Nature-Related Risk and Opportunity
Nature-Related Risk and Opportunity
As a solid member of the Business Council for Sustainable Development of Taiwan (BCSD Taiwan), SinoPac Holdings supports the Council in promoting various international sustainability initiatives and proposes policy recommendations as appropriate. Its subsidiary, Bank SinoPac, is also a founding member of the "Sustainable Finance Implementation Platform" and the "Taiwan Nature Positive Initiative (TNPI)" established by BCSD Taiwan. Natural capital, nature, and biodiversity have become sustainability issues of global concern in recent years, are intertwined with climate change issues, and are also key factors for achieving net zero emission targets by 2050. Bank SinoPac collaborates with SinoPac Holdings in using practical actions to demonstrate emphasis and commitment toward these issues, proactively supporting prospective concepts and discussions that benefit sustainability promotions and sustainable industrial transformations. In 2022, We released "Industrial Net Zero Transformation Strategy Recommendations: Corporate Perspective". In 2023, we published the Chinese version of "Connecting Finance and Natural Capital". In 2024, we released "Positive Industry Climate and Nature Actions Guidelines" to identify positive climate and nature solutions. Most recently, in 2025, we published “Toward a Global Circular Vision – The GCP Framework and Taiwan’s Path to Industrial Circular Practices”. In addition, SinoPac Holdings formally joined the Taskforce on Nature-related Financial Disclosures (TNFD) in 2025 as both a Forum Member and an Adopter, as well as a Supporter of the Partnership for Biodiversity Accounting Financials (PBAF). These engagements demonstrate SinoPac’s strong commitment to advancing nature-related disclosures and promoting sustainable development.
Strategies for Nature-Related Risks
The Taskforce on Nature-related Financial Disclosures (TNFD) published the official TNFD Recommendations in September 2023 and focused on the four pillars including governance, strategy, risk and impact management, and metrics and targets as the framework of disclosure. It also established the LEAP (Locate, Evaluate, Assess, Prepare) approach. It also published the "Additional Guidance for Financial Institutions" to evaluate nature-related risks and opportunities associated with investment and lending activities (such as equity and debt investments, trading and insurance, and lending). In 2026, the Financial Industry Net Zero Promotion Task Force's Data and Risk Management Working Group completed the "Demonstration Case Study Report on the Application of Nature-Related Risk Data (Draft)," which includes the "Basic Operations and Recommendation Exercises of Domestic Nature-Related Risk Data for the Financial Industry (Draft)" (hereinafter referred to as the "Domestic Financial Industry Nature-Related Risk Study Report") to assist financial institutions in analyses on nature-related issues. SinoPac Holdings firmly believes that the loss of natural capital and the resulting nature-related risks will affect the business activities, capital allocation, and risk management of enterprises, which in turn will have a potential impact on financial business activities and lead to asset value impairment. On the other hand, the protection and restoration of natural capital will contribute to the sustainable development of industries and economic activities. Refer to the 2025 "Climate and Nature-related Financial Disclosures Report" for details.
Nature-related Physical Risks Analysis
SinoPac Holdings follows the LEAP analysis procedures, with the "L" (Locate) step focusing on whether the Company's own business activities and value chains affect the natural environment, specific biomes, or ecologically sensitive areas. SinoPac Holdings thus overlays the latitude and longitude location data of own real estate/operating sites, upstream suppliers' operating sites, and downstream investment and lending corporate clients' plants in Taiwan, Kinmen, Penghu, and Matsu (hereinafter referred to as Taiwan) with spatial data referenced in the "Domestic Financial Industry Nature-Related Risk Study Report," including legally designated environmentally sensitive areas, key ecological concern areas, threatened species hotspots and the conservation status of threatened species. The Company thus completed the location sensitivity assessment and species sensitivity assessment, and established a priority concern ranking. In addition, The Company also conducted an analysis of areas within a 0.5 km buffer zone surrounding fault lines to further enhance the assessment of nature-related physical risks.
