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 every year.
Cathay Century announced self-compliance with PSI in 2017, and adopted the slogan “establish universal care and co-create holistic happiness” as its ultimate vision for the realization of sustainability, continuing to fully utilize its core competencies in insurance to prevent, alleviate and share losses.
(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.
As of the end of 2019, more than 100 financial institutions from 38 countries have signed the Equator Principles and become Equator Principles Financial Institutions (EPFIs). Cathay United Bank (CUB) became the first EPFI in Taiwan in March 2015. As of the end of 2019, there are five EPFIs in Taiwan, which has more EPFIs than China (3 EPFIs) and trails only behind Spain, the Netherlands, Canada (each with 7 EPFIs) and the United Kingdom, France, Japan (each with 6 EPFIs), and is tied with the United States, Australia, Sweden, and Brazil. CUB’s EPs projects are most in Taiwan.
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)
Following the achievement of becoming the first bank in Taiwan to adopt the Equator Principles (EPs) in 2015, Cathay United Bank (CUB) committed to self-comply with the United Nations’ Principles for Responsible Banking (PRB) in December 2018, and became the first bank to implement PRB on a voluntary basis in Taiwan. Furthermore, CUB established a task force to define the implementation plan in line with PRB’s relevant rules and goals. The PRB comprises of six major principles: alignment, impact, clients and customers, stakeholders, governance and target setting, and transparency and accountability. By committing to this new framework, the banking industry shall ensure its operating strategies meet the requirements of the UN Sustainable Development Goals (SDGs) and the Paris Agreement.
(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 2018 Responsible Investment and Lending Progress Repor
Conning Inc.’s PRI transparency report
2019 Cathay Life Insurance Responsibility Investment Stewardship Report
ESG Risk Detection System for Product Development
Cathay FHC & its subsidiaries conducted early warning process for ESG risks identification through the following three major activities. Cathay FHC’s subsidiaries take ESG risks into consideration while developing products.
1. Detecting ESG Trends:
Cathay FHC CS Committee will regularly consult the external experts to collect the latest ESG trends. The executive and management of Cathay FHC and its subsidiaries and all employees including those in charge of product development can involve in the process of detecting ESG issues.
2. Assessing ESG Risks:
After discussion by all six Working Groups of the CS Committee with various specialties in 2016, Cathay FHC set up four Focus Areas on ESG as the primary development plan for the product R&D departments of its subsidiaries.
3. Incorporating ESG into Company Policies and Training:
Set up stakeholder engagement policies to review Cathay FHC’s main focus annually. Provide education and training on ESG issues to all employees through regular CS committees, ESG training courses, sales meetings and employee communication platform, etc.
Considering ESG Issues in Insurance Product Design and After-Sales Management
The early warning of ESG risks is built into consideration for product development of Cathay FHC’s subsidiaries. After a product is launched, the "Insurance Management Team" will convene every six months to present the feedback on ESG-related issues, which is then used as reference for the development of further new products.Below is the Insurance Product Design and After-Sales Management Flow Chart.
Cathay FHC Insurance Product Development and After-Sale Management Process
SDGs that Cathay is Focused on
Cathay is focused on achieving sustainability through 10 of the 17 SDGs through the process below.
1. Identifying risks and focusing on development:
Cathay established the Cathay ESG Four Focus Areas in 2016: Renewable Energy and Infrastructure, Aging Society and Health, Women Empowerment, and Community and Financial Inclusion. We analyzed international trends and Taiwan’s priorities, and convened a strategy advancement meeting, which was attended by over 15 departments across our subsidiaries. Over 20 discussions were held to identify key risks, trends, and business opportunities, and to establish the long-term direction for Cathay’s sustainable development.
2. Complying with international standards and responding to the SDGs:
Cathay evaluated the risks and opportunities derived from its core business activities to the SDGs, and focused on implementing 10 SDGs in daily operations under the Four Focus Areas.
3. Setting goals and creating value:
Cathay has set short-term, mid-term, and long-term goals for sustainability issues, establishing the foundation for sustainable management. We strengthen our constitution and have made sustainability a part of our DNA through periodic assessments, which create benefits and long-term value for stakeholders.