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HUA NAN FINANCIAL HOLDINGS CO., LTD.
Sustainability
Report
About This Report Message from the Chairman The Group's Sustainable Development Strategy
The Group's Sustainable Development Goals Significant ESG Achievements in 2023 Corporate Sustainability Development Planning
The Process of Implementing Sustainable Development Material Topics 2Stakeholder1Engagement
Financial 102
Services
Protecting Customer | 104 | 3 |
Rights | ||
Customer Relationship | 111 | |
Maintenance | ||
Digital Finance | 114 | |
Digital Channel Services | 117 | |
Sustainable Finance | 123 | |
Financial Inclusion | 138 | |
Social Care | 148 | |
001
002
006
014
040
042
045
046
050
056 Sustainable Governance
058 About HNFHC
- Corporate Governance
- Integrity Management
082 Internal Control System - Three Lines of Defense
097 Information Security and Customer Privacy
100 Protecting Shareholders' Rights and Interests
150 Employee Development
152 Core Values
156 Employee Composition
158 Talent Management
167 Employee Compensation and Benefits
173 Workplace Safety
176 Communication and Inter- action
Environmental | ||
4 | 180 | |
Sustainability | ||
182 | Environmental Policy | |
184 | Greenhouse Gas Management | |
188 | Energy and Resource Management | |
202 | Green Procurement and Supply Chain | |
Management |
205 Green Finance Initiatives
Social | |||
5 | 206 | ||
Co-prosperity | |||
208 | Hua Nan's Co-prosperity with | ||
You | |||
212 | Public Welfare Engagement | ||
217 | Knowledge Promotion | ||
221 | Arts and Cultural Creative | ||
226 Appendices | 223 | Sports Development | |
226 Appendix 1: GRI Standards Content Index
-
Appendix 2: Taiwan Stock Exchange Corporation Rules Governing the
Preparation and Filing of Sustainability Reports by TWSE Listed Companies - Appendix 3: SASB Standards Content Index
- Appendix 4: IFRS S1: General Requirements for Disclosure of Sustainability- related Financial Information
- Appendix 5: IFRS S2: Climate-related Disclosures
- Appendix 6: IFRS S2: Industry-based Disclosure Requirements- Commercial
Banks - Appendix 7: Climate-related Information of Financial Holding Companies
- Appendix 8: Independent Limited Assurance Report
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About This Report
This report discloses Hua Nan Financial Group utilizing a five-point that includes sustainable governance, financial ser- vices, employee development, environmental sustainability, and social co-prosperity. The viewpoints and responsive actions of Hua Nan Financial Holdings Co., Ltd. and its subsidiaries on environmental, social, and governance (ESG) sustainability challenges encountered in business operations, thereby communicating with the Company and its various stakeholders.
Reporting Period
The material in this report generally covers the period from January 1, 2023 to December 31, 2023. Some information is updated to April 2024, which has been specified in the report regarding the coverage period.
Boundaries and Scope
This report focuses on relevant information of Hua Nan Financial Group in Taiwan. The scope covers the parent company Hua Nan Financial Holdings Co., Ltd. (HNFHC or the Company) and its six major subsidiaries - Hua Nan Commercial Bank Co., Ltd. (HNCB), Hua Nan Securities Co., Ltd. (HNSC), South China Insurance Co., Ltd. (SCIC), Hua Nan Investment Trust Co., Ltd. (HNIT), Hua Nan Venture Capital Co., Ltd. (HNVC), and Hua Nan Assets Management Co., Ltd. (HNAMC). Some information also covers the Group's sub-subsidiaries such as Hus Nan International Leasing Co., Ltd. (HNILC), Hua Nan Futures (HNFC), and Hua Nan Securities Investment Management Co., Ltd. (HNIM). During the reporting peri- od, HNFHC had no significant changes in size, structure, or ownership.
The data collection process and measurement methods in this report involved inviting relevant departments to discuss, interview, and collect operational management data. The Group's ESG performance information was compiled in accordance with requirements of international standards and indicators. Some performance information discloses four years of data from 2020 to 2023.
The collection, measurement, and calculation methods for data on various indicators are primarily based on compliance with local regulatory requirements. If there are no specific local regulations, international standards (such as ISO) are ref- erenced. If no applicable international standards exist, industry standards or practices are followed.
Reporting Guidelines
This report has been prepared in accordance with the Taiwan Stock Exchange Corporation Rules Governing the Preparation and Filing of Sustainability Reports by TWSE Listed Companies and the GRI Sustainability Reporting Standards. It also references the Task Force on Climate-related Financial Disclosures (TCFD), Sustainability Accounting Standards Board (SASB), and the sustainability reporting standards IFRS S1 and S2 issued by the International Sustainability Standards Board (ISSB). At the same time, it responds to the United Nations Sustainable Development Goals (SDGs).
