Ceylinco Annual Report 2024

CEYLINCO LIFE’S ESG JOURNEY

From Giving Back

Contributing to society due to the Company’s success via:

Philanthropy

CSR Activities

To Creating Shared Value

Achieving long-term success by contributing to society via:

Integrating Governance and Sustainability

Upholding Fiduciary Duty

ESG COMMITMENT

Ceylinco Life has long been deeply committed towards building a long-term sustainable business, built on the Company’s purpose, outlined on page 11 of this report.

This is evidenced by a robust ESG Policy, which is in turn reinforced by stringent governance structures, forward-thinking strategies, and holistic targets which govern all aspects of the entity’s operations.

Refer to the Corporate Governance report for ESG Committee Roles and Responsibilities (page 261)

ESG GOVERNANCE

As Ceylinco Life's highest governance level, the Board of Directors is responsible for overseeing the development and adoption of the Company’s sustainability strategy and related policies. Accordingly, detailed responsibilities have been assigned to the Board ESG Committee.

The Board ESG Committee comprises all 5 Executive Directors of the Company. Three sub-committees (Environment Sub-Committee, Social Sub-Committee, Governance Sub-Committee) comprising representatives from each department have been established to oversee the achievement and implementation of ESG aspects across the Company.

The sub-committees are responsible for identifying Sustainability-related Risks and Opportunities (SRROs) to the Board across their respective areas. These will in turn be escalated to the Board to drive strategy development and their necessary action.

Refer to Our Strategy Towards Identifying Climate-Related Risks and Opportunities (CRROs) (pages 36-38)

Refer to Board Oversight Role and the Management’s Role of ESG governance (page 216)

Board ESG Committee

Environment
Sub-Committee

Social
Sub-Committee

Governance
Sub-Committee

THE ESG FRAMEWORK

Ceylinco Life’s ESG Framework is used across the board to assess and evaluate the sustainability and ethical practices of the Company and its investments. It is driven by an overarching ESG vision and mission, and encompasses the following core focus areas which are strongly linked with the organisation’s financial stability, while enabling stakeholder value as outlined below

Refer to Strategy and Resource Allocation for the strategic objectives under each pillar (pages 107-120)

Refer to Our Impact Story for Ceylinco Life’s sustainable impact beyond the value chain (pages 22-25)

ESG INTEGRATION

NAVIGATING THE PATH TO SUSTAINABILITY:
VOLUNTARY ADOPTION OF SLFRS S1 AND SLFRS S2

As sustainability reporting becomes a critical aspect of corporate transparency, Ceylinco Life has taken a proactive step by early adopting the Sri Lanka Sustainability Disclosure Standards – SLFRS S1 (General Requirements for Disclosure of Sustainability-Related Financial Information) and SLFRS S2

(Climate-Related Disclosures). While these standards officially come into effect on January 1, 2025, the Company has embraced them ahead of schedule, reinforcing the Company’s commitment to sustainability, accountability, and long-term value creation.

These standards are designed to meet investor information needs, with investors defined as both current and potential stakeholders, including

creditors. In SLFRS terminology, these individuals are considered the primary users of general-purpose financial reports.

SLFRS S1 & SLFRS S2 VS. OTHER SUSTAINABILITY FRAMEWORKS

Criteria	SLFRS S1 & SLFRS S2	Other Sustainability Frameworks
Focus	Financial impact of sustainability-related risks and opportunities	Broader sustainability goals for global prosperity
Key Objective	Assess effect of sustainability on cash flows, funding and capital costs.	Promote responsible business practices and long-term environmental and social well-being
Regulatory Alignment	Aligned with ISSB’s IFRS S1 & S2 for financial reporting integration	Includes frameworks like GRI, SASB, and SDGs
Scope	Emphasizes financial materiality (impact of sustainability on financial performance)	Covers both financial and non-financial materiality (impact of business on society and environment)
Primary Users	Existing and potential investors, lenders, and other creditors.	Governments, NGOs, regulators, and broader stakeholders
Reporting Areas	Governance, strategy, risk management, metrics & targets	Economic, environmental, and social impacts
Application in Sri Lanka	Tailored to Sri Lankan financial reporting requirements	Used for voluntary or industry-specific disclosures

Core elements of SLFRS S1 and SLFRS S2

Governance

Investors need insight into the company’s governance structures, policies, and processes for managing sustainability-related risks and opportunities.

Strategy

Companies must disclose their strategies for addressing sustainability-related risks and opportunities.

Risk Management

Investors must understand how a company identifies, evaluates, prioritises, and monitors sustainability-related risks and opportunities to assess overall risk exposure.

Metrics and Targets

Companies should report on their sustainability performance, including progress toward regulatory or self-imposed targets.

