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Sustainability

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Task Force on Climate-Related Financial Disclosures (TCFD)

Task Force on Climate-Related Financial Disclosures (TCFD)

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Strategy Scenarios Analysis for Physical and Transition Risks

Strategy

Climate change has significant impacts on corporate and social environments. In order to monitor specific impacts of climate change and respond to climate issues, the Risk Management Division creates climate risk and opportunity assessment tables each year and references climate laws and reports released by domestic and foreign institutes. The risk management units of all subsidiaries are responsible for identifying climate-related risks and opportunities. Management procedures for identifying climate risks and opportunities encompass four steps: compilation of a list of climate risks and opportunities, identification of risks/opportunities at the subsidiary level, identification of risks/opportunities at the group level, proposing mitigation or adaptation measures, and disclosure and communication with the public, which enable us to identify how climate risks and opportunities impact our businesses, strategies, and finances over the short, medium, and long term.The investment cost of the actions taken by SinoPac Holdings in response to climate change risks and opportunities include the insurance premiums for natural disasters, purchase of renewable energy, setup of climate-related databases, project expenses for the introduction of climate risk management and net zero strategy, and net zero event and exhibition expenses, totaling NT$30,806,037. Due to the inclusion of mitigation or adaptation measures for both transition risks and physical risks in certain projects, the investment cost for transition risks amounts to NT$28,243,125, while the investment cost for physical risks amounts to NT$5,385,612.

Process for Identifying for Climate-related Risks and Opportunities

Identification of Climate-related Risks and Opportunities

In the process of identifying climate risks and opportunities, SinoPac Holdings comprehensively considers “time of occurrence,” “likelihood of occurrence,” and “extent of impact”. The scores identified for each dimension are multiplied and weighted in accordance with net values for each subsidiary to obtain overall identification results for the Group, serving as a basis for ranking the materiality of risks and opportunities. The Company selected the risk and opportunity issues with the highest likelihood and extent of impact (first quadrant), and identified their potential operational and financial impacts on different sections of our value chain (suppliers, self-operations, and investment and lending businesses), possible time of occurrence, and links with existing risks in the financial industry (such as credit risks, market risks, and operational risks), to serve as a reference for formulating mitigation and adaptation strategies as well as for risk management.

Risks
Opportunities

Material climate risks, potential financial impacts and response measures, and material climate opportunities, potential strategies and management responses for 2023 are shown in the table below.

