Sustainable Value Creation Process

In order to help stakeholders understand the Group's responses to the risks and opportunities of sustainability issues, we adopted the spirit of International Financial Reporting Standards S1 (IFRS S1) this year to conduct a trial assessment of the potential financial impact of inclusive finance issues on the Group. All the relevant information is disclosed in compliance with the four major aspects of IFRS S1 (governance, strategy, risk management, metrics and targets).

Governance Mechanism of Inclusive Finance

Governing Units

The Board of Directors of the Company serves as the highest governing body for inclusive finance issues, responsible for overseeing and managing the Group's inclusive finance opportunities and risks, and promoting the overall policy and strategic actions. Under the Board of Directors, the "Sustainable Development Committee" is established, composed of the chairman and independent directors. Its functions include supervising and managing the overall inclusive finance opportunities and risks, regularly holding meeting at least twice a year to decide and review the goals and performance indicators of the Group's sustainable development strategies for inclusive finance, as well as reviewing the work plans and execution results related to inclusive finance submitted by the Sustainability Office. In 2023, the Board of Directors passed the first inclusive finance policy of the Group, laying the strategic foundation for the Group to promote inclusive finance issues.

Management and Execution Units

The Corporate Sustainability Office is consisted of the Sustainable Finance Team and Sustainable Finance Products Team, responsible for managing and executing the Group's inclusive finance policies and related plans, including the development of inclusive finance products and services, as well as risk identification. Corporate Sustainability Office reports progress and result to Sustainable Development Committee every half year, review and discuss the progress of related products and services, track goal attainment through the bi-yearly cross-subsidiary sustainable finance meetings and the quarterly sustainable finance group meetings to ensure that inclusive finance products and services align with regulatory policy goals and the Group's vision for promoting inclusive finance.

Inclusive Finance Strategic and Risk Management

The Group's inclusive finance policy outlines key strategic directions aimed at enhancing internal management processes and personnel training to improve the effectiveness of product and service development. This is done in coordination with risk management policies to provide suitable financial and non-financial products and services according to the needs of different demographic groups and the business attributes of each subsidiary. Additionally, we have established effective and understandable communication channels, with increasingly stronger partnerships and external advocacy to help build the financial literacy of target groups. The goal is to construct a comprehensive inclusive finance ecosystem from the inside out.

Inclusive Finance Opportunities and Risks

Each subsidiary of the Group regularly conducts identification and assessment of inclusive finance opportunities and risks based on its business characteristics. Relevant products and services are developed in accordance with domestic and international market trends and regulatory policy directions, with financial opportunities and risks measured to formulate business promotion strategies and risk response measures. The main products and services of inclusive finance in the Group are as follows: fractional share trading, regular investment plans for stocks/funds, loans for small/medium/micro enterprises, and "Quasi long-term care," "small amount endowment," and "micro" insurance. Some businesses are involved with financial risks such as credit risk and insurance risk, which corresponds to transaction fee income, loan interest income, premium income, and other potential financial opportunities creating the expansion of the financial assets scale.

Based on evaluations conducted by relevant units within the Group in 2023, the financial opportunities and risks associated with the main products and services of inclusive finance were assessed. Currently, these business activities account for a relatively low proportion of each unit's operations. Despite limited profitability, financial risks also fall within the risk appetite and limits. Therefore, the overall impact of inclusive finance business on the Group's financial condition, financial performance, and cash flow is not significant.

Inclusive Finance Indicators and Goals

The Group considers domestic and international trends in inclusive finance development, as well as regulatory policy directions, for the establishment of systematic management indicators and goals, such as the number of account holders for regular investment plans in stocks or funds with scheduled deductions and the amount of premiums for microinsurance. We implement tracking and improvement measures for the effective promotion of inclusive finance by refining the Company's inclusive finance policies in line with current developments.

Impact Valuation