Disclosure of Climate-related Financial Information Based on the TCFD Recommendations

The Task Force on Climate-related Financial Disclosure (TCFD), established by the Financial Stability Board (FSB), formulated its recommendations for clarified, comparable, and consistent information disclosure regarding the risks and opportunities posed by climate change. These recommendations were announced in June 2017. Climate change is an issue to be addressed on a global scale. The effects of climate change have significant impacts on the lives of people, through changes in economic behaviors and society worldwide. The T&D Insurance Group has expressed its support for the TCFD recommendations, and is actively committed to disclosing climate-related financial information in an easy-to-understand manner.

[Disclosure of climate-related financial information]


Oversight by the Board of Directors
Role of management



*1 Business risks associated with natural disasters caused by extreme weather such as typhoons and floods, and those associated with phenomena such as an increase in the average temperature and a rise in the sea level

*2 Business risks arising from the behavior of governments, corporations, and consumers in the process of carrying out the transition to a low carbon society (through a significant reduction of greenhouse gas emissions)

Scenario analysis: what the world looks like under each scenario

2°C scenario: Strict measures are taken against climate change. By the end of the century, the average annual temperature will increase by between 0.3°C and 1.7°C.

4°C scenario: No measures are taken against climate change beyond the current status quo. By the end of the century, the average annual temperature will increase by between 2.6°C and 4.8°C.

* RCP 2.6 and RCP 8.5 scenarios, respectively. The annual average temperature is a comparison between the 2080-2100 average and the 1986-2005 average.

The world under the 2°C scenario The world under the 4°C scenario
  • Due to the rise in average temperatures, natural disasters become more frequent and intense. (However, the impact is kept below a certain level.)
  • Strict measures to combat global warming increase business costs for each company.
  • Technological innovation progresses (and new players emerge) in support of low or net-zero carbon emissions.
  • Reallocation of investment away from companies that are unable to support low or net-zero carbon emissions.
  • Due to the large rise in average temperatures, the impact of frequent and intense natural disasters becomes significant.
  • Sea level rise, storm surge, flooding, and heavy rainfall have a significant impact on coastal areas. (A review of lifestyle and BCP is also necessary. The companies face increased business costs.)
  • Reallocation of investment away from companies that are vulnerable to natural disasters.
Physical effects caused by a rise in average temperature (2°C scenario < 4°C scenario)
[Impact on the environment]
  • Frequent and intense natural disasters such as typhoons and floods.
  • Changes in rainfall and weather patterns, rising average temperatures, and rising sea levels.
[Impact on health]
  • Increasing average temperatures lead to an increase in the number of heat stress deaths and heat stroke patients.
  • The number of injuries and fatalities due to natural disasters increases due to an increase in extreme weather events such as typhoons and floods.
  • The risk of contracting an infectious disease increases due to the expansion of the habitats of disease vectors.
Impact of the transition to a society with low or net-zero carbon emissions (2°C scenario)
[Policies, laws, and regulations]
  • Tighter regulations on greenhouse gas (GHG) emissions and the introduction of a carbon tax. Expanded disclosure requirements (increased business costs for companies).
[Technology development]
  • Progress in reducing the carbon footprint of existing technologies and the introduction of new technologies such as renewable energy, storage batteries, and electric vehicles.
  • While some companies emerge and grow by seizing new business opportunities, others have been unable to respond to low or net-zero carbon emissions measures and fail.
[Changes in investor behavior]
  • Reduced investment and lending to companies that cannot comply with regulations, companies that cannot exit from existing GHG emissions businesses, and companies that have recorded fossil fuels as stranded assets. Expanded investment and financing to companies that contribute to low or net-zero carbon emissions.
Scenario analysis: impact on the Group
2°C scenario (RCP 2.6) 4°C scenario (RCP 8.5)
Physical risks Impact on underwriting profitability
  • Significant increases in the number of heat stress deaths and heat stroke patients.
  • Both of these increases will be gradual over a long period of time, which will limit their impact on underwriting profitability.
  • This will be addressed by conducting an appropriate review of premium rates.
  • Significantly higher average temperatures will lead to larger increases in heat stress deaths and heat stroke patients than under the 2°C scenario.
  • Both of these increases will be gradual over a long period of time, but will be larger than under the 2°C scenario.
  • We will address this by conducting a more detailed review of premium rates to avoid a significant negative impact on underwriting profitability.
BCP response
  • A business continuity plan has been established at another site in case a major disaster causes a disruption to the functions of critical sites.
  • To address the increasing intensity of natural disasters, we will use hazard maps and similar tools to assess the risk level of our business sites, relocate important sites, establish backup sites, and implement remote decentralization measures using IT as appropriate.
Transition risks Impact on asset management income
  • In order to transition to a society with low or net-zero carbon emissions, regulations on GHG emissions will be tightened and a carbon tax will be introduced, making the use of fossil fuels more difficult.
  • Expanded use of new technologies (renewable energy, etc.) in response to these environmental changes.
  • Increased investment and financing (green finance) to companies, technologies, and projects that contribute to low or net-zero carbon emissions.
  • In the medium-term, up to the middle of this century, some industries will be significantly affected by tighter regulations on GHG emissions, the introduction of a carbon tax, the replacement of old technologies with new low or net-zero carbon technologies, and changes in consumer values and behaviors.
  • To avoid damage to asset management income from the impact on the investees and borrowers of the Group, we will work as appropriate in accordance with the Principles for Responsible Investment (PRI) through the promotion of investment and financing activities to businesses and companies that contribute to the transition to a society with low or net-zero carbon emissions, for example renewable energy businesses, and through engagement with existing investees.
  • The medium-term impact on the investees and borrowers of the Group will be smaller, since there will be no sudden changes in the environment expected in the 2°C scenario.
  • However, in the long-term time horizon up to the end of the century, it is assumed that the increase in average temperatures and the intensification of natural disasters will have a significant negative physical impact on each company’s business activities.
  • In order to avoid damage to our asset management income, we will avoid or withdraw investment and financing to firms with significant physical risks.

