The corporation towards to sustainable development is the process of creating value for all stakeholders. Furthermore, Cathay has transformed the idea of “corporate social responsibility ” into “corporate sustainability ” to elevate our vision. Cathay expect to become a backup for society and to create long-term value through the core abilities of financing and risk prevention.



Sustainable Impact

Cathay FHC understands that in addition to pursuing business growth, a company must also consider the positive and negative effects of its business activities on the environment and society. In order to create sustainable value in the long term, we collaborated with academic institutions in developing the 5 Capital Profit & Loss (5C P&L) evaluation method based on the triple bottom line (TBL) of economy, environment, and society. We used 2017 as the baseline year and outlined the value chain's effect on sustainability in monetary terms every two years, driving more effective management decisions. This also allows stakeholders to more easily understand the real value we create on the path to corporate sustainability.

We further applied the evaluation of natural resource capital in 2019 to make our analysis results more complete and reasonable. This included taking the damage to the ecosystem into consideration in externality evaluations, and developing localized factors suitable for business locations in Taiwan. We also began developing valuation factors suitable for each region based on local economic conditions and environmental characteristics to evaluate the impact of our investments all over the world. Furthermore, we covered all of our investments in 2019 instead of only the 10 major industries selected in 2017. The next evaluation will be conducted in 2022.

 

(Click on the picture to zoom in)

The externality impact pathway of Cathay's value chain activities is determined based on ESG and the 5 capitals

Analysis results show that the positive effects created by Cathay FHC in 2019 were worth approximately NT$9 trillion, in which 98% were from investments in downstream industries in our value chain. This also shows the importance of positive and negative effects that industrial chain development driven by investments has on the environment and society. We established a strict ESG risk supervision mechanism through the Responsible Investment Working Group, and continued to increase our investments in low carbon industries, which is estimated to have generated carbon reduction benefits worth over NT$20 billion in 2019. Cathay FHC hopes to achieve more comprehensive corporate sustainability management through its tireless efforts, and prepare for the risks and opportunities brought by the macro environment in advance, in order to gain the trust of stakeholders and achieve shared values.

 

Cathay FHC's 5C P&L (Unit: NT$100 million)

Note: The figures for 2017 were changed due to revision of factors used in calculations. Entries marked with a “+” in the figure represent a positive financial impact; entries marked with a “-” represent a negative financial impact.

 

Description of calculation basis:
1.Social and economic contributions from procurements are calculated based on the 2011 Input-Output Table of the Directorate-General of Budget, Accounting and Statistics.
2.We referenced the 2018 Green National Income and Energy Balances in Taiwan, R.O.C. when calculating external environmental costs from procurements.
3.Social and economic contributions from industry investments are calculated based on the Input-Output Table of the OECD.
4.We referenced data in Exiobase2 when calculating the external environmental costs from industry investments.
5.Economic contribution of business activities, employee remuneration and benefits, and depreciation and amortization data are from the Annual Report.
6.Natural resource capital related coefficients reference US EPA (2016), LC-Impact (2016), OECD (2012), and Eco-indicator 2010 Database, and are estimated by this study.
7.We referenced Jiune-Jye Ho (2005) and the Journal of Occupational Safety and Health (2013) when calculating the social cost of occupational accidents involving employees.
8.We referenced Chieh-Hsien Lee (2009) and the WHO (2008) when calculating the benefits of health promotion activities.
9.The calculations of AkzoNobel (2017) were referenced for economic benefits of career development.
10.The economic value of insurance claims is the economic value created by the claims for the policy holder.
11.When calculating the social value of volunteer services, the number of service hours is converted into employee salary amounts.
12.The contribution of lifting the pressure on social enterprises to repay loans is the difference in the amount paid by the borrower, which is calculated using the difference in preferential rates and regular rates.
13.Monetary value conversion takes into consideration inflation and exchange rates of the NTD in 2017.

 


Cathay believes pursuing corporate sustainability contributes social stability which can bring virtuous cycles in the society and also improves the companies’ long-term value. Corporate sustainability development requires systematic actions, therefore we incorporate sustainability into Cathay’s core competencies in accordance with the international sustainability framework and promote sustainable finance. Especially as the largest financial institution in Taiwan with total assets more than NT$ 10 trillion, serving half of Taiwanese population, Cathay has the responsibility to lead the industry towards sustainability.

