As member of the National Association of Insurance Commissioners (NAIC) and part of Pacific Life’s Corporate Social Responsibility (CSR) strategy, we report through the NAIC Climate Risk Disclosure in alignment with the Task Force on Climate-related Financial Disclosures (TCFD). The report is a risk management tool aimed at increasing transparency and identifying climate-related risks and opportunities as they relate to the company. Through our disclosure we seek to support informed collaboration and engagement on climate-related issues across the insurance industry.
Describe the board’s oversight of climate-related risks and opportunities.
Pacific Mutual Holding Company (“PMHC”), a Nebraska mutual insurance holding company, is the parent of Pacific Life Corp, an intermediate Delaware stock holding company (“PLC”). PLC owns 100% of Pacific Life Insurance Company, a Nebraska domiciled stock life insurance company (“PLIC”). PLIC owns 100% of Pacific Life & Annuity Company, an Arizona domiciled stock life insurance company (“PL&A”). The PMHC Board's responsibility is consistent with the oversight role of responsible business, risk management, and stewardship. The Pacific Mutual Holding Company Board's responsibility is consistent with the oversight roles of responsible business, risk management, and stewardship. The Board convenes at least five times per year, but unscheduled meetings may be called at any time to address specific needs of Pacific Life.
Additionally, climate-related risks and opportunities are typically among those topics discussed at the Board’s annual strategy retreat. The Board’s governance includes standing committees to facilitate and assist in the execution of the Board’s responsibilities. At each regular meeting of the Board, the committees are required to report significant matters reviewed, considered, and acted upon by the committee. Climate-related risks are considered by the Audit Committee, Investment and Finance Committee, and Governance and Nominating Committee.
Describe management’s role in assessing and managing climate-related risks and opportunities.
Management groups or sub-committees also have responsibility for identifying and assessing climate-related risks and reporting potential exposures to their respective standing committees.
Enterprise Risk Committee: Responsible for all risks across the company, including emerging risks. Management has currently placed climate risk in the emerging risk category within its risk taxonomy, which is defined as a risk that could impact the company within five years.
Management Investment Committee: Responsible for identifying and assessing ESG risk factors related to financial risks in the investment portfolio.
Corporate Social Responsibility team: Updates the full Board once per year on relevant developments regarding the CSR program with respect to the company’s impact on people, communities, customers, and the environment.
Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term.
Through Pacific Life’s risk identification process and prioritization structure, current strategies are monitored and adapted to mitigate the exposure to climate risks for all processes within the business. Given the global nature of climate change, we proactively participate in industry forums and collaborate with peers. This enables us to exchange best practices, deliberate on emerging trends, and maintain alignment with current industry standards in our climate risk management strategies.
Pacific life defines short-term risks as 1-5 years, medium-term risks as 5-30 years, and long-term risks as beyond 30 years. While climate-related risks are closely monitored (see the ‘Risk Management’ section response for further explanation on how the company identifies, assesses, and manages climate-related risks), at this time, Pacific Life has not deemed any climate-related risks or opportunities to be material in the short-, medium-, or long-term time horizons due to the nature of the life insurance business Pacific Life participates in, but this will continue to be evaluated over time.
Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning.
Pacific Life has engaged various stakeholders and business functions throughout the organization, including Board and management committees (see the ‘Governance’ section response), Enterprise Risk Management (ERM) and Business Continuity (see the ‘Risk Management’ section response), Investment, Actuarial, Legal & Compliance, and Corporate Affairs. Below is additional information on the work done within each business area regarding climate-related risks and opportunities.
Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.
Pacific Life’s Management Investment Committee is tasked with determining investment portfolio resilience, testing credit risk of the portfolio. Various impact pathways are identified to assess how changing corporate bonds and commercial loans will affect the portfolio. Effects driven from the climate scenarios can result in losses due to default which is then used to calculate projected actual loss value. The analysis has affected strategies for credit decisions in various aspects of the investment portfolio. Divestments and investment opportunities are being analyzed for new types of financial investments that are more resilient to climate risk under each scenario.
Describe the organization’s processes for identifying and assessing climate-related risks.
Pacific Life identifies, assesses, manages, and discloses the risks to which the business is, or could be, exposed to, including climate-related risks. Climate risks are integrated within the broader risk management framework. Some potential risks are identified through the Business Continuity Management (BCM) group. BCM administers annual Business Impact Assessments (BIAs) to identify risks at the process level, such as processes in the accounting department that may identify miscalculation as a risk. The BIA is annually completed by the manager of a process and derives Process criticality, Recovery Time Objectives (RTO) and required dependencies. BCM may open formal risk issues when gaps in recovery capability do not meet the recovery requirement. This system allows process-level identification of risks that the Emerging Risk Committee and Enterprise Risk Committee may not be able to detect from a management level. Risks identified are then assessed based on the BCMs four tier Process Criticality ranking derived from the BIAs with missioncritical priority being the most important out of four prioritization tiers.
