Climate Change Initiatives: Response to TCFD | Dai-ichi Life Holdings, Inc.

Basic approach

The Group's pursuit of "well-being of all including future generations" can only be achieved if a sustainable society exists with a 100-year future horizon. We have positioned the sustainability of society as the foundation of our business operations. To this end, we will work more actively than ever before to resolve material issues^(*1).
To ensure the sustainability of the global environment, which is the foundation of people's lives, the Group, as an insurance provider and institutional investor, has set targets for contributing to the realization of a decarbonized society. We will continue stepping up efforts to address climate change through our business. We will also actively participate in domestic and international initiatives, such as GFANZ^(*2), the world's largest coalition of financial institutions committed to the goal of Net Zero, to share our views and contribute assertively to the global rulemaking process.
To realize the aspirations^(*3) of the Group's vision, we will demonstrate stronger leadership as an institutional investor and insurance provider by pursuing initiatives (including information disclosure) that will serve as a model for the rest of the world. In these ways, we will contribute to achieving a decarbonized society and, by extension, a sustainable society.

*1
For the material issues of the Dai-ichi Life Group, please refer to "Material Issues of the Dai-ichi Life Group" on P.29 of Integrated Report.
https://www.dai-ichi-life-hd.com/en/investor/library/annual_report/2023/pdf/index_001.pdf
*2
Glasgow Financial Alliance for Net Zero. Please refer to P.71 of Integrated Report for details of this initiative and the Group's initiatives.
https://www.dai-ichi-life-hd.com/en/investor/library/annual_report/2023/pdf/index_001.pdf
*3
The Group's vision: “Protect and improve the well-being of all”

*4
Scope 1: Direct emissions by the Company; Scope 2: Indirect emissions associated with the use of electricity, etc., supplied by other companies; Scope 3: Indirect emissions other than Scope 1 and 2 emissions). Dai-ichi Life's Scope 3 (excluding Category 15) emissions include Category 1 (Purchased goods and services), Category 3 (Fuel- and energy-activities (not included in Scope 1 and 2)), Category 4 (Upstream transportation and distribution), Category 5 (Waste generated in operations), Category 6 (Business travel), Category 7 (Employee commuting), and Category 12 (Processing of sold products).
*5
Greenhouse gas (GHG) emissions of investees (Scope 3, Category 15)
*6
Compared with 2020 (listed equities, corporate bonds, and real estate portfolios)
*7
Compared with 2020 (listed equities, corporate bonds, real estate, and loan portfolios)
*8
Compared with FY2020, based on GHG emissions per unit of assets held (intensity)
*9
Compared with FY2019
*10
UN-convened Net-Zero Asset Owner Alliance (association of institutional investors committed to transitioning their investment portfolios to net-zero GHG emissions by 2050)
*11
Chief Sustainability Officer

Net Zero Transition Plan (Summary)

As a financial institution, we produced and disclosed our Net Zero Transition Plan in August 2023 to promote a more integrated response to climate issues aimed at transitioning to Net Zero in the real economy. This plan was formulated in reference to the transition plan guidance of GFANZ, etc.
The current transition plan is formulated mainly focusing on the activities of Dai-ichi Life, the Group's core operating entity in Japan. It is overseen by the CSuO and administered by the Corporate Planning Unit, with relevant departments of Dai-ichi Life in charge of promoting their respective initiatives. Its implementation progress is monitored and discussed by the Group Sustainability Committee, which reports its findings to the Executive Management Board and is supervised by the Board of Directors.
This plan clearly states our priorities for achieving net zero. The contents of the plan will be updated on an ongoing basis.

Full text of the Net Zero Transition Plan

Governance / Risk Management

Roles of the Executive Management Board and Board of Directors

The Group pursues climate-related initiatives through the Group Sustainability Committee and the Group ERM Committee. These efforts are supervised by the Board of Directors and are based on business plans related to climate change which are formulated under the leadership of the Executive Management Board. The progress status of initiatives (Direction of initiatives including Group targets, responses to risks, etc.) is reported regularly to the Executive Management Board and the Board of Directors, and the Board of Directors provides supervision to further strengthen climate change initiatives.

