Taishin FHC Corporate Social Responsibility Report 2019

63 Sustainable Finance Management of Risk and Opportunities Global warming and climate change have become important risk issues of the world’s concern. For corporates, the key to sustainability now involves finding ways to avoid operational and environmental impacts, and undertaking mitigation, adaption, management and protection measures with respect to the environment. Incorporating climate change risk into the Risk Management Policy: In 2016, Taishin FHC revised it’s “Risk Management Policy” and introduced a new risk management goal that “take into consideration all economic, social and environmental risks associated with climate change and corporate sustainability” to address the rise in climate change risk. A policy revision followed in 2018, on top of the credit, market, operational and liquidity risks, other sustainability risks such as climate change risks, must be included in risk management process of the Policy, and thereby minimize the risk impacts and influence to the Group. Aiming at climate change strategy indicators, Taishin has set performance targets for mitiga- tion and adjustment within the organization, including: Scope 1 and Scope 2 greenhouse gas emissions, and implementation of the Task Force on Climate-related Financial Disclosures (TCFD). In addition, the main goal for the performance of sustainable finance indicators is to promote the business of green finance. Scope 1 & 2 Greenhouse Gas Emissions (note) Green Finance Business Development TCFD Implemen- tation Please se e "Sustainability Topics Management - Climate Change Introduce the Equator Principles mechanism and draw up industry-specific environmental and social risk management guidelines The industry-specific environmental and social risk managementmechanisms need to be developed and implemented Green financial products (such as green financial funds) are offered; The proportion of green financial services (such as green investment) are increased Conduct full implementa- tion and make assess- ments of climate-sensitive industries Carried out financial impacts analysis on climate change Execute the analysis for other sensitive industries; Management and climate strategies are adjusted on the basis of t he analyzed results; Climate governance mechanisms can be optimized Performance Indicator Short-term(to 2021) Medium-term (to 2022) Long-term (to 2025) Goal Climate Change Risk Management Process of the Subsidiaries Performance Indicators and Targets 1.The Bank is creating a new industry category called climate change sensitive industries to accommo- date businesses that are characterized by high carbon emission. Businesses of this category will be required more thorough KYC (Know Your Customer) during investment or credit extension. 2.The Bank supports the related subjects with detailed KYC process and then makes investment on those which are included into ESG assessments or ESG evaluation as the companies with environmental protection, pollution reduction, natural environment and resources protection, and climate change mitigation. The fund that investment trust plans to issue will be related to environmental protection with green energy and low carbon. The listed corporates of the fund will be focused on the selection from the lower 50% of the quantitative screening criteria for their carbon emissions figures and calculate the carbon emissions per unit of revenue. Through regular interviews and financial statement reviews, the Venture Capital keeps abreast with the correlations between the operational development of the investment projects and climate change. This forms the basis for a second round of capital increase assessment or adjustments to an investment project. The focus of our investment is on innovations in environmentally-friendly technology patents, business models, and applications. Prior to working with an underwriting client, the Company gathers investment advisory reports and external information to evaluate whether the client’s business activities and industry are susceptible to have impacts or negative effects to climate change. Bank Securities Investment Trust Venture Capital Note: The base year was 2018. STEP 1 STEP 2 Taishin selects one climate- sensitive industry Carry out industry-specific risks and opportunities analysis in a“2 °C climate change scenario”simulation Quantify the impacts on Taishin STEP ３ Revenue decreased Operation disruption by typhoon Nationally Determined Contributions (NDC) Scenario Physical climate-related scenarios 2 °C scenario analysis of the “Real Estate” sector Rising demand for air-con with temperature up Regulations mandates the energy saving and carbon emission reduction Growth of low-carbon transition economy market Physical risk Transitional risk Opportunity Cost increased Cost increased Market growth Financial impacts & effects on credit decision s c c M