2022.09 The Taiwan Banker NO.153 / By Liao He-ming
Taiwan's mixed ownership listed banks each respond to recent policies in their own waysBanker's Digest
The domestic banking system includes three banks which are 100% publicly owned and controlled: Bank of Taiwan, Land Bank, and China Export-Import Bank. Besides them, thare are several mixed ownership (private and public) listed banks with market dominance: Chang Hwa Bank, First Bank, Hua Nan Commercial Bank, Mega Bank, Taiwan Cooperative Bank, and Taiwan Business Bank. They are all listed OTC corporations; some are listed as financial holding parent companies. Besides maximizing profits, their mission is to implement government policies. In fact, the mixed ownership listed banks are the lifeblood of the economy, combining the financial resources of the people to invest in industries favored by national policy. By paying active attention to cybersecurity, green finance, trusts, digital finance, and other trending topics, they will not only strengthen Taiwan’s economic capacity, but also lay the foundations for its future. Most importantly, many countries have made declarations and taken actions towards a net zero emissions target. In March 2022, Taiwan also released the General Description of Taiwan’s 2050 Net Zero Pathway and Strategy, providing a trajectory and path of action toward net zero. In the face of the challenges of this transformation, in 2020, the Financial Supervisory Commission (FSC) FSC promulgated the Green Finance Action Plan 2.0, encouraging financial institutions to promote and influence the industry’s pursuit of sustainable development through their investment and financing. The banks have each responded in their own ways. In addition to signing the Equator Principles, they have adopted a variety of measures to declare their progress towards net zero. Four strategies for net zero After completing the basic sustainability goals of the Sustainable Account Standards Board (SASB), Task Force on Climate-related Disclosures (TCFD) and Equator Principles (EP), in the 2021 Chang Hwa Bank Sustainability Report, Chairman Ling Chung-yuan announced four strategies in order to move towards net zero. 1. Carbon: expand greenhouse gas inventory and actively take carbon reduction actions; 2. Capital: Create investment value and exert long-term influence for sustainability; 3. Credit: Follow the EPs and promote green finance to assist in business transformation; and 4. Customers: pay attention to the principle of fairness and improve service culture. Chung Hwa said that it has taken specific actions this year to achieve these goals. It completed verification of its first carbon neutral branch, signed the Science-Based Targets initiative (SBTi), and adopted the Partnership for Carbon Accounting Financials (PCAF) to understand the carbon emissions of its investments and implement its sustainability vision with specific actions. In order to comply with the SBTi carbon reduction goals, and truly grasp the carbon emissions of its investment portfolio, Chung Hwa completed its 2021 greenhouse gas inventory in four asset categories in accordance with to the PCAF methodology: listed corporation stock and bond investments, long-term corporate financing, power generation industry project financing, and commercial real estate financing. Then, it submitted feasible and specific carbon reduction targets to SBTi, moving forward firmly and pragmatically on the road to sustainable finance while still striving for performance. CSR committee changed to ESG committee According to its statistics, First Bank has 33 green buildings, 27 of which are diamond-class – the most among a domestic company. This year, it will plant about 3,000 saplings in Keelung, Yilan, and Taichung. The bank estimates that they can absorb 30 metric tons of carbon emissions every year. First Bank also renovated its 31-year-old, 9-storey self-owned commercial office building located in the financial center of London in 2018, obtaining the BREEAM green building specification. The London branch obtained the green building label – which is not only its first green building overseas, but also the first of a Taiwanese financial institution. In response to international sustainability initiatives and completion of the planning schedule for the Ministry of Finance’s ESG platform for public stock financial companies, on July 1, Hua Nan Financial Holdings agreed to support climate-related financial disclosures, declaring its determination to implement sustainable operations. In 2022, it will reorganize the Corporate Social Responsibility (CSR) Committee into an ESG Committee, implement various ESG plans, and promote actions to improve its carbon efficiency, reducing both operating costs and the impact of its financing activities on the environment. In order to implement the government’s Green Finance Action Plan, Hua Nan will guide its resources into development of the domestic green energy industry. It is helping implement environmental protection in its daily operations by passing ISO-related certifications, obtaining green buildings, promoting electronic billing, and promoting green credit, bonds, and loans linked to ESG indicators. In 2019, Taiwan Cooperative Bank started greenhouse gas inventories from the head office building, gradually spreading to its branches. In 2022, for the first time, it will inventory each of its 311 branches around the world, grasp the carbon emissions generated by its operations, and reduce its carbon dioxide production through diagnosis, internal incentives, and purchases of green energy. It has also obtained ISO-14067 carbon footprint verification for the