Initiatives to strengthen governance structure

In April 2021, we established the Group Sustainability Committee to formulate policies and strategies related to sustainability, including climate change, and to monitor the implementation of initiatives. In April 2023, we established a new position of Chief Sustainability Officer. We are further refining the sustainability promotion functions of the Sustainability Office of the Corporate Planning Unit to strengthen our structure for fostering a decarbonized society. In addition, we have set sustainability indicators, including progress in reducing CO₂ emissions, as evaluation criteria for performance-linked stock-based remuneration for directors and officers (introduced in July 2022)^(*12)

*12
Please see P.95 of Integrated Report for details on the remuneration system for directors and executive officers.
Integrated Report

Risk Management System

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^(*13).
The Risk Management Unit identifies group material risks based on the results of material risks identified at group companies and conducts a four-stage evaluation of the degree of impact^(*14) and the likelihood of occurrence, then uses a heat map to pinpoint material risks with high importance. Group material risks are reviewed every year. The Paris Agreement of 2016 has raised awareness of addressing environmental issues as a challenge that should be tackled by the 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, and the like. From fiscal 2019, we defined risk related to climate change as a material risk and have been reinforcing risk management. Specifically, the Group ERM Committee, chaired by the Chief Risk Officer, discusses how to assess and respond to physical and transition risks, and reports to the Executive Management Board and Board of Directors as necessary.

*13
Please refer to the following Dai-ichi Life Holdings Website
Dai-ichi Life Holdings Website (details on risk management)
*14
Degree of impact is based on economic loss, reputational damage (impact on sales, management responsibility, and stock price), and other factors.

Strategy / metrics and targets

Climate-Related Risks and Opportunities and Their Impact on the Group's Business

The Group recognizes that climate change may bring several impacts (shown on the right) over the medium to long term. Based on the results of analyses using the SSP scenario^(*15) (5-8.5), the NGFS scenarios^(*16), and other scenarios, the Group, as an insurance provider and institutional investor, will strive to ensure resilience to climate change and seize related opportunities.

*15
Shared Socioeconomic Pathways: Climate change scenarios set by the Intergovernmental Panel on Climate Change (IPCC)
*16
Climate change scenarios set by the Network for Greening the Financial System (network of financial authorities on climate risks, etc.)

Risks	Increase in insurance claims and benefits paid due to increase in heatstroke and infectious diseases associated with global warming Increase in insurance claims and benefits paid due to increase in flooding due to typhoons, etc. Decrease in corporate value due to inadequate responses to environmental changes, including significant changes in carbon taxes, damage to assets due to changes in the market and social environment, development of new technologies, and changes in consumer behavior
Opportunities	Increase in investment and loan opportunities, including in the renewable energy business, that help resolve climate change issues Greater resilience of the investment portfolio resulting from proper assessment of climate risks and opportunities by investees Reduced operating costs through the introduction of infrastructure with high resource efficiency

Risks

Increase in insurance claims and benefits paid due to increase in heatstroke and infectious diseases associated with global warming
Increase in insurance claims and benefits paid due to increase in flooding due to typhoons, etc.
Decrease in corporate value due to inadequate responses to environmental changes, including significant changes in carbon taxes, damage to assets due to changes in the market and social environment, development of new technologies, and changes in consumer behavior

Opportunities

Increase in investment and loan opportunities, including in the renewable energy business, that help resolve climate change issues
Greater resilience of the investment portfolio resulting from proper assessment of climate risks and opportunities by investees
Reduced operating costs through the introduction of infrastructure with high resource efficiency

Scenario analysis

We expect that climate risks will have a wide range of repercussions and may materialize over various time frames. Based on the TCFD recommendations, the Group classifies climate risks into two categories-transition risk^(*17) and physical risk^(*18) - and recognizes them by our risk category.
The Group regards the examples shown in the table on the right as climate risks that may materialize over a time horizon of about 3 years (short term) and more than 10 years (long term) and conducts scenario analyses for underwriting risk and market/credit risk. There is still no internationally established method for analyzing the financial impact of climate change on the life insurance business, and we recognize that each company conducts research and analysis on a trialand-error basis. We will continue working to identify risks throughout the Group.

