Climate Strategy | Strengthening Climate Resilience | Low Carbon | Shin Kong Life Sustainability
Climate Strategy
The impacts of climate change include physical risks and transformation risks, as well as opportunities for enterprises to mitigate and adapt to the risks. In order to develop climate risk strategies and identify short-, medium-, and long-term climate-related risks and opportunities, the Company uses in-house expertise consider the main risk factors, such as transformation risks (policy and legal, technology, market, and reputation) and physical risks (acute and chronic), in accordance with the definition of the TCFD of the International Financial Stability Board (FSB), and lists possible climate-related opportunities to mitigate and adapt to climate change (e.g., by improving resource use efficiency).Based on the questionnaire results, 12 climate risk issues and 5 climate opportunity issues were identified, quantified, and ranked according to their "likelihood of occurrence" and "impact level." Detailed explanations and response strategies were developed for material issues:
| Short | Medium | Long |
|---|---|---|
| 1 to 2 years (2023-2024) |
3 to 7 years (2024-2030) |
8 to 20 years (2030-2050) |
Climate-Related Risks
Climate Risk Matrix
Transition risks
Physical risks
In response to the low-carbon transition, SKL raises the energy and resource efficiency standards for all assets.
Due to stricter policies or the global net zero transition, the investments in high carbon industries need to be removed.
Extreme weather events become harder, impacting people's health and raising the cost of life insurance product claims.
Failure to take active and sustainable actions may cause investors to lose confidence in the SKFH Group.
Investment targets are affected by disasters and are facing investment losses.
Increase in operating costs due to the adoption of renewable energy forced by regulations, clients, and international initiatives.
There are more operating costs as environmental regulations and policies both domestically and internationally strengthen.
Due to stricter policies or the global net zero transition, the value of the investments in high carbon industries is affected.
Due to the impact of global warming, there is a surge in domestic electricity consumption, resulting in sudden power outages.
Failure to take active and sustainable actions may cause clients and consumers to lose confidence.
Operational assets are damaged owing to the rise of sea level covering the low-lying coastal areas.
The frequency and severity of heavy rainfall and flooding increased, resulting in failure of operations and interruption of operations.
- Note1. Impact levels: On a scale of 1 to 5, from “minor” to “extremely high”, the analysis results are between “minor (1)” and “very high (4)”.
- Note2. Likelihood: On a scale of 1 to 5, from “Very unlikely” to “Very likely”, the analysis results are all between “probable (3)” and “likely (4)”.
- Note 3: The ranking was based on the average sum of "likelihood of occurrence" and "impact level"
Material Climate Risk Issues
1
Transition ― Technology
Short-term
Due to the trend of low carbon technology development, increased investment costs are incurred to improve the energy and resource efficiency standards of assets.
Increased operating costs
Response Measures
- Regularly check high-energy-consuming assets at each operating location for replacement to improve energy resource efficiency.
- Scheduled to replace the lighting fixtures at all our nationwide locations with LED lights by 2030 to enhance the energy efficiency of air conditioning equipment.
- Develop environmental goals and strategies, such as establishing indicators for GHG emissions, green building, and green procurement.
2
Transition ― Market
Mid-term
As the industry moves towards a low carbon economy, high-carbon-emitting industries are expected to be phased out. The existing investment and financing evaluation methods are not applicable to the low carbon economy and may lead to investment or asset depreciation.
Decreased revenue and profits / Reduced asset values
Response Measures
- In accordance with the "SKFH Sustainable Finance Policy", we have conducted careful. assessments of controversial, high ESG risk, and carbon-intensive industries, and have establish industry-specific guidelines and adjusted asset allocation as needed.
- Define and list the carbon-intensive industries, take inventory of exposure, and assess the climate change risks associated with such industries.
3
Physical risk- Chronic
Long-term
Extreme heat can deteriorate living conditions and lead to power outages, causing disruptions in company operations; Extreme weather conditions can increase mortality or illness rates, resulting in higher life insurance claim payouts.
