Okay. Good morning, everyone. My name is Greg Peters, and I'm the analyst for Raymond James covering the insurance, transportation, and technology space. I'm honored, really, to host, in my career, my first ever ESG strategy fireside chat. As part of the process, I have Leslie Anderka, who I'll turn over to in a second, to help stem the chat and lead some of the questions. I'm honored that we have Aflac and Fred Crawford, who serves as President and COO, on the panel to walk us through their approach to the ESG-related issues. Just for the audience that's listening in on the presentation today, the schedule is this presentation's supposed to go till 10:20 A.M. Eastern Time this morning.
If you have any questions, I'd encourage you just to email me directly at greg.peters@raymondjames.com, and we'll certainly try and include those questions into the discussion as it proceeds over the next 40 minutes. With that said, I'd like to turn the microphone to Leslie to give a brief introduction.
Perfect. Thank you, Greg, and good morning. Thank you, Fred, for joining us as well. As Greg mentioned, my name is Leslie Anderka. I cover ESG strategy here at Raymond James. That is a newer product on the research side. We launched coverage officially in February 2020 here at Raymond James on that. We've been developing the topics that we cover in all the different events we do, including panels such as this over the last few years, and we're very excited to have Aflac on here with us to talk about their ESG journey. I know for everyone out there in the audience, whether an investor or another corporate client, we've all had our own stories and the way that we're working through them over the last year. Having these conversations is always enjoyable and also greatly informational.
Before we get started, as Greg mentioned, you can email him with questions. If you have any ESG questions you'd like to reach out to me about after this panel, feel free to email me, which you should see my name on the screen, leslie.anderka@raymondjames.com. To get us started, I'm going to hand it over to Fred so he can give us an introduction and tell us how Aflac is approaching the ESG journey.
First, Greg and Leslie, thank you very much for the invite this morning, and welcome to everybody. I hope everybody is safe and sound. First, a little bit about Aflac, only because it will tie into some of my comments. Many of you, perhaps all of you, are familiar with Aflac as a company in terms of our brand and our presence. Structurally, as a company, we are really the leading voluntary benefit provider in the work site in the U.S., effectively built that business some 70 years ago. Essentially what our products are, they are our gap products or supplemental products, basically filling the gap between what your major medical insurance covers in the way of health insurance and what your out-of-pocket expenses are related to a health event.
In Japan, we started about roughly coming on 50 years ago, not quite, and we are also the leading supplemental health insurance company in Japan. In Japan, that business is called the third sector business, and it's medical and cancer and disability and now elderly care products that essentially fill the gap between what the government provides in the way of a national healthcare and support system and what out-of-pocket costs are for an individual. In other words, we have a very similar strategy both in the U.S. and Japan, but just formed around the healthcare system that is unique to the U.S. and unique to Japan. Those are the two largest insurance markets in the world, and we're the largest at what we do in those geographies.
Part of the reason I mention that is because when we think about ESG, our efforts are always primarily on a U.S.-based perspective and platform, and then very importantly, on a Japan-based perspective and platform. You'll hear me reference that from time to time. In terms of our ESG journey, the way I would describe it to you is that certainly as part of our culture, the primary components of ESG, government, environmental climate, particularly diversity and inclusion, and cultural social investments have been part of the fabric of the company dating back to the three brothers that founded the company nearly 70 years ago. In terms of the more formality or formal structure built around ESG, that really kicked in around 2008.
Actually quite a few years ago, we were a company that formed what we at the time called our Green Committee of the Board of Directors. It was the brainchild of one of our Board members, Betty Hudson, who was a longtime Board member of Aflac and was an executive at National Geographic in her later years as an executive, had a very strong and acute window into driving ESG initiatives, particularly around climate diversity, social gaps, and issues. She encouraged the Board to form this Green Committee. It later became called the Sustainability Committee, and today it's called the Corporate Social Responsibility and Sustainability Committee of the Board. It is the committee of the Board that wraps all of our ESG efforts together in a bow and drives it forward.