Nature-related Dependencies and Impacts Evaluation
SinoPac Holdings references the LEAP approach, including "E" (Evaluate), which identifies and evaluates nature-related dependencies and impacts. The analysis procedures are as follows:
Exposure to TNFD Nature-related Sensitive Industries
Based on Step 1 above, SinoPac Holdings summarized 12 nature-related sensitive industries. As of December 31, 2025, the investment and lending amount in TNFD nature-related sensitive industries was NT$782,969 million, accounting for approximately 37.17% of the investment and lending portfolio on corporate clients, or 25.02% of the overall investment and lending amount of SinoPac Holdings (including personal loans).
SinoPac Holdings Industry Dependency and Impact Matrix
Based on Steps 2 and 3 above, SinoPac Holdings classified industries into TNFD nature-related sensitive and non-sensitive industries, and mapped the top 20 industries by investment and lending balance onto an industry dependency and impact matrix based on their respective dependency and impact scores.
| Description of matrix axis | ||
|---|---|---|
| Level of dependencies | Level of impacts | Bubble size |
| Companies’ dependence on ecosystem services for survival, such as the ability to regulate water flow and quality and the ability to recover from disasters such as fires and floods. The ENCORE database includes 25 ecosystem services. | Changes in the state of nature may be caused by direct, indirect, or cumulative actions by organizations. They may result in changes in nature’s ability to provide social and economic functions. The impacts may be positive or negative. The ENCORE database includes 13 pressures. | Investment and lending amount as of December 31, 2025 |
Based on the analysis, the top five TNFD nature-related sensitive industries in the overall investment and lending portfolio with high levels of dependency and impact on nature (represented by the purple bubbles in the figure) are: Food, Beverage & Tobacco (including agriculture), Materials, Utilities (including electric utilities, gas utilities, independent power and renewable electricity producers, water utilities, and environmental & facilities services), Energy, and Transportation.
Sankey Diagram of TNFD Nature-related Sensitive Industries
To further focus on TNFD nature-related sensitive industries, SinoPac Holdings identified the potential dependencies (ecosystem services) and impacts (pressures) at the industry level based on the above Step 4. The results serve as the basis for nature-related risk scenario analysis and will support further enhancement of nature-related risk identification and the establishment of corresponding risk management processes for the overall investment and lending portfolio to mitigate potential impacts.
The results of the Sankey diagram analysis for TNFD nature-related sensitive industries are shown in the figure below (Note 1). Based on the analysis of dependencies and impacts of these industries, the top three ecosystem services in terms of dependencies are flood mitigation services, storm mitigation services, and water flow regulation services, accounting for approximately 29.29%. The top three pressures impacting nature are disturbances (e.g., noise, light), emissions of toxic pollutants to water and soil, and generation and release of solid waste, accounting for approximately 38.75%.
Nature-related Risks and Opportunities
Climate change and losses in natural capital have significant impacts on corporates, society, and the environment. In order to monitor specific impacts of natural risks, nature-related risks and opportunities associated with SinoPac Holdings' own operations and investment and lending portfolios were identified, and corresponding strategic measures were formulated. The Risk Management Division referred to the climate and nature-related regulations and reports released by domestic and foreign institutes, and provided climate and nature-related risk and opportunity assessment table every year, and the risk management units of subsidiaries conducted climate and nature-related risks and opportunities assessments. With respect to nature-related risks, no material nature-related risks were identified, accordingly, only the top three most significant issues are presented. Four material nature-related opportunities were identified. For details, please refer to the "2025 Climate and Nature-related Financial Disclosures Report".
Nature Scenario Analysis
In the face of uncertainties in the natural environment, SinoPac Holdings conducted nature-related scenario analysis for domestic positions based on TNFD nature-related sensitive industries. The Company analyzed the Sankey diagram and identified water resources as the nature capital of particular concern for TNFD nature-related sensitive industries. Therefore, the Company analyzed the potential risks of these industries and water resources as the main targets of the scenario analysis. Refer to the 2025 "Climate and Nature-related Financial Disclosures Report" for details and analysis results.
