Climate Change Initiatives: Response to TCFD

Basic Approach

The realization of the "well-being of all including future generations" pursued by the Group is predicated on the existence of a sustainable society with a view of 100 years down the road. By recognizing securing social sustainability as the foundation of our business operations, we will proactively address resolution of material issues*1 related to social sustainability than ever before. In particular, addressing climate change is a material issue recognized globally. The Government of Japan has also announced that it aims to reduce greenhouse gas emissions by 46% from FY2013 in FY2030, and will continue to take on the challenge of reaching a height of 50%. With a view to secure sustainability of global environment that is the foundation of people's lifestyles as both an insurance provider and an institutional investor, the Group has adopted goals for realizing carbon neutrality, and will reinforce its initiatives for addressing climate change through its business, while engaging in dialogue and collaboration with international conferences, governments, industry associations, academic institutions, and others.
As part of these initiatives, we are focusing on the proactive disclosure of information based on the TCFD Recommendations*2 on this page and in our Sustainability Reports. In particular, regarding the effects of climate change on the life insurance business (See "Topics" on p.56), while there is currently still not an established theory on the subject from a global perspective, we are conducting our own research. While this research has just been initiated, through dialogue with various companies in the industry and government and academic institutions as well as with our investors, it produced the disclosure of analytical processes and analysis results aiming at advancing initiatives and information disclosure.
To realize the new vision of the Group*3, as both insurance provider and institutional investor we will demonstrate leadership in promoting initiatives (including information disclosures) that could serve as a model for others as well. In doing so, we will continue contributing to realization of a carbonfree society leading to a sustainable society.

  • *1
    Please see "Material Issues of the Dai-ichi Life Group" on "Material Issues" for information on those issues.
  • *2
    Statement of Agreement with intent of said recommendations on Sep. 2018, Task Force on Climate-Related Financial Disclosures
  • *3
    The Group's new vision is "Protect and improve the well-being of all." Please see the "Group Vision" on "Group Mission, Vision and Values".

Status of Main Initiatives for Fiscal 2020

Having positioned its response to climate change as one of its material issues, the Group is methodically promoting various initiatives in-line with its business strategy.

Four Items Contained in TCFD Recommendations Status of Initiatives Page
Governance
  • Establishment of Group Sustainability Promotion Committee
  • Configuration of climate-related items as part of KPI concerning officer remuneration at Dai-ichi Life, the core company of the Group
Stance on Governance/Risk Management
Risk Management
  • Group ERM Committee regularly checks status of climate-related risk management and considers enhancements to risk management system
  • Risk Management Unit, etc. monitor status of each Group company's initiatives to deal with climate-related risk and share relevant information
Stance on Governance/Risk Management
Strategy (Risks and Opportunities)
  • Establishment of risk quantification model for insurance claims and other payments and quantitative analysis of the impact
  • Measurement of CO2 emissions and weighted average carbon intensity in Dai-ichi Life's investment portfolio
Recognition of Climate Change-Related Risk and Strategic Application
Indicators andTargets
  • Establishment of CO2 emission reduction targets that satisfy the Paris Agreement (limit global warming to 1.5 ) in our capacity as both an insurance provider and institutional investor Insurance Business: Scope 1+2 (Entire Group)
    Scope 3/RE100 implementation targets (both for Dai-ichi Life)
    Institutional investor: CO2 emission reduction targets up to 2025
    (For listed shares, bonds and real estate assets within Dai-ichi Life's investment portfolio)
Recognition of Climate Change-Related Risk and Strategic Application

Stance on Governance/Risk Management

The Group regularly reports the status of initiatives addressing climate change (Group targets, policy and other indicators of initiatives, risk response, etc.) to the Executive Management Board and the Board of Directors*4, and reinforces those initiatives depending on advice or direction received from Board members. At the same time, we promote the Board-led development of business plans related to climate change to form our stance for integrating climate-related risks into our management.
The Group is implementing risk management that takes appropriate measures at an early stage by specifying foreseeable risks with the potential to significantly impact its business as "material risks" and formulating business plans that take these risks into account.*5 Risk Management Unit identifies Group material risks based on the results of material risks identification at group companies and taking into consideration the degree of impact and the likelihood of occurrence. The Paris Agreement of 2016 has raised awareness of addressing environmental issues as a challenge that should be tackled by international community. The Group also recognizes addressing climate change as a material management risk that could considerably impact customers lives and health, corporate activities, social sustainability, etc. From fiscal 2019 we defined risk related to climate change as a "material risk," and have been reinforcing risk management. More specifically, in the course of Group ERM Committee meetings chaired by the officer in charge of risk management, we discuss methods of assessing and dealing with physical and transition risks and, if necessary, report them to the Executive Management Board and to the Board of Directors as well. Furthermore, to reinforcing our Group governance, we established a "Group Sustainability Promotion Committee" chaired by the President in April 2021, and will establish policies and strategies related to sustainability such as responding to climate change, monitor the implementation status of initiatives, and take other actions going forward. In addition, we have set climate change-related items as one of the KPIs related to executive compensation of Dai-ichi Life, a core subsidiary of the Group.

