Status of Operations and Implementation
■ Status of Operations and Implementation
To effectively manage the risks arising from the operations of SinoPac Holdings and its subsidiaries, the Board of Directors serves as the highest supervisory unit in charge of approving the risk management policy and risk appetite or limit and giving the management authority for daily risk management. The Risk Management Division takes in charge of developing the risk management policies, guidelines, and systems for SinoPac Holdings and its subsidiaries. In addition to implementing the risk management policies, guidelines, and systems approved by the Board of Directors, the Risk Management Division is responsible to regularly evaluate the performance of SinoPac Holdings and its subsidiaries in terms of risk management.
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Status of Operations and Implementation：
In 2023：
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The TCFD team formulates specific work plans and timetables and keeps promoting the implementation of TCFD work items, including: specific quantitative scenario analysis of financial impact, corresponding strategies, mitigation and adaptation measures, and metrics and targets for financial climate resilience.
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Introduce and keep intensifying the climate change risk management, conduct the scenario analysis of physical and transition risks and the quantitative calculation of potential financial impact. Adopt the "Advanced Resilience Verification" method by the Association of Banks' Climate Risk Practice Manual to assess whether the operations and transition strategies are resilient based on the potential impact on the capital adequacy ratio of financial holdings.
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Conduct a carbon inventory of the investment and loan positions on December 30, 2022 with the methodology published by the Partnership for Carbon Accounting Financials (PCAF). The coverage rate increased from 9.4% to 79.72% (the value included in the inventory as a percentage of the total value of investment and loan positions).
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Compile independent TCFD report based on TCFD recommended disclosure framework (governance, strategy, risk management, and metrics and targets). and obtain the maturity model for the Climate-related Financial Disclosures of "Level-5+: Excellence" grade from BSI conformity check.
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In response to the COVID-19 pandemic or economic conditions changes, from the Top-down aspect, SinoPac Holdings monthly and irregularly conduct simulation of various stress scenarios. From the Bottom-up aspect, the subsidiaries have formulated a strengthening mechanism and countermeasures for the three risk pillars of market, credit, and liquidity, and will be adjusted in a rolling manner as the pandemic or economic conditions changes.
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With the target of the "data governance" structure and "data granulation", Continue to conduct structural adjustment of risk information. Expect to strengthen risk parameters with AI tools to build intelligence tracking or early warning mechanism, and plan to use the "data visualization platform" to construct a visualized "integrated risk management system".
In 2024：
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The TCFD team formulates specific work plans and timetables and keeps promoting the implementation of TCFD work items, including specifying quantitative scenario analysis and financial impacts, establishing corresponding operational strategies, financial plans, and mitigation and adaptation measures for climate resilience, formulating metrics and targets, and compiling climate and nature-related financial disclosures report.
- The "2023 Climate and Nature-Related Financial Disclosures Report" was published for the first time. The content is continuously improved as follows:
- The overall status of climate change risks (including physical risks and transition risk indicators) and the progress of related projects are reported to the Audit Committee.
- The climate change risks factors (physical and transition risks) are incorporated into ESG risks assessment in the management process of investment and lending.
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In the carbon inventory of financial activity, introduce "Facilitated Emissions" of capital markets, "Avoided Emissions" of electricity generation project finance, and "Financed Emissions of asset management" of SinoPac SITC. The implementation status of Science Based Target (SBT) is disclosed as well.
- Follow the framework of Taskforce on Nature-Related Financial Disclosures (TNFD) and the analysis procedures of LEAP (Locate, Evaluate, Assess, Prepare) approach to identify biodiversity hotspot analysis of own operations and overall value chains, investment and lending portfolios exposure to TNFD nature-related sensitive industries, nature-related dependencies and impacts evaluation, and nature-related risks and opportunities.
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Compile the report based on TCFD framework with the four pillars including governance, strategy, risk management, and metrics and targets. The climate-related financial disclosures were validated by the verification organization BSI, and achieved the "Level-5+: Excellence Certification" for two consecutive years.
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For carbon inventory of Scope 3 financed emissions of investment and lending portfolios with own capital, in addition to the "Financed Emissions: The Global GHG Accounting and Reporting Standard Part A" methodology published by the Partnership for Carbon Accounting Financials (PCAF) on December 30, 2022, SinoPac Holdings also adopted the "Practical Handbook for Financed Emissions (Scope 3) in Investment and Lending Portfolios of Domestic Banks" published by the Bankers Association of the R.O.C. in October 2023.