I think most of you will know from a governance perspective, you'll have elements of your governance committee that handles ESG issues. You'll often have your investment committee, in our case, that is handling and tackling ESG issues. We have a special board that wraps it all together, a committee of the board. In terms of some key milestones in our journey, I would say a few things. One is over 20, coming on 25 years ago, we formed the Aflac Cancer and Blood Disorders Center in Atlanta. We've donated over $150 million to this organization that carries our name and attacks childhood cancer, but also very importantly, blood disorder. In particular, it's one of the leading sickle cell platforms in the country. As many of you know, sickle cell is something that affects particularly the African American community.
It is both a cause and very close to our culture as well as a diversity-based platform in our eyes and something that we're very proud of. In Japan, we formed something called the Parents House. Think of the Ronald McDonald House in the U.S., this would be similar, only focused on families with children that are fighting cancer in Japan. This is predominantly locations in Tokyo and Osaka. They have over the past 20 years now, it was formed in 2001, have served over 140,000 individuals through those Parents Houses in Japan. Culturally and for my point being for several years, that's been part of the fabric of the company, long before ESG became the terminology that's used today.
Now today, we're advancing the ball in ways that are, I think, familiar to all of you, most notably around sizing and measuring our Scope 1, 2, and 3 emissions. Emphasis on Scope 3, which is the more complex part of the measuring dynamic. As you may know, we've pledged to be carbon neutral by 2040 and net zero by 2050. That is on a full 1, 2, and 3 Scope basis. We also have been advancing our disclosures across the board, most notably around TCFD-type disclosures on climate, and other disclosure platforms that have become the standard of the industry. We issued our first sustainability bond this past year for $400 million.
As many of you know, you can't issue a sustainability bond unless you have the appropriate audited tracking and governance processes inside your company to ensure that the proceeds are used in a qualified way once you issue the bond. What I always tell people is it's not about the capital markets side of it's about what all has to be in place in order to even qualify for issuing a sustainability bond. We're quite proud of that and happy with that. Those are some of the key areas that we've been advancing in most recent years. Again, very proud of our path up to this point.
Perfect. Thank you. With that, some questions in today. I'd say that we've got it breaking out into two conversations today. We're just going to first talk about Aflac ESG footprint, which is the nomenclature we use to talk about ESG risks and disclosures. Then our second conversation, if you will be on your ESG handprint. How Aflac is pushing for sustainability, as you mentioned in your prepared comments there. I'd say that the first question here is about transparency and comparability of disclosures. That's the name of the game now. It's what the SEC is pushing for, foreign governments, non-regulatory bodies as well. With transparency and comparability of disclosures being so specific and so culture-driven, how does Aflac approach disclosing and tracking ESG metrics and targets that you have out there?
Do you focus, you mentioned TCFD, do you focus on any other particular frameworks? Are there ones that you've released your data in those formats before?
Yeah, there are. First of all, this is actually also ties in a bit to the sustainability bond and as I mentioned, the things that must be in place from a reporting and auditing perspective, compliance perspective to do it. We base a lot of our disclosures and internal measurements on, for example, UN-based platforms. This would include the global reporting standards or so-called GRI standards for reporting. Then more recently, the SDGs, Sustainable Development Goals. These are the 17 or so published goals coming out of the UN of which you can pattern your measuring, internal measuring, and disclosures around those standards. We do pay careful attention to the types of best practices that grow out of the UN in terms of global standard setting for reporting.
I mentioned SASB, of course, I think most companies you would talk to that have a ESG platforms want to be able to, so does Aflac comply properly with SASB initiatives around a standard of reporting. The reason I mentioned TCFD more particularly is we now are on our second full TCFD report as a company. We had our first official report last year. This is our second annual report. The reason I particularly emphasize that is because it's a very holistic report. It has a lot of both quantitative and qualitative discussion around all holistic facets of reporting on particularly sustainability, including risk reporting and how we think about risk.
