Climate Changes and Cathay’s Response

Cathay FHC began responding to the CDP questionnaire in 2012, and signed the TCFD in 2018. We established a group-level TCFD task force and cooperated with secretariat under CS Committee to actively manage carbon issues and major energy and environment projects. We were rated at the “leadership level” (A-) in the 2019 CDP questionnaire and became a leading financial institution in the field of climate and environment. Besides, our subsidiaries. We referenced the disclosure framework recommended by the TCFD, and includes governance, strategy, risk management, metrics and targets, and key performance.

Cathay FHC has comprehensive climate and environmental governance processes and frameworks. The president is the highest level leader and oversees the measures of Cathay FHC and its subsidiaries. The secretariat under CS Committee and TCFD task force work together and periodically submit supervision results to the Board of Directors. the Corporate Sustainability Committee formulates adaptation and itigation measures through the identification and evaluation of risks, which is the basis for forming the climate strategy that will enable us to seize opportunities, assisting Cathay FHC and its subsidiaries in developing low carbon businesses.

The Chief Risk Officer (CRO) leads the cross-company TCFD task force, which manages the effect of climate-related risks on real estate , negotiable securities, corporate loans, and insurance product .The TCFD task force reports the supervision situation to the CRO each month, and submits annual reports to the Risk Management Committee and Board of Directors. This strengthens our climate-related risk management and allows risks to be quantified according to stakeholders’ requirements.

 

Climate and Environmental Strategies

Cathay FHC analyzed and identified short-term, mid-term, and long-term risks and opportunities in its daily perations and financial business, and assessed the effect of different risks, such as physical risks, market risks, or regulatory risks, on its business.

In 2017, Cathay began building the climate risk and opportunity matrix as basis for scenario analysis and improving climate strategies. The most significant short-term and mid-term risks that were identified include the physical risk of typhoons and temperature change, which can damage renewable energy facilities that we invest in. Long-term risks include the pressure on financial product and service transformation brought by the trend of a low-carbon economy that seeks to restrict global temperature rise within 2ºC.

Scenario Analysis on Operation

Cathay FHC and its subsidiaries all implemented ISO 50001 and ISO 14001 Energy and Environmental Management Systems in daily operations. We assessed operational risks based on the plan to achieve 20% renewable energy generation by 2025 announced by Taiwan’s government, as well as the goal of the Paris Agreement for temperature rise to not exceed 2 degrees Celsius. Methods such as increasing the ratio of renewable energy use to slow temperature rise create the risk of electricity price fluctuations. From a long-term perspective, this will impact our operating costs and require us to formulate strategies.

Scenario Analysis on Real Estate and Mortgages

Cathay FHC and its consultants simulated scenarios to evaluate the risk of position of real estate and mortgages. We evaluated the short-term and long-term financial impact of physical risks on real estate caused by typhoons and floods within the near future (~2035) as defined in the IPCC AR5, and determined that overall risk was non-material. Results also showed that typhoons and floods only cause minimal damage to collateral, and will not trigger defaults on mortgages. Furthermore, the group adopted risks by purchasing insurance to lower the financial impact of typhoons and floods on the group.


Climate and Environmental Risk Management

Cathay FHC uses the ERM framework to include emerging risks, such as climate-related risks, in its risk management policy, and established the Emerging Risk Management Guidelines. On financial business, TCFD task force identify and assess risks and opportunities, and have formulated management principles within business processes. Related measures are as follows:

Energy and Building Management

Cathay FHC established the Environment and Energy Management Committee and Cathay FHC Group Environment and Energy Policy in 2017 to manage its natural capital. The President offers guidance on related operations and periodically convenes meetings on energy and environmental management to supervise policy implementation. Furthermore, Cathay FHC and all of its subsidiaries implemented both the ISO 14001 Environmental Management System and ISO 50001 Energy Management System, and integrated management goals with GHG emission reduction goals. Of related environmental goals, our GHG reduction goal is to reduce GHG emissions, that with 2016 as the base year, we reduce total carbon emissions by 5-10% in 2021.

Cathay Life and CUB focus on renewable energy use and increasing energy efficiency in reducing the group's carbon emission. The real estate management department takes a rolling inventory of equipment to increase energy efficiency, examining the service life and energy consumption of equipment to determine what equipment to replace. Equipment replaced in 2019 are as follows:

In addition to the continued replacement of energy-consuming equipment, in 2019 Cathay Life began using the solar panels (183 kW) installed on the roof of its Education Building in Wuri, Taichung, the largest solar rooftop in the financial industry that generates electricity for self-use. The solar panels are expected to generate about 200,000 kWh of electricity a year. The Pingtung Branch of CUB installed solar panels on its roof. The solar panels not only shade the branch from the sun, but also generate electricity for the branch, creating long-term benefits. Furthermore, Cathay began evaluating and installing solar panels on its own buildings in 2016. The current installed capacity exceeds 5,600 kW and actual electricity generation has exceeded 6 million kWh.

Cathay Life established the Responsible Property Investment and Management Policy, and designs all newly acquired buildings based on green building standards, so that energy use, greening, and waste all reach a certain standard. Two buildings obtained green building certificates this year, specifically the Education Building in Wuri, Taichung (LEED Gold Certification) and Industry Building at Taoyuan THSR Station (EEWH Certificate). At present, Cathay has a total of 15 green buildings and continues to promote sustainable cities.

Metrics and Targets

Cathay FHC set the goals on GHG emissions electricity consumption and keep track of the indicators through the Environment and Energy Management System. All the metrics reach the target, among which the carbon emission even reduced up to 4.96% compared with base year. We also set the goal to use at least 250,000 kWh of renewable energy in 2020.


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