Sustainable Lending

The assets and resources of a bank stem from the trust and support of the general public in society, and therefore, the most important corporate social responsibilities of a financial institution are to properly utilize societal resources, undertake the responsibility of a financing intermediary and financial supply chain, leverage its positive influence, promote domestic economic and financial stability, and simultaneously encourage its corporate partners and customers to commit to protecting the environment and improving social welfare to ultimately create a sustainable environment and society.E.SUN complies with international standards such as Principles for Responsible Investment (PRI) and the Equator Principles to appropriately applies resources to domains beneficial to positive development of the environment and society. Pertaining to the attributes of different customer groups, E.SUN has developed various sustainable financial products that meet customers' needs and match global trends.

■ KYC (Know Your Customer) review process

To promote the development of sustainable finance, E.SUN incorporates ESG concepts into its business operations and take actions to control potential risks that our banking service and capital supply may pose for the society, environment, and our corporate governance. E.SUN has incorporated ESG concepts and the Equator Principles into the loan review process for corporate customers. In the KYC process for every loan application, we check whether the applicant is involved in issues such as environmental pollution or human rights breach, or is a member of high-risk industries (such as tobacco, leather/dyeing and finishing, munitions, or gambling) detrimental to the sustainability of environment and society. Due to their greater impact on the environment and society, applicants classified as high risk and are applying for a loan beyond a certain amount would be put on the watch list. We would disclose their risk information in the customer due diligence report and implement strict lending risk management.


■ Responsible Lending

E.SUN carefully selects its corporate credit counterparts, applies resources in areas that benefit the economy, environment, and society, and has established various internal policies and regulations for management. The E.SUN Bank Lending Policy clearly specifies its support for green energy industries, such as alternative energies, water resources, and environmental pollution control. Companies that are committed to reducing energy consumption and pollution or installing environmentally-friendly facilities should be given suitable financing. The E.SUN Bank Green Energy Lending Principles and Key Points for Undertaking Project Financing based on Equator Principles are adopted to direct resources toward investments in green energy, and review and monitoring on cases above a certain scale shall be conducted in accordance with the Equator Principles. The E.SUN Financial Holding Sustainable Lending Policy incorporates ESG-related considerations into the lending process, and requires monitoring and due diligence review for ESG high-risk industries or applications, so as to prevent impacting the sustainability of the society and environment.

(1) Equator Principles

E.SUN has long supported large-scale projects that contribute to sustainable development. Since it became the one of the first domestic financial institutions to become a signatory to the Equator Principles in 2015, it has participated in a number of large-scale project financings, including those for electric power and infrastructure at home and abroad. Furthermore, in accordance with the international standards of the Equator Principles Association, E.SUN manages project financing risks in a hierarchical manner, carefully assesses whether the project development process fulfills environmental and social responsibilities, and properly formulates environmental and social impact monitoring system and improvement plans.

2020 Results

  • In October 2020, we adopted the fourth edition of the Equator Principles (EP IV) framework and continued to refine the control process. In addition to expanding the scope of application of the Equator Principles and including more project financing into the evaluation criteria, E.SUN also pays great attention to risks related to climate change, human rights, and biodiversity, thus improving its environmental and social risk management capabilities.
  • In 2020, a total of 7 project financing cases to which the Equator Principles apply were approved, and 1 case was declined.
  • As of December 2020, a total of 26 cases have been approved. In response to the development of renewable energy, 16 of the cases were related to green energy.

Cumulative number of approved cases under the Equator Principles

The Equator Principles At ESUN 2020

(2) ESG Sustainable Industries

In 2020, E.SUN continued to invest resources in industries that are friendly to the environment and society and support industries such as green power, energy conservation and environmental protection, circular economy, medical care and education, while also giving full play to the spirit of responsible lending regarding industries with environmental risks (such as pulp/paper making, leather, dyeing and finishing, oil and gas, mining) and industries with higher to social risks (such as gambling, munitions, tobacco and alcohol) by exercising control through a stricter credit review process.

