The following is a supplement to the MS & AD Insurance Group's sustainability approach.
FY2022 (April 1, 2022 - March 31, 2023)
See "Corporate Governance" for an overview of the system.
1.Share of the CEO's short-term incentive
- Performance-linked remuneration shall be linked with the business performance of the company and determined based on financial(*1) and non-financial(*2) indicators.The standard ratio between financial and non-financial indicators used in the calculation of performance-linked remuneration shall be“50:50.”
- The stock-based remuneration components of performance-linked remuneration shall be calculated as follows, based on standard amounts for each position
Standard amount per position × business performance coefficient
(financial indicators × 20% + non-financial indicators × 80%)
- The standard ratios of the components of compensation for the President and Director are as follows:
<Breakdown of 25% of Stock-based remuneration>
The ratio of financial indicators (indicators reflecting single fiscal year performance) is
25% × 20% = 5%.
The ratio of non-financial indicators (indicators to reflect medium- to long-term performance
contributions) is 25% × 80% = 20%.
(*1)Financial indicators are indicators that are used to reflect business performance in a single fiscal year in officer remuneration.
(*2)Non-financial indicators are indicators that are used to reflect initiatives contributing to medium- to long-term business performance in officer remuneration.
2．Performance Period for Variable CEO Compensation
- Performance-linked remuneration shall be linked with the business performance of the company and determined based on financial and non-financial indicators.
- Financial and non-financial indicators have been selected after taking into consideration the Group’s Medium-Term Management Plan（FY2022-2025）, which began in fiscal 2022 and will end in fiscal 2025 for a period of 4 years.
3.Claw back Clause
- We have a claw back clause in place. (click here)
Ratio of the amount converted into the fair value of shares to the amount of consolidated fixed remuneration of a person whose total amount of consolidated remuneration in fiscal 2022 is 100 million yen or more.
(*) March 31, 2023 end-of-day basis
■Changes in the environment surrounding human resources
Our Group recognizes changes in the environment surrounding human resources as one of the important risks in light of the following:
・A gap between management strategies and the human resources portfolio, as well as a shortage in securing or developing human resources to eliminate the gap due to external changes in the human resources market, labor supply-demand, and changes in the skills and expertise necessary for implementing strategies such as DX promotion.
・A decline in employee engagement and an outflow of human resources due to a lack of employee support program that accurately captures changes in employees' attitudes toward autonomous career opportunities, flexible / diverse work styles, and respect for diversity.
・Our Group's medium-term management plan calls for the value creation through the global expansion of CSV×DX and the transformation of the business by reforming the structure of the business and adapting to changes in the business environment, including the creation of new businesses.
Promote digital human resources development programs which all employees acquire basic digital skills with the aim of fostering human resources leading the CSV×DX strategy. Based on our in-house certification system and education programs, we are systematically improving our skills in both business and digital fields. We are implementing our Group's unique Digital Human Resources Development Program in cooperation with universities and other institutions.
Please refer to ERM and Risk Management for other important risks.
■Damage to natural capital
Our Group recognize that damage to natural capital is an emerging risk that may affect our group's management in the medium to long term.
There is a possibility of an impact on insurance underwriting and investment / financing in our Group due to the following;
・depletion of water and other natural resources
・man-made pollution and accidents that cause significant damage to the environment
・ecological degradation and crises
・Our Group provides a number of insurance policies and loans to corporate clients in a variety of industries. For example, we underwrite and invest in natural rubber industries in Indonesia's tropical forest region, which is estimated to have a very high biodiversity. The production of natural rubber is highly dependent on nature, and depending on the degradation of the nature on which it depends (such as the occurrence of pests and diseases or water shortages), the supply chain will be disrupted, and this will greatly affect corporate performance in related industries.
・Natural capital losses will have a negative impact on business activities in a variety of industries, but there are still many challenges in the methodology of how to assess and analyze these risks.
Please refer to ERM and Risk Management for other emerging risks.
We maintain a climate-related governance structure composed of the Board of Directors, the Group Management Committee, and Task-Specific Committees such as Sustainability Committee.
CSuO（Group Chief Sustainability Officer）has been newly assigned this fiscal year and administrates Sustainability.
As part of the initiatives contributing to medium- to long-term performance, we have non-financial indicators reflected in the performance-linked remuneration for directors and officers excluding external directors. Initiatives toward climate change mitigation are included in the evaluation of these indicators. The standard ratio of performance-linked remuneration to total remuneration is 50% for President & CEO and 30 -40% for other directors and officers.
Other employees are also incentivized through annual appraisal where achievement of climate-related KPI in his charge is considered.
Business Coverage for our fossil fuel-related policies in “Business Activities with Consideration for Sustainability” is all of active, passive and third-party managed investment and all direct and re-insurance excluding treaty-re-insurance.
Our memberships of industry associations and outside initiatives will promote "Initiatives to Achieve Net Zero By 2050".
While ascertaining the decarbonization pathways that these organizations are pursuing, the status of their membership and activities are managed by the line of control, and important information is reported to the director in charge. After management of the status of membership and activities by the line of control, material matters are reported to the officer in charge. We will respond through discussions with the organizations when found necessary to confirm consistency with our policy.
Scenario Analysis has been updated in August 2022 in our TCFD disclosure (link below).
■Scenario Analysis excerpt
|Business area||Contents||Result Examples||Scenario used|
|Physical Risk||Insurance Underwriting||Fluctuation in loss paid by typhoon and storm surge in Japan||
of occurrence -30 to +28%
|Transition Risk||Investment||Impact on investee companies by carbon costs||EBIT at Risk
Low Carbon Price Scenario: 4.2%
Medium Carbon Price Scenario: 8.9%
High Carbon Price Scenario: 18.5%
|Developed by Trucost referring to Nationally determined contributions (NDCs), OECD and IEA.|