Risk Category Risk Classification Item Number Risk Incident Impacts Impact Aspects Potential Impacts Links to Other Risks Analysis of Impacts on Operational Strategies, Potential Businesses/ Products, and Financial Plans Mitigation or Adaption Measures/Response Strategies Possible Occurrence Time
Transition Risks
Policy and Legal
R2-2 Tightening policies or regulations on carbon pricing, carbon taxes/emissions, carbon reduction targets, and reporting obligations Increasingly strict policies or regulations on carbon pricing and carbon tax/emissions, carbon reduction targets, reporting obligations, and energy or electricity conservation may reduce the profitability of borrowers and investees and affect the Company's creditor rights or revenue. Lending business Investment/Underwriting business Increase in losses in creditor rights
Decrease in investment proceeds 		Credit risks
Market risks 		If investees and borrowers belong to industries with high power consumption, high pollution, or high climate risks, changes in energy laws, domestic and foreign carbon fees, and carbon taxes (such as carbon tariffs imposed by the EU and US) will increase operational costs and affect profitability, resulting in difficulties with creditor rights recovery or reductions in investment proceeds.
  • The Customer Relations Team is responsible for implementing and enhancing responsible investment and responsible lending and the development of sustainable financial products/services.
  • SinoPac Holdings has pledged to attain net zero emissions of its financial portfolios by 2050, and formulated short, medium, and long-term work objectives for net zero emissions. The Company has received the Science Based Targets (SBT) validation in January 2024. In terms of investment and lending, the Company has established the carbon inventory, monitoring, and disclosure mechanisms of the Partnership for Carbon Accounting Financials (PCAF) and actively engage investment and lending partners. The Company also plans to gradually withdraw from investment and lending of thermal coal and unconventional oil & gas projects.
  • SinoPac Holdings and subsidiaries established the “Responsible Investment Management Guidelines” for promoting and implementing responsible investment. Bank SinoPac established “the Responsible Lending Management Guidelines” and signed “the Equator Principles” to gradually enhance the ability of the Bank’s credit service personnel to identify ESG risks and assess the financial impact of climate change. It also provides guidance to borrowers for developing green energy industries and industry upgrades, and adjust risk allocations in accordance with regulations.
  • The Risk Management Division of SinoPac Holdings oversees the establishment of the "Financial Impact Quantitative Analysis for TCFD Scenario Simulation" and the units responsible for projects evaluate and adjust the existing strategies and policies for the overall sustainable financial development, sustainable products and services, green energy and environmental energy management based on the quantitative financial impact to increase climate resilience.
 Long-term
R2-1 Tightening policies or regulations on carbon pricing, carbon taxes/emissions, carbon reduction targets, and reporting obligations Increasingly strict policies or regulations on carbon reduction goals and reporting obligations (e.g., commitment to net zero emissions and SBT carbon reduction goals) reduce business opportunities and may cause declines in company revenue. Lending business
Investment/Underwriting business
Legal compliance risks 		Increase in losses in creditor rights
Decrease in investment proceeds 		Credit risks
Market risks
Legal compliance risks
Strategic risks
Reputational risks
  • Competent authorities are requiring the financial industry to achieve net zero investment and lending portfolios as well as set annual limits, affecting the growth momentum of lending or causing declines in equity collateral values for the financial industry.
  • If we are unable to achieve SBTs, comply with our declared net zero commitments, or comply with reporting obligations, this may cause investors and consumers to reduce their transactions with us, causing revenue to decline.
  • Consumers and investors are become increasingly attentive of climate change issues. Tightening policies or regulations related to carbon reduction targets and reporting obligations may lead to loss of markets associated with climate change themes, causing loss of business and customers.
  • The Company has pledged to attain net zero emissions of its financial portfolios by 2050, and formulated short, medium, and long-term work objectives for net zero emissions. In terms of investment and lending, the Company has established the carbon inventory, monitoring, and disclosure mechanisms of the Partnership for Carbon Accounting Financials (PCAF). The Company also plans to gradually withdraw from investment and lending of thermal coal and unconventional oil & gas projects and actively engage investment and lending partners in high-emission industries to support the transition and decarbonization in the industry.
  • The Customer Relations Team is responsible for implementing and enhancing responsible investment and responsible lending. It regularly reviews, updates, and develops green financial products and services.
  • SinoPac Holdings and subsidiaries established the "Guidelines for the Management of Climate-Related Risks and Opportunities" or "Standards for the Management of Climate-Related Risks and Opportunities" to manage climate-related risks, disclose information on climate-related risks and opportunities, and comply with the disclosure requirements of the competent authorities on climate-related information.
  • SinoPac Holdings and subsidiaries established the "Responsible Investment Management Guidelines" or related regulations. Bank SinoPac established the "Responsible Lending Management Guidelines" and signed the "Equator Principles" to incorporate ESG factors and related risks into the business decision-making process. When processing investment and asset management and making decisions on projects lending, they carefully evaluate the investee or borrower's environmental, social, and corporate governance risks. The Company also supports the FSC's "program to encourage domestic banks to provide loans to new key innovative industries" by providing lending for the green energy industry.
 Mid-term
R1-3 Economic changes caused by climate change regulations and policies As a result of the low carbon policy implemented by the government, large quantities of equipment in industries with high carbon emissions (e.g., fossil fuel industry) will be written off earlier than planned in during the useful life due to accelerated depreciation and becoming "stranded asset" as a result. Lending business
Investment/Underwriting business 		Increase in losses in creditor rights
Decrease in investment proceeds 		Credit risks
Market risks 		If investment and financing targets belong to industries with high power consumption, high pollution, or high climate risks, government low-carbon policies, domestic and overseas carbon fees or carbon taxes, and changes in energy regulations may accelerate depreciation such that equipment are written off before the end of their life cycles, causing their value to decline, following which they become “stranded assets,” which may increase operational costs and impact profitability, leading to difficulties in creditor rights recovery, reducing investment income/underwriting benefits, and causing market liquidity problems.
  • To support international trends and the national target for attaining net zero emissions by 2050, the Board of Directors of the Company approved the net zero emission target on March 15, 2022. It has officially pledged to achieve net zero emissions in its own operations by 2030 and its financial portfolios by 2050. It also established the Project Management Office (PMO) for operations across different subsidiaries and departments to formulate short, medium, and long-term work objectives.
  • The Company has set science-based targets (SBTs) and received the validation in January 2024. The Company will continue to enhance all carbon reduction actions.