 

Cathay's Sustainability Framework

Sustainable development is inseparable from a company's core competencies. Hence, Cathay's three engines of growth correspond to international sustainability frameworks: the PSI, EP, PRB and PRI, while ESG is incorporated into our core operations. Cathay strengthens its core competitiveness through emphasis on sustainability and grasp on trends, opportunities and risks. This creates an all-winning situation for company profitability, mutual prosperity with society, and environmental sustainability.

 

(1) Principles for Sustainable Insurance (PSI)

Principle for Sustainable Insurance (PSI) is an international framework launched by UN. It require insurance companies to integrate ESG into business. Cathay Life became Asia's first life insurance company self-complying with the Principles for Sustainable Insurance (PSI) in 2016. Cathay Life completed the CS Strategic Blue Print in 2018 to enhance the implementation of sustainable strategies. We also have been adopting strategic focuses, CARE (Commitment, Accountability, Richness, Eco-living), to set short/medium/long-term goals and continuously monitor the progress. Cathay Century Insurance also self-complies PSI in 2017.

Cathay Life has incorporated ESG into our operations in accordance with PSI and its CARE strategy. We actively engage with stakeholders through a variety of channels and publishes PSI annual self-compliance reports to disclose PSI achievements and our sustainable actions. Cathay Century also integrate ESG into core business and published PSI Disclosure Report and Sustainability Report every year.


 

Cathay Life Insurance Corporate Sustainability Report

 

Cathay Century Insurance PSI Disclosure Reports

 

Cathay Life Insurance Corporate Sustainability Report

 

 

(2) Equator principles (EPs)

The “Equator Principles” (EPs) is an international risk management framework for financial industry. It categorises risks in large project finance based on their potential environmental and social impact and initiates varying levels of review for different categories. It requires lenders to include human rights and engagement mechanisms, establish an environmental and social management system, and establish action plans in accordance with risks disclosed in environmental assessments. These items are listed in credit contracts for compliance and execution. Banks shall implement continuous monitoring of project construction and operations after funding loans and regularly disclose information on the implementation status.

CUB also issues ESG guidelines for corporate lending “Principles Governing Corporate Loans by Environmental, Social, and Governance (ESG) Criteria” in 2017 to extend scope for "responsible lending" to all corporate borrowers. CUB integrates ESG risk management and corporate governance into the credit lending procedures to achieve the objectives of business growth and sustainable development.


   

  
Cathay United Bank's dedicated units Corporate loan application & review process

 

(3) Principles for Responsible Banking (PRB)

Cathay United Bank declared its voluntary compliance with the United Nations' Principles for Responsible Banking (PRB) at the end of 2018 to line up with international sustainability frameworks and set an example for the industry. CUB became the first bank in Taiwan to obtain PRB compliance assurance from a CPA firm in February 2021, and takes concrete actions to fulfill the corporate social responsibility of a financial institution. CUB continues to promote the PRB and maximize financial influence based on its banking core competencies to facilitate the prosperity of companies, society, and the environment.

Material influence target 1: Renewable energy loans

Cathay United Bank established targets for renewable energy loans: "Continue to increase the percentage of renewable energy in the Bank's electricity supply and reach 85% by 2025." taking concrete actions to promote the growth of the green finance industry in Taiwan and support renewable energy development.

Material influence target 2: Reduce loans for industries with high carbon emissions

Cathay United Bank has suspended new loans for coal-fired power generation projects starting from October 2019 to demonstrate its resolve in supporting international carbon emissions reduction ambitions and countering climate-related risks.

CUB Progress Report on the Implementation of the PRB

 

(4)Principles for Responsible Investment (PRI)

Principles for Responsible Investment (PRI) is an international framework launched by UN, requiring investors to integrate ESG into investing process. Cathay believes institutional investors have responsibility to exercise its positive influence to investee companies. Cathay was the first Taiwanese financial institution establishing the Responsible Investment Working Group in 2014. The Working Group is led by the Chief Investment Officer of the Cathay FHC and it works together with senior investment executives of subsidiaries. Cathay Life and Cathay SITE have also respectively established their Responsible Investment Task Force with total of 51 members and 3 dedicated employees. Cathay Life and Cathay SITE have voluntarily adopted PRI in 2015.