Governance/Risk Management System Relating to Climate Change Response (As of April 2021)

  • *4 In fiscal 2020, climate-related topics were reported to the Board of Directors a total of three times. The main agenda are as follows. Status of Group response to climate change (including initiatives for climate-related risk, future direction, etc.) Response to climate change and other sustainability strategies under next MMP
  • *6 The main agenda items related to climate change in fiscal 2020 were as follows.
    • Status of response to climate-related risk
    • Quantification of insurance claims and other payment risks
    • Analysis of climate-related

Recognition of Climate Change-Related Risk and Strategic Application

(1)Climate-Related Risks and Opportunities and their Impact on Our Group's Business

We recognize that climate change may have the following effects in the medium- to long-term (result of analysis using Business-As-Usual and 2 scenarios), and therefore, promotinginitiatives to enhance our control measures as an operating company and institutional investor and resilience of our business. Please also see "Topics" (next page) for details.

Climate-related risks Main impacts on business Term Initiatives to increase resilience and control measures based on future risks

Physical risks

  • Risks that consist of chronic physical risks (rise in average temperatures and sea levels, etc.) and acute physical risks (increase in abnormal weather, such as typhoons and flooding, etc.) which are associated with physical changes due to climate change
  • Impacts could increase under the scenario of significant long-term increase in temperatures due to inadequate climate change countermeasures by each country

 

  • Increase in insurance claims and benefits paid due to increase in heat strokes and infectious diseases associated with global warming
  • Increase in insurance claims and benefits paid associated with increase in flooding due to typhoons, etc.
    Assumed scenario
    Business-as-usual
Long term

 

  • Promote initiatives for quantifying by building a risk management model that analyzes the impact on insurance earnings and expenses from global warming due to various factors, such as the effects of heat stroke, infectious diseases, and wind and flood disasters.
  • Start research and studies on the relationship between climate and health in countries inside and outside Japan.
  • Investigate trends of regulators in each country and consider applying the findings in business
  • Promote initiatives that lead to contributions to customers and society using the knowledge from the above efforts

Transition risks

  • Risks that include market and technology risks (changes in consumption behavior, failure ofinvestments in new technologies, etc.), policy and regulatory system risks (tightening of regulations on greenhouse gas emissions, etc.), and reputational risks (criticism of industry, changes in consumer choices, etc.), which are associated with the transition to a low carbon society
  • Impacts could increase under the scenario of reductions in long-term increase in temperatures due to adequate climate change countermeasures, such as the development of new technologies and utilization of carbon recovery and storage technology

 

  • Decrease in corporate value of companies with inadequate responses to environmental change, including the introduction of carbon taxes, damage to assets due to market and social environment changes, development of new technologies, response to changes in consumer behavior, etc.
    Assumed scenario
    2℃ scenario
Short-to Medium-term

 

  • Incorporate transition risks, such as carbon tax and stranded assets, into the evaluation standards for the companies to invest in and loan to.
  • Conduct trial stress tests referring to various documentation and disclosed information from national and international regulators
Climate-related opportunities Main impacts on business Term Initiatives that increase resilience to capture future opportunities
  • Corporate revenue opportunities associated with climate change, such as an expansion of the market contributing to solving climate change problems
  • Increase in investment and loan opportunities, such as renewable energy business, that contribute to solving climate change issues
  • Reduction in operating costs due to the introduction of infrastructure with high resource efficiency
Short
to
Long
  • Actively promote "transition finance" to support loans and investment, and decarbonization, in assets that contribute to solving climate change issues
  • Support corporate initiatives and behavioral changes that solve social issues through dialogue with companies the Group invests in
  • Look for opportunities to provide products and services related to good health and disease prevention in anticipation of climate change, etc.

