Climate Strategy | Strengthening Climate Resilience | Low Carbon | Shin Kong Life Sustainability
Climate Strategy
In order to formulate climate strategies and identify short-, medium-, and long-term climate-related risks and opportunities, the Company follows the TCFD definition of the International Financial Stability Board (FSB), and uses internal expert methodology to consider transformational risks (emerging policy, existing policy, law, technology, market, reputation) and physical risks (immediate and long-term climate change). The main risk factors are listed, and the possible opportunities for mitigating and adapting to climate change are listed, and the risk factors for significant impacts of climate change are identified for risk issue assessment and management.
The Company adjusted the issue repository based on the scenario analysis and transition risk results of the previous year to strengthen the correlation between the four aspects of climate. The Company inventoried climate-related opportunities in its operations, investments and insurance products. By conducting internal expert investigations and gathering opinions from departments related to sustainable development, risk management, resource management, investment, and customer relations, we identified the impact and implications of climate factors on various aspects of the Company's business. Based on the questionnaire results, 15 climate risk issues and 9 climate opportunity issues were identified, quantified according to their "likelihood of occurrence" and "impact level", and ranked in order of materiality based on the sum of the scores of the first two items. Detailed explanations, response strategies and scenario analysis were developed for material issues:
Climate-Related Risks
Climate Risk Matrix
Transition risks
Physical risks
Faced with the rapid increase in power demand, power overload causes power outages without warning, which in turn affects operating costs and capital expenditures.
Failure to actively take sustainable actions has impacted its own value and revenue.
Due to the imposition of carbon taxes and fees at home and abroad, the profitability of SKL investment and financing customers in high-carbon emission industries has been impacted.
Shin Kong's failure to actively engage investment and financing customers may lose the favor of stakeholders, resulting in a decrease in its own value and revenue.
Extreme weather events cause damage to the assets of investment and financing objects.
Extreme weather events increase the likelihood of claims from insured customers.
Extreme weather events lead to business interruption or asset damage at operating locations.
Rising average temperatures lead to increased likelihood of claims from insured customers.
- 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)”.
- Note3: The ranking was based on the average sum of "likelihood of occurrence" and "impact level"
Material Climate Risk Issues
1
Technical risks
Mid-term
In the face of rapidly increasing demand for electricity, the Company is required to build backup electricity and replace high energy-consuming assets, which in turn increases Shin Kong's operating costs and capital expenditures.
Rising operating costs and increased capital expenditures
Response Measures
- 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.
- Establish a business continuity management system (BCMS) and conduct business continuity drills and tests every year.
2
Reputation risks
Mid-term
Failure to actively take sustainable actions will result in an impact on own value and revenue, which may cause Shin Kong to lose the favor of investors, customers and the public.
Reduced inflow of capital
Response Measures
- Actively participating in international sustainable initiatives, alliances, and sustainability assessments, in order to enhance stakeholders' trust in the company and stay informed about domestic and international sustainability and climate change information.
3
Emerging policy risks
Mid-term
Due to the imposition of carbon taxes and fees at home and abroad, the profitability of SKL investment and financing customers in high- carbon emission industries has been impacted.
Decreased revenue and 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.
4
Physical ― Immediate risks
Long-term
Affected by extreme climate disasters, the frequency and severity of typhoons, heavy rains and floods have increased, leading to operational interruptions or asset losses for investment and financing customers, indirectly causing Shin Kong to face investment and financing losses.
Decreased revenue and profits
Response Measures
- 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
5
Immediate risks
Long-term
Affected by extreme climate disasters, the frequency and severity of typhoons, heavy rains and floods have increased, and the probability of casualties among insurance customers has increased, resulting in an increase in the claim amount of related insurance products, which directly affects the company's profitability.
Decreased revenue and profits
Response Measures
- In response to extreme weather events, a "typhoon / disaster protection" mechanism is in place to help policyholders cope with major accidents and climate change disasters.
6
Immediate risks
Long-term
Rising operating costs and decreased asset value
Response Measures
- Conduct physical risk scenario analysis and assess the financial impact on the Company for the Company’s own operating locations and investment real estate.
Climate-Related Opportunities
Climate Opportunities Matrix
Actively develop digital financial services and reduce operating costs.
Actively guide the flow of funds into sustainable enterprises, thereby enhancing corporate image.
Evaluate investable targets and invest to increase revenue and profits.
Increase the number of green building certifications to reduce electricity and water consumption.
Increased customer demand for climate-related commodities and green financial products.
- 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)”.
