05.26.2020

Taiwan Futures Exchange Adds ESG Contract

The Taiwan Futures Exchange (TAIFEX) will launch two new futures contracts – FTSE4Good TIP Taiwan ESG (“F4G TIP TW ESG”) Index Futures and TIP Taiwan Market Biotechnology and Medical Care (“TIP Taiwan BIO”) Index Futures on June 8, 2020. The addition of these two products further broadens TAIFEX’s portfolio of equity index futures as it seeks to cater to investors pursuing thematic or sector-based trading strategies.

With demand for ESG (environmental, social and governance) investment growing across the globe and in Taiwan, the need for hedging sustainability risks using ESG derivatives is increasing. In response, through collaboration with FTSE Russell and Taiwan Index Plus (TIP) Corporation on the F4G TIP TW ESG index, TAIFEX will introduce a new ESG derivative product – F4G TIP TW ESG Index Futures, in an effort to help market participants to address the challenges and and opportunities of ESG-driven asset management.

Officially designated as a domestic investment benchmark in the discretionary investment plan of Taiwan Labor Pension Fund, F4G TIP TW ESG index measures the performance of companies listed on the Taiwan Stock Exchange (TWSE) that meet the globally recognized ESG standards used by the FTSE4Good Index Series. The index excludes companies with negative trailing twelve-month return-on-equity as financial performance selection criteria.

As seen in other advanced economies, biotechnology and medical care is one of the most dynamic investment sectors in Taiwan’s financial market. Under the government’s “5+2 Industry Innovation Plan”, the sector shows rapid growth in revenue, a steady stream of exchange listings and a significant level of market capitalization, which now is the third largest industry group by trading value in Taiwan’s stock market, next only to electronics and finance sectors.

To facilitate participants to manage volatility in Taiwan’s biotech market, TAIFEX plans to launch TIP Taiwan BIO Futures, a risk management tool based on the TIP Taiwan BIO index – a market-value representative index that tracks leading biotechnology and medical care companies listed on TWSE and the Taipei Exchange (TPEx). TAIFEX’s new BIO product is designed specifically for investors seeking to hedge their exposure to Taiwan’s fast-growing and globally-competitive biotechnology and medical care industries.

Both products will be cash-settled, with F4G TIP TW ESG Index Futures trading at a contract size of NTD 100 per index and TIP Taiwan BIO Futures at NTD 50 per index – contract sizes with low trading threshold, yielding high efficiency and flexibility. By offering the two new products, TAIFEX endeavors to help investors to manage the risks associated with investing in ESG and the biotech industry.

Source: TAIFEX

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