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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.
|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.