Governance

Chunghwa Telecom's risk management policy, structure and culture are approved by the Board of Directors, and has established the Risk Management Committee, with the President as the convener, reporting to the Board of Directors. In addition, the Sustainable Development Promotion Committee has been established at the Company, under which the Environmental (E) group is responsible for the management of the company-wide climate change mitigation and adaptation strategies and actions.

The group is tasked with the analysis and tracking of risks and opportunities of climate change. The Environmental (E) group reports results to the Risk Management Committee for the Committee to perform a comprehensive assessment of the risks and implement necessary mitigation measures in line with the risk levels. The Environmental (E) group shall regularly produce the TCFD Assessment report for the reference of the Board of Directors.

Climate Governance Mechanism

• Senior Executive Management – Chief Executive Officer (CEO)
  • In accordance with the Chunghwa Telecom Senior Executive Performance Management Regulations, the sustainability indicators linked to the variable compensation of senior executives include:
    1. Risk Management
    2. Code of Ethical Conduct
    3. Information and Cybersecurity
    4. Climate Change
    5. Stakeholder Engagement and Materiality Assessment
    6. Social Participation
• Middle and Senior Management
  • The Sustainable Development Committee links sustainability performance to the variable compensation of senior executives. The linkage ratio has increased progressively from 10% in 2022 to 30% in 2025 and has since been maintained at that level, encouraging executives to integrate ESG principles into daily business operations. According to the Senior Executive Performance Management Regulations, relevant sustainability performance indicators include electricity consumption, renewable energy utilization, digital empowerment of SMEs, corporate governance performance, and international sustainability ratings.
  • Senior executives' compensation is also tied to performance evaluations of climate-related indicators. By closely aligning corporate sustainability objectives with executive performance assessments, Chunghwa Telecom incentivizes senior management to proactively advance environmental protection initiatives and climate action programs.
• Employees
  • To ensure that all employees understand and embrace the Company's sustainability vision, actively implement sustainability initiatives, and provide timely feedback and suggestions, Chunghwa Telecom has established multiple internal communication channels to promote sustainability-related topics. These efforts are integrated with the performance management system to transform sustainability awareness into concrete actions embedded in daily operations. Sustainability objectives are incorporated into annual performance evaluations as a key basis for assessing departmental performance.
  • To encourage organization-wide participation in environmental sustainability and enhance employee engagement, Chunghwa Telecom has established the Environmental Sustainability Incentive Program of Chunghwa Telecom Co., Ltd. The program is linked to individual annual performance evaluations, fostering a corporate culture that supports net-zero transformation and sustainable development.

Risk Management

In alignment with TCFD recommendations, Chunghwa Telecom identified short-, medium-, and long-term climate-related risks and opportunities by reviewing global industry risk management reports, Taiwan’s regulatory policies, and peer company disclosures. To enhance the robustness of this assessment, perspectives were gathered through interviews with senior managers across departments (internal departments) and independent directors (external). These interviews provided insights into the relevance, potential impact, and expected timing of each identified climate-related risk and opportunity.

In accordance with the TCFD recommendations, Chunghwa Telecom reviewed global industry risk management reports, Taiwan’s regulatory policies, and peer disclosures to identify climate-related risks and opportunities across the short, medium, and long term. Additionally, Chunghwa Telecom referred to the ISO 31000 Risk Management Guidelines to establish a climate risk management process. A hazard severity assessment methodology was adopted to evaluate risk levels (low, medium, high), using the following formula: Risk Severity = Likelihood × Impact Magnitude.

Starting in 2023, Chunghwa Telecom elevated its “Risk Management Committee” to a functional committee under the Board of Directors in 2023 and renamed the former management-level committee to “Risk Management Promotion Committee,” clearly delineating the roles of strategic oversight and operational execution, and thereby enhancing the hierarchical structure of the company’s risk governance framework.

The Environmental (E) Group under the Sustainable Development Promotion Committee is responsible for overseeing climate-related risk management activities, based on climate risk and opportunity matrix. Its duties include formulating response strategies, setting implementation directions and management targets, and planning resource allocation. The results of related assessments are reviewed by the Sustainable Development Promotion Committee and regularly reported to the Risk Management Committee. The Risk Management Committee is responsible for integrating climate-related risks into Chunghwa Telecom’s broader enterprise risk assessment and for initiating appropriate mitigation measures based on the level of risk identified. To ensure the effectiveness of response strategies, Chunghwa Telecom conducts quarterly reviews of the implementation status and progress toward risk management targets. A mechanism for ongoing monitoring and evaluation has also been established to track performance continuously. Progress and outcomes are regularly reported to both the ESG Committee and the Board of Directors. Where necessary, adjustments are made based on actual implementation results to ensure timely achievement of the stated objectives.

