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Commitment and Policy for Sustainable Finance

Chang Hwa Bank(hereinafter referred to as "the Bank") is committed to leveraging its financial influence through sustainable financial services, driving collective efforts with customers to address the balance between climate change and environment, promoting the transform to Net Zero, and upholding the values of equality and inclusivity in human rights. In doing so, the Bank aims to contribute to the realization of the United Nations Sustainable Development Goals (SDGs). In order to move towards the goal of Net Zero, the Bank outlines four major visions-“Carbon - Expand the greenhouse gas inventory and actively take action on carbon reduction”, “Capital - Create investment value and exert long-term sustainable influence”, “Credit - Follow the Equator Principles and assist enterprises in transformation by green finance”, and “Customer - Value the Principle to Treat Clients Fairly and optimize financial friendly services”. The Bank integrates ESG factors into the operation process of investment, financing, financial products and services, and proposes Sustainable Financial Commitments. It will actively support enterprises with environmental protection (E), social responsibility (S) or corporate governance (G), and assist customers in developing green energy industries and green economies transformation to build a sustainable low-carbon society.

Chang Hwa Commercial Bank’s Commitment on Decarbonization for Financing and Investment

The Bank has made the “Sustainable Financial Commitments” in 2023, and has begun to gradually reduce its financing and investment positions for thermal coal and unconventional oil and gas. The Bank formulated the "Chang Hwa Commercial Bank Sustainable Finance Policy", "Chang Hwa Bank Responsible Investment Guidelines", "Credit Limit Management Regulations for Net-Zero Emission of Chang Hwa Commercial Bank", "Investment Engagement and Voting Guidelines" and "Implementation Procedure for Engagement on Financing". Therefore, we set different phased schedule and methods to implement the decarbonization plan to promote the Bank's 2050 Net Zero targets and to build a sustainable low-carbon society.

