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Climate Change Risks and Opportunities Management

According to the risk map analysis in 2018, climate change risks belong to the Company's material risks. Considering its material financial impact on business operations, therefore, according to the TCFDNote framework, the inventory and disclosure of climate change risk and opportunity management are carried out, enabling relevant stakeholders to grasp the climate change risks and opportunities as well as financial impact more systematically.

Note"Task Force on Climate-related Financial Disclosures (TCFD)" was officially released in June 2017 by the Financial Stability Board (FSB).
Climate Change Governance
The identification and management of climate change risks and opportunities are handled by the Environmental Management Committee, and the climate risk issues and environmental risk issues are reported to the Risk Management Committee on a regular basis in accordance with the Company's risk management system, and then relevant mitigation and adaptation projects are assessed and approved by the Risk Management Committee.
In addition, the Risk Management Committee reports the Company's risks (including climate risks) to the Board of Directors on a regular basis to allow the Board of Directors to understand and monitor the risks faced by the Company.
Climate Change Risk Management
With reference to TCFD's and standard enterprises' lists of risks, the Company invited all business units in the Company to attend a TCFD workshop to discuss and prioritize climate risks in terms of significance and distributed a questionnaire about the identification of the significance of climate risks after the workshop to prioritize the risks in terms of potential impact, potential vulnerability, and likelihood; the results are shown below. In 2018, a total of 12 major climate risks were identified, four of which belonged to high-risk impacts on operations, namely increased frequency and severity of typhoons/hurricanes, increased costs of greenhouse gas emissions, increase in demand and regulations relating sustainability, and increase in the cost of transformation to low-carbon technology. The management of climate-related risks has been internalized to the Company's risk management process.
Climate Change Strategy
The impact of 12 major climate risk factors on TWM’s strategy, operations, and financial planning as well as relevant response measures are displayed in the table below:
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Type of risk Aspect of risk Risks Description of financial impact
Transformation risk Regulations and policies Increased demand and regulations related to sustainability In response to the direction of the amendments to the Renewable Energy Development Act, the operating locations may have an increased cost of installed capacity of renewal energy and subscription of green power certificates.
Increase in cost of GHG emissions In response to Taiwan's Greenhouse Gas Reduction and Management Act, the Company shall upgrade the energy efficiency of the equipment rooms\operating locations; the Company may face increased operating costs due to the potential carbon tax and carbon trading system.
Technology Increase in cost and expenses of transformation to low-carbon technology The progress of global low-carbon transformation technology will prompt Taiwan to accelerate the replacement of equipment rooms/equipment/vehicles to improve energy efficiency, resulting in increased operating costs.
Technology upgrades or innovations that do not support low-carbon transformation As the smart services and solutions of the ICT industry are the keys to assisting other industries in reducing carbon emissions, there lies many business opportunities; there is a need to collaborate with external partners and invest a great deal of resources in research and development.
Replacement of the existing products and services with low-carbon alternatives The replacement of existing products and services with lower-carbon products and services may result in significant damage to revenues and may also lead to a decline in sustainability ratings, affecting the Company's reputation.
Failure of new technology investments The services we provide mainly rely on the technological progress of equipment manufacturers in the telecommunications industry. In the context of low-carbon transformation, it is less likely to invest in high-carbon technology (compared with our own telecommunications equipment suppliers) in terms of new technology investment. Therefore, it is not possible that there is no return on a large investment; the financial impact is relatively insignificant.
Market Changes in customer behavior As customers' awareness of sustainability is rising, the demand for low-carbon products and services increases, and it is likely for them to shift to lower-carbon services, impacting the revenues.
Goodwill Customer preferences transfer High-carbon emissions and low-climate resilience will affect the customers' trust in the Company, damage the Company's goodwill and further affect the Company's revenue.
Physical risks Extreme risks Increase in frequency and severity of typhoons/hurricanes Extreme physical risks may damage telecommunications equipment, which will accelerate asset depreciation and increase equipment maintenance costs, while inducing complaints due to network instability, affecting the brand image.
Increase in frequency and severity of rainstorms
Long-term risks Changes in rainfall patterns and the drastic changes in weather patterns The long-term drought caused by changes in rainfall patterns will affect the water stability of the equipment rooms, causing operational disruption.
Dramatic changes in temperature, such as the increase in the number of extreme-high-temperature days, will also change customers' consumption patterns and even cause the Company to invest a certain amount of resources to change its business models.
Increase in average temperature The increase in the average temperature will increase the electricity costs related to air-conditioning in the equipment rooms, which will also affect the customers' consumption patterns and even cause the Company to invest a certain amount of resources to change its business models.

A more in-depth climate scenario analysis is conducted in terms of 4 high climate risks to understand the impact of climate risks in different scenarios in Taiwan. The impact path of high-risk factors in the 2°C scenario is displayed in the diagram below.

Climate Change Indicators/Targets (Five Core Strategies)
In order to effectively manage the impact of relevant climate change risks and opportunities on TWM, in addition to completing the Scope 1 and 2 greenhouse gas inventory, we have gradually completed the Scope 3 and set short-, mid- and long-term targets for greenhouse gas reductions, renewable energy use, and climate change resilience improvement. The climate risk and opportunity management objectives are as follows:
  1. Development of Green Energy for Self-use: Generate 6,000 kW by 2030
  2. Renewable Energy Certificates (T-REC) : Use of green energy reaches 20% by 2030
  3. Smart Energy Conservation in Equipment Rooms at Base Stations: 30% of electricity was saved in 2030 compared with 2016.
  4. Climate Financial Disclosure (TCFD): Introduced in 2018
  5. Scope 3 Inventory: Conducted inventory of all 15 categories in 2018