Third-party Assurance
Some of the performance data in this report has been independently assured with limited assurance by KPMG in accordance with TWSAE 3000 "Assurance Engagements Other than Audits or Reviews of Historical Financial Information". The assurance report is included in the appendix of this report.
Publication
HNFHC publishes its sustainability report annually and makes it available for download on the Company's official web- site. The previous report was released in July 2023, and this version is published in June 2024.
Feedback
Administrative Management Division, Hua Nan Financial Holdings Co., Ltd.
Tel: +886 2 23713111
Ext: 6392, 6389
Fax: +886 2 87291943
E-mail: public@hnfhc.com.tw
Head Office: (11073) 23F., No. 123, Son-
gren Rd., Xinyi Dist., Taipei City
110415 , Taiwan (R.O.C.)
HNFHC Sustain- | Stakeholder Question- |
able Development | naire |
Website |
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Preface
Message from the Chairman
Ushering a New Era of Global Reform
Reflecting on the post-pandemic era, the worldwide geopolitical instability, sluggish end-user demand, state of high inflation and interest rates are all ongoing amidst the emergence of thriving business oppor- tunities, such as artificial intelligence and high-performance computing, along with the interest rate hikes cycle being on its last leg. Despite negative global economy and unstable social circumstances, Hua Nan Financial Holdings (Co., Ltd.) has managed to deliver outstanding results. In 2023, our after-tax net profit saw and increase of NT$4.31 billion compared to the previous year, continuing to hit a record high of NT$21.618 billion. Earnings per share (EPS) was NT$1.58, while return on equity (ROE) amounted to 11.01%.
Conversely, 2024 will be presented with radical changes; forcing societies and countries alike to face challenges, with significant elections across seventy-four nations worldwide, predicted to impact the lives of half of the global population. On the other hand, Israel's counterattacks against the Yemeni anti -government armed group's attacks on commercial ships passing through the Red Sea have led to a series of regional conflicts, and the impasse in the Russia-Ukraine war has prompted Sweden to join the North Atlantic Treaty Organization (NATO). The significance of "sustainable development" is still something HNFHC considers in light of the shifting global political and economic landscape. Although enterprises cannot shake the changes in the international situation, they may effectively manage risk control and strengthen their business health, by anticipating and planning ahead for future domestic trends such as an aging population, low birth rates, and carbon emission pricing. As the global situation changes and impacts sustainability issues, HNFHC will continue to strengthen and assess its sustainable development strategies, in an effort to lay the clear foundation for HNFHC's second century.
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Grasping International Sustainability Trends
The United Nations Climate Change Conference (COP) is held annually and has reached its 28th session, with the most recent event held in Dubai, the economic center of the United Arab Emirates, an oil-producing country. COP28 announced its first "Global Stocktake" (GST) to review global carbon reduction efforts, which has failed to meet expectations lamentably. To limit global warming to1.5°C, carbon emissions must be reduced by 43% by 2030, based on the 2019 global carbon emission levels. The conference also considered the gradual phase- out or decrease of fossil fuels, as well as the increased use of renewable energy. Many countries made funding commitments towards the "Loss and Damage Fund" announced during COP27 to implement climate justice.
On the other hand, the European Union's "Carbon Border Adjustment Mechanism" (CBAM), which was piloted in October 2023, has begun to require products exported to the EU, such as cement, fertilizers, steel, aluminum, and chemicals, to provide information on direct and indirect carbon emissions during the manufacturing pro- cess. CBAM certificates are planned to be awarded based on product carbon emissions beginning in 2026, while the United States have been aggressively planning to implement the "Clean Competition Act" (CCA) in 2024, imposing a carbon emission tax on products exported to the US.
To more comprehensively grasp the potential operational impact of climate change issues on the Group, the Company has been responding to the Carbon Disclosure Project (CDP) questionnaire since 2020. In 2023, the Company used the Task Force on Climate-related Financial Disclosures (TCFD) framework to compile a TCFD report and passed the British Standards Institution (BSI) audit, obtaining the highest level of "Level-5+: Excel- lence" audit certificate. At the same time, the Group's three main subsidiaries - HNCB, HNSC, and SCIC - all issued TCFD reports to illustrated the Group's commitment to the climate crisis.