  • The Company announced that starting from July 1, 2022, SinoPac Holdings and subsidiaries will cease lending for new thermal coal and unconventional oil & gas projects and will not renew existing lending projects. To attain our net-zero commitment and continue improvements, the Company has expanded the scope of decarbonization to include investment and lending of thermal coal mining and power generation starting from July 1, 2023.
  • The Risk Management Division of SinoPac Holdings oversees the establishment of the "Financial Impact Quantitative Analysis for TCFD Scenario Simulation" and the units responsible for projects evaluate and adjust the existing strategies and policies for the overall sustainable financial development, sustainable products and services, green energy and environmental energy management based on the quantitative financial impact to increase climate resilience.
 Long-term
Market
R6 Increases in raw material prices Due to the far-reaching impact of the EU Carbon Border Adjustment Mechanism (CBAM), the gradual increase in global carbon tariffs on imported goods may continue to increase the price of raw materials, which may affect their business or revenue. Lending business
Investment/Underwriting business 		Increase in losses in creditor rights
Decrease in investment proceeds 		Credit risks
Market risks
  • Widespread impacts from the European Union Carbon Border Adjustment Mechanism (CBAM) are leading to gradual global increases of carbon tariffs on imported goods, which may further increase raw material prices and affect business or revenue, causing difficulties in creditor rights recovery or impairing investment values.
  • According to statistics compiled by the Ministry of Economic Affairs, CBAM has imposed restrictions on 248 products; products associated with Taiwan are mainly steel products. Trade data from the Ministry of Finance showed that, in 2022, exports of base metals and associated products from Taiwan accounted for 7.69% of total exports, of which 15% was exported to the EU. We will continue to observe the developments of related industries, compare historical profits, and conduct research and analysis.
  • The Customer Relations Team is responsible for implementing and enhancing responsible investment and responsible lending and the development of sustainable financial products/services. Carefully review investments or lending for companies with high climate risks.
  • SinoPac Holdings and subsidiaries established the “Responsible Investment Management Guidelines” or related regulations for promoting and implementing responsible investment. Bank SinoPac established the Responsible Lending Management Guidelines and signed the Equator Principles to gradually enhance the ability of the Bank's credit service personnel to identify ESG risks and assess the financial impact of climate change. It also provides guidance to borrowers for developing green energy industries and industry upgrades, and adjust risk allocations in accordance with regulations.
  • The Risk Management Division of SinoPac Holdings oversee the establishment of the “Financial Impact Quantitative Analysis for TCFD Scenario Simulation” and the units responsible for projects evaluate and adjust the existing strategies and policies for the overall sustainable financial development, sustainable products and services, green energy and environmental energy management based on the quantitative financial impact to increase climate resilience.
 Mid-term
Policies and regulations
R1-2 Economic changes caused by climate change regulations and policies The promulgation and implementation of net-zero policies in different countries will affect the overall sales of specific products and services. For example, policies on the percentage of electric vehicles on the market or new building energy efficiency standards will result in dramatic increases/decreases in the output value of individual industries, which may affect their business or revenue. Lending business
Investment/Underwriting business 		Increase in losses in creditor rights
Decrease in investment proceeds 		Credit risks
Market risks
Strategic risks
  • The promulgation and implementation of net-zero policies in different countries will affect the overall sales of specific products and services, impacting business and revenues. Compliance with regulations may directly or indirectly increase operational costs for investment and lending clients, thereby impacting profits. If clients do not make timely changes to operational strategies based on market conditions, they may lose orders or suffer business impacts; clients in poor financial health may be unable to repay their debts or their income may not meet expectations. Therefore, investment values of corporations may decline, and risks will increase for creditor and other financial market participants.
  • Changes in net zero policies of various countries will affect investment and lending strategies of the financial industry. Failure to be attentive of current events, regulations, and policy trends may result in missed or misjudged changes in industrial operations, resulting in loss of business opportunity or revenue.
  • The Customer Relations Team is responsible for implementing and enhancing responsible investment and responsible lending and the development of sustainable financial products/services.
  • The Board of Directors of the Company officially approved the net zero emission target on March 15, 2022. It has officially pledged to achieve net zero emissions in its own operations by 2030 and its financial portfolios by 2050.
  • The Company has set science-based targets (SBTs) and received the validation in January 2024. The Company will continue to enhance all carbon reduction actions.
  • In addition to continuous promotion of green and paperless operations and use of green electricity, the Company announced that starting from July 1, 2022, SinoPac Holdings and subsidiaries will cease lending for new thermal coal and unconventional oil & gas projects and will not renew existing lending projects. To attain our net-zero commitment and continue improvements, the Company has expanded the scope of decarbonization to include investment and lending of thermal coal mining and power generation starting from July 1, 2023.
  • The Risk Management Division of SinoPac Holdings oversee the establishment of the "Financial Impact Quantitative Analysis for TCFD Scenario Simulation" and the establishment of the TCFD Team. It evaluates and adjusts the existing strategies and policies for the overall sustainable financial development, sustainable products and services, and green energy and environmental energy management based on the quantitative financial impact to increase climate resilience.
 Long-term
Market
R4-2 Changes in customer behavior Rising environmental sustainability awareness or extreme weather may impact companies with high energy consumption / high carbon emissions and increase the difficulties of recovering creditor rights or the impairment of the investment value. Lending business
Investment/Underwriting business 		Increase in losses in creditor rights
Decrease in investment proceeds 		Credit risks
Market risks
  • Extreme weather events may damage the operational headquarters, assets, or impact product and service sales of our investees, negatively affecting profitability and debt repayment capabilities, thereby reducing the value of our investments.
  • Environmental sustainability is a global initiative. Industries with high power consumption/high emissions are facing major financial impacts, so the Company should strengthen client engagement on climate change risks when conducting business.
  • Increasing awareness of environmental protection issues may affect selection of investment targets. Changes in products and services may also cause sales for the original products and services provided by our investees to decline, impairing investment values.
  • The Company has pledged to attain net zero emissions of its financial portfolios by 2050, and formulated short, medium, and long-term work objectives for net zero emissions. The Company also plans to gradually withdraw from investment and lending of thermal coal and unconventional oil & gas projects and actively engage investment and lending partners in high-emission industries to support the transition and decarbonization in the industry.