Increased operating costs / Decreased revenue and profits
Response Measures
- Analyze the likelihood of operational disruptions, such as prolonged interruptions in operations
- According to the IPCC AR6 report, research on the impact of climate change on human health indicates that under. RCP4.5/SSP3, the population's exposure to heatwaves is projected to increase 16-fold by 2050; Under RCP8.5/SSP3, the exposure is expected to increase 36-fold. Higher temperatures can potentially lead to health risks such as dengue fever and labor productivity losses; additionally, there is an increased likelihood of heat-related injuries (such as heatstroke.) The Company will closely monitor employee occupational safety and health, especially during extreme weather conditions, and provide additional protective measures to prevent related injuries.
- We intend to assess and develop new types of products related to climate change.
4
Transition ― Reputation
Mid-term
Global markets are increasingly prioritizing sustainable development, and there is a shifting of preference in the market. Failing to adopt proactive sustainability measures may result in a loss of favor from consumers, investors, and other stakeholders, leading to a decline in business opportunities.
Decreased revenue and profits/ Reduced inflow of investment capital
Response Measures
Actively participating in international sustainable initiatives, alliances, and sustainability assessments such as AIGCC (Asian Investor Group on Climate Change) and Taiwan Alliance for Net Zero, in order to enhance stakeholders' trust in the company and stay informed about domestic and international sustainability and climate change information.
5
Physical― Acute
Long-term
Extreme weather may pose disaster impacts on business locations, suppliers, and investment targets, leading to potential losses in company infrastructure, equipment, revenue, and investment asset value.
Decreased revenue and profits / Increased operating costs/ Reduced asset values
Response Measures
- Perform scenario analysis of physical risks under RCP2.6 and RCP8.5
- Evaluate the potential physical climate risks of the Company's self-owned and financed real estate through the database to control possible investment losses
- Convert some equipment to leasing models to transfer the financial loss risk caused by extreme weather events
- Identify the risks of industries with higher climate sensitivity and plan adjustments to the investment portfolio to mitigate investment uncertainties caused by disasters.
6
Transition-Policy and legal
Short-term
In response to regulations (such as the Climate Change Response Act, and Renewable Energy Development Act), customer demands, and international initiatives, companies, suppliers, and investment targets may be affected by carbon fees imposition and an increase in the proportion of renewable energy usage.
Increase in operating costs / Decreased profits
Response Measures
- Conduct NGFS scenario analysis to assess credit and market risks of investment and financing in response to policy and regulatory risks associated with the net zero transition trend
- Actively engage with high carbon-emitting suppliers or investment targets to urge their low carbon transformation; Adjust procurement targets or investment strategies accordingly for companies that show no improvement.
- Conduct thorough assessments of GHG emissions in our own operations and develop. decarbonization strategies.
- Invest in renewable energy power plants, purchase green electricity and obtain renewable energy certificates.
Climate-Related Opportunities
Climate Opportunities Matrix
More investment opportunities are presented by the global green industry's continuous growth.
Upgrade equipment at operational sites to improve energy efficiency and save costs
Develop sustainable green buildings to achieve environmental friendliness and efficient resource utilization, thereby attracting and gaining the trust of consumers, leading to increased revenue
Develop climate-related financial products to explore new market opportunities
Promote digital finance to reach carbon reduction benefits
Develop low-carbon energy transition to achieve carbon reduction
- Note1. Impact levels: On a scale of 1 to 5, from “minor” to “extremely high”, the analysis results are between “minor (1)” and “very high (4)”.
- Note2. Likelihood: On a scale of 1 to 5, from “Very unlikely” to “Very likely”, the analysis results are all between “probable (3)” and “likely (4)”.
- Note 3: The ranking was based on the average sum of "likelihood of occurrence" and "impact level"
Material Climate Opportunities
1
Market
Short-term
More investment opportunities are presented by the global green industry's continuous growth.
Increased revenue
Response Measures
Continuously monitor the trends in green-related industries and invest in sustainable development industries such as environmentally friendly and green energy industries.
Results in 2022
Investments in environmentally friendly or green energy-related industries reached a value of NT$34.2 billion dollars.