Core content of SLFRS S1 and SLFRS S2

Content	Reference from the Annual Report	Reference from the SLFRS S1 and SLFRS S2	Note
Identifying sustainability related risks and opportunities.
Climate Related Risks and Opportunities		SLFRS S1 (Sec 43-44)	Insurance Industry-based Guidance to identify sustainability related disclosure topics and metrics
Climate-related physical risks. Climate-related transition risks. Climate-related opportunities.	pages 36-38	SLFRS S2 (Sec 3-4)	CRROs identified based on SLFRS S2
Determining material information (including metrics)	Materiality Assessment pages 99-106	SLFRS S1 (Sec 17-19)	An entity shall disclose material information about the sustainability and climate related risks and opportunities that could reasonably be expected to affect the entity’s prospects
Disclosure locations and reporting timelines	pages 33,30,216,36,37,38,87,88,163,165	SLFRS S1 (Sec 60-69)	SLFRS S1 and S2 disclosures are produced as a part of general purpose financial statements.
Comparative reporting requirements	Not reported. Transition relief applied	Transition relief applied -SLFRS S1 Appendix E: Sec (E6) Transition relief applied -SLFRS S2 Appendix C: Sec (C3)1 applied - SLFRS S2 (C3)	An entity is required to disclose comparative information for all amounts reported in the current period, based on the preceding period. If it helps users better understand the sustainability-related financial disclosures, the entity must also provide comparative information for narrative and descriptive sustainability-related financial data.
Compliance statements	pages 261 Statement of Directors Responsibility for Environment,Social and Governance	SLFRS S1 (Sec 72-73)	An entity whose sustainability related financial disclosures comply with all the requirements of SLFRS Sustainability Disclosure Standards shall make an explicit and unreserved statement of compliance. Third-party assurance for SLFR S1 and S2 will be obtained from 2025.
Transition reliefs		Transition relief applied - SLFRS S1 (E1-E6) Transition relief applied - SLFRS S2 (C3-C5)	Climate-first reporting - SLFRS S1 permits an entity to disclose information on only climate related risks and opportunities (in accordance with SLFRS S2) in the first annual reporting period in which that entity applies SLFRS S1. Comparative reporting – See above (Comparative reporting requirements) GHG emissions - In the first annual reporting period of applying this standard, entities are granted two reliefs: - Alternative GHG Measurement If an entity previously used a different method instead of the Greenhouse Gas Protocol (2004) to measure emissions, it could continue using that method. - Scope 3 Emissions Exemption Entities are not required to disclose Scope 3 emissions, including financed emissions for financial institutions (e.g., insurers, banks, asset managers). Anticipated financial impact of identified CRROs – entities are permitted to defer [SLFRS S2 Paragraph 15(b)] the disclosure of qualitative information regarding anticipated risks and opportunities for a period of two years following the mandatory application of the standard. Resilience assessment and climate related scenario analysis – relief period of two years is granted to apply the requirements [SLFRS S2 Paragraph (22)] from the date of mandatory application to fully comply with climate resilience disclosure requirement.
Sources of guidance		SLFRS S1 (Sec 54-59) pages 419-421	Ceylinco Life has referred to the following sources of guidance in identifying SRROs/CRROs and preparing relevant disclosures: - SLFRS Sustainability Reporting Standards (SLFRS S1 and SLFRS S2) - SASB Standard - Insurance Industry
Reporting Entity		SLFRS S1 (Sec 20) -B38 SLFRS S1- E1	Being a subsidiary of Ceylinco Holdings PLC, a top 100 listed entity, the Company is required to adopt SLFRS S1 and SLFRS S2 from January 1, 2025, onwards. (Mandatory application) SLFRS S1 and SLFRS S2 covers the SRROs relevant to Ceylinco Life Insurance limited only.

Our strategy towards Identifying climate-related risks and opportunities is critical as a company, particularly in the life insurance industry, as it helps to mitigate potential adverse impacts and capitalize on emerging trends.

climate related risks and opportunities

Time scale: short term (1-2 years); medium term (3-5 years); and long term (5+ years).