*17
Risks arising from new government policies, technological innovation, market changes, etc., in the process of transitioning to a low-carbon economy
*18
Risks of direct damage to real estate and other assets due to long-term climate change factors, such as rising temperatures and sea levels, as well as typhoons and other natural disasters

Risk categories	Examples of major physical and transition risks
Underwriting risk	[Physical risk] Risk of an increase in insurance claims and benefits paid due to an increase in mortality, etc. caused by the spread of heat stroke and infectious diseases resulting from rising temperatures→See "(1) Impact of climate change on the life insurance business" bottom of this page
Market/credit risk	[Transition risk] Risk that the prices of assets held will decline as businesses are affected by decarbonization and as society increasingly chooses to invest in decarbonization [Physical risk] Risk of deterioration in the financial condition of a creditee counterparty due to damage to business facilities caused by extreme weather or disruption of supply chains in the manufacturing industry, etc→See "(2) Analysis of climate value-at-risk (CVaR)" bottom of this page
Liquidity risk	[Physical risk] Risk of increased insurance payouts due to extreme weather conditions and risk of inability to conduct sufficient market transactions due to market disruptions caused by natural disasters, etc
Operational risk	[Transition risk] Risk of financial losses due to fines, lawsuits, etc., stemming from inadequate measures to address climate change [Physical risk] Risk of damage to data centers, business offices, and other locations necessary for operations due to extreme weather conditions, resulting in the suspension of operations
Reputational risk	[Transition risk] Risk that our business will be negatively impacted by being evaluated as inappropriate by stakeholders (due to our inadequate climate change initiatives), continued relationships with business partners that are insufficiently environmentally conscious, or other factors

(1) Impact of climate change on the life insurance business

As part of our efforts to understand risks related to claims and benefit payments, we have analyzed the relationship between air temperature and Dai-ichi Life's claims and benefits since fiscal 2020 in cooperation with Mizuho-DL Financial Technology Co., Ltd. Specifically, we conducted an analysis focusing on the increase in health hazards due to rising summer temperatures based on Dai-ichi Life's past benefit payment records to estimate the correlation between them and maximum temperatures.
We then assumed future climate scenarios to analyze the impact of maximum temperatures on deaths and hospitalizations for the Group's three domestic life insurance companies^(*19),^(*20). The analysis results (see figure below) were limited, but it is noted that the analysis for hospitalization is based on considerable assumptions compared to mortality due to the wide variety of diseases and the paucity of statistical data and previous studies.

*19
Dai-ichi Life, Dai-ichi Frontier Life, Neo First Life
*20
Please refer to P.63-64 of our Integrated Report 2022 for details on assumptions and other related matters used in the analysis.
Integrated Report 2022

(2) Analysis of Climate Value-at-Risk (CVaR)

We used MSCI's CVaR methodology to analyze transition risk and physical risk related to our investment assets. The aggregated CVaR was -19.5% for the 1.5℃ Orderly scenario^(*21), -21.2% for the 3℃ Orderly scenario^(*21) with high physical risk, and -21.8% for the 1.5℃ Disorderly scenario^(*21) with high transition risk. In comparison to the benchmark, the 1.5℃ Orderly scenario showed superior results in terms of both transition and physical risks. The methodology for measuring climate-related risks and opportunities is still in its developmental stage, and the results have changed significantly due to the revision of MSCI's methodology and the enhancement of scenario data. Dai-ichi Life will continue analyzing climate-related risks and opportunities, including CVaR, to strengthen the resilience of its investment and loan portfolio.

