Equator Principles

To accelerate international integration and promote sustainable financial development, as well as guide companies to prioritize environmental protection and social responsibility, KTB officially joined the Equator Principles Association on December 1, 2022. Additionally, in 2023, KTB issued the "KTB Equator Principles Financing Guidelines." When KTB processes corporate financing applications, we evaluate the applicability of the Equator Principles based on the amount and purpose of each case. If the case falls under the Equator Principles, it undergoes further classification into "Category A, High Risk B, B, C" using the Equator Principles Risk Classification Checklist. Depending on the classification, relevant documents are requested, and a dedicated unit conducts a review of environmental and social risks to ensure the completeness of risk classification and related documentation. After the case is approved, a routine review will be conducted in accordance with regulations to monitor its environmental and social performance.

In 2023, there were a total of four cases under review. Out of these, one case required examination according to the Equator Principles. In total, one case was approved, fulfilling the disclosure requirement for the EP (Financial Close) status. The details are as follows:

Support Small- and Medium-Sized Enterprises (SMEs)

The small- and medium-sized enterprises are the backbone of Taiwan's industry and economic development. However, these enterprises face higher operating costs due to small loan amounts, but large number of transactions, or they have to bear higher financing risk due to relatively imperfect accounting system and higher difficulty in the credit check. These factors lower the financial institutions' willingness to finance small- and medium-sized enterprises. As a consequence, many promising enterprises are nipped in the bud due to a lack of capital. KTB has spared no effort in supporting SMEs over the years. KTB utilizes its advantages in the concentration of branch offices in central and southern Taiwan, understanding of the nature of the customers and industries, flat organization, flexible operating strategies, to provide small- and medium-sized enterprises with different financing plans based on the nature of their industry and life cycle, complemented by digital financial products, so as to address their capital needs, from loans to daily operation. As of the end of 2023, the loan balance of SMEs accounted for 60.94% of the total loans, among which the loan balance of small enterprises with capital less than NT$25 million accounted for 12.44%.

Responsible Investment

Besides undertaking credit businesses to support sustainable development, KTB also lays great emphasis on the investees' actions in the aspects of environment, society, and corporate governance, when investing in shares or credits. Thus, the "Stewardship Principles" was formulated, and approved by the Board of Directors, specifying the principles, such as the due diligence policy, with the aim to facilitate the improvement of investees' corporate governance quality, through caring for, communication, and interaction with the investees, thereby promoting an overall positive development in the industry, economy, and society as a whole. The "Stewardship Principles“, "Stewardship Compliance Statement," and "Stewardship Report" are available for download from KTB's official website.

Specific achievements of responsible investment in 2023

KTB not only conducts due diligence and engagement on investment targets in its investment decision-making process to fulfill its responsibilities to investors, but also recognizes that investment can encourage businesses to adopt more sustainable business models, thereby leveraging its investment influence. Therefore, we refer to various external ESG rating results during the investment process to obtain a more objective evaluation of the sustainability performance of our investment targets. As of the end of 2023, approximately 18% of KTB's securities were ranked in the top 10% of industries in the DJSI, and 21% were classified as "low risk" according to Sustainalytics standards. These figures demonstrate our commitment not only to balancing risk and return in investments, but also to actively considering the ESG performance of investment targets.