The other reason I mention it, though, is that many in the industry, in the insurance industry, and I would say more broadly, are encouraging, for example, the regulatory community, the rating agency community, to try to coalesce around a set of standards that frankly don't drive companies crazy. Right now, there are so many different requests for information, questionnaires, that are coming into companies to feed information that we're trying to really, as an industry, push for a more common set of measuring dynamics to make life easier on us reporting, and for comparability and measurability and all the things that I think an investor and other governance gurus would want to see. The TCFD report, in our view, is the best report for accomplishing that.
We're finding many of the regulators in our industry, the state-by-state dynamic as well as the NAIC, are in fact coalescing around TCFD reporting. We obviously publish and will make available those reports. I emphasize that one because I think it does the best job of somewhat of a common basis of reporting among companies, absent a true global standard or agreed-upon regulatory standard.
Perfect. Thank you. You can't talk about ESG these days without touching on the changes that occurred in 2020. After last year, it seems that the tier 4 of ESG is the R for resilience. Now, how did Aflac work with employees as well as customers in the communities in which you work to face COVID, continue business during lockdowns, provide necessary resources, information, premium delays or cuts for customers? What was the Aflac approach to that?
I would tell you this, I think very true to form all of your cultural commitments, your verbal commitments, saying the right thing, all of that gets tested in a very real way when you are faced with a crisis of some kind. Sometimes the crisis is a company crisis. Sometimes the crisis is more along the lines of a pandemic, which is more of a global crisis in nature. I think in many respects, it tested out elements of your commitment around various aspects of ESG, particularly around the more social, cultural, community aspects of ESG. In our particular case, we were pretty early in making moves as a company. There's a couple reasons for that. One is our Japan presence. You have to really remember back to the early days of the pandemic.
It started to hit the news and really become an issue with the Diamond Princess cruise ship, if you remember that, off the coast of Japan. It was that that started the process of understanding what was going on in that ship, what was the nature of this virus Japan was struggling with, whether to let people onshore or not, and how to contain that. Japan is no stranger to fighting off things like the Asian flu and other dynamics. Because of our presence in Japan, we had a very close and insightful understanding of what was developed. We were very early to move as a company. The other issue, and this goes to ESG, is we moved very quickly in our hometown of Columbus, Georgia, and we moved quickly to move people remotely, upwards of 98% of our employees in Columbus, Georgia.
We have 5,300 employees in the U.S., and 3,500 of them are in Columbus, Georgia. Columbus, Georgia, is a community of 200,000 people. If we get it wrong at Aflac, we could overwhelm the hospital system and hospital beds and critical care system. We moved very quickly and very early, long before any other company was even discussing the notion of moving remotely. We moved all of our employees remote because we were very concerned about the hospital system in Columbus, Georgia. We did that smoothly, and that ended up really managing the local environment in a better way. The other thing we did is, of course, we answered the call with our pocketbook. We donated about $10 million to first responders both in the U.S. and in Japan to go at the virus.
We immediately expanded some of the definitions in our coverage, this is very important. As you all know, one of the things that we provide is hospital coverage, where we reimburse individuals for a day in the hospital. We reimburse them if they move into the ICU. We immediately expanded the definition because the definition of hospital all of a sudden changed. In Japan, hospital was in hotel rooms that were converted to hospitals. In the U.S., as many of you know, in some cases, we were converting parking garages next to hospitals to take on patients. We immediately expanded that definition. Basically, if you are being treated, you're good for coverage. It doesn't literally have to be brought into a hospital, if you will. Those are examples of the things we did.
We obviously, with our employees, immediately did things like erase any sort of co-pays for anybody that was needing medical attention. We expanded our definition of leave and qualified leave because we wanted people to feel very comfortable. They had to take care of their families, in many cases, kids out of school, elderly parents they had to care for. This is both in Japan and the U.S., we greatly expanded our definition of what accounts for paid leave because we knew these were unusual circumstances. Those are a few of the things we did as part of our adjustment in the community. Obviously, it was a big deal for us and something we wanted to move quickly on.