(2) Specific Initiatives and Targets

As an operating company and institutional investor, in March 2021, the Group set medium- to long-term targets for the reduction of CO2 emissions. With further accelerating various initiatives and contributing to earlier realization of decarbonized society, we will enhance the resilience of our life insurance and investment management businesses as we move forward.

<Initiatives and Targets as an Operating Company>

Originally, for our CO2 emission reduction targets, we had applied Scope1*7 and Scope2*7. Then, we raised targets to conform with targets stated in the Paris Agreement (which calls for limiting the rise in average global temperature to under 1.5 compared to the time before the Industrial Revolution). In addition, for promoting initiatives which would unify all employees unify, Dai-ichi Life set CO2 emission reductions under Scope 3*7 that subject to "items that should be emphasized from the perspective of behavioral change of employees and businesses.". For actual CO2 emission data up to fiscal 2020, please see this page (Sustainability Data)

  • *7
    Scope 1: Direct emissions from Company. Scope 2: Indirect emissions accompanying use of electric power, etc. supplied from other company. Scope 3: Indirect emissions other than those under Scopes 1 or 2 (=emissions from other companies related to activities by Dai-ichi Life). Presently, the Company applies Category 1 (purchased products/services), Category 3 (fuel and energy activities not included in Scopes 1 or 2), Category 4 (transport/delivery (upstream)), Category 5 (waste generated by businesses), Category 6 (business travel), Category 7 (commuting by employees) and Category 12 (disposal of purchased products). It does not include Category 15 (investment).

In order to achieve the above targets for fiscal 2025 (under Scopes 1 + 2), Dai-ichi Life will promote RE100 : "transition to 100% renewable energy by the end of fiscal 2023" (in particular, we will aim to achieve this goal for properties that Dai-ichi Life leases externally (real estate for investment)) in the course of fiscal 2021.*8 Additionally, at the Protective and TAL as well, we are promoting initiatives for introduction of renewable energy and carbon offsetting, and will expand initiatives that the Group unifies behind.

[Topics] Research of Effects of Climate Change on Life Insurance Business

The Group is promoting initiatives to grasp risks related to payment of insurance claims and benefits to estimate the impact of climate change on life insurance business. While research on the impact global warming is conducted in various sectors, where the payment of insurance claims and benefits is concerned, changes in human health and natural disasters may have direct effects. According to a report (Assessment Report on Effects of Climate Change)*9 by the Ministry of Environment of Japan, an increase in heatstroke during the summer season, an increase in cardiovascular and respiratory diseases associated with production of photochemical oxidants, ozone and other pollutants.
Moreover, report informs about the spread of infectious diseases due to the expanded habitat of mosquitos and mites and the intrusion of non-native species, an increase in heatstroke, infections and mental illness among disaster victims due to the prolonged living as refugees. As for natural disasters, the more frequently occurring flooding, inundation and landslide disasters may also have impact.
In recent years, documents concerning these effects have been published by a large number of research institutions, making them a growing subject of attention. In addition to investigating and analyzing such research results, the Group is promoting comprehensive grasp of risks and quantifying their effects after factoring in the attributes of the insurance products that it underwrites.
For initiatives for fiscal 2020, as a joint endeavor with Mizuho-DL Financial Technology, we analyzed the relationship between global warming and the payment of death insurance claims by Dai-ichi Life. In an analysis where focus was placed on the increase in health hazards caused by global warming during the summer season, using actual death insurance claim payments for the last several years, we inferred a relationship between peak temperatures across Japan and mortality. The results of this analysis showed that if we applied a RCP8.5 scenario*9, relative to past results (for fiscal 2010 to fiscal 2019), the increase in mortality rate would be estimated at approx. 0.4% in the 2050s and approx. 1.0% in the 2090s. When these estimates are applied to actual death insurance claim payments by Dai-ichi Life in fiscal 2020 (approx. 400 billion yen), they amount to an increase of approx. 1.5 billion yen at a rate of 0.4% and an increase of approx. 4.0 billion yen at a rate of 1.0%. The analysis and quantification of the effects of climate change on the life insurance business are recognized as being researched and analyzed by various companies through a process of trial and error, with no standard methods being established internationally at this time. The effects analysis recently performed by the Group is limited to a statistical analysis of the correlation between peak temperatures and death based on past results data at Dai-ichi Life using various researches as a reference.*10 We believe there are many challenges, such as investigations of the occurrence of various diseases, approaches from a medical viewpoint and impact investigations at our various overseas companies, and we will continue understanding risks across the entire Group as we move forward.

