Information disclosed reflects data collected from the reporting year.

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.

Step 1

 

Establish List of Critical Risks and Opportunities

Assess and select 10 critical climate-related risks associated with FENC from the value chain perspective.
Assess critical climate-related opportunities with FENC.

Step 2

 

Identify Climate-related Scenario

Establish the pathways of 10 critical climate-related risks under two different scenarios.

Step 3

 

Quantify Climate-related Financial Impact：

Select the top 3 risks from 10 climate-related risks for quantitative analysis.

Step 1 Establish List of Critical Risks and Opportunities

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
• Critical Opportunities

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
Transition Risk	Policy and legal	Increased cost of GHG emission due to GHG emission regulations
Physical Risk	Extremity	Typhoon (hurricane)
Transition Risk	Policy and legal	Renewable energy related regulations
Transition Risk	Reputation	Climate related reputation risk
Transition Risk	Market	Change in customer behaviors
Physical Risk	Chronic	Changes in precipitation patterns
Transition Risk	Technology	Substitution of existing products and services with lower emissions options
Physical Risk	Extremity	Heavy Downpours and Floods
Physical Risk	Chronic	Rising mean temperatures

FENC assesses critical climate-related opportunities, and takes on challenges posed by climate change.

Opportunity Type	Detail	Management Approach	2019 Management Costs
Efficiency of Energy and Resource Use	Use of more efficient modes of transport	Promote energy conservation and carbon reduction projects. Invest in solar energy. Introduce water-conserving production and projects. Research and develop green products.	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

Assessment Index

Direct Financial Impact

• Percentage of financial loss against net profit

Indirect Financial Impact

• Days of interrupted operation
• Degree of impact on supply of products or raw materials
• Being ordered to cease operation temporarily or permanently

 

Brand Image

• Negative press
• Effects on market share due to changes in market preference.
• Effects on investment scale due to lower investor confidence.

Step 2 Identify Climate-related Scenario

Establish Temperature Rise Scenario

1. International Institute for Applied Systems Analysis -《Energy investment needs for fulfilling the Paris Agreement and achieving the Sustainable Development Goals》
2. World Bank -《State and Trends of Carbon Pricing 2019》
3. International Energy Agency -《Energy Technology Perspectives 2016, ETP2016》
4. International Energy Agency -《Energy Technology Perspectives 2017, ETP2017》

Step 3 Quantify Climate-related Financial Impact：

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).

• Typhoon
• Costs to Transition to Lower Emissions Technology
• Increased Cost of GHG Emission Due to GHG Emission Regulations

Data Collection

2DS：each 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 by 4.78 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：Heavy 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.