Cathay FHC has established a top-down supervisory mechanism as well as a bottom-up analysis & review process for responsible investment and lending to mitigate ESG risks. Cathay aims to strengthen Cathay’s long-term investment/lending value and protect the rights of our clients and shareholders.

 

 


 

Cathay FHC_ ESG Integration in Investment and Lending_Final2021

 

Conning Inc.’s PRI transparency report

 

2020 Cathay Life Insurance Responsible and Investment Stewardship Report

Cathay's Declaration of Sustainability Values

Cathay's Declaration of Sustainability Values declares how Cathay will comply with professional ethics, lawfully and reasonably engage in business, and also dedicate efforts to lower Environmental, Social and Governance (ESG) risks. It is our goal to create benefits for the economy, society and environment, and we invite partners in our value chain, such as suppliers and joint ventures, to comply as well. We hope that our efforts under the Values Declaration will enable us to take strides towards corporate sustainability.

 

Corporate Sustainability Principles and Corporate Governance Best Practice Principles

After the establishment, the Cathay FHC Corporate Sustainability Committee then formulated “Cathay FHC Corporate Sustainability Principles” and “Cathay Financial Holdings Corporate Governance Best Practice Principles” with reference to "Corporate Social Responsibility Best Practice Principles for TWSE / GTSM Listed Companies" to allow colleagues to follow and manage practical behaviors on the economic, environmental and social aspects. Moreover, we also pay attention to the development of domestic and international corporate social responsibility system and corporate environmental changes, according to the review to improve the company's corporate social responsibility system and norms.

 

Organization of Cathay FHC CS Committee

 

 

Milestones of Cathay FHC Corporate Sustainability Committee

Cathay FHC's CS Committee is subordinate to the Board of Directors and is the core unit for promoting corporate sustainability. The CS Committee is supervised by independent directors, and chaired by the President of Cathay FHC. The committee comprises 6 main working groups, each headed by a senior executive. The CS Committee began making advancements every year since 2011 in order to achieve breakthroughs. Our milestones over the years are as follows:

 2011
  • Founded Cathay FHC CSR Committee and assembled five main working groups
 2012
  • Established Corporate Social Responsibility Best Practice
  • Principles Published a CSR Report for the first time
  • Signed the U.K.’s Carbon Disclosure Project (CDP)
 2013
  • Developed CSR rewarding mechanism
  • Included corporate sustainability in training programs for new employees
  • Refined the response to ESG messages from international institutional investors
 2014
  • Restructured into the Cathay FHC CS Committee at the Board of Directors level supervised by independent directors
  • Assembled the Responsible Investment Working Group
 2015
  • Responded to and was selected into the Dow Jones Sustainability Index (DJSI) for the first time
  • Signed the Equator Principles (EPs) and became Taiwan's first Equator Principles Financial Institution
  • Acquired Conning, Inc., which signed Principles for Responsible Investment (PRI)
 2016
  • Cathay Life committed to complying with the UNEP FI's Principles for Sustainable Insurance (PSI)
  • Convened a strategy advancement meeting with the six working groups and established the four focus areas of sustainable development
  • Introduced social return on investment (SROI)
  • Signed the Taiwan Stewardship Principles for Institutional Investors
 2017
  • Cathay Century committed to complying with the UNEP FI's Principles for Sustainable Insurance (PSI)
  • The six working groups were restructured into a dual secretary system
  • Investigated the cause-effect relationships related to sustainability for understanding the level of influence between sustainability issues and business Performance
 2018
  • CUB committed to complying with the UN Principles for Responsible Banking (PRB)
  • Selected into the DJSI World Index
  • Cathay Life disclosed the first Stewardship Report in Taiwan
  • Completed the audit of every index in the 2018 Cathay FHC CS Report
 2019
  • Cathay FHC established the Corporate Sustainability Section
  • Reviewed and refined the Four Focus Areas of sustainable development established in 2016
  • Started to follow TCFD in 2017. The TCFD task force led by the Chief Risk Officer comprehensively monitored climate-related risks in 2019
 2020
  • Established "Corporate Sustainability Office" under the management of the President of Cathay FHC
  • Reviewed Cathay's four focus areas for sustainability and established the three focus areas of "Climate, Health, and Empowerment"
  • Prepared the first ESG Integration Report in Taiwan and published it in 2021
  • Implemented "sustainable financial brand research" to see the connections between sustainable actions and the brand in order to intensify sustainability strategy management


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