Climate Change Initiatives

With the adoption of the Paris Agreement in 2015 and the establishment of the Sustainable Development Goals (SDGs), there is a heightened expectations for corporate action on climate change risks. In response, we declared support for the recommendation of the Task Force on Climate-related Financial Disclosures (TCFD) and take various actions addressing climate change and promoting highly transparent information disclosure, as a responsible effort to pass on a hopeful future to next generations.

Governance and Risk Management System

The Company has risk management systems based on the Group Basic Policy on ERM, established by the Board of Directors.
Under these systems, risks that could have a major effect on the Group are defined as “Material Risks.” After comprehensively identifying and assessing the risks inherent in our businesses, we regularly report on the status of management to the Board of Directors. With respect to climate change, we identify the occurrence of unexpected natural catastrophe as well as reputational damage associated with transition to a decarbonized society as Material Risks in the ESG(environmental, social, and governance) area. Responsibility for implementing countermeasures for these risks lies with the Group’s executives.

As for the risk of windstorm disasters, we conduct stress tests. We quantitatively assess the impact of stress scenarios that have a significant impact on management and verify the adequacy of capital and the effectiveness of risk mitigation measures. Furthermore, we are currently conducting large-scale analyses that use meteorological and climatic big data on typhoons and heavy rain. This entails quantifying changes in the average trends of disasters as well as quantifying trends in the occurrence of extreme weather events in climates with 2℃ or 4℃ increase in temperature. We then incorporate the findings into typhoon and flood assessment models and conduct quantitative analyses of the effect on insurance underwriting.]

Climate-Related Strategies and Main Initiatives

Based on the impact of climate change risks on its business strategies, the Group is taking various initiatives focused on climate change.

Climate-Related Risks and Opportunities

(1) Risks Associated with Increased Natural Disasters

A rise in natural catastrophe due to climate change may lead to an increase in insurance payment and a deterioration in underwriting results, which may make it difficult to provide the stable insurance.

(2) Risks and Opportunities Associated with the Transition to a Decarbonized Society

Technological progress or the introduction of stricter laws and regulations aiming at transitioning toward a decarbonized society could result in the changes of industrial structure. Such reform could lead to changes in insurance needs and impairment of the value of stocks and other investment assets under management, thereby adversely affecting the Group’s future performance or financial position.
On the other hand, we believe that changes of industrial structure will increase business opportunities by creating new insurance needs and markets.

(3) Expansion of the Risk Consulting Business

We expect that the growing need of companies and local governments to take measures in response to climate-related risks will expand not only the insurance business but also the risk consulting business.

Main Initiatives

●Enhancement of Natural Catastrophe Assessment Models and Analytic Technology

Since 2018, Sompo Risk Management Inc. has been participating in the Social Implementation Program on Climate Change Adaptation Technology of the Ministry of Education, Culture, Sports, Science and Technology (SI-CAT). The Group aims to upgrade its natural catastrophe assessment models, enhance its analytic technology, and accumulate know-how by utilizing a climate projection database in the event of a 2℃ or 4℃ increase in temperature, findings from research, and collaborative efforts with research institutions.

●The Group’s Council for CSR Promotion

This council discusses environmental, social, and governance issues, including the risk of reputational damage accompanying the transition to a decarbonized society. Chaired by the Group Chief Brand Officer, the council comprises executives from respective Group companies.

●Disclosure Enhancement

The Group has been a member of the PSI-TCFD Insurer Pilot Group of the United Nations Environment Programme Finance Initiative (UNEP FI) since 2018. We are enhancing disclosure in light of the recommendations of the TCFD.

●Stakeholder Engagement

Aiming to improve its measures that address social issues, the Group exercises leadership by creating opportunities for dialogue with diverse stakeholders—including experts and civil societies —and by participating in initiatives related to social issues.
We are taking steps to transform society into sustainable based on the belief that collaboration and co-creation have a significant impact on issues such as climate change that are being addressed by many different organizations.

●Natural Disaster Damage Prediction

Sompo Japan Insurance Inc. aims to use various types of data related to regional disaster prevention—such as meteorological and building data—in combination with AI technology to develop a service that enables the accurate prediction and assessment of damage to individual blocks before, during, and after floods, earthquakes, and other natural disasters.

●Weather Index Insurance in Southeast Asia

In Southeast Asia, agriculture is the main industry, but the region’s agriculture is vulnerable to climate change. With a view to reducing the risks associated with agricultural businesses in the region, we have been offering weather index insurance since 2010. This insurance pays fixed insurance claims in the event that measurable weather conditions, such as temperature, wind, and precipitation, satisfy particular previously established requirements. Currently, we provide weather index insurance through Agri Sompo, an integrated global underwriting platform for agricultural businesses.
The product has been recognized as meeting the requirement for membership in the Business Call to Action (BCtA) initiative, which is led by the United Nations Development Programme (UNDP), with the aim of promoting the establishment of business models that combine commercial activities and sustainable development.

●Regional Resilience through Insurance for Local Governments

In response to a series of floods caused by heavy rains and typhoons, Sompo Japan has launched Disaster Prevention/Reduction Insurance, which compensates local governments for costs arising from evacuation in natural disasters. In this way, we help local governments achieve rapid initial responses and contribute to the peace of mind and safety of local communities.

●Personnel Development in the Environmental Field

The Group is raising interest in and awareness of the environment, including climate change, among our personnel, thereby increasing the number of employees capable of exercising autonomy in addressing such issues. In this way, we are ensuring a sustained contribution to the resolution of environmental issues. Also, the Group shares the results of research on environment issues in collaboration with research and government institutions with society at large.

