Strategy/Capital
SDGs in Business Management
Overview of SDGs in Business Management
In its current Mid-Term Management Plan, the Sompo Group has positioned “SDGs in Business Management” as one of our Group Business Foundations to create economic and social value by using its core business to resolve social challenges. To do this, we have designated seven Materialities—or priority issues—for realizing SOMPO’s Purpose. We have also set KPIs for each Materiality to facilitate the creation of highly effective PDCA cycles, visualizing our progress and identifying issues.
By driving value creation cycles through this SDGs in Business Management framework, we seek to promote Group-wide initiatives for realizing SOMPO’s Purpose.
Identifying Materiality
The Sompo Group has identified social challenges based both on international norms and on its mission to realize SOMPO’s Purpose. After assessing their importance according to their relevance to SDGs, we have identified priority social challenges, and organized, integrated, and systematized them as Materiality.
| PROCESS 1 | Identify social challenges surrounding our business | Comprehensively identify social challenges surrounding SOMPO from the perspective of both their importance to management and their impact on stakeholders based on our value creation story and international norms, such as the United Nations Global Compact and ISO 26000 |
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| PROCESS 2 | Identify social challenges to be prioritized | Evaluate the importance of social challenges surrounding SOMPO based on their relationships with the SDGs (which represent a universal language) to identify social challenges the Group should prioritize through its business |
| PROCESS 3 | Organize into seven Materialities (Key management themes) | Organize and integrate priority social challenges from the perspective of the Group’s management strategy approach and organize them into seven Materialities as key management themes |
Integrating Materiality KPIs and the Value Creation Cycle
The Sompo Group has set KPIs for each Materiality to measure progress toward achieving its Materiality goals. By integrating these Materiality KPIs with important elements and KPIs of our value creation cycle, we have created a system for executing a PDCA cycle for our SDGs Management.
SDGs Matrix: Social Challenges and SDGs Addressed by SOMPO
This matrix follows ISO 26000 frameworks to clarify the relationship between the social challenges facing SOMPO, which were identified in Process 1 of the Materiality Identification Process, and the core subjects of ESG and ISO 26000. It also indicates which of the 169 SDG Targets the Sompo Group will contribute to through the provision of its products and services. In Process 2, we narrowed down Materiality candidates based on their level of importance, and identified which social challenges to prioritize through our business. Finally, in Process 3, we organized, integrated, and systematized these social challenges according to our strategies. We have termed these challenges “Materialities,” or priority issues for realizing SOMPO’s Purpose.
Click here for the SDGs matrix table
SDGs Matrix: Social Challenges and SDGs Addressed by SOMPO(PDF/905KB)
Materiality KPIs
The Sompo Group has set KPIs for each Materiality to define its actions for realizing SOMPO’s Purpose, and to gauge the progress of these actions. By integrating these KPIs with important elements of our value creation cycle, we have created a system that enables us to implement said value creation cycle. In fiscal 2021, we achieved 24 of the 29 KPIs for which we had set single-year targets. As our initiatives and strategies for realizing SOMPO’s Purpose evolve and change, we are expanding our Materiality KPIs. Indeed, we have committed to adding a further four KPIs in fiscal 2022, and plan to subsequently add two more. In this way, by establishing a Group-wide framework that facilitates the creation of a PDCA cycle for our value creation cycle, we are making progress towards realizing SOMPO’s Purpose.
Click here for materiality KPI table
SOMPO Climate Action
In its current Mid-Term Management Plan from FY2021, the Sompo Group has positioned climate change as a priority social challenge. We launched “SOMPO Climate Action” to adapt to climate change, to mitigate climate change, and to contribute to transforming society.
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1. Four Actions to Adapt to Climate Change
Having analyzed the potential risks and opportunities that climate change will have on our Group, we have established a basic policy of engaging in four actions to achieve our Climate Action plan: 1) Formulate and execute a Green Transition Plan; 2) Strengthen our internal response systems; 3) Enhance our Climate Risk Framework; and 4) Create climate-related business opportunities.
2. Formulate and Execute a Green Transition Plan
The goal of our Group is to achieve net-zero greenhouse gas (GHG) emissions by 2050, including our underwriting operations and our investee and borrower companies. To this end, the entire Group is promoting the following actions.