That's great. Thank you for all the detail there. Also on the side of, as an insurer, Aflac has a large scope of personal identifying information. Given that a large issue risk for many companies, whether it be in financial services or in tech, et cetera, is data security and customer information security. How do you, as a company, approach security around those issues, and how does that evolve with the constantly fluctuating cybersecurity landscape today?
Well, it starts by understanding something very fundamental, and that is, unfortunately, healthcare or health information, personal health information on individuals has become one of the more valuable pieces of information in the black market among cyber criminals. You tend to think naturally about things like your credit card information, your bank statement information, things that are very financially oriented. You don't realize how valuable all of the personal identifiable information around medical records are in the black market, unfortunately. As a result, if you are in the health insurance industry, whether it be supplemental or major medical, while supplemental health insurance carries less data, if you will, on the personal health information of individuals, we still have it, and we have to be particularly careful about it. As you can imagine, we have very robust compliance standards that we maintain.
They're driven by regulatory dynamics, also best practices in the industry, and obviously the local and national laws and regulations, and in our case, international law and regulation as pertains to Japan. We have very robust data security policies in place, and we actively monitor the threat landscape on a regular basis. I think most importantly for the purposes of this conversation is governance over cybersecurity. We actually happen to be this week in our board meetings, one of the standing agenda items that we have at our audit and risk committee is a whole report on where we stand on the cybersecurity and privacy landscape. Where are we on the maturity spectrum of where we want to fall relative to peers in the industry and best practices globally?
That report does something very, we think, important, and that is we report out of that committee to the full board. Every board meeting, the audit and risk committee is given a detailed download, the full board is given a similar report out as part of our board meeting. By doing that, by having that type of visibility at the top of the house, it pushes the rest of the organization to be very refined and very acutely aware of where we stand, where we see any gaps, how we're closing them, what threats are out there, and how we're dealing with that.
I would tell you the most important thing is starting from the governance of it, and then the rest flows through naturally because no executive, including myself, wants to go in front of the audit and risk committee of the board or the full board and talk about where we have gaps and weaknesses or threats. One more comment I would make. This is something that I think is obvious, but I'll just make it. The most valuable asset that our company has both in the U.S. and Japan is our brand. 9 out of 10 individuals in the U.S. know the Aflac brand. Similarly, 9 out of 10 individuals, consumers in Japan know the Aflac brand. We have a policy in 1 in 4 households in Japan, and our brand is something we possess.
When we think about privacy of information and protecting information, we are also focused on protecting the most valuable asset of the company, and that's the brand. There's no shortage of attention or investment to do that because we can't risk a black eye in that regard when that's our number one asset.
That's an understandably thorough answer. It seems like these cyber issues, it's not a question of preventing them, it's just a question of minimizing them when they do pop up. Seems to affect a lot of different industries.
It is. It's a bit like homeland security.
Yeah.
You can't guarantee that something won't get through and cause a problem, but you can sure do everything you possibly can within reason to make it difficult and lower that risk profile as much as you can.
Precisely. I'm going to kick off conversation two, and this is around how Aflac is working to push forward sustainability issues through its business model and through community involvement. I'll kick off with one question and then a follow-up, and then turn it back to Leslie to bring home the rest of the conversation in the remaining 15 minutes. The first area I wanted to focus on is just the social issues and the framework of all of the If you think about 2020 and early 2021, there was a lot of social movements in the U.S. and globally. Some of it was COVID related, some of it, there were protests of other sorts that manifested itself across the country and frankly, across the globe.
Fred, from your perspective, when you think about Aflac, can you give us a, from where you sit, how does Aflac track its diversity within the company? How do you think you measure up not only against the broader companies comparisons, but I think within the insurance industry, there's been some challenges in this area as well. That would be my first area to focus on.
