Sustainable Investment

Realizing the Value of Sustainable Investment

KGI Life upholds the spirit of mutual prosperity throughout the value chain and continues to utilize effective investment strategies, aiming to achieve the vision of a sustainable ecosystem through the power of capital flows. Through the implementation of responsible investment and policy-based exclusion of inappropriate investment targets, we established investment goals for sustainable development and relevant investment portfolios. KGI Life responds to international development trends and government policies as we continue to move towards sustainable investment. While exerting our influence in investment, we also create stable investment returns and realize the value of sustainable investment.

Responsible Investment Policy

Moving Towards the Net Zero

Responsible Investment Policy

In order to implement responsible investment, KGI Life has formulated the Responsible Investment Policy in accordance with the Taiwan Stock Exchange Corporation’s Stewardship Principles for Institutional Investors and the UN Principles for Responsible Investment (PRI). The Policy adopted important environmental, social, and governance indicators for investment to fulfill our corporate social responsibilities and attain the goal of sustainable development.

The scope of responsible investment includes domestic and overseas listed and unlisted stocks, corporate bonds, financial bonds, government bonds, and fund management institutions. The Company considers ESG and other sustainability factors in assessing investment targets, making investment decisions, and managing investments, and implements stewardship actions to enhance investment value and promote the sound development of the Company's investment business. Furthermore, we established investment exclusion criteria to exclude companies that are involved in environmental pollution, social controversies, or poor corporate governance when evaluating potential investment targets, excluding them from direct investments. In accordance with appropriate procedures, we assess and manage climate-related risks associated with our investment targets. For investment targets exposed to higher climate-related risks, we follow the Company's Climate-related Risk Management Guidelines, establishing additional review mechanisms.

We continue to monitor, analyze, and evaluate information on investment targets after making investments. If any investment target is involved in a matter listed in the exclusion criteria, we shall immediately examine and evaluate if the investment target has made any improvements or plans, and explain the response measures taken by KGI Life in the evaluation report, such as changing the investment strategy or lowering the investment limit.

KGI Life Responsible Investment Policy

Responsible Investment Process

KGI Life developed the Responsible Investment Policy with reference to the UN's Principles for Responsible Investment (PRI). ESG factors are integrated into the investment analysis and decision-making processes based on the nature of each asset type. Investment decisions take ESG considerations into account, and tools such as MSCI and Bloomberg databases are used to assess the ESG performance and financial metrics of potential investments. Based on these assessments, the Company decides whether to invest or reduce exposure. In 2024, 100% of individual stock investment reports included ESG evaluation items.

Step 1 Negatives List Screening

Step 2 Selection of Investment Targets

Step 3 Highly Sensitive (High Carbon) Industries Screening

Step 4 ESG Assessment Mechanisms

Step 5 Investment Decisions

Step 6 Post-investment Management

Step 7 ESG Engagement and Communication

Integrating ESG Factors into Investment Decisions

KGI Life selects investment targets, based on the macroeconomic analysis, industry research, investment reports, and then makes informed investment decisions within the established investment limit. To manage the sustainability risks of our investment portfolio, KGI Life has established an ESG screening mechanism. Using the ESG checklist, the Company integrates ESG factors into our investment analysis reports to evaluate the sustainability performance of each investment target. When investing in listed equities and bonds, KGI Life considers both the financial and ESG performance of the investment targets. The Company leverages external resources, including Taiwan’s ESG IR platform and international databases such as MSCI ESG and Bloomberg, to assess aspects such as financed carbon emissions and ESG ratings.

To effectively assess and manage the climate risks of investees, the Company plans to incorporate climate risk factors into the inspection and review of the investment process. We will strengthen the review mechanism for investment targets that involve higher climate-related risks, and periodically evaluate the changes in climate-related risks of these targets to serve as the basis for adjusting investment positions.

Environment

Considers a company's implementation of environmental protection, such as low-carbon transition plans, whether it implements energy conservation and carbon reduction in its operations, and whether it is involved in major environmental pollution, inappropriate waste disposal, etc.

Social

Consider whether a company has established human rights policies, labor health management, talent cultivation, workplace safety, and measures to prevent sexual harassment, and has not experienced any major information security incidents, while also supporting community development and charity activities.

Governance

Considers a company's ethical corporate management, compliance, information transparency, independence of directors and supervisors, ESG report preparation, etc.