  • SinoPac Holdings and subsidiaries established the “Responsible Investment Management Guidelines” or related regulations for promoting and implementing responsible investment. Bank SinoPac established the “Responsible Lending Management Guidelines” and carefully evaluates investment and lending in sensitive industries (including high-emission industries).
  • When the first line of defense processes related businesses, they must evaluate climate risks, particularly those of industries susceptible to more significant climate risks, and take climate-related measures for clients in industries susceptible to more significant climate risks.
  • Reference the ESG rating mechanism of professional institutions, constituent stocks of ESG-related benchmarks indexes, or ESG-related external resources or tools to enhance evaluations. Enhance the ESG risk analysis of "sensitive industries". Where such risks are known, avoid underwriting if the assessment concludes that there is a risk of deterioration of ESG risks in the future.
  • The Risk Management Division of SinoPac Holdings oversee the establishment of the "Financial Impact Quantitative Analysis for TCFD Scenario Simulation" and the units responsible for projects evaluate and adjust the existing strategies and policies for the overall sustainable financial development, sustainable products and services, green energy and environmental energy management based on the quantitative financial impact to increase climate resilience.
 Long-term
Physical Risks
Acute
R9-2 Increased frequency and severity of droughts, water shortages, and other extreme weather events Increased likelihood of drought/water shortage results in losses due to potential water shortages in industries with high water consumption, such as manufacturing, agriculture, or semiconductors, which affects the Company's creditor rights or impacts the value of investment positions. Lending business
Investment/Underwriting business 		Increase in losses in creditor rights
Decrease in investment proceeds 		Credit risks
Market risks 		Borrowers or investees in industries with heavy water usage (such as agriculture, electronics, semiconductors, and manufacturing) may be affected by water shortages or uneven water distribution, causing operational interruptions or equipment damage, affecting production volumes, reducing profits, and creating difficulties in creditor rights recovery or reducing investment income.
  • SinoPac Holdings and subsidiaries established the “Responsible Investment Management Guidelines” or related regulations for promoting and implementing responsible investment. They also incorporate ESG issues into investment analysis and decision-making processes, and review ESG information disclosed by investees.
  • Bank SinoPac established the “Responsible Lending Management Guidelines” and signed the “Equator Principles” to incorporate ESG issues in the credit review decision-making process. It carefully evaluates the borrower's environmental, social, and corporate governance risks and monitors whether clients evaluate and adequately respond to climate change risks and opportunities.
  • When the first line of defense processes related businesses, they must evaluate climate risks, particularly those of industries susceptible to more significant climate risks, and take climate-related measures for clients in industries susceptible to more significant climate risks.
  • The Risk Management Division of SinoPac Holdings oversee the establishment of the "Financial Impact Quantitative Analysis for TCFD Scenario Simulation" and the units responsible for projects evaluate and adjust the existing strategies and policies for the overall sustainable financial development, sustainable products and services, green energy and environmental energy management based on the quantitative financial impact to increase climate resilience.
 Mid-term
Opportunity Category Item Number Opportunity Event Impacts Impact Aspects Potential Impacts Assessments of Development Opportunities Related to Operational Strategies, Potential Businesses/Products, and Financial Plans Opportunity Development Management Measures/Response Strategies Possible Occurrence Time
Products and Services
O3-1 Increase in green financial products and services Complying with government policies and regulations, expand investment and lending in renewable energy or green industries and innovate development of sustainable financial products and services to expand business opportunities. Product and merchandise sales
Lending business
Investment/Underwriting business 		Increase in income
  • Global trends in low-carbon green energies have increased demand for products associated with environmental sustainability and climate change. Active alignment with government policies and promotion of appropriate green products and services (such as green deposits, national rooftop green energy participation plan, and preferential mortgage rates for electric vehicles) help us to expand business opportunities.
  • The Company continue to optimize our responsible lending and responsible investment policies to increase investment and lending in companies with better performance in ESG, carbon reduction, and sustainable economic activities, while also encouraging corporate enhancement of information disclosures and launching of green products to increase revenue proportions from sustainable economic activities.
  • Align with government policies and regulations by expanding investment and lending in renewable energy and green industries, developing innovative sustainable finance products and services, and expanding business opportunities though lending for solar photovoltaic power generation and green buildings.
  • The Company continue to launch green bonds, green consumer loans, green funds, and other financial products to align with current consumption trends and policies proposed by competent authorities.
  • Sustainable development has become an international trend. After COP26, all countries have intensified their carbon reduction actions and strengthened carbon reduction regulations. Taiwan also plans to introduce carbon fee measures in 2024. Additionally, the introduction of RE100 and brand company requirements toward adherence with net zero trends for supply chain vendors mean that OEM companies in Taiwan are now faced with carbon reduction and renewable energy investment and lending plans, as well as CBAM changes, which will extend to carbon credit requirements.
  • The Ministry of Economic Affairs has set a policy target to achieve 20% of renewable energy usage by 2025, focusing on renewable energy and low-carbon gas-fired power, so it is necessary to continue developing investment and lending products for renewable energies.
  • Providing competitively priced loans for renewable energy and green industries to assist renewable energy companies in obtaining the capital required for operational developments with our financial expertise . And also engaging with our investees and borrowers to guide relevant industries, investors, and consumers in enabling transition in green low-carbon economies, green investments, green consumption, and daily life.
  • The Sustainable Development Committee of Sinopac Holdings continues to be attentive of domestic and foreign sustainable development issues and climate change trends, and has formulated specific sustainable guidelines. The five teams established under the Committee formulate action plans and short, medium, and long term targets aligned with our sustainability commitment to “mitigate and adapt to climate change”; these action plans and targets are adjusted on a rolling basis each year.
  • The “Customer Relations” Team is responsible for promoting and strengthening responsible investment and responsible lending, development of sustainable finance products/services, as well as promoting Bank SinoPac to sign and incorporated the Equator Principles to integrate our core financial businesses into sustainable development. The Team continues to keep abreast of market trends and develop green finance products to provide themed products that meet client needs, and formulate short, medium, and long-term plans and annual work plans.
  • Besides formulating strategies related to net zero economies by continuing to develop products for solar power, wind power, and other renewable energies, the Company as well as conduct evaluations of international sustainable syndicated loan projects and research issues related to carbon trading, including carbon inventory and lending opportunities from clients upgrading to energy-saving equipment, automation equipment, and pollution prevention equipment.
