Climate-related Risk Strategies
Building Climate Resilience
The effects of climate change and global warming are growing severe. To mitigate and adapt to climate risks, FENC adopted the Task Force on Climate-related Financial Disclosures (TCFD) assessment in 2019. Each year, the Company discloses the results in its annual Sustainability Report and on the Company website. In 2023, the Company issued its first TCFD Report. Leveraging the TCFD framework and sustainability disclosure standards from Draft IFRS S2 Climate-related Disclosures, the report is an assessment of climate-related financial risks and opportunities on FENC Businesses and production sites with which the Company wishes to cultivate a resilience mindset.
⇥ Download the company's Climate-Related Financial Disclosures (TCFD) report.
Climate Governance
FENC's climate governance is led by the Board of Directors, which oversees the company's climate-related strategies and management guidelines. FENC also set up a functional committee at the Board level, the Sustainability Committee. In addition, the Sustainability Implementation Committee was established under the company's organizational structure, with the President of Corporate Management serving as the convener. The committee consists of representatives from the production sites and business units of each Business, and the administrative department, collaborating to promote the company's climate-related risk mitigation, adaption and low-carbon transition. The Energy Task Force is in charge of matters related to greenhouse gases and energy management. The Sustainability Team of the Corporate Staff Office is responsible for compiling sustainability performance data and reporting to the Board of Directors and the Sustainability Committee. The Presidents, Chief Operating Officers of each Business and the Energy Task Force report to the Board of Directors and internal meetings on a regular basis.
The Organizational Chart of Climate-Related Risk and Opportunity Management
Climate-Related Risk and Opportunity Management System
In order to fully grasp the impact of climate-related risks and opportunities on the company, FENC has established a climate-related risk and opportunity management system. The Sustainability Implementation Committee is responsible for promoting the management of climate-related risks and opportunities and formulating a bottom-up risk and opportunity reporting system to implement a top-down tracking and supervision mechanism by the Board of Directors.
Climate-Related Risk and Opportunity Management Procedure
Identifying Climate-Related Risks and Opportunities
Based on the TCFD framework, FENC established a comprehensive workflow to identify climate-related risks and opportunities. First, climate-related issues are collected. The climate risks and opportunities are then identified and screened using the Representative Concentration Pathway 8.5 (RCP8.5) and Net Zero Scenario (NZE) analysis to arrive at 18 that are most relevant to FENC. The risks and opportunities are assessed for impacts based on the time horizon, likelihood of occurrence and degree of impact for the prioritization of major climate risks and opportunities.
Climate-Related Risks and Opportunities Identification Process
Scenario for Risks and Opportunities
| Scenario | RCP8.5 (Emission Scenario) | NZE (Net Zero Scenario) |
| Type | Physical risks | Transition risks and opportunities |
| Detail | The RCP8.5 scenario is presented in the IPCC’s Fifth Assessment Report (AR5) under the assumption of absence in climate actions from all countries, which would result in the highest CO2 concentration. The RCP 8.5 scenario could be regarded as the most stringent climate scenario. Adopting the RCP8.5 scenario would help FENC assess the degree of impacts under the most extreme climate challenges. | The NZE scenario is published by IEA. To limit the global temperature rise to 1.5 °C, the NZE scenario represents a path to net zero emissions by 2050 for the world and is considered the most extreme reduction scenario. As the surge of carbon reduction policies sweeps through the world, adopting the NZE scenario would help FENC gain competitive advantages by taking preemptive strikes. |
List of Climate-Related Risks and Opportunities
| No. | Type | Risk and Opportunity Issues | Potential Financial Impact | Time Horizons |
| 1 | Transition Risk | Regulations on greenhouse gas reduction and renewable energy | To meet regulatory requirements, FENC has expanded the deployment of its renewable energy installations, resulting in an increase in operating costs. | Medium term |
| 2 | Transition Risk | Carbon pricing mechanism | The regions where the company's production sites are located have implemented carbon pricing policies and imposed carbon fees/taxes on carbon emissions. It is estimated that the rising operating costs from carbon fees or taxes may peak in 2050. | Long term |
| 3 | Transition Risk | Carbon border tax | To avoid carbon leakage, countries have formulated carbon border taxes for imported products. FENC's operating costs will rise due to the import duty imposed on its exports. | Medium term |