Investment in Renewable Power Plants

To realize the value of corporate sustainability and support the development of Taiwan's renewable energy industry, the investment departments of KGI Life carefully evaluates the eligibility, risks, and related opportunities of investment targets. KGI Life has invested approximately NT$1.65 billion in renewable energy power plants. The total avoided carbon emissions generated by the renewable energy companies invested in during 2024 amounted to approximately 338,000 metric tons of CO2e. Based on KGI Life’s proportional capital contribution, the Company is estimated to have avoided approximately 86,000 metric tons of carbon emissions. The estimated power generated by the Company’s held positions totaled approximately 203,362 MWh. As of 2024, the Company's investment in renewable energy power plants is expected to reach a total installed capacity of 1,142 MW, a 47.5% increase from that of the previous year.

Investment in Green and Sustainable Financial Assets

KGI Life actively invests in benchmark domestic and foreign green bonds, sustainability-related funds, and ETFs, with the expectation that these funds will be allocated to renewable energy, energy efficiency improvements, green transportation, sustainable water resource management, and green building initiatives. As of 2024, KGI Life's green and sustainable investment amount was approximately NT$44.8 billion, representing a 45.7% increase from 2022. Investment items included green bonds, sustainability bonds, renewable energy, sustainable thematic funds, and green energy technology. As of 2024, the amount invested in green bonds and sustainability bonds was approximately NT$31.4 billion. It is estimated to have a greenhouse gas reduction effect of 333,000 metric tons per year.

Furthermore, KGI supports the government's Green Finance Action Plan 3.0, which aims to promote the development of green financial products. The Company has invested approximately NT$2.3 billion in green bonds approved by the Taiwan Stock Exchange and the Taipei Exchange, as well as around NT$9.06 billion in ESG ETFs and other financial products. KGI Life supports the development of Taiwan's ESG framework and realizes the spirit of sustainable investment through its financial actions.

High Carbon Emission Industry Engagement

After identifying high carbon emission positions , KGI Life issued questionnaires to investee companies that either had high carbon emissions or had not yet signed on to the SBTi. The goal is to promote climate action in partnership with investees by encouraging them, through the questionnaire, to proactively inventory and manage their GHG emissions, set reduction targets, implement mitigation measures, and track their progress. We understand the carbon emissions, current carbon reduction measures, climate actions, biodiversity issues, and future carbon reduction goals of investees across different scales and industries, based on analysis results. We continue to track their carbon emissions and other climate actions to verify if investees are able to achieve their annual goals.

Responding to the National Net Zero Policy

To achieve the national goal of net-zero emissions by 2050, KGI Life aims to drive the sustainable development of industries and facilitate an orderly carbon reduction transition through funding. Our vision coincides with policy spirit of the Reference Guidelines for the Recognition of Sustainable Economic Activities and the 12 Key Strategies Action Plans of the FSC and the National Development Council.

The following is the distribution of domestic corporate bond investment assets that may be recognized as general economic activities and domestic enterprises that may be recognized as supporting economic activities in the Reference Guidelines for the Recognition of Sustainable Economic Activities screened out by KGI Life through the industry statistical classification of the Directorate General of Budget, Accounting and Statistics (DGBAS):

General Economic Activities	DGBAS Code	Investment Balance (NT$ in millions)
Petrochemicals	C1810、C1841	3,049
Cement	C2331	7,000
Semiconductors	C2611	8,706
Passenger and freight rail transport	H4910	1,000

Supporting Economic Activities	DGBAS Code	Investment Balance (NT$ in millions)
Renewable Power Generation, Facilities, and Related Equipment	D3510	1,893
Energy Storage Facilities and Related Equipment	C2890	205

Sustainability Performance of Investment Portfolio

KGI Life reviewed the ESG ratings of investments in listed equities, corporate bonds, and financial bonds. The Company utilized the MSCI ESG Manager database to assess the ESG ratings of our investment portfolio. In 2024, investee companies with available ESG ratings accounted for 89% of the total assets reviewed. Among these, the proportion of investments rated as ESG Leaders increased to 59%. The Company regularly engages with investee companies, tracks their ESG progress and monitors the ESG performance of investment targets regularly. In the future, we will continue to engage with companies rated as Average and Laggard to improve the ESG ratings of our investment portfolio.