I've been with Aflac for about six and a half years now, and what's interesting is it's given me an opportunity to really understand and study and get familiar with the depth of the culture of the company. It's a very strong culture here at Aflac, and you got to remember that Aflac was built from the very single first policy we sold both in the U.S. and Japan. We have not grown through acquisition, for example, we have merged and so forth. As a result, that creates a very thick and very formidable culture. One aspect of that culture is diversity, and this is my personal observation, but I think it's confirmed, and that is, we became a major company in Columbus, Georgia, 90 miles south of Atlanta, on the border of Georgia and Alabama.
The founders of the company, including particularly our principal founder, John Amos, really set the tone for themselves to drive diversity and fairness and equitable treatment, really equity, in the community, starting with the community around us and then starting beyond that. Interestingly, John Amos was very good friends with John Lewis, again, being in proximity here on the border of Alabama and Georgia, there was a lot of understanding and focus about the things that John Lewis was driving. He became a friend of the company and somebody that we worked with, in driving those types of initiatives. It's been part of the fabric of the company for many years. Today, 65% of our board are minority and women, and two members of our five-member executive team are minority women, African American women, running both Aflac U.S. as the general counsel of the company.
This has just been ingrained in the company, to drive diversity throughout. Interestingly, I will tell you that it also travels over to Japan. Japan is a different matter. Japan diversity is really about driving women in executive leadership roles and officer roles. Back in 2014, we established Women in Leadership in Japan to drive towards a goal of 30% of our officer ranks in Japan being female by 2025. That's a significant initiative in Japan that's broader than Aflac. It's also part of the government's initiative to drive better GDP growth by having women in the workplace and most importantly, moving up the ladder into leadership positions. We currently have around, we're approaching 23% of our managerial leadership structure in Japan being female, and we're quite proud of that. That makes us a leading company in Japan in that regard.
We have more room to go, of course, but we're on the right path. Where we are today, though, is taking it from what we do internally and our statistics internally to how we drive it externally. That is through initiatives involving particularly the way in which we invest our assets. We have incrementally invested in $600 million worth of diversity and inclusion qualified investments that we've committed to. This is opportunity zones and really what we would call standing in the gap, where we stand in the gap between economic prosperity and some of the communities that are underserved, underdeveloped, and have been left behind in many cases, closing that gap with the rest of the community on particularly economic, educational, housing, and so forth, health basis. That's where we're focusing much of our investments.
I would say, Greg, where we've matured is from, hey, our house is very well in order when it comes to diversity statistics on any measure that you can base it on. Okay? The issue isn't that any longer. The issue is now what can we do as a company externally to drive more of that into the community around us? Not surprisingly, where do all the roads lead? It leads to your $135 billion investment account, right? Because it's all about economics at the end of the day. We can be out there as a leader, we can be an influencer, and we are. At the end of the day, it's the power of that economics of our asset and how we invest it that's going to be the biggest driver, so we're concentrating on that.
As part of your answer, you talked about education. Can you just provide a brief view on what kind of programs you have internally, education programs you have for your existing employees to help them go out into the marketplace, either recruiting new talent to come on board at Aflac or customers that are more diverse and qualify under the better footprint going forward?
I'll describe it in this way. First, I would tell you that at Aflac, we have many of the same types of programs, I think, that have become conventional in mature corporations that are dedicated to these initiatives. We have significant diversity and inclusion councils within the company that provide education. We have a chief diversity and inclusion officer in the U.S. We have a similar officer role in Japan, although more oriented around women in the workplace. These organizations penetrate and provide education. We also build a lot of internal education around all employees through use of various communication vehicles inside the company. Very importantly, though, I would tell you one of the things that we made a decision to do, is incorporate ESG metrics, including diversity inclusion standards, into our compensation programs and into our annual incentive compensation.
I hate to make this all about compensation, the reality is that at the end of the day, you want accountability, not just communication. If you want everybody harnessing around the same mission, embracing and educating themselves and needing to remain educated, then tying it into incentives is very helpful to rally troops around. We've also embedded that into our system. By communicating on where we stand on the metrics and that it matters to your compensation, that resonates with every employee pretty quickly as you can imagine. It becomes less of a nice thing to do or the right thing to do and more embedded in the fabric of what the company's trying to achieve in the way of real milestones. I consider that part of communication.
