement the spirit of responsible investment and stewardship. ESG funds are promoted and available on the ESG fund section of SinoPac Securities.
In response to the spirit of ESG investments, all of the 31 domestic securities investment trust companies that SinoPac Securities work with, respectively, have signed the statement of compliance with the "Stewardship Principles for Institutional Investors" In 2024. Furthermore, all 6 of the offshore fund asset management institutions that SinoPac Securities are working with are in compliance with the “Principles for Responsible Investment (PRI).”
Engagement with investees
SinoPac Securities continuously monitors significant news regarding investee companies, quarterly financial performance, future industry outlook, medium- to long-term operational strategies, major environmental protection initiatives, social responsibility, labor rights, and corporate governance. The company maintains appropriate dialogue and interaction with investee companies through various means, including conference calls, face-to-face meetings, participation in earnings calls, conducting training sessions, and sending representatives to annual shareholder meetings or extraordinary meetings with significant proposals. By attending shareholder meetings, actively exercising ownership rights (such as voting rights), and communicating with the management of investee companies, SinoPac Securities integrates ESG issues into its ownership policies and practices. This approach aims to further understand and communicate the risks and strategies faced by the industry, striving to reach a consensus with investee companies on long-term value creation. If necessary, SinoPac Securities will collaborate with third parties to encourage or assist investee companies in prioritizing sustainability issues. If the ESG performance of the engagement targets does not show positive improvement over the long term, the company will exercise shareholder activism, gradually reduce investment positions, or assess whether to continue the relationship.
In 2024, SinoPac Securities attended a total of 1,284 shareholder meetings (5 in-person and 1,279 via electronic voting), participated in 66 earnings calls, visited 5 companies (including joint engagements), and received responses from 26 companies to the sustainability issues survey.
Summary of the 2024 Sustainability Issues Survey Results
The Environmental, Social, and Governance (ESG) sustainability issues survey focused on the actual sustainability actions of investee companies, such as whether ESG issues are incorporated into operational/business decision-making, whether they assess their sustainability level based on the Sustainable Economic Activities Reference Guidelines or EU Taxonomy, and the disclosure of net-zero targets and greenhouse gas emissions. The survey results indicated that most surveyed companies have implemented energy management measures, responded to sustainability initiatives, and invested resources in actions to mitigate and adapt to climate change. Over 70% of companies have adopted low-carbon reduction measures, published sustainability reports, and established human rights policies. However, in terms of biodiversity conservation, the proportion of companies investing in marine/terrestrial ecosystems, species conservation, and related public welfare activities has not reached 30%. Additionally, approximately 20% of companies have assessed their sustainability level according to the Sustainable Economic Activities Reference Guidelines and EU Taxonomy, indicating that Taiwanese companies' attention to biodiversity issues and the adoption of sustainability classification systems still require improvement.
For SinoPac Securities' "Stewardship Principles for Institutional Investors" compliance statement and "Stewardship Policy," visit the Corporate Governance session on the company website：Stewardship Principles.