Initiative 1: Formulate Interim GHG-Reduction Targets for Investee and Borrower Companies
In fiscal 2021, we set ourselves the goal of achieving net-zero GHG emissions across our entire value chain—including investee and borrower companies—by 2050. In May 2022, we strengthened our engagement with our investee and borrower companies by setting an interim target of reducing GHG emissions by 25% by 2025 (compared to 2019 levels).
Initiative 2: Strengthen Underwriting and Investee and Borrower Company Policies
Our Group believes sustainability to be a driver of long-term value creation, and we make decisions for our underwriting operations, investee and borrowing companies, and business activities based on the basic approach outlined in SOMPO’s Purpose.
For further information about our Underwriting Operations and Investee and Borrower Company ESG Policies, please visit our corporate website:
Click here for details “Policy for ESG-related Underwriting, Investment and Loan”
Renewable energy is particularly important as we transition towards a green society, and we seek to achieve our SOMPO Climate Action plan through the following initiatives for our underwriting operations and investee and borrowing companies.
Initiatives for Underwriting, Investment and Loan
- We will not underwrite new insurance or make new investments in or loans for new or existing coal power plants or thermal coal mine projects.
- We also will not underwrite new insurance or make new investments in or loans for oil and gas extraction projects in the oil sands or the Arctic National Wildlife Refuge (ANWR).
- We will not insure or make investments or loans to companies that they do not establish a GHG reduction plan by January 2025, that derive at least 30% of their revenues from coal-fired power generation, thermal coal mines, or oil sands, or electric utilities companies that generate at least 30% of their energy from coal, or that oil and gas extract in the ANWR.
Initiative 3: Join Net Zero Organizations
The Sompo Group became the first Japanese insurance company to join three of the sector-specific alliances that comprise the Glasgow Financial Alliance for Net Zero (GFANZ), a global alliance of financial institutions committed to achieving net-zero GHG emissions by 2050. Through our membership in these organizations, we intend to contribute to the establishment of rules aimed at realizing social transformation, and to accelerate our initiatives to achieve net zero by promoting decarbonization in our underwriting operations, and reducing GHGs in our investments.
The Three Sector-Specific GFANZ Alliances (2022)
- Net-Zero Insurance Alliance
- Net-Zero Asset Owner Alliance
- Net Zero Asset Managers Initiative
3. Information Disclosures that Follow TCFD Recommendations
The Sompo Group supports the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), and works to disclose various initiatives and information related to climate change with high levels of transparency.
Click here for details
Climate Change Governance System
The Sompo Group has designated “contributing to a green society in which the economy, society, and environment exist in harmony” as one of its Materialities for realizing SOMPO’s Purpose. To this end, we have established a system in which our Executive Officers formulate and execute climate change strategies and measures, and progress is supervised by the Board of Directors.
Chaired by the Group Chief Sustainability Officer, the Group Sustainable Management Committee ensures these strategies and measures are communicated to employees, and verifies the initiatives of Group companies. Based on the Committee’s discussions, the latest information regarding our climate change strategies and measures are reported to the Global Executive Committee (Global ExCo) and the Managerial Administrative Committee (MAC).
The Group Chief Risk Officer (Group CRO) has established a risk control system based on the “SOMPO Group’s Basic Policy on ERM,” comprehensively identifies and evaluates the risks to each business through the Group ERM Committee, a subcommittee of Global ExCo, and periodically reports to the MAC and the Board of Directors on the management status of the Group’s “material risks” including climate change.
The Board of Directors receives reports regarding discussions and deliberations held by Global ExCo and MAC. It oversees the appropriateness of strategies in light of SOMPO’s Purpose, and monitors the execution of these measures by Directors and Executive Officers.
Number of meetings and discussions on the subject of climate change held by each committee in FY2021:
Global ExCo: 2
MAC: 5
Group Sustainable Management Committee: 3
Group ERM Committee: 2
Strategy and Scenario Analysis
1) Assessment and analysis of climate-related risks and opportunities
Once environmental changes related to climate change have been identified, the risks and opportunities they present to our Group’s business are assessed and analyzed according to two timeframes: short-term, medium-term (5–10 years), and long-term (10–30 years). These assessments and analyses are used when proposing strategies and discussing concrete measures.