Nature-related Risks - Water Resource Exploratory Scenarios
Among TNFD nature-related sensitive sectors, the Company selected utilities—with the largest investment and lending exposure—for analysis, including electric utilities, gas utilities, independent power and renewable electricity producers, water utilities, and environmental and facilities services. With reference to the TNFD Additional Sector Guidance－Electric Utilities and Power Generators, the TNFD Additional Sector Guidance －Water Utilities and Services, and the dependency and impact assessment under ENCORE, the Company identified the potential water resource risks and developed four scenarios: Ahead of the Game, Go Fast or Go Home, Sand in the Gears, and Back of the List. These scenarios were used to assess the potential risks that investees and borrowers in the utilities industries may pose to the Company under different scenarios, thereby supporting subsequent management and development of appropriate response measures.
| Scenarios | Identification of potential risks to SinoPac |
|---|---|
| Scenario #1
Ahead of the game |
|
| Scenario #2
Go fast or go home |
|
| Scenario #3
Sand in the gears |
|
| Scenario #4
Back of the list |
|
Nature-related Physical Risks – Water Resource Dependency Assessment
Through the analysis of the TNFD nature-related sensitive industries Sankey diagram, the dependency on ecosystem services is mainly derived from "water resources." For instance, the food, beverage, and tobacco (including agriculture) industries rely on water resources for production and water quality regulation; casting, cooling, and dust emission control in the metal manufacturing processes of the materials industry require water. We therefore used the "drought risk factor" to conduct a scenario analysis of "water resource dependency" for the domestic investees and borrowers of these TNFD nature-related sensitive industries (12 industries in total).
Nature-related Physical Risks – Water Resources Impact Assessment
Sinopac Holdings analyzed the Sankey diagram for the TNFD nature-related sensitive industries and identified water resources as the key impact item. The top three impact pressure factors include "toxic soil and water pollution emissions," as corporate water withdrawal or discharge may affect water availability, water quality, impact freshwater ecosystems, or alter hydrological characteristics. The Company therefore checked whether the plant locations of investees and borrowers are located within "Water Quality and Quantity Protection Areas" to conduct a scenario analysis of "water resource impacts" for the domestic investees and borrowers of these TNFD nature-related sensitive industries (12 industries in total).
Nature-related Transition Risks – Environmental Penalty Impact Assessment
To assess nature-related transition risks, the Company compiled environmental penalty cases disclosed by the Ministry of the Environment for 2025 and cross-referenced them with the list of investees and borrowers in TNFD nature-related sensitive industries to identify whether any sensitive industry clients incurred environmental penalties in 2025. The Company also referenced SinoPac Bank's Responsible Lending Management Guidelines and set an accumulated penalty amount of NT$1 million as the threshold for materiality. Clients reaching this threshold are deemed to pose environmental regulatory compliance risks, which serves as the basis for quantifying potential financial impacts.
Nature-related Risk Management of Investment and Lending
SinoPac Holdings formulated a group-level sustainable finance statement in 2022 and has incorporated environmental, social, and corporate governance (ESG) factors into its corporate banking, retail banking, asset management, wealth management, investment banking, and brokerage businesses. The Board of Directors approved the “Sustainable Finance Policy” in July 2023 as the highest guiding principles for sustainable finance businesses, and business units established related management guidelines accordingly.
Biodiversity assessment has been incorporated into multiple business process management: For project financing, the Company follows the Equator Principles Version 4.0 (EP4) and the eight Performance Standards of International Finance Corporation (IFC), and includes climate change and biodiversity risks as necessary items; for sustainability-linked loans, the Company includes ecosystem protection indicator in the “environmental protection checklist”; for equity investment, the Company included risk events related to biodiversity in the ESG risk assessment of equity investment. For details, please refer to "Sustainable Finance Statement", "Responsible Investment" and "Responsible Lending".