*21
Orderly scenario: Orderly transition scenario Disorderly scenario: Orderly transition does not proceed and carbon price soars

*
Subject assets are Dai-ichi Life's equities and corporate bonds and Dai-ichi Frontier Life's corporate bonds, totaling approximately ¥8 trillion. Benchmarks are NOMURA-BPI corporate bonds (for domestic corporate bonds), Barclays Global Corporate Bond Index (for foreign corporate bonds), TOPIX (for domestic equities), and MSCI ACWI (for foreign equities). Data: As of March 31, 2023 Source: Reproduced by permission of MSCI ESG Research LLC

Initiatives and targets as an insurance provider

With respect to Scope 1 and Scope 2 CO₂ emissions, the Group has set targets of a 50% reduction by fiscal 2025 (compared with fiscal 2019) and Net Zero by fiscal 2040, in anticipation of the targets set in the Paris Agreement. To promote integrated efforts among all employees, Dai-ichi Life has set Scope 3 (excluding Category 15) target (for items that should be emphasized from a perspective that leads to changes in business and staff behavior) of a 30% reduction by fiscal 2030 (compared with fiscal 2019) and Net Zero by fiscal 2050.
The Group's CO₂ (Scope 1 & 2) emissions in fiscal 2022 were approximately 23,800 tons (down around 83% from fiscal 2019). Since becoming the first Japanese life insurance company to join the RE100 _(*22) in 2019, we have been reviewing our electricity supply and demand contracts and promoting the use of environmental values, such as off-site PPA services _(*23) and non-fossil certificates. As a result, Dai-ichi Life achieved its renewable energy consumption target of 100% in its business activities in fiscal 2022, one year ahead of its target _(*24). We are also encouraging the introduction of renewable energy at other Group companies in Japan and overseas.
In addition, Dai-ichi Life's Scope 3 emissions (excluding Category 15) totaled approximately 46,600 tons in fiscal 2022 (down around 6% from fiscal 2019) through sequential reductions in office paper consumption and other measures.
We will continue making Group-wide efforts to achieve net-zero emissions.

*22
International initiative aiming to procure 100% of electricity consumed in business activities from renewable energy sources
*23
Method of procuring electricity utilizing a scheme in which a solar power generation facility dedicated to Dai-ichi Life is installed on land remote from where the demand is located, and the electricity thus generated is sent to the demand location along with its environmental value.
*24
For more information, please visit the Dai-ichi Lifes News Release (Japanese only)

Dai-ichi Lifes News Release (510KB) PDF

Initiatives as an institutional investor

Dai-ichi Life, the Group's core domestic subsidiary (approximately ¥34 trillion in total assets as of March 31, 2023), has positioned climate change as the most important issue for responsible investment and has been working to realize a decarbonized society. In February 2021, we became the first Japanese company to join NZAOA, demonstrating our commitment to achieving a net-zero investment and loan portfolio by 2050. To achieve this, we set an interim GHG emission reduction target (25% reduction by 2025 (compared with 2020)) for our listed equity, corporate bond, and real estate portfolio in accordance with the NZAOA Protocol (target-setting guidelines).
GHG emissions from Dai-ichi Life's listed equity, corporate bond, and real estate portfolio in 2022 were approximately 4.5 million t-CO2e, down around 16% from the 5.37 million t-CO2e ^(*25) emitted in 2020. We attribute this to a combination of factors, including progress of GHG emission reduction efforts by our investees and market fluctuations that affect the calculation of GHG emissions allocated to us. To further advance our net-zero efforts, we have set a new interim reduction target for 2030 (50% reduction in GHG emissions in our investment and loan portfolio ^(*26) by 2030 (compared with 2020)).
We are also taking steps to strengthen the resilience of our portfolio by incorporating transition risks, such as significant changes in carbon taxes and stranded assets, into our evaluation criteria for investees. We will continue analyzing climate-related risks (including transition and physical risks) and opportunities, using CVaR and other methodologies.

