Taishin FHC Corporate Social Responsibility Report 2019

62 Sustainable Finance Climate Change Strategies Taishin understands that climate change brings physical and transitional risks and opportunities. With a view to its climate change strategy, Taishin has inventoried the risks and opportunities brought about by climate change to its own operations, personnel, customers, suppliers, products and services, and reputational goodwill. Through the matrix analysis of the probability and impact intensity of risks and oppor- tunities, 9 possible risks and 11 potential opportunities brought about by climate change are identified. Among them, the short-, medium-, and long-term exposures are assessed according to the probability and impact intensity indicators to under- stand whether decisions should be adjusted, with several risks that need to be paid attention to are as follow s (for the full content, please see Taishin Financial Holdings’ 2018 CSR Report P58-59): Taking consideration for the risk identification on the above table as one of the major results, clients may suffer damage to their collateral due to natural disasters which would affect the bank’s creditor rights. To understand the possible financial impact, we first used “real estate” as the object of this scenario for the analysis and quantitative assessment. In the case of a 2°C climate change status, we analyzed the industry-specific climate risks of the objects financed by Taishin, integrated the consideration of the industry’s climate sensitivity, and the scale of risk exposure to simulate various degrees of financial impacts on Taishin under this scenario. We analyzed real estate credit issuance patterns and the business behavior for real estate sector, and we identified the physical and transitional risks that the industry may face under the“ 2°C climate change scenario” and the impact’s pathways. Based on this, we then assessed the impacts of these scales of impacts on our credit decision-making and our own financial side. Taishin will take reference from this analysis process and its outcomes under the “2°C climate change scenario” simulation to adjust its decision-mak - ing process regarding certain products to include climate considerations, and to strength- en its future climate management strategies and governance structures. Some potential opportunities are listed as follows (for the full content, please see Taishin Financial Holdings’2018 CSR Report P58-59) ： Description of the Risk Financial Impact Response Measures Adopting Green Finance Principles involves additional assessment and classification to be performed on new loans or financing with limit increase, which may deter new customers Operation cost increased Impose additional requirements such as in-depth KYC and checks for critical cases, system checklist amendment, and training courses arrangement Participation in renewable energy projects helps to raise the lending business volume and increase the gains from the interest differences Fund-using units need to provide a fund overview to the fund management unit on a regular basis Employees may be required to perform duty during typhoon leave, which incurs additional personnel cost Make adequate budget for personnel costs and reinforce the notification and reminders on performing duty during typhoon leave Strengthen the Decision Making by the Result of Scenario Analysis Description of the Opportunity Financial Impact Response Measures Revenues increased Supporting the government’s green industry policy and issuing green bank debentures expand the Bank’s green finance portfolio, which increases financing amount and improves interest spread Fund-using units need to provide a fund overview to the fund management unit on a regular basis Revenues increased By providing digital products/services and ATMs, the carbon emission level can be reduced by the trips to the physical branches of the customers BPM process optimization Operation cost reduced Revenues decreased Operation cost increased Revenues decreased Operation cost increased Asset value decreased Absence of products or services that address the climate change may effect negative corporate image and media coverage about Taishin’s ignorance for environment protection Monitoring social trends, peer action and media coverage might be needed at all times Asset value decreased Climate change issues may lead to more frequent natural disasters and cause damage to customer’s equipment of collaterals, and affect the Bank’s debt entitlement Apply more rigorous view or reduce TLV for real estate properly collateral located in areas those are more susceptible to disaster, and have business personnel monitor borrowers’ financial/business position on a constant basis 1 2 3 1 2 3 4