  • Underwrite green bonds and green infrastructure projects; use of funds, evaluation and screening of green projects, fund management, regular disclosures and reports to investors on use of funds and environmental benefits all adhere to the Taipei Exchange Operational Directions for Green Bonds We have sound management plans that ensure raised funds are actually used on green investment plans, and we continue to track use of funds and regularly disclose the same to investors.
  • Develop more energy storage, energy conservation, and green electricity trading opportunities, create innovative green finance and technology services (such as digital certification) to enhance customer experience and satisfaction.
 Mid-term
Market
O5 Increase in issuance of green financial products and green investments to seek out new business opportunities in the market. Increase in the issuance of or investment in green bonds or participating in underwriting of green energy industries will help us enter new markets, win new business opportunities in the circular economy, and increase operating revenue. Investment/Underwriting business
Products and sales services 		Increase in income
  • Increase in issuance of or investment in green bonds will help us enter new markets and obtain new business opportunities related to circular economy.
  • Issuance of green finance bonds rely on bank’s high credit ratings. Positive market ratings for bank allow it to absorb market funds at lower interest rates, and insurance companies and publicly listed companies have a higher willingness to subscribe. All funds can be used for developing renewable energy financing services.
  • Increase in the proportion of investments in green bonds reduces our exposure to climate risks, enhances our resilience to climate change. The Company issues bonds to collect funds for our green investment plans and social investment plans, invest in low-carbon and renewable energy industries, and increase our investment proportion in environmental sustainability.
  • Increase in green investments helps us to enhance our image so that the Company can be included in ESG-related funds. The Company issues green bonds and uses all collected funds for loans related to our green investment plans.
  • Grasp new business opportunities and work to understand investor and consumer concerns regarding climate change issues as well as needs and preferences for green financial products and services; continue to develop green/ESG funds, bonds, and loan products and services themed around sustainable development; and increase investment balances of green bonds as appropriate. The Company also issues green bonds to raise funds required for development of renewable energy businesses and environmental sustainability businesses.
  • In response to the “Green Finance 3.0” and “Trust 2.0” initiatives of competent authorities, Bank SinoPac has successively issued green bonds and sustainable bonds in recent years, and has launched innovative local rebate trust mechanisms to support developments of green energy-related industries. In future, we will continue to use trusts, lending, and other diverse finance tools to expand our green and sustainable finance services.
  • Provide low-carbon products and services, and offer investment plans for solar energy, wind power, hydropower, biomass power, and other renewable energy solutions.
Mid-term
Resilience
O6-1 Develop adaptation capabilities in response to climate change Actively participate in government and international sustainability and climate change initiatives. Implement the concepts in real actions and gain positive media coverage to enhance the overall corporate image. Corporate image
Own operations
Legal compliance risks 		Improve the Company's reputation
Decrease in operating costs
  • Increase employee awareness of environmental protection through internal activities and implement concepts through specific actions to achieve energy and carbon reduction goals.
  • Participate in sustainability and climate change initiatives hosted by government units, international organizations, or large corporations to increase media coverage.
  • Host or sponsor sustainability and climate change forums to enhance our corporate image.
  • Participate in lectures and activities hosted by relevant public associations, support and promote various international climate initiatives, propose policy recommendations as appropriate, and actively develop sustainable finance to exert our financial influence and drive low-carbon transitions for ourselves and the industry.
  • The Sustainable Development Committee of SinoPac Holdings continues to be attentive of domestic and foreign sustainable development issues and climate change trends, and is responsible for formulating specific sustainability guidelines. The five teams established under the Committee formulate action plans and regularly track sustainable development blueprint, short, medium, and long-term targets, as well as annual work plans.
  • SinoPac Holdings actively works to shape the “SinoPac Life” environmental protection culture, encouraging green actions in daily life through education, promotion, initiatives, commercial services, and diverse channels. The Company has hosted online and physical activities based on our “SinoPac Life - A Million Acts of Green” theme, organizing green markets, used goods donations, beach clean-ups, habitat maintenance, and other environmental protection and charity activities. The Company organize monthly environmental protection themes and environmental protection Q&A activities to guide our colleagues in reducing consumption of single-use resources (such as paper towels), climb stairs for exercise, and eat in-season ingredients. The Company simultaneously promote replacements of energy-consuming equipment and office power-saving measures, and constantly encourage our colleagues to implement green actions in their daily work and lives, cherish resources, and reduce waste.
  • SinoPac Holdings has established the “Code of Environmental Protection and Energy Conservation” and actively promotes environmental protection and energy-saving concepts to our employees; the Company also require SinoPac Holdings and subsidiaries personnel to sign documents online.
  • Actively participate in governmental and international sustainability and climate change initiatives. For example, SinoPac Holdings is one of the founding members of the “Taiwan Nature Positive Initiative,” which iniciated by Business Council for Sustainable Development of Taiwan (BCSD Taiwan) and the Company supported BCSD Taiwan in obtaining authorization from Capitals Coalition to release the Chinese version of Natural Capital Protocol.
 Mid-term
Products and Services
O3-2 Increase in green financial products and services In response to the global trends in low carbon and green energy and the increased demand for products that support environmental sustainability and climate change issues, increasing low-carbon products and services and optimizing digital financial services to enhance the convenience of use will be conducive to increasing customers and expanding business opportunities. Additionally, adopting paperless financial technology inside the Company with electronic services can also improve operational efficiency and save storage space. Product and merchandise sales
Customer service 		Increase in income
Decrease in operating costs
  • In respond to global low-carbon and renewable energy trends, providing low-carbon products and services will be beneficial for attracting customers and expanding business opportunities. For example, digital technologies enable us to provide or optimize digital-friendly application processes for mortgages/credit loans/credit card/card acquiring businesses, increasing customer willingness to apply for these services, reducing physical documents and operational costs, and lowering carbon emissions.
  • Digitalized financial services and transactions, increased services provided by non-physical channels, and used electronic files to replace paper files, thereby avoiding resource wastage and reducing the chance of damage to files.