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Taiwan Carbon Rights Exchange and Future Trends
Preface
The Taiwan Carbon Rights Exchange began operations on August 7, 2023, with the "International Carbon Rights Trading Platform" launched on December 22. Hua Nan Financial Holdings (HNFHC) proved its commitment to net-zero by one of the first buyers of international carbon rights trading. The Taiwan Carbon Rights Exchange is the first step in "pricing carbon emissions". With the subsequent advocacy of domestic carbon rights trading and carbon prices in 2024, carbon reduction is no longer simply a talking point, but is increasingly being incorporated into company operations under government regulations.
The Group currently grasps the policy requirements of the FSC's "Roadmap for TWSE/TPEx Listed Com- panies' Sustainable Development" and "Green Finance Action Plan 3.0". Whether it is the inventory of our own operational carbon emissions (Scope 1 and Scope 2) or working with policy timelines to plan and carry out the disclosure and assurance of financial carbon emissions of investment and financing portfolios (Scope 3), we are able to sense that the public disclosure of sustainability information and the force of "carbon reduction, net zero, and green transformation" are becoming increasingly important. Under this trend, understanding and planning for the future industry green transformation, carbon capture tech- nology, carbon trading market, hydrogen energy, renewable energy and other business opportunities has emerged as a sustainable development issue for domestic finance industry participants. HNCB also began the "SME Net Zero Transformation Project" in September 2023, offering SMEs recommendations on how to progressively build carbon inventory and reduction strategies, as well as net zero transformation financing alternatives. In addition to helping enterprises of all sizes achieve net zero targets, it also is able to also reduce the supply chain carbon emissions of major enterprises, killing two birds with one stone.
Core Values of Sustainable Development
When sustainability issues shifted from the previous corporate social responsibility focusing on envi- ronmental, social, and governance (ESG), we also began to reflect on what is the core value of Hua Nan Financial Group's sustainable development. The social element is now pursuing diversity, equality, and inclusion (DEI), the environmental aspect is concentrating on climate change and net zero carbon reduc- tion, and corporate governance is emphasizing performance management and expanding board member diversity. Diverse advancements are occurring on various problems.
From the standpoint of stakeholders , the core value may be traced back to the earliest corporate social responsibility theories. In the 1970s, the economic giant Milton Friedman published an article in the New York Times headlined "The Social Responsibility of Business Is to Increase Its Profits," recognizing that the corporate social responsibility at that time was to enhance profits for shareholders and the Compa- ny. When many companies today shout "ESG & EPS", it also demonstrates that, in addition to preserving shareholder rights and interests, the three components of environment, society, and corporate governance must also be recognized in order to establish a solid foundation for corporate sustainability.
In addition to the "financial" aspect of profitability, corporate sustainable development now focuses on "non-financial" management. As a capital provider and driver of industrial growth, the financial industry should have a broader view of "profitability" in order to achieve "co-prosperity" with other stakeholders. This will be critical to the financial industry's "continued profitability" and "sustainable operation." HNF- HC's core value in sustainability is to flourish alongside shareholders, customers, and society as a whole.
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Strategies and Actions for Sustainable Development
In terms of sustainability decision-making, the structure of the Group Sustainable Development Committee in 2022 and adjusted to include short-,medium-, and long-term goals for the Group's sustainable development over the following five years, allowing each subsidiary to formulate applicable promotion strategies. The implementation results are submitted to the Board of Directors on a regular basis in order to improve the decision-making and oversight of sustainability concerns. The integration and promotion of the financial holding company and subsidiaries realizes the aim of HNFHC's sustainability and keeping up with the times. In 2023, the Group conducted an assessment of goal execution and established sustainable development objectives for 2024, as well as updating the medium- and long-term goals on a rolling basis.
In terms of enhancing sustainability information disclosure, the Company refers to the GRI Standards to engage with stakeholders and develop the information disclosure structure and content of the sustainability report. We also refer to the "Sustainability Accounting Standards Board" (SASB) to improve the information disclosure of commercial banks. At the same time, the International Financial Reporting Standards (IFRS) S1 and S2 guidelines are closely monitored to ensure that the information disclosed in the sustainability report fulfills external expectations. In addition, to manage the environmental impact of the Group's operations, carbon emissions, energy and resource usage is accurately managed, through annual ISO 14001 environmental management system, ISO 14064-1 greenhouse gas inventory, ISO 50001 energy management system, and the newly added ISO 46001 water efficiency management system certification in 2023.