2
Resource Efficiency
Short-term
Upgrade equipment at operational sites to improve energy efficiency and save costs
Reduced operating costs
Response Measures
- Take inventory of equipment in operating locations and implement a rolling replacement plan for energy-consuming equipment such as air conditioners and lighting fixtures to improve energy efficiency.
- Replace all lighting fixtures with LED lights in all locations nationwide by 2030, gradually improving the energy efficiency of AC equipment.
- Promote a change in energy resource usage habits among employees through environmental sustainability training.
Results in 2022
- Implement energy-saving measures (such as replacing chiller units and upgrading nighttime lighting), resulting in a savings of approximately 727,694 kWh of electricity and a reduction of 370.4 tCO2.
- Continuously optimize the electricity usage in data centers.
3
Resource Efficiency /Product and Service
Short-term
Develop sustainable green buildings to achieve environmental friendliness and efficient resource utilization, thereby attracting and gaining the trust of consumers, leading to increased revenue
Reduced operating costs / Increased revenue
Response Measures
- Obtain green building certificates (silver and above) for all new projects to enhance the environmental sustainability performance of buildings.
- Continuously revitalize existing buildings and equipment by implementing various energy-saving measures to improve the energy efficiency of existing buildings.
Results in 2022
As of 2022, a total of 7 buildings applied for green building certifications.
4
Product and Service
Mid-term
Develop climate-related financial products to explore new market opportunities
Increased revenue
Response Measures
- Actively seize climate-related business opportunities and continuously develop environmentally friendly products and services to assist consumers in coping with the environmental or health impacts of climate change.
- As the temperature rises, secondary air contaminants form, and the incidence of respiratory and cardiovascular disorders rises (the indirect impact of climate change on humans as defined in the IPCC AR5). We launched the industry's first air pollution insurance policy.
Results in 2022
In 2022, the premium revenue from the air pollution insurance policy amounted to NT$180 million. Among them, the newly developed "Air Pollution Rider" sold 1,445 policies.
- Note: Climate opportunity types include resource efficiency, energy source, products and services, markets, and resilience.
Climate Scenario Analyses and Stress Tests
To further understand the impact of climate change risks on SKL, we use climate scenario analysis to measure risk exposure under various climate scenarios for physical and transition risks and actively implement relevant management actions and countermeasures to strengthen climate resilience. The scenarios used and described as follows.( Refer to SKL’s Sustainability Report (P.31~36) or TCFD Report for details )：
| Application | Risk Category | Climate Scenario | Description | Analysis and results | Risk response |
|---|---|---|---|---|---|
Operating locations and Investment property |
Physical Risk - Acute and Chronic | RCP 2.6 & RCP 8.5 | Calculate the impact of climate risks on real estate investments (maximum climate risk values(MVaR), reconstruction costs, and possibility of operational disruptions) |
|
|
Real estate collateral |
Physical Risk – Chronic | RCP 2.6 & RCP 8.5 | Calculate the impact of climate risks on real estate collateral |
|
In the future, when undertaking new loans that require an evaluation of real estate collateral, the Company will enhance the assessment of the physical risks associated with the collateral to mitigate the potential climate change risk faced by the loans. |
Life insurance products |
Physical Risk – Chronic | RCP 2.6 & RCP 8.5 | Calculate the impact of temperature rise on heat-related injury claims in life insurance products |
Warming not financially significant for insurance claims |
Continuously improve the understanding of how climate scenarios will affect the well-being of the Taiwanese population, comprehend the risks associated with the life insurance products due to climate change, and help people adapt to increasingly serious changing climates. |
Investment portfolios |
Transition Risk - Policy and Legal | Net Zero 2050 & Current Policies | Calculating the changes in credit and market risks for investment and financing positions under stricter climate regulations. |
Under the Net Zero 2050 and Current Policies scenarios, the financial impact of climate change risk (corporate bonds, equities, long-term corporate financing) is limited and is within the accepted range of the company. |
The Company has incorporated climate risk factors into its investment and financing regulations, stipulating that the risk of climate change of the counterparty should be carefully evaluated before making investment and financing decisions and continuously tracked and managed after the transaction. |
SDGs