Physical risk reference data: Climate Change Adaptation Information Platform (A-PLAT)


Risk management

Risk identification and assessment process
Risk management process
Management of climate change-related risks

1) Physical risks

  • The Group considers to mitigate deterioration of underwriting profitability through reinsurance and other means, along with large-scale disaster risks (insurance underwriting risks).
  • The Group monitors existing products and implements countermeasures, including product revisions, as necessary.

2) Transition risks

  • The Group engages in investments and borrowings, taking into account climate change-related risks based on the Principles for Responsible Investment (PRI).
  • The Group monitors trends in economic policies, laws, and regulations, and share the information across the Group, through the Group SDGs Committee and the Group Management Promotion Committee. Measures are taken to ensure that the Group responds to such trends in a sufficiently effective manner at the level expected of a listed company.
Integration to the overall risk management
  • For the purpose of overall risk management activities, the Group integrally manages its capital, profit, and risk by using ERM (Enterprise Risk Management). ERM refers to a strategic method of corporate management that seeks to maximize corporate value and profits while ensuring the soundness of business through integrated management of capital, profit, and risk. As opposed to passive risk management, which considers risk something to be avoided, in ERM, risk is not something only to be eliminated or reduced, but rather, the risks that should be taken on to pursue growth in profitability are selected actively while limiting risk to a fixed scope of capital to maintain sound management of business operations.
  • The T&D Insurance Group has specified an economic solvency ratio (ESR), which is a risk-management index based on economic value. These are concrete quantitative indicators of risk appetite and tolerance. ESR is calculated as net assets (surplus) based on economic value, divided by economic capital (EC), which is the risk level based on economic value, calculated using an internal model including insurance underwriting risk, asset management risk, and operational risk. We manage risk on the basis of economic value through such means as controlling EC to stay within a certain range of the surplus. ESR is managed on a monthly basis. The statutory solvency margin ratio is managed on a quarterly basis. As with other risk reviews, these are reported to the Group Risk Management Committee and Board of Directors.

Metrics and targets