TCFD Climate-related Financial Risk Assessment
Average temperature and occurrences of natural disasters around the globe continue to rise in recent years. Climate change has become a major issue that catches the world’s attention. In 2019, FENC implemented the project on TCFD Climate-related Financial Disclosure, using the Recommendations of the TCFD framework to evaluate financial impacts on the business and production sites due to climate change. TCFD stands for Task Force on Climate-related Financial Disclosures established by Financial Stability Board (FSB). The task force provides specific framework to help corporations disclose climate-related risks and quantified data.
FENC referenced the official list of risks from TCFD, risk sources suggested by TCFD and benchmark corporations from the industry to compile the 24 climate-related risks. Using 3 indexes – direct financial impact, indirect financial impact and brand image, the project assesses direct impacts the risks pose on corporate operation as well as indirect impacts on FENC from suppliers and customers. The list is finally reduced to 10 critical climate-related risks.
● Critical Risks
Low Impact 
Medium Impact 
High Impact 
Irrelevant
| Risk Type | Risk Aspect | Risk Content | Scope of Impact | ||||||
| Supplier | Company Operation | Customer | |||||||
| Raw Material Supplier | Equipment Supplier | Logistics | Petrochemical | Polyester | Textile | ||||
| Transition Risk | Technology | Costs to transition to lower emissions technology | |
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| Transition Risk | Policy and legal | Increased cost of GHG emission due to GHG emission regulations | |
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| Physical Risk | Extremity | Typhoon (hurricane) | |
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| Transition Risk | Policy and legal | Renewable energy related regulations | |
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| Transition Risk | Reputation | Climate related reputation risk | |
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| Transition Risk | Market | Change in customer behaviors | |
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| Physical Risk | Chronic | Changes in precipitation patterns | |
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| Transition Risk | Technology | Substitution of existing products and services with lower emissions options | |
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| Physical Risk | Extremity | Heavy Downpours and Floods | |
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| Physical Risk | Chronic | Rising mean temperatures | |
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FENC assesses critical climate-related opportunities, and takes on challenges posed by climate change.
● Critical Opportunities
| Opportunity Type | Detail | Management Approach | 2019 Management Costs |
| Efficiency of Energy and Resource Use | Use of more efficient modes of transport |
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NT$2.88 billion |
| More efficient production and distribution processes | |||
| Use of recycling | |||
| More efficient buildings | |||
| Reduced water usage and consumption | |||
| Energy Source | Lower-emission sources of energy | ||
| Participating in carbon market | |||
| Products and Services | Develop and / or expand low emission goods and services | ||
| Climate adaptation and insurance risk solutions | |||
| R&D and innovation | |||
| Shifting consumer preferences | |||
| Markets | New markets | ||
| Resilience | Participate in renewable energy programs and adopt energy-efficiency measures |
● Establish Temperature Rise Scenario
I. Climate-related Scenario
- 2 Degree Scenario: The Paris Agreement calls for keeping global temperature rise this century below 2℃, hereinafter referred to as 2DS.
- Nationally Determined Contributions: With Nationally Determined Contributions, global temperature rise by the turn of the century will be 3℃, hereinafter referred to as NDC.
II. Scope of Assessment
- 7 production sites in Taiwan
- 7 production sites in China
III. Output
Impacts posed on FENC by the 10 critical climate-related risks and the corresponding financial categories.
IV. Approach
CSR committee members from petrochemical, polyester and textile businesses as well as managers from production sites are invited to 3 meetings to discuss climate scenarios. A total of 70 participants are in attendance, including production sites in Taipei, Hsinchu, Taoyuan, Shanghai and Suzhou.
FENC identifies top 3 risks from the 10 critical climate-related risks and conducts quantitative impact analysis based on the 2 scenarios (2DS and NDC).
Data Collection
- 2DS：ach year, the world will see an increase of 1.2 category 4 hurricanes and 1.2 category 5 hurricanes.
- NDC：No significant evidence indicates that the increase of hurricane will be higher than the 2DS scenario. Therefore, the hypothesis is that the increase is identical to the previous scenario.
Based on the above scenario and research studies, Taiwan could be struck by 7.48 severe typhoons between 2019 and 2030; China would be struck by4.78 typhoons during the same period.
Pathway Setting
- Flood：A minimum of 0.5 meter for 2 consecutive days.
- Strong wind：Level 17 wind.
- Water outage：Water supply interrupted for one day.。
- Wastewater treatment：eavy rain results in wastewater overload, and lowers production for one day.
- Power outage：One-hour power outage.
- Logistics interruption：Harbors close down for 4 days.
Quantified Results and Responses
- The quantified results indicate that loss due to flood accounts for 61% of total loss, which is the highest under the typhoon category.
- FENC will focus on flood prevention and reinforce preventive measures against typhoon damages at production sites.
Data Collection
- 2DS：Between now and 2050, the annual average global investment in energy efficiency will increase by 188% compared to 2015; investments in renewable energy will increase by 186% compared to 2015.
- NDC：Between now and 2050, the annual average global investment in energy efficiency will increase by 59% compared to 2015; investments in renewable energy will increase by 99% compared to 2015.
For the pathways under the 2DS and NDC scenarios, renewable energy and energy efficiency are major contributors for carbon reduction.
Pathway Setting
- Carbon Reduction：The carbon reduction target for FENC by 2050 is estimated using the decrease from the carbon reduction pathway.
- Average annual investments：Investments made by FENC in 2015 are estimated using the percentage of Company contribution to global carbon reduction.
- Growth rate：Growth in investments by FENC is consistent with the global percentage.
Quantified Results and Responses
- The quantified results show that increase in investments in energy efficiency are likely to be on par with the scenarios. Investments in renewable energy are confined by regulations and external environmental factors. Therefore, the Company contribution is slightly lower.
- FENC plans to increase investments in energy efficiency to achieve the overall goal in carbon reduction and make up for the lower carbon reduction contribution rate in renewable energy.
Data Collection
- 2DS：Reduce 67.1% of global GHG emissions by 2050 compared to 2014.
- NDC：Based on the NDC scenario for Taiwan, the emissions by 2050 must be 50% lower than the emissions in 2005. The NDC scenario for China indicates a reduction of 60-65% in CO2 emission per unit of GDP is necessary by 2030 compared to 2005.
Pathway Setting
- 2DS：FENC must reduce 3% carbon emissions annually.
- NDC：Production sites in Taiwan must reduce carbon emissions by 1.5% annually; production sites in China must reduce the intensity of carbon emissions by 3.6% annually.
Quantified Results and Responses
- The quantified results indicate that FENC should step up the reduction of GHG emissions to avoid future costs resulting from additional carbon emissions.
- FENC anticipates ongoing efforts in energy conservation and carbon reduction projects, and will continue to refine the management of indirect GHG emissions to reduce overall emissions.