In terms of green finance, in addition to strengthening ESG issue management in the credit review process, HNCB has introduced the "HNCB Net Carbon Instant Loan" to provide customers with funds for green capital expenditures such as purchasing renewable energy, energy-saving, energy storage, and pollution prevention equipment or systems, as well as financing services linked to sustainability performance. To create a cleaner and more sustainable environment for future generations, we also continue to invest in green industries and green bonds, paying attention to the opportunities brought by net zero concerns, and making every effort to prepare forward.
Building Sustainable Development from a Corporate Health Management Perspective
Changes in the financial market are driven by several variables, including industrial progress, government pol- icies, and the state of the global situation. Sufficient planning and forward thinking are necessary to maintain profitability in the face of change. Companies that have demonstrated the ability to weather difficult times and convert them into opportunities have done so by consistently practicing "health management" in addition to having internal cohesion. They constantly assess whether their services satisfy customer needs, decision exe- cution, and staff development. From this, they may determine the Company's ability to adjust, respond and learn in the face of external changes. Enhancing the Company's "resilience" is the only way to guarantee that it stands invincible when faced with challenges. To safeguard the rights and interests of every shareholder and customer, we work to further HNFHC's sustainable development sustainable development in the most viable and stable manner possible. In the process of implementation, to the Company will continue to share its rich corporate experience with the public. Co-prospering with you, who care about HNFHC, is the core of our sustainable devel- opment.
Chairman
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Preface
The Group's Sustainable
Development Strategy
The cornerstone of corporate sustainable development is continuous profitability, a strong financial structure, capital planning, business strategies, etc. This report provide more detailed information to enable all stakeholders (shareholders, government, customers, employees, investors, suppliers, etc.) better understand HNFHC's efforts in sustainable operations.
The Company's operating growth and profits have increased year by year over the past three years; setting new highs from a net profit of NT$17.206 billion in 2021 to NT$17.308 billion in 2022, and growing
⑴
Financial
Strategy
HNFHC's Vision
Pursue capital efficiency to enhance peer rankings, green and digital dual-axis transformation, and the transition to a high-quality financial institution with sustainable operations.
⑵
Marketing
Strategy
Group Strategic
Planning
⑶
Information
Strategy
⑷
ESG Strategy
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further to NT$21.618 billion in 2023. Due to the sharp fluctuations in the global financial market caused by rising interest rates, shareholders' equity increased from NT$200.7 billion at the end of 2021 to NT$184.8 billion in 2022, as a result of valuation losses on stocks and bonds. However, by the end of 2023, it had rebounded to NT$207.8 billion, continuing to achieve excellent results and setting a new historical high.
Facing the future, the Group will continue to preserve shareholders' rights and interests, promote company sus- tainability, and pursue dividend growth. Increased engagement in worldwide ESG initiatives and ratings will continue to elevate the Group's position in the ESG field.
The Group's financial aim is to exceed the industry average. A "Three-Year Profitability Improvement Plan" will be implemented, and annual rolling reviews conducted to maximize capital usage efficiency. Through planning of medium- and long-term (1) business strategies, (2) financial targets, (3) dividend policy, (4) capital and risk management strategies, and formulating corresponding performance evaluation and reward systems, profitability can be improved in peer rankings.
- Improvement of the Group's cross-selling performance
- Global layout and value recognition
- Value-addedproduct collaboration and synergy
- Economic knowledge generating business opportunities
- Joint marketing activities promotion
- Increased stickiness through product customer cross-selling
Move towards the four directions of ABC+S (AI & Automation, Big- Data, Cloud, Security). In 2024, Hua Nan Bank will take the lead in attempting to utilize generative AI to accelerate internal knowledge transfer efficiency in intelligent services and cloud platforms, introducing a collaborative cloud work framework to improve employee productivity, and implementing cloud services to accelerate digital content delivery and increase resource utilization. The information gathered will be shared with other subsidiaries in the future. Each company will continue to improve RPA automation, increase data analysis value, and boost information security protection mecha- nisms.
The Group develops sustainable development goals based on the five aspects of "Corporate Governance": "Financial Services," "Em- ployee Development," "Environmental Sustainability", and "Social Co-prosperity. " Short-,medium-, and long-term goals for the next five years are planned based on the above subjects. It strives to align with sustainability trends, plan relevant business and improve corporate operations in advance by conducting regular reviews of goal execution and rolling adjustments to the goal content.
Five Core Strategies
The following five core strategies will be implemented in 2024 to achieve the goals mentioned above. The primary focus will on incorporating capital use efficiency into subsidiary and branch performance evaluations to increase capital use efficiency and profitability, dynamically allocating dividends and assets based on business development, gradually refine related measures in line with the Group's digital transformation and sustainable finance development trends.