Percentage of the outstanding balance of sustainable industries in 2020

Percentage of the outstanding balance of industries with environmental and social risks in 2020

E.SUN also carefully evaluates the ESG risks of each corporate loan. Even in regard to companies that aren't members of high-risk industries, E.SUN would check on every loan applicant to see whether they're involved in major environmental and social concerns. In 2020, 4 loan cases, with 3 domestic applicants and 1 from overseas, were declined due to high ESG risks and their failure to propose specific mitigation measures, totaling at NT$1.83 billion in the rejected amount.

Company A B C D
Risk Environment Corporate governance Society Environment
Reason Violation of E.SUN's coal ban policy Parent company and top management were involved in scandals Business model is prone to consumer disputes Environmental protection concerns

■ Supporting green finance and responding to the call for low-carbon homes

E.SUN has long attached great importance to environmental sustainability and actively responded to international trends and industrial policies. It therefore continues to develop special products such as green finance and green energy project financing to help increase the proportion of the power generated from renewable energy and promote energy conservation and carbon reduction.

(1) Green energy project financing

Starting from small and medium-sized solar rooftops, E.SUN has recently been actively involved in project financings for large-scale power plants such as offshore wind power and groundbased solar power plants. In recent years, we have successively established offshore wind power and green energy expert in the headquarter to participate in important domestic wind power and solar projects. In the future, E.SUN will continue to invest resources to master new trends of green energy.

Green energy project financing Outstanding balance as of 2020 (NT$M) Total amount of loans in project financing position Percentage of green / sustainable infrastructure finance vs. total value of infrastructure finance
・Domestic solar photovoltaic project financing
・Domestic onshore wind power project financing
・Overseas offshore wind power project financing
・Domestic offshore wind power project financing
・Overseas solar photovoltaic project financing
11,106 16,510 67.27%

・Solar photovoltaic

E.SUN incorporates inclusive financing with project financing and provided the Solar Panel Rooftop project in 2014 to encourage small and medium enterprises and regional developers in promoting rooftop solar power stations. In recent years, it has leveraged its project financing evaluation experience to successively invest in large-scale ground-mounted and floating solar power plants. According to the carbon emission per kilowatt-hour of electricity of 0.509 kilograms per kilowatt-hour announced by the Bureau of Energy, the results are as follows.
In 2020, E.SUN supported domestic solar photovoltaic plants, resulting in 360MW of power generation, which was 3.3 times more than 109MV in 2019, with one of the contributors being a large-scale project in the Changbin Intertidal Zone. In addition to the challenging construction technology, E.SUN's internal assessment process also pays attention to local biodiversity to confirm that the development process will not have a significant impact on the wetland ecology.

・Wind power generation

Taiwan Straits has abundant wind farm resources, and offshore wind power has been listed as a key energy development goal in the country, thereby attracting many major international developers to invest in the Taiwanese market. To enhance the evaluation capabilities of offshore wind power lending projects, E.SUN set up an inter-departmental project task force in 2017 to study and gain professional knowledge of the offshore wind power industry and supply chain, technologies, and finance, so as to better assess the risk of these industries. Through actual participation in outstanding projects with long-term stable cash flow, we continue to accumulate experience in projects relating to financing and the Equator Principles.

2020 Results

  • Domestic offshore wind power: E.SUN participated in large-scale domestic syndicated loans and served as joint mandated lead arranger.
  • Onshore wind power: Served as the lead bank of an international syndicated loan and the domestic collateral management bank. This case is also the first case of onshore wind power evaluated in accordance with the Equator Principles in Taiwan.
  • The cumulative installed capacity of wind power projects at home and abroad that E.SUN has participated in is 3,746MW, including 2,210MW from offshore wind power and 1,536MW from onshore wind power. According to the electric carbon emission coefficient announced by the Bureau of Energy stating that domestic carbon emissions per kilowatt-hour of electricity is 0.509 kg, the United Nations International Financial Institution (IFI) greenhouse gas accounting guidelines which discloses the energy emission coefficients of various countries, as well as the proportion of loan balances, it was estimated that the carbon reduction benefits of wind power project financing was about 193,000 tons of carbon emissions.

