In September 2014, the committee's name was changed into "Cathay FHC Corporate Sustainability Committee" and established responsible investment (RI) working group with the Chairman's approval in the hope of bringing greater foresights into the issue of sustainability.
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.
In the meantime, Cathay FHC defined its responsible investment and lending policy by following the PRI, EPs, and Taiwan Stewardship Principles for Institutional Investors. We also formalized the following investment and lending process by integrating the seven approaches of responsible investment defined by GSIA report and the PRI framework:
Negative/ Exclusionary screening
Cathay FHC defined the group-level "Investment/ Lending Exclusion Policy," which includes high risk industries (e.g. controversial weapons) and countries (e.g. countries that severely violate human rights or are sanctioned). The Responsible Investment Working Group reviews the exclusion list regularly.
Cathay Life and Cathay SITE (asset management) use ESG database, besides company research, to analyze the ESG performances of investee companies. CUB also established the Sustainable Finance Section to promote corporate sustainability within the bank. In addition, Cathay SITE's ESG integration efforts are highly recognized. In March 2018, Cathay SITE officially received the Bureau of Labor Funds' first ESG investment mandate in Taiwan, managing assets in the amount of NT$6 billion; the FTSE4Good TIP Taiwan ESG Index will be used as the benchmark for investment performance.
Sustainability Themed Investing
Cathay FHC examined international trends and Taiwan & Cathay's current circumstances in 2016 in response to global sustainability agendas. By doing so, Cathay concluded on four Focus Areas, and actively utilized its substantial influence in cash flow to invest in related industries and bring benefits to the society.
Corporate engagement and shareholder action
(1) Climate Change
Cathay FHC has been trying to address the impact of climate risks to corporate enterprises. We have been participating in the CDP Non-Disclosure Campaign for two consecutive years since 2017, and we are the only financial institution in Taiwan participating in the campaign. We hope that such efforts can encourage Taiwanese companies which have yet to respond to CDP questionnaires to disclose their carbon emission data and management measures. At the end of 2017, Cathay FHC also participated in Climate Action 100+ initiative, which was initiated by the Asia Investor Group on Climate Change (AIGCC), the Global Investor Coalition on Climate Change (GIC) and PRI. More than 320 global institutional investors have joined the initiative to engage with the world’s largest corporate greenhouse gas emitters on improving the governance mechanism on climate change and curbing carbon emissions.
Cathay FHC also established the Engagement Policy in 2018 in hopes of making positive impact to the investee companies and improving their ESG performance. Climate change is one of our engagement focuses. Cathay FHC organized Taiwan's Climate Change Roundtable Forum in 2017. The roundtable invited top management from Taiwan’s significant industries to share their opinions on climate change and their climate actions.
In 2018, Cathay FHC co-organized the Climate Change Forum with Cathay Life and Cathay SITE. During the forum, CDP and PwC shared with our investee companies how to respond to CDP and TCFD. A total of 86 individuals and 55 enterprises participated. Cathay FHC has been continuously caring about climate risks, and our efforts have been recognized by international organizations. Sophia Cheng, CIO of Cathay FHC, was appointed as the AIGCC Chair in November 2018.
(2) Taiwan Stewardship Principles for Institutional Investors
To exercise the active owners’ responsibility, Cathay Life, Cathay Century, and Cathay SITE have been the signatories of Taiwan Stewardship Principles. The companies have all publicly disclosed their implementation progress in their websites.
External Investment Management
In 2018, Cathay Life and Cathay Century took ESG into consideration when signing contracts with external managers to ensure they will fulfill their duties as asset managers. As of the end of 2018, 98% of Cathay Life and Cathay Century’s external asset managers are either PRI signatories or have followed the government stewardship code, 3% higher than the previous year.