  • During transitions processes to reduce paper-based operations, the Company not only reduced carbon emissions, but also used automated services to enhance our efficiency and expand our customer base as we continued to promote green and paper-free operations while developing low-carbon products and services, gradually moving financial products from physical channels to online channels while guiding customers in accepting digital channels and applying for related services.
  • The Company actively develops various digital finance services, conducts research, and invests resources into developing smart finance technologies, new products, and innovative smart finance strategies. The Company continues to launch online platform services, paper-free transactions, and other digitalized processes to reduce the time and carbon footprint required to travel for bill paying, reduce physical contact risks, and reduce resulting problems such as forgetting to pay bills.
  • In future, the Company will continue to launch innovative services and optimize user experiences for existing functions to achieve our goal of providing “Zero contact but zero distance services,” making digital innovation our new frontline for epidemic prevention as we work to become the ideal digital finance brand in the hearts of our customers.
  • The Company developed the DACARD app and increased payment items by connecting to the Taiwan Clearing House platform, added credit card payment tools, payment records, payment reminders, and other digital functions to enhance mobile services and convenience.
  • The Company launched the funBIZ online service mechanism which is not constrained by time and space limits. Application documents can be uploaded at any time, eliminating the need to print paper documents and reducing the time required for processing of paper documents.
  • The Company expanded our online bill payment services to digital service channels: We optimized customer authentication mechanisms on the DACARD Paybill website, provided online bill payment services on the DACARD app, and added new payment items.
  • The Company added a fund matching function to our mobile financial advisor, and Bank SinoPac is also developing mother-child fund investment and bond functions for our mobile financial advisor according to planned schedules.
  • The Company continues to offer more green online banking services (such as membership points) to improve customer satisfaction toward Bank SinoPac.
  • The Company provides credit cards and debit cards made using low-carbon manufacturing processes.
  • The Company optimizes front-, middle-, and back-end systems to enhance customer convenience and attract potential customers.
  • The Company strengthens trust business systems to enhance customer services, increase personnel efficiency, reduce overtime hours, and lower electricity usage and water consumption.
  • The Company has completed internal electronic services for funds, bonds, mother-child fund investment, and investment matching to spearhead paper-free processes.
  • In response to the advent of the post-pandemic era, Bank SinoPac has launched ESG-related investment targets, green deposits, and other programs, and is currently working to design and build a new online bank and new DAWHO app to provide a better customer experience.
  • SinoPac Securities actively develops digital financial services, continues to invest in research, and in resources for developing smart finance technologies and new products. SinoPac Securities and Bank SinoPac launched the industry-first online settlement account—the DAWHOTOU app—and also launched the brand-new wealth management DAWHOFONE app to integrate seven major client assets, providing one-stop asset overviews and powerful functions.
 Mid-term
Products and Services
O4 Engagement with customers In response to the international green finance trends, the market raised the threshold for collaboration with other non-green industries in the market by adopting a negative list or declining business transactions. By adopting the role of an ESG communicator with clients and assisting and guiding them in the low-carbon transition and improvement of their business strategies through lending and investment, the Company can create an environmentally friendly environment and consolidate existing client relationships, which will enhance our corporate image. Lending business
Investment/Underwriting business
Corporate reputation 		Increase in income
Increase in operational flexibility
  • Bank SinoPac provides preliminary ESG self-assessments for enterprises, and assists corporations in understanding international sustainability and renewable energy requirements, keeping informed of sustainability transition programs, and adhering to low-carbon transition standards so they can lower their interest rates for loans.
  • Design lending for green energy products, assist clients in entering green industries, and collaborate with financial industry peers to expand market share, guide non-green industries, introduce lending assessment mechanisms for green energy and environmental protection corporations, and provide preferential conditions to lending targets which adhere to government regulations.
  • Carbon Border Adjustment Mechanisms and supply chain carbon management from foreign companies have triggered carbon anxiety in enterprises seeking to conduct carbon inventory. The financial industry can work together with consultant companies to identify corporate carbon risks and further provide corresponding financial products and services.
 The “Customer Relations” Team is responsible for promoting and strengthening responsible investment and responsible lending, develops green finance products/services, and works to enhance climate awareness in customers and provide themed products that adhere to customer needs. Short-term
Resilience
O6-2 Develop adaptation capabilities in response to climate change Include climate-related products in investment and lending portfolios to monitor market trends and increase operational flexibility. Lending business
Investment/Underwriting business
Product and merchandise sales 		Increase in operational flexibility
Increase in revenue
  • Global trends in low-carbon, green energies have increased demand for products associated with environmental sustainability and climate change. The Company have included climate change-related products in our investment and lending portfolios to align with current investment trends, and we evaluate industries with high climate risks in our investment and lending portfolios to enhance our resilience toward climate risks and increase income.
  • The Company have increased climate change-related products (such as carbon emission and ESG related products) in our investment and lending portfolio, focusing not only on financial indicators, but also diversifying investment targets, increasing investment in different industries such as electric vehicles and energy transition, or adding carbon credit collateral to lending products, which can help increase operational flexibility, track market trends, and respond to market changes.
  • The “Customer Relations” Team is responsible for promoting and strengthening responsible investment and responsible lending, develops green finance products/services, and works to enhance climate awareness in customers and provide themed products that adhere to customer needs.
  • The Company keeps informed of market products, continue to assess/provide themed products that adhere to customer needs, and references and utilizes ESG evaluation mechanisms, ESG benchmark index constituents, and other ESG-related external resources or tools from professional institutes. The Company also supports thematic investments that contribute to sustainable development, with a focus on industries or investment targets that promote sustainability.
  • SinoPac Holdings and subsidiaries established the “Responsible Investment Management Guidelines” or related regulations for promoting and implementing responsible investment. They also incorporate ESG issues into investment analysis and decision-making processes, and review ESG information disclosed by investees.
  • Bank SinoPac established the “Responsible Lending Management Guidelines” and signed the “Equator Principles” to incorporate ESG issues in the credit review decision-making process. It carefully evaluates the borrower's environmental, social, and corporate governance risks and monitors whether clients evaluate and adequately respond to climate change risks and opportunities.
 Short-term

