Navigating sustainable investments: Taiwan Stock Exchange paves the way for global traders with ESG insights

TAIWAN, known for its technology and manufacturing industry, has emerged as one of the top performers in Asian stock markets this year.

In a striking display of growth, the Taiwan Stock Exchange (TWSE) registered an impressive 19.65 per cent growth in the first half of 2023, making it the second-best performing stock market among Asian economies, just behind Japan's Tokyo Stock Exchange.

TWSE's success can be attributed to its strong track record, high dividend returns and a well-established supply chain in the information and communication technology (ICT) industry.

"This year, Taiwan's stock market has continued to attract foreign capital and recorded an outstanding rise in stock prices. We're hoping that this trend keeps going, and more foreign investors choose to come on board," says Sherman Lin, who took the helm as the chairman and chief executive officer of TWSE in July 2022.

The remarkable performance was also driven by the recent generative AI frenzy and anticipation of the end of US rate hikes. Foreign investors now account for over 40 per cent of Taiwan's stock holdings this year, underscoring the exchange's increasing appeal to international investors.

The TWSE, which was established on Oct 23, 1961 and started operations on Feb 9 the following year, currently has 981 listed companies. Taiwan's stock market roared nearly 20 per cent in the first half of this year, ranking fourth among the world's major indices.

As of July 31, the total market capitalisation of TWSE-listed stocks stands at NT$53.86 trillion (S$2.28 trillion), based on preliminary data. Among the constituent stocks of the Taiwan stock index, listed companies in technology, semiconductors and electronic components have a combined weight of more than 60 per cent.

Making informed investment decisions

To better serve investors, the TWSE in July unveiled a new corporate identity system (CIS), its first update in 15 years, to create a vibrant capital market in collaboration with the Financial Supervisory Commission (FCS) and related units, as well as market participants.

In line with its motto "Partners Today Tomorrow and Beyond", the bourse also introduced several initiatives which includes new industry classifications, compiling industry-themed indices, and establishing the ESG InfoHub and Investment InfoHub.

The launch of the ESG InfoHub and Investment InfoHub, says Lin, will provide investors with information they need to understand the advantages of investing in companies listed on TWSE.

The Investment InfoHub aims to provide investors, particularly foreign institutional investors, with a one-stop access to crucial reference materials needed for making investment decisions. It consolidates information from the official TWSE website, Market Observation Post System (for listed companies to disclose information) and Market Information System websites.

"By doing so, it empowers investors with comprehensive data, allowing them to make informed decisions aligned with their investment objectives," Lin says.

The ESG InfoHub, on the other hand, stands as a platform for ESG-related information and products, enabling investors to assess listed companies' environmental, social and governance practices. As responsible investing gains prominence globally, this initiative not only aligns Taiwan's capital market with international standards, but also showcases the commitment of Taiwanese companies to responsible and sustainable operations.

"Global investors are increasingly focusing on companies' ESG performance and information disclosure. Companies with stronger ESG performance signify greater resilience to various risks, while transparent ESG information empowers investors to gain deeper insights and evaluate companies," Lin says. "Taiwan's capital market has demonstrated remarkable ESG performance, consistently serving as a pivotal factor in attracting foreign investments."

New bourse measures

Alongside the two hubs, the TWSE in July also introduced measures which includes adding four new categories for the industry classification of listed companies - "Digital and Cloud Services", "Sports and Leisure", "Green Energy and Environmental Services", and "Household".

The new classification allows distinctive listed companies to benefit from a clustering effect and draw the attention of investors. For example, the world's largest sports footwear OEM Pou Chen Group and the world's leading bicycle manufacturer Giant Group, which were originally listed under the "Other" category, are now included in the "Sports and Leisure" industry category.

In tandem with these measures, the TWSE also launched the "Taiwan New Economy Industry Index", which covers the listed companies of the four new industry groupings, as well as the "Taiwan Innovation Board Index" to highlight Taiwan's new economy companies.

In addition, the TWSE will provide more content in English to enhance accessibility for international investors. By 2024, all TWSE-listed companies are required to make material information disclosure in English.

To attract more foreign investments, Lin will lead delegations to New York and Boston in September to strengthen ties with international investors, encourage more investments in Taiwan, as well as explore collaborations with major international financial institutions. This follows the roadshows also helmed by Lin in Singapore, Malaysia and Japan early this year. The delegations mark the first in-person events overseas for TWSE since activities were halted during the Covid-19 pandemic.

"We are committed to attracting foreign investors to the Taiwan Stock Exchange by showcasing the remarkable potential and opportunities our market offers. Through transparent and responsible practices, we aim to foster a thriving environment that appeals to global investors seeking sustainable and impactful investments," Lin says.

For more information on the Taiwan Stock Exchange, visit the TWSE website here.