(2) Sustainability-linked Loans

To encourage companies to set up their own ESG development goals and continue to invest in sustainability-related activities, referencing the LMA Sustainability Linked Loan Principles, E.SUN plans related regulations and operating methods, and negotiates and agrees on the establishment of sustainability development goals with the companies it finances. If an enterprise achieves its goals, E.SUN will offer financial service discounts. In September 2020, E.SUN undertook the bank's first sustainability-linked loan. By 2020, a total of 4 cases had been evaluated and 1 case approved, and the current balance is NT$290 million. In the future, E.SUN will continue to refine its operating procedures and plan to incorporate the performance of related products into the assessment of business units, guide business units to grasp the sustainable development process of customers through incentive mechanisms, and actively promote sustainabilitylinked financial products to enhance the bank's influence in the environmental and social aspects.


■ Managing lending risks

(1) Loan review

E.SUN actively investigates ESG-related information when customers apply for loans. If the company,person in charge or individual who applys for loans has been involved in ESG illegal cases, such as environmental pollution, illegal fundraising, human rights violations, etc., E.SUN will actively negotiate with customers and request customers to provide a reasonable explanation and issue related improvement measures and results, and adjust the loan conditions according to the circumstances of the case. If the case is considered a major hazard or if effective improvement measures cannot be established after counseling, the loan will not be approved.

(2) Anti-money laundering

To prevent funds from flowing into money laundering and terrorism financing accounts, since April 2018, Know Your Customer (KYC) and Customer Due Diligence (CDD) procedures have been applied to any new individual loan, incremental loan or transfer of loan, and all loan applications filed by persons who have been sanctioned as announced by government agencies will be declined. If the applicant is identified as a high-risk customer, E.SUN will further conduct Enhanced Due Diligence (EDD), and the subsequent loan review can only be conducted after the approval of a supervisor with anti-money laundering professional license. In 2020, a total of 3,567 cases were submitted for EDD, of which about 63 were not accepted due to factors such as high-risk occupations.

(3) Climate change

In order to monitor the risk of real estate value impairment that may be caused by climate change, E.SUN has an independent department responsible for collateral valuation, revealing information such as soil liquefaction potential areas in the valuation report. In cases of high risk, the bank will not approve the loan or counsel the borrower to shift the risk of natural disasters through insurance. In addition to valuation control, E.SUN is connected to the AR5 scenario of the "Disaster Management Information Platform of the Ministry of Science and Technology" to identify flooding risks every year and reveal the proportion of credit collaterals in areas with high flooding risks in total assets, which was 1.15% in 2020.

■ Reconstruction of Urban Unsafe and Old Buildings Loan

E.SUN not only satisfies customers' desire to buy and repair their homes through diversified mortgage solutions, but also integrates housing loans with environmental and social issues, and continues to launch numerous housing loan projects that promote sustainability, including "green buildings," "care-free mortgage" and "integrity loans." In 2020, E.SUN assisted more than 10,000 customers in achieving their dreams of building a home. The balance of sustainable mortgages reached NT$95.6 billion, accounting for 20.78% of the total purchase.

Purchase and renovation mortgages
Residential mortgage Number of cases: 84,037 households
Loan balance: NT$406.5 billion
Commercial mortgage Number of cases: 6,743 venues
Loan balance: NT$52.5 billion
Renovation mortgage Number of cases: 2,424 households
Loan balance: NT$1.1 billion
Total balance NT$460.1 billion
Dimensions Mortgage projects that promote sustainability 2020 Proportion of total purchase and renovation mortgage balance (%)
Environment Green buildings
(Promotes purchase of certified green buildings)
Number of cases: 122 households
Loan balance: NT$1.198 billion
20.78%
Society Care-free mortgage
(Supports young people to form their own families, and grants lower-income families housing subsidy and a grace period)
Number of cases: 9,324 households
Loan balance: NT$93.051 billion
Integrity loan
(Encourages customers to pay back on time/early by offering favorable interest rates)
Number of cases: 1,298 households
Loan balance: NT$2.621 billion
Total Number of cases: 10,595 households
Loan balance: NT$95.621 billion

Green Building revenue pct:0.02%, Affordable Real Estate Revenue%:0.03%. Affordable Real Estate includes youth's housing grant, government housing subsidies and the earthquake victim loan.