Scenario Analysis for Physical and Transition Risks

With identified climate risks, SinoPac Holdings proposes three scenario analyses for physical risks: "heavy rainfall and flooding", "droughts", and "rising sea levels", with "heavy rainfall and flooding" and "droughts" being acute physical risks, and "rising sea levels" being a chronic physical risk. Scenario analyses for three transition risks were conducted: Possible additional "carbon costs" (such as carbon credits, carbon taxes, and carbon fees), "energy transitions" from compulsory installed capacity quotas under government low-carbon transition goals (Nationally Determined Contribution, NDC), and net zero emissions target from own operations by 2030.
SinoPac Holdings conducted respective analyses on different value chain sections (suppliers, own operations, investment and lending businesses) to evaluate potential financial impacts under different climate scenarios and time scales.

Physical Risks

Overview of Physical Risks and Scenario Analysis Results

Note
  1. Assessed according to the latest (July 2023) “Climate Change Flood Risk Map Version 3 (RCP 8.5 only provided)” released by the “National Science and Technology Center for Disaster Reduction” to determine areas prone to flood and severity levels when daily rainfall volumes exceed 650 mm/day.
  2. The period of global warming with temperature rises of 1°C as recommended by the National Science and Technology Center for Disaster Reduction was used as the base period.
  3. Conducted individual assessments for real estate assets located on the island of Taiwan.
  4. Assessed additional costs and revenue impacts to corporations from work stoppages or from obtaining water resources based on the Bankers Association of the Republic of China “Climate Change Scenario Analyses Report for Domestic Banks” drought risk levels for each city or county, and the Ministry of Economic Affairs Water Resources Agency water conservation alert levels.
  5. Analyzed using the Climate Central Coastal Risk Screening Tool developed by Climate Central based on a study by Kopp et al. (2014) published in the international academic journal Earth’s Future, which contained a model for predicting rising sea levels around the globe.
  6. Conducted individual assessments for real estate assets located on the island of Taiwan.

Physical Risks – Mitigation and Adaptation Measures

1 Acute physical risk: Heavy rainfall and flooding
2 Acute physical risk: Droughts
3 Chronic physical risk: Rising sea levels
Analysis Targets Mitigation and Adaption Measures Risk Factors
Upstream supplier’s operating sites Raise signing rates of supplier commitment. The signing rate for 2023 was 100%. The Company also plans to incorporate climate issues into the contents of the commitment. 1 2 3
Continue to strengthen supplier awareness of climate change issues and regularly organize supplier communications and exchanges themed around climate issues. We hosted 1 supplier training session themed around ESG/climate change issues in 2023. 1 2 3
SinoPac Holdings operating sites and own real estate Apart from adhering to the “Natural Disaster Emergency Response Guidelines,” SinoPac Holdings and all subsidiaries have formulated business continuity plans and organized remote backup drills to prepare for sudden natural disasters. 1 2 3
The company takes comprehensive commercial fire insurance and comprehensive electronics equipment insurance for all assets each year which cover typhoon and flooding incidents. With total-mass-based control, our insurance policies entitle us to settlements of approximately 90% of post-disaster recovery costs, so most losses can be offset. 1
Operating sites in drought-prone areas prepare water storage tanks and rent water trucks when necessary to shorten operation interruption times. 2
Enhance waterproofing facilities and drainage pipelines for offices in identified high-risk areas. Installations of floodgate have been completed for 50% of self-owned buildings in high-risk areas as of 2023. 1
Continue to track the scenario analysis results of physical risks and reference historical climate data from the National Science and Technology Center for Disaster Reduction when purchasing own real estate. 1
Loan collateral The credit investigation process already incorporated the ESG risks included in the environmental (including climate change) risks for analysis, and the Company reviews clients’ action plans for ESG risks. 1 3
Avoid lending on real estate targets prone to flooding, landslides, faults, soil liquefaction, tsunamis, and nuclear disasters. 1 3
Apart from land, guarantees, deposits, securities, and items governed by other regulations, all collateral shall be insured by the borrower (or provider) based on appraised values and loan amounts to reduce risks, and the subsidiary providing the loan shall be listed as a designated beneficiary. 1 3
Major natural disasters should be considered when ranking region of real estate for undertaking , and immediate reviews of associated areas should be conducted during emergency incidents. 1 3
With regard to physical risks of areas where real estate collateral are located, rigorous assessments should be conducted as needed to determine whether said areas may be potential climate disaster sites, and the Disaster Risk Adaptation Platform (Dr. A) should be referenced when determining loan ratios. When listing real estate as collateral, climate-related physical risks should be taken into consideration, and climate risks of heavy rainfall, rising sea levels, and flood-prone areas should be identified. 1 3
The Company have formulated corresponding short/medium/long-term targets and incorporated climate change risk factors into loan evaluation procedures and regulations to serve as references for determining loan conditions and review levels. 1 3
Corporate clients' plants The credit investigation process already incorporated the ESG risks included in the environmental (including climate change) risks for analysis, and the Company reviews clients’ action plans for ESG risks. 1 2 3
Determine whether clients have analyzed and established appropriate responses to climate change risks (both physical and transition risks) and opportunities, for example the physical risks associated with their main operating sites or plants. As needed, carefully assess whether said areas are potential climate disaster sites and to serve as a reference for credit investigations. 1 2 3
SinoPac Holdings pays attention to the environment, society, and governance of potential investees before investments. The Company also learns about the impact of climate change on the industry and the company’s operations through Investors’ conferences, seminars, and interviews of upstream and downstream suppliers and includes them in the factors to be considered for investment assessment. 1 2 3
The “Responsible Investment Management Guidelines” stipulate that: “Climate risks of investment targets should be assessed and reviewed before setting investment quotas, and assessment results should be used to establish mechanisms for differential management. Due diligence and careful evaluation should be conducted for listed industries with high climate risks. Climate risk assessment and reviews should be based on the Banking Book Stock ESG Risk Assessment Form or Banking Book Bond ESG Risk Assessment Form.” 1 2 3
The Company has formulated corresponding short/medium/long-term targets which are incorporated into non-financial risk identifications/assessments for investment and lending client operations. 1 2 3