Describe the organization’s processes for managing climate-related risks.
BCM and the BIA process help inform risks that are considered by Enterprise Risk Management (ERM). ERM is responsible for identifying, assessing, and working to mitigate risks. Management committees are also used to assess risks on a group level which can be directly integrated into ERM. The Enterprise Risk Committee is responsible for overseeing all risks present to the company including people, processes, and systems. The Emerging Risk Committee is a sub-committee of the Enterprise Risk Committee responsible for monitoring and assessing new risks and evaluating if they have a material impact on Pacific Life. The committee then assesses ownership, estimated impact, and likelihood. When risks are fully managed, they are removed from the emerging risk list. Climate risk is considered an emerging risk that is regularly monitored for material impact to Pacific Life.
Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk management.
BCM and the BIA process help inform risks that are considered by Enterprise Risk Management (ERM). ERM is responsible for identifying, assessing, and working to mitigate risks. Management committees are also used to assess risks on a group level which can be directly integrated into ERM. The Enterprise Risk Committee is responsible for overseeing all risks present to the company including people, processes, and systems. The Emerging Risk Committee is a sub-committee of the Enterprise Risk Committee responsible for monitoring and assessing new risks and evaluating if they have a material impact on Pacific Life. The committee then assesses which management entity should own the risk, and when risks are fully managed by an entity, they are removed from the 9 emerging risk list. Climate risk is considered an emerging risk that is regularly monitored for material impact to Pacific Life.
Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process.
Pacific Life uses a variety of metrics and tools to manage the potential financial impact of climate-related risks and opportunities on the business. These include metrics related to insurance, investments, and emissions.
Disclose the metrics related to insurance, investments, and emissions.
Pacific life monitors geographic concentration risk of the underwriting portfolio, which aids in the analysis of how exposure to physical risks may impact the insurance portfolio. Catastrophe modeling is not used to assess climate-related risks at this time and is not incorporated into underwriting assumptions or factors given climate change events are not yet expected to be material to business operations.
To better plan for the transition to a low carbon economy, Pacific Life is incorporating investment criteria, metrics, and targets into portfolio management. The Sustainable Financing Framework aims to finance green and social projects that align with Pacific Life’s sustainability priorities. The framework encourages issuers to structure and administer their issuances of green bonds, social bonds and sustainability bonds in alignment with the Green Bond Principles, the Social Bond Principles and the Sustainability Bond Guidelines, respectively. The Principles are intended to promote integrity in the Sustainable Bond market through recommendations relating to transparency, disclosure and reporting. Pacific Life’s Sustainable Bond issuances will target 90% eligible green investments and the remainder eligible social investments, metrics which will be regularly tracked. Examples of eligible projects include green buildings, renewable energy, energy efficiency, and clean transportation.
Pacific Life updates investors annually regarding the allocation of net proceeds from issued Sustainable Bonds, until such time Bonds are fully allocated. Where feasible, the allocation reporting includes qualitative and quantitative key performance indicators.
Credit risk Scenario analysis is being performed by the Investment Committee, which provides metrics for tracking climate-related risks within Pacific Life’s investment portfolio. Corporate bonds and commercial loans are assessed with carbon prices being a key input. Through the analysis, information pathways are identified and used in other models and management decisions. Outcomes of the testing may affect strategies for credit decisions in various aspects of the investment portfolio, and potential opportunities may be analyzed for new types of financial investments.
Greenhouse Gas (GHG) emission disclosures inform investors of Pacific Life’s carbon footprint and track progress as society transitions to a low carbon economy. Scope 1 and Scope 2 emissions were calculated for the first time in 2022 with an established baseline of 2019 using emission quantification methodologies drawn from the Greenhouse Gas Protocol developed by the World Resources Institute and World Business Council for Sustainable Development (GHG Protocol). The emission manual is reviewed and updated at least annually based on developments in data collection, calculation, and data quality review process in future years. Emissions are calculated in metric tons of carbon dioxide emissions, or MTCO2e.
Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (GHG) emissions and the related risks.
2022 Scope 1 emissions are 872.6 MTCO2e, a decrease of 11% over the prior year, and 2022 Scope 2 emissions are 5982.1 MTCO2e, a decrease of 1% over the prior year. Pacific Life defines its GHG emissions inventory organizational boundaries using the Operational Control Approach. Offices over which Pacific Life has operational control are included in the GHG emissions inventory, including owned and leased properties, globally with the exception of the following: 1) Field offices and 2) Any office that is smaller than 500 sq.ft. Progress will be monitored year over year. Scope 3 emissions are not yet calculated, but are planned to be assessed in the future.
Last updated: August 2023