  1. The Bank’s decarbonization commitments are as follows:
  2. I. Gradual phase-out of financing and investment for thermal coal[*1]  and unconventional oil and gas[*2]  industries[*3] 
  3. (I) Financing[*4]
    1. From now on, the Bank will not provide any new financing(include lending and project financing) for Coal mining, coal-fired power generation, coal-fired infrastructure or unconventional oil and gas related companies. For existing financing, if the companies meet the phase-out conditions, they would not be taken into consideration as the financing subjects.
    2. The Bank committed to completely eliminate lending and project financing for thermal coal and unconventional oil and gas related companies by 2040.  
  4. 1. Coal Mining
  5. Completely phase out the lending and project financing for coal mining companies by 2030.
  6. 2. Coal-Fired Power Generation
  7. Completely phase out the project financing for coal-fired power generation companies by 2030.
  8. Completely phase out the lending for coal-fired power generation companies by 2035.
  9. 3. Coal-Fired Infrastructure
  10. Completely phase out the lending and project financing for coal-fired power generation companies by 2030.
  11. 4. Unconventional Oil and Gas
  12. Completely phase out the project financing for unconventional oil and gas companies by 2030.
  13. Completely phase out the lending for unconventional oil and gas companies by 2035. 
  14. (II) Investment[*5]
    1. From now on, the Bank will not provide any new investment for Coal mining, coal-fired power generation, coal-fired infrastructure or unconventional oil and gas related companies. For existing investment, if the companies meet the phase-out conditions, they would not be taken into consideration as the investment targets. 
    2. The Bank committed to completely eliminate investment for thermal coal and unconventional oil and gas related companies by 2040.
  15. 1. Reduce investment in the thermal coal and unconventional oil and gas industries by 50% by 2030. 
  16. 2. Reduce investment in the thermal coal and unconventional oil and gas industries by 75% by 2035. 
  17. 3. Completely eliminate investment in thermal coal and unconventional oil and gas industries by 2040. 
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  19.  Note: 
  20. [*1]- “Thermal coal Industries” is defined as the enterprise listed in the "Global Coal Exit List (GCEL)”, covering: (I) Coal mining: The "Coal Industry Sector" includes "Mining". (II) Coal-fired power generation: The "Coal Industry Sector" includes "Power". (III) Coal-related infrastructure: The "Coal Industry Sector" includes "Services". 
  21. “Global Coal Exit List (GCEL)”: a list published by the international non-governmental organization Urgewald. Companies are defined as “industries related to thermal coal” if they meets at least one of the following 3 criteria: (1) Relative Criteria: At least 10% of a company’s power production or revenue is coal-related. (2) Absolute Criteria: Companies whose annual thermal coal production exceeds or equals 10 million tons, and companies whose installed coal-fired power capacity generation exceeds or equals 5 GW. (3) Expansion Criteria: Companies with coal power, coal mining or coal infrastructure expansion plans. 
  22. [*2]- “Unconventional oil & gas industries” is defined as the enterprise listed in the” Global Oil & Gas Exit List (GOGEL)”, including industries related to extraction, processing and manufacturing, exploration and expansion and the supporting infrastructure of tar sands, shale oil and gas, arctic oil and gas, liquified natural gas (LNG), ultra-deep-water oil & gas (UDW) and is an upstream company. 
  23. Global Oil & Gas Exit List (GOGEL): a list published by the international non-governmental organization Urgewald. A company is defined as "unconventional oil and gas company" if it is determined to be involved in any of the unconventional oil and gas related activities. Therefore the Bank defines the relative threshold as 0% of the revenue. If the GOGEL threshold changes overtime, the Bank will make corresponding adjustments.
  24. [*3]-  The state-owned enterprises that have provided a transition plan or the enterprises have over 50% government ownership are excluded, to assist the enterprises transform to green or sustainability or to promote the industry development before the global phase-out year.
  25. [*4]-  “Financing” can be divided into “lending” and “project financing”, contains the loans, overdrafts, discounts, guarantee, acceptances, exchange bills negotiated, letters of credit, without recourse factoring, and other business approved by the Head Office.
  26. [*5]-  Investment refers to "Active investments", including general investment and project investment. Chang Hwa Bank is not active in "Passive investments" and "Third-party managed investments".
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  28. II. Gradually reduce non-green credit for carbon-intensive industries[*6]:
  29. (I) Reduce the non-green credit by 4% by 2025.
  30. (II) Reduce the non-green credit by 15% by 2030.
  31. (III) Reduce the non-green credit by 30% by 2035.
  32. (IV) Reduce the non-green credit by 50% by 2040.
  33. (V) Reduce the non-green credit by 75% by 2045.
  34. (VI) Achieve full green credit for carbon-intensive industries by 2050.[*7]
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  36. Note: 
  37. [*6]- Based on outstanding balances and loan commitments at the end of 2023.
  38. [*7]- The term "green credit" includes green lending and project financing that are used for transition or sustainable development, or all lending and project financing that are granted to recipients of specific carbon emissions reduction or transition plans that are align with the goals of the Paris Agreement, and if necessary, adjustments to the aforementioned targets based on the achievement of the targets.
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  40. III. Communication and Engagement on the Transition for Net-Zero
  41. Before reaching the phase out year set in each phased schedule, the Bank will actively communicate and engage with credit holders and investment targets of financing and investment for thermal coal and unconventional oil and gas affected on sustainability transformation. In accordance with the Bank's "Investment Engagement and Voting Guidelines" and "Implementation Procedure for Engagement on Financing", we take different levels of engagement actions base on the climate performance progress of credit holders or investment targets, and track the progress on transition from time to time. If the engagement result does not meet the Net-Zero transformation goal, the Bank will take follow-up actions such as (including but not limited to) adjusting the investment and financing maturity time, speech/proposal at shareholders' meeting, temporarily prohibited from investing/financing, and included in the exclusion list. 
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