At the end of 2021, the Financial Supervisory Commission (FSC) announced the "Guidelines for Climate-related Risk Financial Disclosures (TCFD) in the Insurance Industry," which requires insurance companies to establish appropriate mechanisms for assessing and disclosing climate-related risks and opportunities based on their size and business nature. Our company will also deepen climate governance in accordance with these guidelines and actively respond to the issue of climate change, continuously working towards achieving sustainable environmental goals.
The Company has established a climate governance framework to ensure the implementation of climate change risk management through a systematic division of responsibilities from the Board of Directors, Risk Management Committee and relevant departments of the three lines of defense.
The Board of Directors is ultimately responsible for the administration of climate change risks and set up a "Risk Management Committee" to regularly review the implementation of climate risk management.
The Risk Management Department shall be responsible for implementing climate change risk management-related affairs, and the Head Office shall also ensure that the execution results are consistent with the objectives of the Company and ESG, so as to guide relevant departments to carry out climate change risk management, and report the results to the Risk Management Committee regularly.
Mercuries Life Insurance uses the TCFD classification to assess the climate transition risk and climate entity risk for both investment and operational activities.
In order to mitigate and adapt to the impact of climate change, the governments of all countries have declared the vision of net zero and strengthened the control power related to carbon emissions, including the EU's "Carbon Border Adjustment Mechanism (CBAM)" and revised "Climate Change Response Law" in Taiwan. Greenhouse gas emissions will be reduced through the carbon tariffs or charges, which may affect the cost or revenue of the investment object. Mercuries Life Insurance conducts the risk analysis for specific industries or investments, taking into account the policy and regulatory factors.
As shown in the figure below, at the end of December 2022, portfolio exposure to high-carbon industries accounted for about 6.03%, among which exposure to oil, natural gas and coal products (integrated oil industry, exploration and production) was the main exposure, followed by cement manufacturing (cement and aggregate).
The electricity consumption of each operation site in 2022 was counted, while carbon emissions were converted according to the carbon emission coefficient of electricity in 2021, and the potential financial impact of carbon fee imposition in the future was assessed through scenario analysis. According to the evaluation, as the Company belongs to the financial and insurance industry, and its main source of carbon emission is the power use of office buildings, so there is no significant increase in operating costs temporarily assessed. In the future, ISO14064-1 will continue to be adopted to check the carbon emissions among operation sites and promote energy conservation and carbon reduction measures to ensure that the operation can meet the regulatory requirements of the competent authorities.
The Occupational Safety and General Affairs Department will take the following measures to respond and manage the risk of operation site transformation.
According to the Intergovernmental Panel on Climate Change (IPCC) issued “Impact, Adaptation, and Vulnerability" report, human-induced climate change has led to more frequent and more intense extreme events, such as extreme rainfall. There will be widespread negative impacts on Nature and human, and possibly irreversible impacts. The Company conducts the risk analysis of real estate distributions, taking into account the extreme weather factors.
- Risk factor of flooding: According to the "Taiwan Disaster Risk Chart" of the National Center for Disaster Prevention and Rescue Technology (NCDR), the future flooding risk is divided into Risk1~Risk5 (the higher the value, the higher the risk).
- Target floor: The risk coefficient below the first floor is 3, the second to the fourth floor is 2, and the fifth floor and above is 1.
- The target age of housing: The risk coefficient is 1for an age of housing more than 31 years, 2 for 11-30 years, and 1 for less than 10 years.
The Real Estate Department and the Loan Department will take the following measures in response to and manage physical risks.
The General Services Department of Labor and Safety will take the following measures to respond to and manage risks in operation sites.
