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.