Taking Strides Towards International Engagement
Cathay FHC and International Investors Collaboratively Engage with Asian Utilities to Drive Low Carbon Transition

Cathay Financial Holdings Co. Ltd. (Cathay FHC), one of Taiwan's largest financial holding companies, participated in the Asian Utilities Engagement Program launched by the Asia Investor Group on Climate Change (AIGCC) in June. Together with international institutional investors including Amundi, Manulife, and BNPP AM, with a total of US$8.8 trillion in assets under management, Cathay FHC jointly engaged 5 major coal-fired power generation companies in China, Hong Kong, Japan, and Malaysia towards low carbon transition. This recommends the power generation sector to incorporate climate risk response measures into business strategies as a key issue in their current operations, leading to the transition to a net zero emission economy. This is yet another major climate change commitment made by Cathay FHC after participating in the CDP Non-Disclosure Campaign and Climate Action 100+.

 

  The COVID-19 pandemic has caused turmoil around the world since 2020, and resulted in significant impacts in economic activities. Meanwhile, climate change continues to pose significant threats to individuals, businesses as well as the world as a whole. Analysis by the National Oceanic and Atmospheric Administration shows that 2020 was the second hottest year in history, only lower than year 2016, suggesting climate change as an imminent threat to the survival of mankind. Five major investor organizations, including the United Nations Principles for Responsible Investment (PRI) and AIGCC, jointly launched the five-year Climate Action 100+ in 2017, and engaged high carbon emission corporations around the world to take action on carbon reduction according to the Paris Agreement. The latest statistics of the International Energy Agency (IEA) show that electricity generation and heating are the main sources of carbon emission around the world. The AIGCC thus launched the Asian Utilities Engagement Program in 2021. The program brings together 13 institutional investors and stewardship service providers around the world to engage Asia’s systematically important electric utilities on cutting emissions, strengthening disclosure and improving governance of climate-related risks.

 

As a major institutional investor in Taiwan, climate change has been a long term focus for Cathay FHC. Cathay Life Insurance, a Cathay FHC subsidiary, has excluded power companies that rely mainly on coal-fired power generation while not actively transitioning to renewable energy from investment since 2018. Cathay United Bank stopped providing new loans to coal-fired power plants starting in 2019. As a consequence, Cathay FHC was the first financial institution in Taiwan to commit to eliminating coal-fired power generation from its investments and loans.

 

Furthermore, Cathay Life believes that it should do more than passive exclusion, and establish an active approach by engaging investee companies, influencing and raising awareness of Taiwanese corporations with regard to climate change. Cathay FHC provided feedback on the AIGCC report "Investor Expectations of Asian Electric Utilities Companies – Crossover to Net Zero" and assisted in producing a traditional Chinese transcript in 2020, in order to provide investors and Asian utilities with guidelines for practices relating to climate change adaptation. This year Cathay FHC expanded beyond Taiwan towards international engagement and participated in the Asian Utilities Engagement Program, in hopes of taking action as an international institutional investor for global carbon reduction and climate change.

 

Engagement has always been a key strategy of Cathay FHC's responsible investment. Cathay FHC has participated in the CDP Non-Disclosure Campaign for four consecutive years starting in 2017, and encourages investee companies to respond to the CDP questionnaire, and has successfully engaged 25 companies over the past four years. Among these companies, 65% made an improvement in their CDP results in the following year, proving engagement as a successful strategy which creates long-term positive effects. Cathay FHC began participating in Climate Action 100+ since 2017. The initiative engages 167 high carbon emission companies around the world (accounting for at least two thirds of global GHG emissions). Cathay FHC engaged all three Taiwanese companies on the list and one of the companies has committed to net zero carbon emissions by 2050.

 

The collective efforts of all governments around the world are needed to respond to the climate crisis, and net zero transition requires policies as foundation. Hence, Cathay FHC signed a statement addressing governments together with institutional investors around the world in 2014. In 2021, Cathay FHC signed the 2021 Global Investor Statement to Governments on the Climate Crisis together with 457 institutional investors worldwide with US$41 trillion in assets under management. The statement was issued to government leaders worldwide in June before G7 took place, in hopes that governments will exert their influence and commit to net zero carbon emissions by 2050, and also set higher carbon reduction targets in their NDC for 2030 before COP26 this year. Cathay FHC was the only financial institution signatory in Taiwan to this statement.

 

As the global climate is now in a state of emergency, investors must take action to engage in dialogue with investee companies, raise awareness of climate change, and encourage plans for net zero transition according to the Paris Agreement. Combined with government policy as the foundation for economic transformation, this is the only way to achieve the goal of preserving the climate. Therefore, Cathay FHC participates in multiple initiatives requiring proactive engagement, while stipulating climate change as one of the pillars of its engagement strategy, actively engaging in dialogue with all sectors to synergy for our climate. (20210624)

 

Note: Link to the report "Investor Expectations of Asian Electric Utilities Companies – Crossover to Net Zero": https://www.aigcc.net/wp-content/uploads/2020/12/Final-Asia-IE-of-Utilities_TChi.pdf