One of the things we're also doing on the branding side is what we call Care on Purpose. We're trying to move from being that brand that everybody loves the duck and finds our commercials humorous and noteworthy. We're trying to move that to more of where can we advance the ball on caring and caring on purpose, because that drives a thicker attachment point between you and the consumer and you and the intermediaries, such as agents and brokers, in driving your business. One of the partnerships we have recently is with Historically Black Colleges, HBCUs. We have been developing partnerships with them, which help with recruiting individuals and talent into distribution into executive roles. You might have noticed Deion Sanders has now joined Nick Saban on our commercials. For those of you who are college football fans, that's not an accident.
It's not just about Deion Sanders. It's also about him being a head football coach at a Historically Black College, and that we have tied into other forms of joint venture work with him and those universities to drive recruitment and education. We also, again, try to connect it to our brand where possible. I view this as as important a branding dynamic as the duck and how well that's received.
Perfect. Thank you. We're getting towards the end of the panel, but I think we've got, of course, some time for one or two more questions. I actually wanted to do a quick follow-up to part of your answer before as well. You mentioned the power of the pocketbook, right? How you can take the monies that Aflac has to invest for premium and really make your biggest impact there with that portfolio. I noticed in your report, your report last year, that you all have an internal ESG scoring system that you use to determine those investments. I guess the question would be, how do you caucus those investments? Are there particular ESG issues, or do you just have a wide variety of ESG scorings that you then lay on top of your traditional investment goals?
Yeah. We have developed a proprietary ESG scoring mechanism. It plays off of some of the best practices you see around responsible investing standards globally. It's not a wholly and invented process of scoring by Aflac. It is proprietary, but it does play off the standards that we know to be best practices, and it draws in information, both third-party information on potential investments as well as questionnaire type due diligence dialogue with issuers when we're looking to invest. We currently apply this to all of what we call our internally managed money. What do we mean by that definition? What that excludes is we have a very large sovereign exposure or sovereign level of investments, most notably, of course, JGBs. Like every Japanese insurance company, you're going to have a meaningful portion, upwards of 40% of your general account invested in JGBs.
In that regard, we simply pay careful attention, as you could expect, to what the Japanese government is doing, for example, in the efforts towards net zero emissions and various ESG initiatives in Japan. Absent that, it's a sovereign and it's a different type of equation. We don't apply scores, if you will, to sovereigns. We simply track and try to understand what these developments are, because JGBs are a reality if you're an insurance company in Japan. Beyond that, we also have externally managed money where we go to outside asset managers to manage money in more specialized asset classes. In there we actually focus on what the standards are of the actual managers themselves. Part of the RFP process or the proposal process to qualify an external manager is a questionnaire and feedback on how they approach ESG with their investments.
When you remove those two asset classes, JGBs or sovereigns and externally managed money, the remainder of that money, over 90% of those issuers and securities are qualified under our scoring system for ESG proprietary scores. That's how we approach it. We don't have a bright line litmus test, but we know enough about where we need to go in terms of Scope 3, for example, emission standards, to know what types of investments are going to dig a deeper hole for us in getting there, and what kinds of investments are going to advance us closer to meeting our obligations come 2040 and 2050.
Those scores are our ESG broad scores, but also particularly around climate, we know the types of investments we're going to push to the top of the stack that also advance us on the overall Scope 3 dynamic, which starts to include your assets under management.
That's great. I know that we are running up against the time here now, that'll have to be our last question. You'll have to give us another opportunity in the future because I'm sure I could ask you about another 2 hours worth of questions myself. I look forward to that in the future. I wanted to say thank you again for joining us and thank everyone in the audience. If you have any questions, feel free to email Greg or myself here at Raymond James, and we'd be happy to follow up with you. I hope everyone has a delightful day at the insurance conference.
Thank you very much.
Absolutely. Thank you, Fred and David Young. Thank you, David.
Thank you, Greg. Thank you, Leslie.
All right.