The bureau, which manages retirement and labour insurance funds on behalf of Taiwanese workers, said the restriction would apply to individual stocks in portfolios it manages directly.
It would not cover externally managed investments or other assets such as corporate bonds. The bureau would also remain free to invest in fossil fuel companies deemed to be actively transitioning, a term it did not define in the report.
The Environmental Justice Foundation, or EJF, welcomed the announcement as a milestone for climate risk management by Taiwan’s public funds, but urged the government to introduce rigorous criteria to determine whether companies were genuinely shifting away from fossil fuels.
“The funds must establish rigorous, meaningful assessment criteria and mechanisms to define ‘actively transitioning’, to prevent the regulatory mechanisms from becoming mere formalities, or worse, a vehicle for greenwashing,” EJF said in a statement on Monday.
Under the bureau’s definition, a company would be classified as part of the fossil fuel industry only if more than 50 per cent of its revenue in the previous year came from fossil fuels. EJF said the threshold was too lenient and should be lowered to between 5 per cent and 30 per cent, a range it said was commonly used by financial institutions.
The group said a company classified as actively transitioning should, at a minimum, have a credible pathway aligned with the Paris Agreement’s goal of limiting global warming to 1.5°C, allocate capital spending to the transition, demonstrate actual emissions reductions and cease expanding fossil fuel operations.
EJF and German environmental group Urgewald said in July that Taiwan’s labour funds held at least NTD53 billion (US$1.68 billion) in fossil fuel-related investments, with state-owned utility Taiwan Power Company and energy supplier CPC Corporation among the largest holdings.
The campaigners had previously criticised the funds for failing to disclose adequately their exposure to high-emitting industries, conduct climate scenario analysis or establish a fossil fuel divestment strategy.
The Bureau of Labour Funds said in its 2024-2025 sustainability report that climate change could alter the value of assets held by the funds and affect investment returns.
An orderly global transition towards net zero emissions by 2050 would generate more pronounced transition costs in the short and medium term, it said. Delayed action or the continuation of existing policies, however, would expose investments to greater physical climate risks over the longer term.
Companies could face higher carbon costs, stranded assets and falling demand for energy-intensive products, while extreme weather, changing climate patterns and sea-level rise could raise operating costs, interrupt operations and lead to asset repricing, the report said.
The labour funds invest in emissions-intensive industries including petrochemicals, oil refining, cement, steel and fossil fuels. The bureau said those sectors remained closely connected to Taiwan’s economy, employment and capital markets, making corporate engagement an important part of its approach.
Since 2023, it has prioritised discussions with companies in which the funds hold larger stakes or which generate high emissions, examining their climate commitments, emissions-reduction pathways and results. It has also used shareholder voting rights to encourage businesses to pursue net-zero transitions.
The bureau plans to disclose emissions information for domestic and overseas equities managed by outside investment firms in 2026 and 2027, bringing forward work that had originally been scheduled to begin in 2029.
EJF said Taiwan’s Public Service Pension Fund Management Board and state-owned postal service Chunghwa Post had verbally indicated that they would follow the labour bureau’s direction and make formal commitments in sustainability reports next year.
The group also urged the bureau to consider outside managers’ fossil fuel policies and climate commitments when awarding investment mandates. It also called for the restrictions to be extended beyond individual stocks to bonds and other assets to prevent fossil fuel companies from continuing to obtain long-term financing.