Transition Risks

Overview of Transition Risks and Scenario Analysis Results

Note
  1. The scope of assessment for the industrial climate risk heatmap encompassed domestic and foreign investment and lending positions of SinoPac Holdings and all subsidiaries.
  2. "Contract capacities" were estimated using the indirect emission volumes disclosed by the Ministry of Environment on the Mandatory Greenhouse Gas Reporting System; "equipment construction costs" were based on the "Renewable Energy Feed-in Tariffs (FIT)" released by the Ministry of Economic Affairs, which set preliminary (Phase 1) construction costs for rooftop solar photovoltaic equipment with installed capacity of more than 500 kW as NT$40,900/kW; "electricity sold per kW of renewable energy" was based on the "Regulations for the Management of Setting up Renewable Energy Power Generation Equipment of Power Users above a Certain Contract Capacity" and set at annual levels of 1,250 kWh/kW for solar photovoltaic power; "renewable energy certificate costs" were calculated using the market trading price of NT$4/kWh; "monetary substitution per kW" was set at 2,500 kWh/KW based on the "Regulations for the Management of Setting up Renewable Energy Power Generation Equipment of Power Users above a Certain Contract Capacity"; "monetary substitution rate" was set at NT$4/kWh based on the Ministry of Economic Affairs "Fee rate of monetary substitution payment for consumers of renewable energy obligation."
  3. The "Regulations for the Management of Setting up Renewable Energy Power Generation Equipment of Power Users above a Certain Contract Capacity" stipulates that eligible entities are required to complete installations of renewable energy power generation equipment, purchase of renewable energy electricity and certificates, or the installation of energy storage equipment, either individually or in combination by 2025, and therefore the analysis was conducted based on the annual requirements specified in the regulations. The obligated capacity for renewable energy installations is determined as 10% of the average contract capacity of the user in the previous year. In the case of fulfilling the obligations by installing renewable energy power generation equipment before 2023, the notified obligated capacity by the central competent authority is reduced by 20%. For those who fulfill their obligations before 2024, the notified obligated capacity by the central competent authority is reduced by 10%.
  4. "Renewable Energy Certificate Costs" are determined according to the National Renewable Energy Certification Center. The prices are often negotiated between buyers and sellers through market mechanisms. Based on current market estimates, the cost is projected to be around NT$4/kWh by 2030.
  5. Please refer to Policy and Commitments for more details on our net zero commitment.

Transition Risks - Mitigation and Adaptation Measures

Risk Factors Analysis Target Mitigation and Adaption Measures
Payments of Carbon Cost
  • Carbon costs transferred from suppliers
  • Corporate clients in high-carbon-emission industries
  • Corporate clients listed as high-carbon-emission corporations managed by the Ministry of Environment
  • Use the “Responsible Investment Management Guidelines” as a guideline for promoting and implementing responsible investment.
  • Adhere to the “Responsible Lending Management Guidelines”; “Corporate Banking Manual” and “Equator Principles” (Bank SinoPac); “Financial Markets Manual” (Bank SinoPac); “Transaction Guidelines for Sustainable Development” (SinoPac Leasing) for rigorous evaluation of the environmental, social, and corporate governance impacts of businesses operated by corporate clients when making investment and lending decisions.
  • Formulate limits for "high-risk industries" in consideration of overall business developments for all subsidiaries, risk capacity, future industrial developments, and business cycles. Limits for high-risk industries included industries with high carbon emissions (such as non-ferrous metals, shipping, oil & gas exploration and wholesale, coal chemicals, and aviation).
  • Strengthen management of sustainable supply chains, optimize supplier grading systems, continue to survey high-carbon-emission suppliers, further expand green procurement items such that 60% of procured items are government certified green procurement and finance items, and increase usage ratios of green building materials for renovation and decoration to more than 96%.
  • The Company’s commitment to achieve net zero emissions across financial portfolios by 2050 was approved by the Board in March 2022. The Company joined SBTi in August 2022 and submitted Science Based Targets (SBTs) which were approved in January 2024, hoping to initiate low-carbon transitions alongside stakeholders and “Achieve Net Zero Emissions in Taiwan Through Sustainable Finance.” To advance net zero progress, the Company has established the Net Zero Project Management Office (PMO) to manage net zero action plans and implementations.
  • The Company has pledged to cease financing for new thermal coal and unconventional oil & gas projects and will not renew the existing projects since July 1, 2022. To achieve our net zero commitment, The Company continues to advance the decarbonization policies and expanded the decarbonization scope to investment and lending for thermal coal mining or thermal coal-fired power generation from July 1, 2023.
“Regulations for the Management of Setting up Renewable Energy Power Generation Equipment of Power Users above a Certain Contract Capacity” of the Ministry of Economic Affairs Corporate clients who are major electricity clients affected by these Regulations
Net Zero Emissions in Own Operations by 2030 Own operations
  • Achieve net zero emissions in own operations by 2030 in accordance with SBT pathway.
  • Implement internal carbon pricing mechanisms: Review/adjust internal carbon pricing mechanisms for Taikai and Beigao buildings (own operations).
  • Raise renewable energy usage ratios: Continue to raise annual targets for renewable energy usage ratios.
  • Promote energy and carbon reduction programs: Expand inventory scope and certification rate of own buildings under ISO14001 and ISO50001 management systems.