  • *9
    Scenario equivalent to maximum greenhouse gas emissions in 2100. Should measure surpassing current ones not be taken, using averages from the period between 1986 and 2005 as the standard, temperatures will rise between 1.4 and 2.6 close to 2050 (medium term) and between 2.6 and 4.8 close to 2090 (long term).
    (Source) Assessment Report on Effects of Climate Change (Disclosed by Ministry of Environment on December 17, 2020
  • *10
    For example: Antonio Gasparrini and others, in The Lancet Planetary Health, Volume 1, Issue 9, Projections of temperature-related excess mortality under climate change scenarios, Pages e360-e367 December 2017.
  • *11
    Excerpt of outline drawing of envisioned effects from climate change (partially processed)
    http://www.env.go.jp/press/files/jp/115261.pdfOpen a page in another window.

<Initiatives and Targets as an Institutional Investor>

By positioning the addressing climate change as its foremost issue under responsible investment, Dai-ichi Life is pursuing realizing a carbon-neutral society. In February 2021, we joined the "Net-Zero Asset Owner Alliance" (AOA)*12 as the first Japanese entity, thereby making an external commitment to making the transition to a carbon-neutral investment portfolio by the year 2050. Additionally, we set forth the goal of carrying out a 25% reduction (over the end of March 2020) in greenhouse gas emissions in our listed shares, bonds and real estate portfolios by 2025 in accordance with the AOA protocol (targetsetting guidelines). By principally engaging investee companies with considerable greenhouse gas emissions and supporting initiatives to address the issue of climate change in those companies, we will demonstrate leadership on a global level and aim to realize a carbon-neutral society.

  • *12
    Institutional investor organization that aims to make the transition to carbon-neutral asset portfolios by the year 2050

Main Initiatives Aimed at Realizing Carbon Neutrality

Setting reduction targets aimed at decarbonization by 2050
  • Set an interim target of a 25% reduction over levels at the end of March 2020 for listed shares, bonds and real estate by 2025 in accordance with the AOA protocol (target-setting guidelines)
  • Targets scheduled to be successively set for other assets based on consultations with AOA
Supporting initiatives by investment destination companies through engagement*13
  • Provided ESG analyst-issued reports and suggestions for climate change initiatives by corporations, promoted elevation of level of target-setting for reductions of GHG emissions and otherwise engaged 50 companies with top GHG emissions
  • Promoted disclosure of information based on TCFD Recommendations and agreement with TCFD through dialogue with investment destination corporations while simultaneously supporting initiatives by those corporations through Climate Action 100+ and other forms of cooperative engagement
  • Appropriately reflected results of engagement in investment judgment process
Supporting transition to low-carbon society and creation of environmental innovation
  • Proactively supplied capital for transition to low-carbon society through transition finance, impact investment and other means in addition to making investments and loans in green bonds and renewable energy power generation businesses
  • Will not engage in new project finance for thermal power generation (coal, petroleum and gas included) that uses fossil fuels

Total Carbon Emissions and Medium-Term Reduction Targets for Listed Share, Bond and Real Estate Portfolio

  • *14
    Sum value of Scope 1 and Scope 2 for listed shares, bonds and real estate as of end of Mar. 2020 (Source) Listed shares, bonds: Prepared by Dai-ichi Life using data from S&P Trucost Limited. Real estate: Aggregated and prepared by Dai-ichi Life.

To assess the climate-related risks and opportunities at companies to invest in and loan to with respect to its domestic and foreign equity and bond portfolios, Dai-ichi Life performed total carbon emission and weighted average carbon intensity (WACI) analysis, the disclosure of which is recommended by TCFD. With WACI, a weighted average of greenhouse gases per unit sales of the company is obtained in accordance with the holding percentage for that company in the investment portfolio. We have implemented initiatives aimed at bolstering the resilience of our asset portfolio up to now, including the incorporation of transition risk such as a carbon tax being introduced or assets becoming stranded into assessment criteria for companies to invest in and loan to. Additionally, we plan on tackling the advancement of our analysis of climaterelated risk and opportunities, including transition risk and physical risk and opportunities, in order to further reinforce our risk management stance.

  • *15
    Sum value of Scope 1 and Scope 2 for listed shares, bonds and real estate as of end of Mar. 2020¥
  • *16
    TOPIX, MSCI ACWI ex-Japan, S&P Japan Corporate Bond Index and S&P International Corporate Bond Index were used for market indices.
    (Source) Listed shares, bonds: Prepared by Dai-ichi Life using data from S&P Trucost Limited. Real estate: Aggregated and prepared by Dai-ichi Life.