- Note3: The ranking was based on the average sum of "likelihood of occurrence" and "impact level"
Material Climate Opportunities
1
Products and services
Short-term
SKL actively develops digital financial services and continues to promote digital account opening, electronic trading, and account processing services to reduce the use of paper and energy and lower operating costs.
Reduced operating costs
Response Measures
Actively promote digital finance, with "creating excellent services, deepening digital value and developing financial innovation" as our digital innovative strategies, to reduce the consumption of energy and resources through digitalization.
Results in 2024
- E-tools reduced a total of 22.87 million sheets of paper and approximately 155.5 tons of carbon emissions.
- The average amount of paper purchased for administrative purposes decreased by 2,207 packs compared to the previous three years, resulting in a reduction of 7.5 tons of carbon emissions.
2
Market opportunities
Short-term
SKL formulates sustainable investment and financing policies in response to the sustainability trend and actively guides the flow of funds to sustainable enterprises. Its sustainability performance has received positive coverage from the media and sustainability rating agencies, thereby enhancing the corporate image and winning the favor of investors and customers.
Increased capital injection and increased revenue and profits
Response Measures
- Actively respond to the UN's Sustainable Development Goals in the investment activities, continue to search for sustainable investment targets, grasp ESG opportunities, and invest in sustainable development industries.
- Continue to actively participate in internal and external organizational initiatives to enhance the company's image.
Results in 2024
- Won the TCSA Climate Leadership Award.
- Invested approximately NT$582.9 billion in ESG topics.
3
Market opportunities
Mid-term
Increased revenue and profits
Response Measures
- Continuously monitor the trends in green-related industries and invest in sustainable development industries such as environmentally friendly and green energy industries.
- Establish management guidelines for carbon-intensive industries and dynamically adjust trading strategies to effectively achieve the goal of sustainable finance decarbonization and enhance market resilience.
Results in 2024
The amount of green investment reached NT$32.7 billion, of which the amount of investment related to green energy and renewable energy industries reached NT$7.2 billion.
4
Resource efficiency
Mid-term
SKL increases the number of green building certifications among its operating locations by reducing electricity and water consumption to achieve energy conservation and carbon reduction, thereby increasing the value of fixed assets and environmental external benefits.
Increased asset value and reduced operating costs
Response Measures
- 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.
- Obtain green building certificates (silver and above) for all new projects to enhance the environmental sustainability performance of buildings.
Results in 2024
- Adopted power-saving project measures (upgrading of lighting fixtures, improvement of energy efficiency of power equipment, etc.)
- Obtained a total of 6 green building certificates, 3 green building candidate certificates, 1 low-carbon building candidate certificate, and 1 US LEED certificate.
- Note: Climate opportunity types include resource efficiency, energy source, products and services, markets, and resilience.
Climate Scenario Analyses and Stress Tests
To further identify 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 are based on the scenarios set by the Fifth and Sixth Assessment Reports (AR5 & AR6) of Intergovernmental Panel on Climate Change (IPCC) and the “Network for Greening the Financial System” (NGFS). The scenarios used for each application and risk category are as follows, and the definitions of each scenario will be explained one by one in the following chapters:
| Application | Risk Category | Climate Scenario | Description |
|---|---|---|---|
Operating locations and Investment real estate |
Physical Risk – Immediacy and Long-Term | Overall:IPCC AR5-RCP2.6、RCP8.5 Some physical risk factors (flooding, high temperatures):IPCC AR6- SSP1-2.6、SSP2-4.5、 SSP3-7.0、 SSP5-8.5 |
Calculate the impact of climate risks on real estate investments (maximum climate risk values, reconstruction costs, and likelihood of operational disruptions) |
Real estate collateral |
Physical Risk – Long-Term | Overall:IPCC AR5-RCP2.6、RCP8.5 | Calculate the impact of climate risks on real estate collateral |
Operating locations of investment and financing portfolio companies |
Physical Risks | Overall:IPCC AR5-RCP2.6、RCP8.5 Some physical risk factors (flooding): IPCC AR6- SSP1-2.6、SSP2-4.5、 SSP3-7.0、 SSP5-8.5 |
Calculate the impact of climate change risks on the operating locations of investment and financing portfolio companies |
Life insurance products |
Physical Risk ‒ Long-Term | IPCC AR6- SSP1-2.6、SSP2-4.5、 SSP3-7.0、 SSP5-8.5 | Calculate the impact of temperature rise on heat-related injury claims in life insurance products |
|
Investment portfolios |
Transition Risk - Policy and Regulation | NGFSs-Net Zero 2050、Current Policies、Delayed transition、Nationally Determined Contributions(NDCs) Fragmented World | Calculating the changes in credit and market risks for investment and financing positions under stricter climate regulations. |
SDGs