| 4 | Transition Risk | Transition to low-carbon technologies and fuels | In order to achieve low-carbon transition, FENC has replaced existing conventional equipment and machines of high energy consumption and high carbon emissions with high-efficiency and low-carbon ones, resulting in an increase in both capital expenditure and production cost. | Medium term |
| 5 | Transition Risk | Research and development in net zero technologies | In the face of market demand, FENC has continued to develop net-zero technologies and green and low-carbon products, resulting in an increase in its R&D cost. | Medium term |
| 6 | Transition Risk | Changes in customer behavior | Considering the impact of climate change, customers prefer to use lower-carbon products and demand FENC should reduce carbon emissions. Failure to meet customer requirements may result in customer attrition and revenue loss. | Medium term |
| 7 | Transition Risk | Loss of investment attractiveness | Due to the inability to maintain good ESG performance, the willingness of investors to invest (or finance) will be reduced, resulting in a decline in FENC’s market value or an increase in funding costs. | Medium term |
| 8 | Transition Risk | Industry stigmatization | With the rising awareness of environmental protection, any negative publicity related to carbon emissions may cause government and people living in the surrounding area to demand FENC cut down or even stop production, resulting in reduced production capacity and revenue. | Long term |
| 9 | Physical Risk | Increased severity and frequency of extreme weather events such as cyclones and floods | Damage to equipment caused by extreme weather events may reduce production capacity or increase maintenance costs. | Long term |
| 10 | Physical Risk | Rising sea levels | Under the impact of climate change, if the company's production site is located in a high-risk area prone to sea level rise, it may cause the assets and equipment to be submerged, leading to asset damage. | Long term |
| 11 | Physical Risk | Increased severity and frequency of extreme weather events such as cyclones and floods (supply chain) | The locations of suppliers or the shipping routes are affected by climate change, causing raw materials to not arrive at the factory on schedule, resulting in a reduction in output. | Medium term |
| 12 | Physical Risk | Rising mean temperatures | Outdoor operations need to be suspended due to high temperatures, leading to prolonged working time and an increase in labor costs. | Long term |
| 13 | Physical Risk | Changes in precipitation patterns and extreme variability in weather patterns | Extreme precipitation patterns, such as an increase in consecutive dry days, heighten the risk of water shortages. In order to enhance the resilience of water resources, FENC has invested in water-saving facilities and initiated water conservation measures, resulting in an increase in capital expenditure and operating costs. | Short term |
| 14 | Opportunity | Reduced water usage and consumption | When water shortages occur, FENC's water resources management measures with better resiliency, compared to its peers, help to avoid a decline in production output or delayed shipments, thereby increasing sales revenue. | Medium term |
| 15 | Opportunity | Use of lower-emission sources of energy | By using renewable energy or other low-carbon energy sources to meet customer requirements, FENC can increase product price bargaining power or order volume, thereby increasing sales revenue. | Medium term |
| 16 | Opportunity | Development or expansion of low emission goods and services | The company continues to reduce product carbon emissions, meeting customers' emission reduction requirements, increasing product price bargaining power or order volume, thereby increasing sales revenue. | Short term |
| 17 | Opportunity | Development of new products or services through R&D and innovation | Through the research and development of green products, FENC can meet customer requirements, thereby increasing sales revenue. | Short term |
| 18 | Opportunity | Access to new markets | As recycling policies are promoted and implemented in various countries, the overall environment is conducive to FENC's expansion of its market for recycled products, thereby increasing sales revenue. | Short term |
Note: Short term refers to the period between 2022 and 2025; medium term 2026 and 2030; long term 2031 and 2050.
Identification Outcome of Material Climate Risks and Opportunities
Carbon pricing mechanism, carbon border tax and changes in customer behavior are identified in the assessment as the top three material risks; access to new markets, use of low-emission sources of energy, and development or expansion of low-emission goods and services are the top three material opportunities. FENC conducted quantitative financial analysis targeting the six issues and formulated management strategies with implementation measures to galvanize FENC’s climate resilience.
