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.

 

ESG Integration

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.




Cathay Life Insurance Stewardship Report

Cathay Century's Vote Disclosure Report


Disclosure of Compliance with the Stewardship Principles

 

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.


Lean management

Cathay FHC and its subsidiaries implemented the ISO 20400: 2017 Sustainable Procurement Guidelines in 2018 to influence its upstream suppliers by incorporating concepts of sustainability into its procurement practices, and became the first financial institution worldwide to obtain the certification. We established the Cathay FHC Sustainable Procurement Policy and a complete sustainable procurement procedure based on risks identified in the procurement process and the seven core principles of sustainable procurement. We are systematically working with our suppliers in corporate sustainability via an online procurement platform, self-assessment and management of sustainability by suppliers, the Sustainability Value Declaration signed by 100% of suppliers, fulfillment on sustainability related education and training, and annual supplier conferences, emphasizing the regulatory compliance of suppliers, protection of human rights, and creation of local employment opportunities.

 

 

Contract Regulation

Cathay FHC added a CSR clause to the supplier contract in 2012 which explicitly requires suppliers to comply with regulations regarding employment conditions, workers' health and safety, environmental protection, and labor rights.

 

Periodic Communication with Suppliers

Cathay provides suppliers with human rights and environmental protection training each year. Cathay also convenes a general meeting with all types of suppliers every three years, and meetings with 1-2 types of suppliers every year, communicating corporate sustainability issues, based on procurement amount and materiality.

In 2016, Cathay held a general meeting with all types of suppliers. More than 200 suppliers responded enthusiastically. Moreover, 26 green product supplier were awarded by Cathay for their service.

In 2017, Cathay FHC held workshop for 35 Printing suppliers to share cooperate sustainability ideas and to introduce PAS7000 (supply chain risk management system).

 

Insurance Brokers and Agencies Management

Cathay Life has a set of “Performance Appraisal and Remuneration Guidelines for Insurance Sales Force, Brokers and Agencies” in place to ensure the level of services provided by distribution channels it works with. The Guidelines serve to maintain the quality of new insurance contracts made by insurance brokers and agencies and control the number of improper sales. In 2017, 57,431 sales cases were reviewed during regular inspections. If the contracts fail to meet the established standards, the company has a set of mechanisms in place to determine the necessity of renewing such contracts.

 

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