Sustainable Finance Strategy

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Sustainable Finance Blueprint

The Customer Relations Team of SinoPac Holdings was formed by the Sustainable Development Committee, in which the CFO of SinoPac Holdings heads the task force and is responsible for the overall development of sustainable finance at SinoPac Holdings and its subsidiaries. In response to the three sustainability commitments of SinoPac Holdings to "Reduce Inequality," "Mitigate and Adapt to Climate Change" and "Promote Inclusive Growth," the task force planned four major action plans to improve the accessibility of financial services, support the development of the renewable energy industry, raise climate awareness (customers), and support the development of small and medium enterprises (SMEs), and implementing sustainability strategies including "implement responsible investment," "implement responsible lending," "develop green financial products," and "promote inclusive financial services."

Responsible Investment

Responsible Investment Policy and Engagement

SinoPac Holdings actively complied with the six principles under the United Nations “Principles for Responsible Investment (PRI)” in 2019 and established the “Responsible Investment Management Guidelines” for the group's investment and asset management business. The guidelines are applicable to the asset classes including listed equity, fixed income, private equity, infrastructure, property, and derivatives & alternatives. Further, SinoPac Holdings incorporates ESG issues and related risks into the decision-making process of related operations, in order to implement responsible investment.

Formulation of Management PRI Policy

  • Incorporate ESG factors into investment analysis and decision-making processes
  • Be active asset owners and incorporate ESG issues into our ownership policies and practices
  • Seek appropriate disclosure on ESG matters of the entities in which we invest
  • Improve familiarity and promote execution of the Principles within the investment industry
  • Establish cooperation to enhance effectiveness of the Principles
  • Report on activities and progress of the implementation

Development of Responsible Investment by SinoPac Holdings

SinoPac Holdings pays attention to the ESG performance of investment targets and incorporates different ESG factors in each phase of investment. Before making an investment, SinoPac Holdings first assesses the ESG risks of investment targets, and incorporates ESG factors into investment evaluations to determine the investment target's risk level with the references of standards of international organizations and external tools or indexes. For management after making an investment, SinoPac Holdings complies with the voting policy under the “Stewardship Policy”, and in principle opposes any proposal that violates major climate-related issues. The Company engages with investees company to determine potential ESG-related issues that they may face and examines their ESG-related performance regularly.

SinoPac Holdings Principles for Responsible Investment

SinoPac Holdings Responsible Investment Process

Bank SinoPac, SinoPac Securities, and SinoPac SITC have signed a statement of compliance with the “Stewardship Principles for Institutional Investors”, and established their “Stewardship Policy” in September 2020, incorporating ESG factors into the investment evaluation process, and also incorporating climate change related issues into their voting policy. In practice, the subsidiaries attend shareholders' meetings and exercise their voting rights and engage senior executives to monitor the business situation of the investee company, which is disclosed on an annual basis. Please refer to the stewardship report of each subsidiary for the implementation status of stewardship in 2020.

 
  Stewardship Policy Stewardship Report   Stewardship Policy Stewardship Report   Stewardship Policy Stewardship Report  

Responsible Investment Policy Adopted for Asset Management Business

ESG-themed Investments

SinoPac Holdings believes that a company that incorporates ESG into its business strategies, attaches importance to co-existing with the natural environment and its social impact, and implements corporate governance will be able to achieve better sustainability performance. This will bring the company's operations into a virtuous cycle so that it can become a paradigm for enterprise excellence. SinoPac Holdings attaches importance to the ESG performance of equity and bond investment targets and implements ESG stewardship to meet the needs of investors for sustainable investment growth, providing investors with a new option to diversify their investment portfolio.

Results of SinoPac Holdings' Own Assets ESG Investments in 2020

Responsible Lending

SinoPac Holdings understands the financial industry plays an important role in reducing global carbon emission, as it controls the majority of the cash flows supporting the economy. By following the Equator Principles and incorporating ESG into its risk assessment process, SinoPac Holdings pays close attention to clients' understanding of the risks and opportunities brought by climate change as well as its influence on financial performance, in order to take further proactive countermeasures.