*25
GHG emission results for 2020 have been revised due to a change in vendor used (from S&P Trucost Limited to MSCI ESG Research LLC). GHG emissions in 2022 using S&P Trucost Limited were approximately 4.7 million t-CO₂e (2020: approximately 6.02 million t-CO₂e).
*26
In accordance with the NZAOA Protocol, we added loans to the assets covered under the new interim reduction target. The year for the interim reduction target for our listed equity, corporate bond, real estate, and loan portfolio is 2030.

[Dai-ichi Life] Major initiatives to achieve Net Zero

Formulate Net Zero transition plan	Developed a transition plan to achieve net-zero portfolio with reference to GFANZ guidance, etc
Set reduction targets and promote initiatives to achieve net-zero emissions by 2050	Updated our previously announced interim GHG emission reduction target^(*27) for 2025 in accordance with the NZAOA Protocol, setting a new target of a 50% reduction from our listed equity, corporate bond, real estate, and loan portfolio by 2030 (compared with 2020) Engage in international initiatives through participation in the GFANZ Principals Group meetings and workstreams
Encourage initiatives by investees through engagement	Provide analyses and suggestions by our ESG analysts on climate change initiatives of around 50 of the top GHG emitting investees, encourage them to set GHG emission reduction targets consistent with the 1.5℃ target and to develop and implement strategies to achieve the targets Encourage the decarbonization efforts of investee companies through collaborative engagement frameworks, such as Climate Action 100+ and the Life Insurance Association of Japan
Support the transition to a low-carbon society and the creation of environmental innovation	Aggressively make investments and loans to contribute to resolving climate change issues, targeting a cumulative total of ¥1 trillion by the end of fiscal 2024 (cumulative balance of investments and loans at the end of fiscal 2022: ¥710 billion) Proactively supply capital for the transition to a low-carbon society through transition finance^28, impact investments, and other means in addition to making investments and loans in green bonds and renewable energy power generation businesses Set a GHG emission reduction contribution^29 target of 1.5 million tons CO2e by fiscal 2024 to provide positive impact through investments and loans Developed and disclosed the “Policy on Transition Finance” to support the transition to a low-carbon society

*27
Reduce GHG emissions in our listed equity, corporate bond, and real estate portfolio by 25% by 2025 (compared with 2020)
*28
Transition finance is a new financing method that aims to support the efforts of companies that are steadily reducing GHG emissions in accordance with their long-term strategies targeting a decarbonized society
*29
Renewable energy power generation projects for which the impact is disclosed

Dai-ichi Life conducted an analysis of total carbon emissions and weighted average carbon intensity (WACI), which the TCFD recommends for disclosure purposes, in order to assess the climate-related risks and opportunities of investees in relation to Dai-ichi Life's portfolio of domestic and foreign equities and domestic and foreign corporate bonds. For WACI, the GHG emissions per unit of sales of the investees are weighted according to Dai-ichi Life's percentage of ownership. For domestic corporate bonds, the WACI tends to be relatively high, and our analysis indicates that this is partly due to the relatively high proportion of the power sector, which has high emissions in the domestic corporate bond market.
To realize a decarbonized society, it is important to promote long-term transition strategies, particularly in GHG-intensive sectors. With this in mind, Dai-ichi Life announced its "Policy on Transition Finance" in September 2022. While our transition finance efforts may possibly lead to a temporary increase in our financed emissions, since decarbonization of GHG-intensive sectors is essential for society as a whole to achieve net-zero emissions, then, if a potential investment is deemed to contribute to appropriate transition, we will actively support such transition to contribute to realizing a decarbonized society.