Climate-Related Risk Matrix
Climate-Related Opportunity Matrix
Material Climate-Related Risks and Opportunities: Strategies and Response Plans
| Material Climate-Related Risks and Opportunities Issues | Strategies and Response Plans |
| Carbon pricing mechanism | FENC has launched the ISO 14064-1:2018 GHG inventory, monitored the GHG emissions of each production site, and formulated five low-carbon transition strategies to achieve the GHG reduction goals set by the Company. These strategies include improving energy efficiency, adopting low-emission fuel alternatives, developing renewable energy, utilizing CCUS, and fostering raw material transition. The Company is set to reduce 20% of GHG emissions by 2025, 40% by 2030, and reach net zero emissions by 2050. In addition, FENC continues to analyze and evaluate the trends on international carbon pricing to assess its strategy on internal carbon pricing. |
| Carbon border tax | The financial impact is positively correlated with the carbon emissions per unit of production. To mitigate the risk, FENC will implement strategies, such as expanding the use of alternative low-carbon materials, improving energy efficiency, adopting low-emission fuel alternatives, and deploying more renewable energy facilities to reduce the carbon footprint of its production processes. |
| Changes in customer behaviors | In response to customers' demand for low-carbon products in the value chain, we will aggressively reduce GHG emissions per unit of production, and GHG emissions in the production processes by improving energy efficiency, adopting low-carbon fuels, and using renewable energy. |
| Use of lower-emission sources of energy | FENC continues to deploy renewable energy facilities, including solar, biogas and wind power generation, and collaborates with other renewable energy suppliers. It is estimated that the installed capacity of its solar power facilities will reach 90MW by 2025, a five-fold increase from 2022, and the annual electric output can reach 100 GWh. In addition, starting in 2023, FENC will purchase a minimum of 100 GWh of renewable energy each year, endeavoring to meet the expectations of customers. |
| Development or expansion of low emission goods and services | FENC continuously promotes the research and development of technologies related to green products, including products which can replace petroleum-based raw materials (Replace), and can be recycled (Recycle), as well as reduce energy and resource consumption (Reduce). FENC has been expanding its green product production capacity to meet the needs of customers in the value chain. |
| Access to new markets | FENC keeps on researching and developing circular recycling technology and the applications of multiple recycling products, while paying attention to the trend of recycling-related laws and regulations in various countries. It has deployed all-encompassing circular technology on land, ocean and air, and expanded its production capacity of recycling and circular products with optimal capacity planning, aiming to become the World No. 1 in rPET production capacity. |
Climate Risk Metrics and Targets
Target and Progress of GHG Reduction
Five Major Low-Carbon Transition Strategies
- Improve Energy Efficiency: FENC improves energy efficiency by optimizing the production process, facilities and energy management. Energy projects in the pipeline include a new cogeneration system, capitalizing on thermal and electrical power by recycling and reusing waste heat.
- Adopt Low-Emission Fuel Alternatives: FENC’s short-term carbon reduction plans call for replacing high-emission fuels such as coal or heavy oil with low-emission alternatives such as natural gas and biofuels. The mid- to long-term plans are to be fully transitioned, replacing natural gas completely with hydrogen fuels.
- Develop Renewable Energy: FENC is investing heavily in renewable energy equipment and increasing the percentage of renewable energy yearly in its energy mix.
- Installed capacity for renewable energy: The 2025 capacity is projected to grow 500% to reach 90MW from the 2022 capacity of 15MW. The projected power generation with this capacity is 100 GWh.
- Purchased renewable energy: Starting in 2023, FENC will purchase a minimum of 100 GWh of renewable energy each year.
- Utilize CCUS:FENC plans to capture and reuse carbon from the boiler exhaust to reduce carbon emissions.
- Foster Raw Material Transition: FENC adopts low-carbon alternatives with focuses on recycling and biomass. The Company has been applying its core strengths towards the development of environmentally friendly and low-emission materials and expanding the applications of these innovations.
