Task Force on Climate-Related Financial Disclosures (TCFD)
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Strategy
Climate change and losses in natural capital have significant impacts on corporate and social environments. In order to monitor specific impacts of climate change and natural risks as well as strengthen responses to climate and nature related issues, the Risk Management Division of SinoPac Holdings referred to the climate and nature-related regulations and reports released by domestic and foreign institutes, to create climate and nature-related risk and opportunity assessment tables every year. The risk management units of all subsidiaries referred to the industry-based “disclosure topics” defined in the Industry-based Guidance on Implementing IFRS S2 Climate-related Disclosures, and considered their applicability, climate-related scenario analysis, past events, current conditions, and forecasts of future conditions, to identify the climate- and nature-related risks and opportunities that could reasonably be expected to affect the Company’s prospects.
The Company uses risk and opportunity identification processes to determine the impacts of climate- and nature-related risks and opportunities on our businesses, strategies, and finances over different periods. The Company conducts scenario analysis to evaluate potential financial impacts on all sections of our value chain (suppliers, own operations, investment and lending businesses) under various scenarios and timeframes, and responsible units formulate corresponding business, strategic, and financial mitigation and adaptation measures to enhance climate and nature resilience.
The investment cost of the actions taken by SinoPac Holdings in response to climate change risks include project expenses for the introduction of climate risk management, introduction of physical risk data, establishment of climate change databases and automated systems, validation of carbon inventory, insurance premiums for natural disasters, climate-related training, totaling NT$8,706,148. 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$2,671,733, while the investment cost for physical risks amounts to NT$6,791,522.
Risks and Opportunities Management Process
Risks and Opportunities Identification
SinoPac Holdings did not adjust the climate and nature-related risk and opportunity management process this year. In the process of identifying climate and nature-related risks and opportunities, the Company comprehensively considers "expected time horizons of occurrence," "likelihood," and "extent of impact". The scores identified for each dimension are multiplied and weighted in accordance with net values for each subsidiary to obtain group-level identification results, which serve as a basis for ranking the materiality of risks and opportunities. SinoPac Holdings selects the risk and opportunity issues with high likelihood and extent of impact (i.e., those in the first quadrant), and identified their potential operational and financial impacts on different sections of our value chain (suppliers, own operations, and investment and lending businesses), expected time horizons of occurrence, and connections 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.
SinoPac Holdings identified one material climate transition risk and two material climate change opportunities in 2025. To ensure the completeness of risk identification and assessment, the major physical risk issue with significant impact was also included. For more details, please refer to 2025 Climate and Nature-Related Financial Disclosures Report.
| Risk category | Risk description | Potential financial impact | Expected time horizon of occurrence (Note) | Mitigation and adaptation effort/strategy |
|---|---|---|---|---|
Transition risk – policy and legal
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High-emission industries or companies may be affected by regulatory requirements, carbon fee/carbon tax, or decarbonization/net-zero policies, which could increase the financial pressure or default risk of the Company's borrowers and investees, thereby affecting the Company's credit exposures or investment returns. | Increase in credit loss Decline in investment returns Impairment of collateral value |
Long term |
|
Physical risks – acute
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Extreme climate events (such as heavy rainfall, landslides, and droughts) may damage the headquarters, operating sites, plants, and other assets of the Company's borrowers and investees, or disrupt their operations, thereby affecting the Company's credit exposures or investment returns. | Increase in credit loss Impairment of collateral value Decline in investment returns |
Long term |
|
| Opportunity category | Opportunity description | Impact of potential opportunity | Expected time horizon of occurrence (Note) |
|---|---|---|---|
Market
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Increasing investment in or underwriting of green bonds or equities of green-related industries will help the Company enter new markets and capture new business opportunities in the green or circular economy, thereby driving revenue growth. | Investment and underwriting business Product and sales services Strategic risk |
Short, medium, and long term |
|
Product and services
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In line with the global trend toward low-carbon and green energy, and in response to government policies and regulations, the Company will continue to promote green financial products and services—such as green loans (including retail loans such as green building mortgages), low-carbon/climate-related funds, green energy electricity trading trust services, and green credit cards—and support customers’ low-carbon transition through engagement channels, thereby increasing the Company’s earnings. | Expand business opportunities/market Increase in competitiveness Increase in revenue Improve the Company’s reputation |
Short, medium, and long term |
Climate Risk Scenario Analysis
Based on identified climate risks, SinoPac Holdings has conducted scenario analysis covering five types of physical risks: Heavy rainfall and floods, droughts, landslide disasters, rising sea levels, and wildfires. Among these, heavy rainfall and floods, droughts, landslide disasters, and wildfires are acute physical risks, while rising sea levels is a chronic physical risk.In 2025, SinoPac Holdings expanded the scope of its climate physical risk scenario analysis to include overseas locations of entire value chain for the first time. The analysis factors included heavy rainfall and floods, droughts, wildfires, and rising sea levels. Due to the lack of global projection data for landslide disasters, this specific factor remains limited to domestic locations. Taiwan is often affected by extreme weather events such as typhoons and heavy rainfall each year. Landslide disasters may occur as Taiwan has many mountains and is often impacted by earthquakes and typhoons, which may cause slope collapses and affect the safety of real estate and businesses located in slope regions. The Company assesses that, in the short term (within one year), acute physical risks are likely to have a significant financial impact.