CRRO	Description	Time Horizon of the risk reasonably be expected to occur	Impact to the business model/Value Chain	Effects on strategy and decision making	Current Financial Impact	Anticipated Financial Impacts (Short, Medium ,Long term)
Physical Risks: Acute Risk -Event driven Risk
Extreme weather events (Floods and landslides)	Increased claims due to extreme weather events affecting health and mortality rates. Physical damage to infrastructure leading to operational disruptions and higher costs.	Short to Medium term	Increased claims and Operational Costs Infrastructure Damage Service Disruptions and customer dissatisfaction	Adjust the policy pricing to incorporate the cost of extreme whether events New products to cover acute risk element Moving to cloud data centres Business continuity plan, disaster preparedness plans	Total claims due to floods and other extreme weather conditions- Operational cost of damage- Floods on 27.11.2024 - total negative impact on collection Batticaloa Branch Rs. 3.3 Mn Akuressa Branch Rs. 0.3 Mn	Medium
Physical Risks: Chronic Risk – Long Term likelihood of something happening
Spread of contagious diseases	Respiratory conditions, heat-related diseases becoming more prevalent. Spread of infectious diseases caused by viruses, bacteria, fungi, or parasites.	Short to long term	Increase claims and operations cost through more claims/ reinsurance cost Disruption to the business operations due to mobility limitations between office premises/ Close-down of branch operations Workforce absenteeism Increase in staff welfare cost	Adjust the pricing to incorporate the chronic risk New products to cover above risk elements Business continuity plan, disaster preparedness plans Use technology for predictive modelling & early risk identification	No significant financial impact currently observed, but potential future costs are expected in [short/medium/long] term.	Medium to Long
Rising sea levels	Coastal erosion and ecosystem shifts causing land displacement and additional claims.	Long	Coastal erosion that impact to deprecation of lands	Invest in predictive modelling for long term climate risk. Support government and private sector efforts in climate adaptation strategies. Assess exposure of land linked investments to climate risks.	No significant financial impact currently observed, but potential future costs are expected in [short/medium/long] term.	Long
Rise in Temperature	Global Warming due to Greenhouse gas effect caused by the GHG such as carbon dioxide, methane, and nitrous oxide in the atmosphere	Short to Long	Health issues in sales staff who visits customers on field Reduces human productivity Lead to employees/ policy holders’ death	Adjust underwriting & pricing models for climate-related health impacts. Promote digital channels to reduce dependency on field visits. Increase investment in ESG-friendly assets (green bonds, renewable energy). Expand climate resilient insurance offerings.	No significant financial impact currently observed, but potential future costs are expected in [short/medium/long] term.	Medium to long term
Transition Risks
Policy and Legal Risk	Non- availability of carbon pricing policies in Sri Lanka including carbon taxation, carbon credit programs and Cap and-Trading system on total GHG emissions	Medium to long term	Discourage investment options that engaged in low carbon solutions	Complying with the government plan of becoming net zero in 2050.	Currently no impact, but future regulatory changes may introduce compliance costs	Medium to long term
Market Risk	The impact on market share reflects a company’s ability to attract and retain customers by introducing environmentally friendly products	Medium to long term	Loss of market share due to non adaptability with the consumer preferences towards environmentally friendly products	Introduction of new products that featured with environmental aspects like green initiatives.	No significant financial impact currently observed, but potential future costs expected in [short/medium/long term]	Medium to long term
Reputational Risks	Reputational damage if stakeholders perceive the company as insufficiently addressing climate change, affecting customer retention and brand trust.	Medium to long term	Impact on the Market share due to non-adaptability with the Consumer preferences towards environmentally friendly products. Loss of the brand Value Loss of Investor Confidence	Introduction of new products that featured with environmental aspects like green initiatives. Increase in customer awareness	No significant financial impact currently observed, but potential future costs expected in [short/medium/long term]	Medium to long term
Opportunities
Development of Climate Resilient Insurance Products	Create new insurance products tailored to climate risks, such as health coverage for climate-related illnesses or policies supporting climate resilient homes and sustainable lifestyles	Medium to Long	Increased demand for climate-related coverage; potential underwriting challenges due to evolving risk profiles.	Shift towards sustainable underwriting and product innovation; requires investment in risk modelling and product development.	No financial impact at present, but expected to enhance profitability as market adoption increases	Moderate to High (growth in premiums and market share, potential increased claims exposure)
Sustainable Investment Strategies	Invest in green projects, renewable energy, and low carbon infrastructure to benefit from the growing green economy and enhance the insurer’s reputation for sustainability.	Short to Long	Diversification of investment portfolio, alignment with ESG goals, and compliance with sustainable finance regulations.	Strategic shift towards ESG-compliant investment portfolio; may require reallocation of capital and risk assessment of green investments.	Green Bond - 12% interest rate per annum Refer Environmental Sustainability dashboard on page 152 for more details	High (potential for higher long-term returns, regulatory benefits, and reputational gains).
Brand Differentiation and Reputation Building	Position the insurer as a leader in sustainability and attract eco-conscious consumers, strengthening relationships with policyholders, investors, and regulators.	Short to Long	Increased customer trust and loyalty, competitive advantage in a growing sustainability conscious market.	Adoption of sustainability focused marketing, partnerships, and enhanced stakeholder engagement.	No Financial impacts assessed at the present.	High (enhanced customer acquisition and retention, stronger investor confidence).

Overview

ESG integration