2) Climate change-related business initiatives
Based on the above analyses and the Group’s basic policy on climate change, we work to promote the spread of renewable energy through our insurance (mitigation), engage in disaster-prevention and mitigation through collaboration with our stakeholders (adaptation), and continuously invest in ESG bonds.
3) Scenario analysis
Based on the assessments and analyses of climate change-induced risks and opportunities outlined above, we also conduct scenario analyses on physical risks and transition risks.
1. Physical risks
The growing severity and frequency of natural disasters such as typhoons, floods, and storm surges has increased the likelihood of unexpectedly large claim payouts, and consequentially financial impact on the Group. In the P&C insurance business, risks can be controlled by revising underwriting conditions and reinsurance policies based on incidence trends. We are also working to ensure resilience based on geographic diversification, quantification based on short- and long-term climate forecasts, and long-term scenario analysis results.
To quantitatively grasp risks, we use weather and climate big data, such as the Database for Policy Decision-making for Future Climate Change (d4PDF). We seek to understand the mediumand long-term (5–10 years) impact of 2˚C and 4˚C rises in average temperature on typhoons, floods, and storm surges, and on the incidence of extreme weather events. In addition, we estimate the impacts of these phenomena using simple quantitative analysis tools, based on guidelines issued by the United Nations Environment Programme Finance Initiative’s TCFD Insurer Pilot Group.
Estimate results
Frequency of typhoons approx. -30% to +30%
Amount of damage per typhoon approx. +10% to +50%
At present, we use the scenario analysis framework provided by the Network for Greening the Financial System, which is examining financial supervisory responses to climate change risk.
2. Transition risks
We have analyzed the impact of transition risks on assets held by the Group (Japanese and foreign equities and corporate bonds) using the model provided by MSCI, based on scenarios in which global warming are limited to 1.5°C, 2°C, or 3°C. We focused on the impact of policy risks associated with the transition to a low-carbon global economy and the impact of technological opportunities from climate change mitigation and adaptation initiatives. These analyses indicate that while the impact on Japanese equities is the largest, the overall impact of policy risks is limited as it is offset by that of technological opportunities.
Risk Management
The Company has established a risk appetite framework to clarify which risks the Group should take and which it should avoid, in order to increase the achievability of the Group Management Philosophy, SOMPO’s Purpose, and Group management plans.
With regard to climate change-related risk, we have established a Climate Change Risk Framework in light of the fact that climate change will impact various aspects of our Group’s business, and that these impacts will be lasting and uncertain.
We have visualized these risks in our Climate Change Risk Map, using risk assessments that presuppose various policy shifts. The findings of this risk map are fed back into our existing risk control system framework, with the goal of enhancing our risk management.
Metrics and Targets
1) Key Metrics
Absolute GHG emissions
| FY | Equities | Bonds |
|---|---|---|
| 2019 | 119.60 | 121.07 |
| 2020 | 100.58 | 133.77 |
2) Key Targets
| - | Scope 1–3 (excluding investments and loans) |
Scope 3 Category 15 investments and loans |
|---|---|---|
| 2025 | - | 25% reduction (compared to 2019 levels) |
| 2030 | 60% reduction (compared to 2017 levels) | - |
| 2050 | Net zero | Net zero |
[Third-party verification]
To ensure the reliability of reported figures, Sompo Holdings has received third-party verification from Lloyd’s Register Quality Assurance Limited (LRQA) for its calculations of greenhouse gas emissions (Scope 1–3) in FY 2021.
*1 Total Scope 1 (direct emissions from use of gasoline, etc.), Scope 2 (indirect emissions from energy sources, such as electricity), and Scope 3 (indirect emissions across the entire value chain, including transportation, business travel, etc.) GHG emissions. This total covers the emissions of the Company itself and of its key consolidated subsidiaries. Note that emissions for FY2017–FY2020 have been recalculated based on FY2021 calculation methodologies.
*2 Calculated for Scope 1 and Scope 2 in Japanese and foreign listed stocks and bond investees using data provided by MSCI ESG Research. GHG emissions are our share of emissions based on investee’s Enterprise Value Including Cash (EVIC), and WACI is the weighted average of each investee’s GHG emissions per unit sales, according to the holding percentage for that investee in our portfolio.
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