To assess transition risks from global net zero trends, SinoPac Holdings conducted separate analyses on different value chain sections (suppliers, own operations, and investment and lending businesses) to evaluate potential financial impacts of three risk incidents under different climate scenarios and time scales. The evaluation focused on: (1) possible additional “carbon costs” (such as carbon credits, carbon taxes, and carbon fees), (2) “energy transitions” from compulsory installed capacity quotas under government low-carbon transition goals (Nationally Determined Contributions, NDCs) and (3) net zero emissions in own operations by 2030.
Physical Risks
Overview of Physical Risks and Scenario Analysis Results
- Conducted individual assessments for real estate assets located both domestically and overseas for heavy rainfall and floods, droughts, wildfires, and rising sea levels; assessments were only conducted on real estate assets located on the island of Taiwan and Penghu, Kinmen, and Matsu for landslide disasters.
- Due to the lack of warming scenario projections for wildfires, the global wildfire risk assessment was conducted based on the baseline period (annual average from 1981 to 2010).
- The scenario for rising sea levels was updated from IPCC AR5 to IPCC AR6, and the timeline was adjusted to 2030 and 2050 based on the original data sources.
- The scope of assessment is aligned with the consolidated financial reporting boundary of SinoPac Holdings.
- The assessment scope for overseas corporate clients' plants is defined based on the materiality thresholds of SinoPac Holdings and its subsidiaries. Data were collected for clients with investment and lending exposures exceeding TWD 300 million (inclusive) for SinoPac Holdings, exceeding TWD 300 million (inclusive) for Bank SinoPac, and exceeding TWD 100 million (inclusive) for SinoPac Securities, as well as all investment and lending clients of other subsidiaries.
- The parameters and projection inputs for physical risk scenario analysis are based on information developed by an external expert, Formosa Climate Smart Service Limited (FCS).
Physical Risks – Mitigation and Adaptation Measures
| Analysis Target | Mitigation and Adaptation Measures | Risk Factors |
|---|---|---|
| Upstream suppliers' operating sites | Continue to strengthen supplier awareness of climate change issues and organize regular supplier communications and exchanges themed around climate issues. In 2025, one briefing session was held to present the on-site audit results of suppliers with high ESG risks. The audit findings for seven audited suppliers were communicated and engagement was conducted via written correspondence. | 1 2 3 4 5 |
| SinoPac Holdings operating sites and own real estate | In addition to 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 3 4 5 |
| 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 4 5 | |
| 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 100% of self-owned buildings located in high-risk areas in Taiwan as of 2025 (excluding King’s Town Bank). | 1 | |
| Continue to track physical risks identified under scenario analyses and use the results as a reference when purchasing own real estate and entering into new lease agreements for operating sites. | 1 5 | |
| 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 5 |
| Avoid lending on real estate targets prone to flooding, landslides, faults, soil liquefaction, tsunamis, and nuclear disasters. | 1 3 5 | |
| 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 4 5 | |
| 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 4 5 | |
| With regard to physical risks of areas where real estate collaterals are located, rigorous assessments should be conducted as needed to determine whether said areas may be potential climate disaster sites, and the Disaster Risk Adaption Platform 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 5 | |
| The Company has 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 4 5 | |
| Added systemic registration and disclosure mechanisms incorporating potential risks from rising sea levels and landslide disaster risk information to real estate appraisal processes. | 3 5 | |
| The Company has established domestic climate change physical risk database in 2024 and applied the information in real estate collateral appraisal processes in 2025. | 1 3 5 | |
| The Company has established overseas climate change physical risk database in 2025 and plan to integrate the information in real estate collateral appraisal processes. | 1 3 4 5 | |
| 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. Additionally, a list of industries with high climate risks has been established, and the processes includes the evaluation of climate risks (including physical risks). | 1 2 3 5 |
| 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 5 | |
| 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 5 | |
| 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 5 | |
| 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 4 5 | |
| The Company has established domestic climate change physical risk database in 2024 and applied the information in physical risk assessment processes in 2025. | 1 2 3 5 | |
| The Company has established overseas climate change physical risk database in 2025 and plans to integrate the information in physical risk assessment processes. | 1 2 3 4 5 |
Transition Risks
Overview of Transition Risks and Scenario Analysis Results
- The scope of assessment for the industrial climate risk heatmap encompassed domestic and foreign investment and lending portfolios of SinoPac Holdings and all subsidiaries.
- “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$36,400/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 Electricity 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 Electricity 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.”
- The “Regulations for the Management of Setting up Renewable Energy Power Generation Equipment of Electricity 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%.
- “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.
- Please refer to the SinoPac Holdings official website for more details on our net zero commitment.
- Assessment scope encompassed domestic and overseas suppliers of subsidiaries within the same boundary as the consolidated financial statements.
- The scope of assessment encompassed domestic and foreign investment and lending portfolios of SinoPac Holdings and all subsidiaries.
Transition Risks - Mitigation and Adaptation Measures
| Risk Factors | Analysis Target | Mitigation and Adaption Measures |
|---|---|---|
| Carbon Cost Payments |
|
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| Ministry of Economic Affairs "Regulations for the Management of Setting up Renewable Energy Power Generation Equipment of Electricity Users above a Certain Contract Capacity" | Corporate clients who are major electricity users affected by these Regulations | |
| Net Zero Emissions in Own Operations | Own operations |
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