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The Company and its subsidiaries' carbon inventory of Scope 3 financed emissions of investment and lending portfolios with own capital, asset management businesses of SinoPac SITC and facilitated emissions for capital markets was validated by the verification organization BSI in accordance with ISO 14064-3:2019, and a validation report was issued, complying with the regulations of Chapter 6 "Assurance (verification) Descriptions" in "Practical Handbook for Financed Emissions (Scope 3) in Investment and Lending Portfolios of Domestic Banks."
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In response to the COVID-19 pandemic or economic conditions changes, from the Top-down aspect, SinoPac Holdings monthly and irregularly conduct simulation of various stress scenarios. From the Bottom-up aspect, the subsidiaries have formulated a strengthening mechanism and countermeasures for the three risk pillars of market, credit, and liquidity, and will be adjusted in a rolling manner as the pandemic or economic conditions changes.
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With "data governance" structure and "data granulation" requirements, construct SinoPac Holdings' Integrated Risk Information System (IRIS) and use "data visualization platform" to construct "integrated risk management system" for risk visualization, and plan to strengthen risk parameters or negative news with AI tools to build intelligence risk tracking, monitoring, and early warning mechanism.
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■ Credit, Market, Operation, and Liquidity Risk Management
SinoPac Holdings and its subsidiaries have established management and assessment mechanisms for four major types of risks including credit risks, market risks, operational risks, and liquidity risks to effectively identify, assess, monitor, and manage all types of risks. The Company also compiles a summary of the risk exposure of subsidiaries for management and report results to the Board of Directors. In addition to rigorous compliance with credit risk management regulations, SinoPac Holdings is also aware of the potential impact of ESG trends on the finance industry and loan businesses. SinoPac Holdings thus actively responds to international standards, incorporates ESG indicators into the credit analysis and pre-investment analysis and decision making and implements more comprehensive management of hidden risks in loan and investment businesses.
For details, please refer to "2023 Sustainability Report"", 2.3.3 Credit, Market, Operation, and Liquidity Risk Management.
■ Emerging Risk Management
SinoPac Holdings established the "Emerging Risk Management Guidelines" and implemented management mechanisms for the identification, measurement, monitoring, reporting, and mitigation measures for emerging risks accordingly. Since 2019, the Company has referenced related reports on emerging risks published by external institutions each year to identify emerging risks. The Company also compiles feedback from subsidiaries, identifies emerging risks at the group level, and establishes mitigation plans to prepare in advance.
SinoPac Holdings compiles the emerging risks submitted by the subsidiaries and considers the possibility of occurrence and the level of impact to identify the emerging risks of the Group. Among them, two major long-term potential risks, namely "Potential risks of the adoption of new technologies in operations (e.g., generative AI)" and " geopolitical and geoeconomic confrontation" have more significant impact on SinoPac Holdings and the Company formulates related mitigation and management measures.
For emerging risk identification procedures, identification results, and mitigation and management measures, please refer to "Emerging Risk Management", or "2023 Sustainability Report", 2.3.4 Emerging Risk Management for more details.
■ Climate Risk Management
SinoPac Holdings continues to evaluate climate change risks and establish corresponding response measures to identify the potential crises and opportunities brought forth by climate change. The Company also discloses climate-related information in accordance with the four pillars of the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) − governance, strategy, risk management, and metrics and targets. SinoPac Holdings also became an official TCFD supporter in 2021 and published its first "TCFD Report" in 2022. The Company aims to continue to expand the influence of the financial industry to continuously power the development of green financial industries, enhance the transparency and integrity of climate change information disclosure, respond to requirements in domestic and international policies and rating agencies, and address the concerns of stakeholders regarding the risks and opportunities of climate change. In addition to climate change risks, SinoPac Holdings also focuses on long-term nature-related risks in the long run and has disclosed information in the "Climate and Nature-related Financial Disclosures Report" since 2023.
For emerging risk identification procedures, identification results, and mitigation and management measures, please refer to "Task Force on Climate-Related Financial Disclosures", "2023 Sustainability Report", 2.3.5 Climate Change Risk Management, or "2023 Climate and Nature-Related Financial Disclosures Report" for more details.