Development of Responsible Lending by SinoPac Holdings

 

SinoPac Holdings' KYC and CDD Processes for Lending Business

SinoPac Holdings incorporates ESG factors into its Know Your Customer (KYC) and Client Due Diligence (CDD) procedures for lending business and implements classified management of corporate banking and retail banking customers, carrying out reviews and management operations by risk level. Furthermore, the Company has enhanced ESG risk reviews for project financing and continues to monitor environmental and social risks after approval.

Corporate Banking Lending

Bank SinoPac's "Corporate Credit Risk Management Division" is the dedicated unit responsible for establishing regulations relating to responsible lending and the EPs, and for planning a conducting ESG credit risk analysis. The Division continues to monitor trends in ESG risks of each industry and their impact on the Bank's operations.
Bank SinoPac established the "Responsible Lending Management Guidelines" and exclusion list of industries with high ESG risks (e.g. pornography, controversial arms), and enhanced ESG risk analysis for sensitive industries (e.g. gambling, those with issues in food safety, toxic radioactive substance, non-medical and hazardous genetic engineering, non-adhesive asbestos fiber and polychlorinated biphenyls (PCBs) manufacturing). ESG factors were included in the "Risk Information Disclosure Inspection Items for Credit Investigations" of the credit review system. For new corporate lending application, in addition to the KYC and CDD mechanisms, the Company also conducts ESG risk assessments and review ESG factors of the clients. In the process of reviewing ESG factors, if ESG risks is checked in "Risk Information Disclosure Inspection Items for Credit Investigations," in the credit investigation report, Bank SinoPac will carry out ESG engagement for all items and look into the situation after verification by the business unit, and will assist clients in making improvement. Bank SinoPac will also evaluate and formulate mitigation and compensation measures in response. If the client's situation is severe or unable to make improvements over a long period of time, then it must carefully evaluate whether or not to continue doing business with the client.
For ESG risk assessments, Bank SinoPac will prepare a list of inherent ESG risks for "specific industries," such as high carbon emission industries/activities (e.g. oil, gas, coal-fired power plants, cement and concrete manufacturing, manufacturing of iron, steel and other metals, manufacturing of pulp and paper, agriculture, and animal husbandry), and will recommend related clients provide carbon emission intensity data. The Bank will also monitor whether or not clients assess their risks and opportunities brought by climate change and take appropriate response measures. Furthermore, Bank SinoPac also plans to reference the SASB's materiality map and identify the ESG risks of material issues in different industries/companies, in order to assess the financial losses clients might sustain due to ESG issues.

Continue to Improve ESG Risk Assessment Tools and Information Platforms
SinoPac Holdings aims to achieve ESG information disclosures in the “Green Finance Action Plan” implemented by the competent authority, and thus planned the "Integrated ESG Information Platform" in July 2019. The Company began working with Taiwan Economic Journal (TEJ) for the first time in November 2020, and incorporated TEJ's CSR dashboard. In addition to conventional financial indicators, the TEJ CSR dashboard focuses on non-financial ESG variables related to credit risk, in order to more efficiently conduct a comprehensive risk assessment of clients. SinoPac Holdings utilized this in the lending decision-making process and became the first financial holdings company in Taiwan with the ability to comprehensively assess a company's ESG risks.

Equator Principles

Bank SinoPac formally became a signatory to the Equator Principles (EPs) in February 2020, and became the world's 102nd signatory of Equator Principles Financial Institutions (EPFIs), established EPs related guidelines and operating procedures in 2020. Bank SinoPac announced the "Business Manual of Corporate Banking -Article 11th: The Equator Principles" within the Bank in June 2020 and smoothly transitioned to EP4, strengthening the management of human rights risks and climate change risks in the credit investigation and lending process for project financing.

EPs Credit Investigation and Lending Process

 

Starting in 2022, Bank SinoPac will disclose on the EPs official website and Bank SinoPac official website the industry, risk category, and designated or non-designated country of project financing, number of cases involving environmental and social risks management, and whether or not an environmental and social risks assessment report prepared by independent third-party experts is provided.

Deals Reviewed in line with EPs