World Card, Lohas Card, and Over-the-Counter Service of Head Office Sales Department. Its cards are made of environmentally-friendly materials, and no toxic substances are produced during their destruction, effectively reducing impact on the environment. The bank has also been issued a carbon label by the Environmental Protection Administration for transparency about carbon emissions, and it is working with customers to reduce the emissions of its products and services. In March, the financial holdings company signed the Equator Principles, and in July it signed the (SBTi), promising to set medium and long-term carbon reduction goals and implement energy conservation and carbon reduction measures. A multi-pronged approach In late 2021, Taiwan Business Bank launched a Sustainable Living Card made of environmentally-friendly PETG, which does not emit toxic gases when destroyed. In addition, it has introduced and followed the TCFD recommended framework to identify its climate change risks and opportunities. Climate-related risks such as carbon emission controls impacting customer operations, and flooding leading to collateral damage, etc., and opportunities such as green loan services and low-carbon credit cards, etc., identified risks and opportunities to provide business units (enterprise funds, personal funds, digital funds, credit cards and trusts, etc.) to develop green and low-carbon financial services such as energy transition, circular economy and sustainable low-carbon financial services to help reduce carbon emissions. Besides green finance, trusts have also been a recent focus of public stock banks. In addition to long-term care and employee benefit trusts, they are also strengthening industry-university cooperation. Their trust business has experienced explosive growth. Taking both profitability and social responsibility into account Mega Bank has promoted a variety of Trust 2.0 services. Recently, its Trust Office signed a MOU with the Parents’ Association for Persons with Intellectual Disability, Taiwan, which just had its 30th anniversary, receiving support from bank customers and the Kanner Foundation of Taiwan. The bank supported the creation of a video with real cases of people with disabilities handling trusts, helping the public understand how it assists disadvantaged groups to use trusts to get long-term care for their families. Chen Chao-rung, Deputy General Manager of Mega Bank, said that ESG is not just about digitization or energy conservation, but also striking a balance between profits and social responsibility, and assisting everyone in society to plan their finances. In the future, the bank will jointly establish a trust service platform for the physically disabled with the Parents’ Association, and will also welcome other elder care or social welfare organizations to sign MOUs, jointly achieving the goals of financial security and innovation, and fully implementing the vision of the FSC’s “Trust 2.0 initiative.” Hua Nan Bank is now comprehensively promoting development-oriented real estate trusts, including urban revitalization and demolition of old housing. It hopes that cooperation between Hua Nan Assets Management with developers will integrate cross-industry resources to provide full one-stop “Hua Nan Revitalization and Demolition” services. Hua Nan is working with the Trust 2.0 plan, and jointly promotes it at 185 locations. It estimates that the number of new elder care trust beneficiaries will double this year. In addition, it uses big data to capture lists of potential customers, and actively strives for business opportunities in employee stock ownership and benefit trusts. First Bank, meanwhile, attaches great importance to talent cultivation. It has assigned 20 staff to participate in TABF’s Retirement Financial Planning Advisor Training Course. The number of participants will soon be expanded, and the contracting method will be discussed with TABF. In addition, through cross-resource integration of financial holdings, its strength in SME lending, and urban renewal experience, First Bank is currently actively inquiring about cross-industry cooperation and alliances with social welfare groups, long-term care centers, and schools. Land Bank, meanwhile, has drawn up a two-year Trust 2.0 plan from 2021 to 2022, aiming to increase the scale of trust assets, fee income, and the number of beneficiaries. And Taiwan Cooperative Bank hopes to create a full range of trust services. It is currently negotiating and cooperating with industries including electrical appliance manufacturers, care providers, funerary services, and chartered escrow providers, integrating cross-departmental resources to integrate itself into a full variety of daily services. The Ministry of Finance promotes skills cultivation Public stock banks must also rely on mid-to-high-level leaders with foresight and leadership for development trends that are important to Taiwan's future, and lead the entire staff together for better effect. The Ministry of Finance also launched the public stock bank talent training program SPPB to cultivate suitable candidates in various respects. While earning profits, the financial industry also must take the public interest and financial stability into account. Public stock banks played an important role in the response to the pandemic, helping many SMEs maintain their livelihoods, and even guiding their transformation. Green finance can help make the earth beautiful and reduce carbon emissions; and trusts can allow the elderly to live out their days, young adults to prosper, the youth to grow up, and widows, the lonely, the disabled, and the sick to be supported.