Notes:

  1. Figures are the total of the number of people who participated in the SAVE JAPAN Project, which is a program for preserving rare species in Japan, and in Open Lectures on the Environment as well as of the number of people who completed the CSO Learning Scholarship Program, which provides an internship program for university and graduate program students in environmental nonprofit and nongovernmental organizations.
  2. The fiscal 2016 SAVE JAPAN Project was implemented between October 2016 and March 2017. The number of people for fiscal 2016 is the number of participants in the project during this period.

Metrics and Targets

We have established key performance indicators for corporate social responsibility initiatives to enhance and check their effectiveness. In relation to the environment, we are conducting initiatives based on the following key performance indicators.

  1. Development and provision of products and services that contribute to climate change adaptation and mitigation
  2. Participants in environmental conservation awareness and educational opportunities in collaboration with civil society organization
  3. CO2 emissions reductions
  4. Electric power consumption
  5. Paper use

Further, in fiscal 2018 we set reductions in greenhouse gas emissions versus fiscal 2017 levels of 21% by 2030 and 51% by 2050 as medium-to-long-term targets. To these ends, we are taking steps to mitigate climate change.

Moreover, we are implementing these measures with a view to acquiring certification under the Science Based Targets initiative, which promotes reductions in greenhouse gas emissions that will enable the realization of the Paris Agreement’s long-term goals.

Notes:

  1. Figures are the total of Scope 1 (direct emissions due to use of gasoline, etc.), Scope 2 (indirect emissions from electricity and other energy sources), and Scope 3 (indirect emissions across entire value chains, including transport and business trips). The coverage of the survey is as follows.
    Fiscal 2014: Sompo Japan Insurance Inc. and its consolidated subsidiaries
    Fiscal 2015: The Company’s main consolidated subsidiaries and other subsidiaries
    Fiscal 2016–fiscal 2018: The Company and its main consolidated subsidiaries
  2. Since fiscal 2012, the Group has received an annual Assurance Statement from a third-party certification organization.
  3. Fiscal 2017 emissions have been recalculated using fiscal 2018 calculation methodology.

Leadership to Address Climate Change

Leadership through Various Initiatives

It is important that many stakeholders work collaboratively to address the challenges of climate change. As climate action is being discussed in numerous initiatives both in Japan and the world, we are making an effort to show leadership in such initiatives. Here we introduce some of our major activities.

Participation in CDP (Climate Change) and Support for TCFD

The CDP is a set of collaborative initiatives by the world’s institutional investors. It encourages businesses worldwide to adopt climate change strategies and disclose their GHG emissions. Sompo Japan has been a member since 2005 as an institutional investor. As a responding company, Sompo Holdings was selected for the 2016 and 2017 Climate A List in a CDP climate change, and has been recognized as being among the highest ranked financial institutions in the world.
Following the Task Force on Climate-related Financial Disclosures (TCFD) Recommendations Report published in June 2017, the Group declared support for TCFD and started participating in the TCFD insurance working group of the United Nations Environment Programme-Finance Initiative (UNEP-FI) to formulate TCFD standards for the insurance sector.

Signed the Montreal Carbon Pledge

In September 2017, Sompo Asset Management signed the Montreal Carbon Pledge.
The Montreal Carbon Pledge was adopted at the annual general meeting of the Principles for Responsible Investment (PRI) held in Montreal, Canada, in September 2014, aiming to reduce GHG emissions. Signatories are required to measure and disclose GHG emissions associated with some or all of their stock portfolios, and Sompo Asset Management is committed to regularly disclosing the funds’ emissions.

Paris Agreement: Participation in Initiatives to Achieve 2℃ Target

In 2017, we took part in an initiative led by the Ministry of the Environment, Japan aiming to set Science Based Targets (SBT). In 2018, we submitted a letter of commitment to the SBTi (international initiative that certifies companies that set ambitious targets consistent with the Paris Agreement) and declared our participation in the drafting of financial sector guidance*. In fiscal year 2018, we set new mid- to long-term GHG emission reduction targets for 2030 and 2050 in line with the levels recommended by the SBTi.

  • Guidance on SBT for the financial sector is currently being developed thus it is not yet possible for financial institutions to be certified by SBTi. (As of July 2018)

In July 2018, the Japan Climate Initiative network was established to enhance information dissemination and the exchange of opinions among corporations, local governments, and civil society organizations actively taking measures to combat climate change. We endorse the purpose of this initiative and are participating as a founding member.

Caring for Climate

Caring for Climate is an initiative established by the United Nations Global Compact (UN GC), the United Nations Environment Programme (UNEP), and the United Nations Framework Convention on Climate Change (UNFCCC) to advance the role of business in addressing climate change. Masao Seki, Senior Advisor on CSR at Sompo Japan, is a member of the steering committee.

The Conference of the Parties (COP)

In November 2016, the 22nd Session of the Conference of the Parties (COP22) to the United Nations Framework Convention on Climate Change was held in Marrakesh, Sompo Japan, spoke at a session of a side event organized by Japan’s Ministry of the Environment, focusing on Japanese corporations’ efforts for climate resilience. The company also participated in a High-Level Meeting on Climate Change organized by Caring for Climate during COP22, as a steering committee member. In November 2017, at a side event organized by the Japan International cooperation Agency (JICA) at the COP23 held in Bonn, Germany, Sompo Risk Management gave a presentation on Private Sector Perspective on Agricultural Insurance.

In November 2018, Masaya Futamiya, Director Chairman of Sompo Japan participated in Global Business and Biodiversity Forum held in advance of COP 14 and gave a presentation on the revision of Declaration of Biodiversity by Keidanren and a progress status of the “mainstreaming of biodiversity” in the Japanese business sector as a Chairman of Keidanren Committee on Nature Conservation. He also held dialogs with representatives from organizations that have a great effect on promoting global nature conservation.