[Dai-ichi Life] GHG emissions and WACI by asset

	GHG emissions (million t-CO₂e)	WACI (t-CO2e/¥million) ^(*32)
	GHG emissions (million t-CO₂e)		(Reference) 2020
Domestic equities	2	0.7	0.8
Foreign equities	0.19	1.2	1.8
Domestic corporate bonds	1.9	2.4	2.6
Foreign corporate bonds	0.31	0.6	0.7
Real estate	0.1	-	-

*30
Total (Scope 1 & 2) for the listed equity, corporate bond, and real estate portfolio. Figures for listed equities and corporate bonds are compiled by Dai-ichi Life based on data from MSCI ESG Research LLC. The figure for the real estate portfolio was compiled by Dai-ichi Life. The following calculation standards were used for measurement.
GHG emissions = Σ (GHG emissions per individual company × Dai-chi Life's percentage ownership)
Dai-chi Life's percentage ownership = Investment value ÷ Enterprise value (Market capitalization + Interest-bearing debt)
*31
Loans have been included in assets covered by the new interim reduction target for 2030.
*32
WACI figures for 2020 have been revised due to a change in vendor used (from S&P Trucost Limited to MSCI ESG Research LLC).

Full text of Dai-ichi Life's "Policy on Transition Finance"
"Policy on Transition Finance" (397KB) PDF

Dai-ichi Life's cumulative investments and loans aimed at addressing social issues reached approximately ¥1.6 trillion as of the end of fiscal 2022. We will increase these investments and loans to ¥2 trillion by the end of fiscal 2024 to provide even more positive impacts on society. Strengthening its responses to climate change issues is the most important priority of its responsible investment approach. With this in mind, Dai-ichi Life will increase investments and loans that contribute to resolving climate change issues^(*33) to ¥1 trillion by the end of fiscal 2024 (approximately ¥710 billion at the end of fiscal 2022).
As part of its integration efforts of climate change factors into investment and loan decisions, Dai-ichi Life conducts both quantitative and qualitative analyses in evaluations of investees. Specifically, ESG analysts evaluate companies (ESG scoring) based on the estimated impact on business performance of significant changes in carbon taxes, etc. (transition risk), the presence or absence of environment-related technologies, etc. (opportunities) that could lead to future earnings gains, and investees' climate-related risk initiatives and governance status, which are confirmed through engagement activities. By reflecting the results of this ESG scoring in internal rankings used by analysts who examine each asset to make investment and loan decisions, Dai-ichi Life incorporates climate-related risks and opportunities into the evaluation criteria for investees and thus strengthen the resilience of its portfolio.

*33

Investments and loans that contribute to resolving climate change issues, such as investing in green bonds and renewable energy power plant-related projects
For more information on Dai-ichi Lifes ESG integration and engagement initiatives (Responsible Investment Report), please visit the following website of Dai-ichi Life.

https://www.dai-ichi-life.co.jp/english/dsr/investment/ri-report.html

TOPICS

[Dai-ichi Frontier Life] Efforts to reduce GHG emissions

Dai-ichi Frontier Life (which mainly sells savings products through bancassurance channels) has approximately ¥7.9 trillion of investment assets, which are mainly public and corporate bonds. In fiscal 2022, the company set a target to reduce GHG emissions^(*34) in its investment portfolio by 15% by March 31, 2025 (compared with March 31, 2021). Its reduction efforts include ESG engagement where it encourages investee companies to achieve their reduction targets and reduce more emissions. As of March 31, 2023, Dai-ichi Frontier Life achieved an 8.7% reduction (compared with March 31, 2021).

*34
GHG emissions per unit of assets held (intensity basis)

Fostering awareness among officers and employees

In addition to our activities as an insurance provider and institutional investor, we crucially need to raise the awareness and change the behavior of our officers and employees to realize a decarbonized society, and we believe this will help the Group demonstrate its unique attributes. As part of this, we held the "ECO Action Relay," a Group-wide environmental event, in FY2022.
The ECO Action Relay is a relay-type program of environmental initiatives at Group companies in Japan and overseas, and more than 4,000 officers and employees from 22 Group companies participated. Through the event, participants shared details of initiatives and effective implementation methods that take advantage of the individuality of each company and department. As a result, each and every executive and employee became more motivated about environmental initiatives.