■ Responsible Products - Credit Cards

In 2019, all of our credit cards obtained the carbon label, and we purchased carbon credits from the wind power farm in Changbin Industrial Park to offset carbon emissions. After verified by a third party, we reached the carbon-neutral goal. We have issued 3.36 million carbon-neutral cards by 2020. Before 2025, all cards circulating will be replaced by carbon neutral cards. For other ESG credit cards, please see the table below:

ESG Credit Card Contents 2020 issued cards Proportion Donated amount
Social Welfare World Card 0.3% of general spending is allocated for donating to the "E.SUN Golden Seed Project" to build E.SUN Libraries for primary schools in rural areas, providing a warm and comfortable reading environment for children in rural areas. 600,000 10% NT$41,000,000
Nan Shan Life Co-branded Card 0.1% of general spending was allocated for donating to the NanShan Happiness Fund to support community care for disadvantaged patients who fall into economic hardship.
Tsing Hua Recognition Card 0.2% of general spending is allocated for donating to National Tsing Hua University's "Rising Sun Project" to assist outstanding students who are socially and economically disadvantaged and lack educational resources to receive education and enabling economically disadvantaged students to turn their lives around.
Charity Card 0.2% of general spending is allocated to sponsor the blood donation charity fund.
Environmental Conservation ETC Easy Card E.SUN allocates 0.1% of the auto-top-up amount to a sustainability account for holding E.SUN CSR charity events. 620,000 10% NT$8,590,000
Nan E.SUN Business Platinum Card For customers who choose e-billing, 0.2% of general spending is allocated for donating to the "One Tree Per Person. E.SUN Plants Trees" activity.
Formosan Bear Conservation Card 0.2% of general spending is allocated to the Taipei City Zoo animal conservation fund. For card holders who donate to the fund, E.SUN rewards them with triple bonus.
Easy Card E.SUN offers the second 30 minutes of YouBike services for free in the following month to customers who spend NT$3,000 or more on their E.SUN credit card in any given month.
E.SUN Infinite Card E.SUN offers the second and third 30 minutes of YouBike services for free in the following month to customers who use their E.SUN credit card once in any given month, regardless of spending amount.
Overall 6,350,000 100%s NT$49,590,000

Note:

  • BSI's investigation proved that we issued more than 1.36 million carbon-neutral credit cards in 2020, which offset 1,196 tons of carbon emissions. We thus demonstrated the achievement of carbon neutrality in response to PAS 2060:2014.
  • The carbon credits we purchased were from the wind power farm in Changbin Industrial Park.
  • The total number of active credit cards was 4.49 million as of the end of 2020.

■ ESG Engagement

  • To build a sustainable senior-friendly living environment, E.SUN worked with construction management companies to launch Reconstruction of Urban Unsafe and Old Buildings Loan. While assisting customers in planning the redevelopment of old buildings, we also encourage them to incorporate green elements in the design. For customers receiving the green building bulk reward, we may offer a lower interest rate or transaction fee depending on the situation. E.SUN, through the provision of resources and information, invites customers to promote the sustainable development of cities with us.
  • E.SUN invited credit card holders to respond to green actions by signing up for e-bills. We would donate 0.2% of the amount of purchases made by E.SUN Business Platinum Card holders that signed up for e-bills to "Plant a tree, Plant a life" E.SUN plant trees project Customers could contribute to protecting the environment simply by using the card to pay.