Aligned with the TCFD framework, Chunghwa Telecom has established a comprehensive inventory of climate-related transition risks, physical risks, and climate opportunities, and conducts annual assessments to identify and evaluate climate-related risks and opportunities. Transition risks encompass four key dimensions: regulatory and policy, market, technology, and reputation. Chunghwa Telecom systematically identifies and assesses climate-related risks through climate scenario analysis and its Enterprise Risk Management (ERM) framework. The regulatory and policy dimension covers current regulations, emerging regulations, and legal risks including carbon pricing mechanisms, emissions trading schemes (ETS), renewable energy policies, IFRS S2 climate-related disclosure requirements, and other regulations associated with the net-zero transition. The Company evaluates the potential financial impacts of different carbon price pathways under both STEPS and NZE scenarios. The results indicate that proactive implementation of energy transition initiatives and the achievement of SBTi-aligned decarbonization targets can effectively mitigate future carbon costs and regulatory compliance risks.

In addition, achieving carbon neutrality will require telecommunications operators to increase the use of renewable energy. However, due to the intermittent nature of renewable energy generation, significant investments in microgrids and energy storage systems are necessary to maintain network availability and power reliability. Inadequate technology assessments, investment decisions, or asset allocation planning may create technology transition risks. Chunghwa Telecom continuously monitors developments in climate-related regulations and policies and integrates potential compliance, litigation, disclosure, reputation, and technology transition risks into its risk management and strategic planning processes, thereby strengthening operational resilience and long-term competitiveness.

Physical risks are categorized into “acute” and “chronic” risks based on the timeframe and nature of their impacts. Climate-related opportunities are focused on three key areas: the transition to a low-carbon economy, improvements in energy efficiency, and the development of green products and services.

Specific assessment criteria are established for both climate-related risks and opportunities. Climate risk assessments focus on their potential impact on business strategy, operations and service continuity, value chain activities, and corporate reputation. Climate opportunity assessments evaluate potential benefits from operational performance and cost efficiency, market growth and competitiveness, as well as innovation and technological development.

Climate Risk and Opportunity Identification Process

The Group applies the principle of double materiality to identify material issues. Climate-related risks and opportunities are evaluated from both operational and financial perspectives, and a climate risk and opportunity matrix is developed accordingly. For issues with significant operational impact, the Group quantifies financial impact and establishes disclosure thresholds to determine material climate issues. Issues reaching the threshold are incorporated into the Group's material climate risks and opportunities, ensuring focus and consistency in Group-level identification.

During the reporting year, five climate risks and three climate opportunities were identified as having medium to high operational impact. Based on the combined assessment of financial materiality and operational impact, the material climate risk for the year was “Increased compliance costs associated with 2050 Net Zero Policy,” while the material climate opportunity was “Provision of climate enhancement services to customers.” Although the financial impact of “Damage to telecommunications infrastructure caused by extreme weather events” did not reach the disclosure threshold during the reporting year, the Group included this issue as a material climate risk. This decision reflects several factors: telecommunications services constitute critical infrastructure; the Group has long prioritized digital resilience and uninterrupted communication services; and extreme climate events are increasingly unpredictable and severe, closely linked to service stability and business continuity.

Climate-related Risk

Note: Expected impact period — Short term: within 1 year; Medium term: 1–5 years; Long term: over 5 years.
The financial impact of implemented measures is calculated based on the Group's consolidated profit before tax for 2025 and represents the proportion of impact attributable to each climate risk and opportunity.

Climate-related Opportunity

Note: Expected impact period — Short term: within 1 year; Medium term: 1–5 years; Long term: over 5 years.
The financial impact of implemented measures is calculated based on the Group's consolidated profit before tax for 2025 and represents the proportion of impact attributable to each climate risk and opportunity.

Strategies

As global climate governance becomes increasingly stringent and countries accelerate the implementation of 2050 net-zero transition policies, the telecommunications industry, as a critical infrastructure provider, faces growing regulatory and market pressures. Failure to respond effectively to expanding carbon pricing mechanisms, mandatory sustainability disclosure requirements (such as IFRS S2 Climate-related Disclosures), and energy transition regulations may result in higher compliance costs, increased carbon fees and potential penalties, as well as greater disclosure-related risks. These challenges could adversely affect corporate sustainability ratings, investor confidence, and overall market competitiveness.

To address these evolving risks, telecommunications companies must invest in renewable energy procurement, strategic carbon credit management, and the replacement of energy-intensive equipment with more efficient technologies. While such initiatives may increase capital expenditure and operating costs in the short term, they can deliver long-term benefits by improving energy efficiency, reducing carbon-related costs, enhancing operational resilience, and strengthening sustainable competitive advantages in a low-carbon economy.

To analyze the impacts of climate change on Chunghwa Telecom in the future, Chunghwa Telecom set a baseline scenario and a 1.5°C scenario in accordance with the TCFD framework to identify and analyze the short-, medium-, and long-term climate risks and opportunities in the business scope of the Company, the upstream and the downstream, and the entire life cycle of assets. IEA STEPs (baseline scenario) and IEA NZE (1.5°C scenario) are employed as the climate scenarios for climate mitigation strategies (transition risks). IPCC RCP 8.5 (baseline scenario) and IPCC RCP 2.6 (1.5°C scenario) are employed as the climate scenarios for climate adaptation strategies (physical risks).

Metrics & Targets

Pursuant to the metrics formulated based on the two strategies, i.e. climate change mitigation and adaptation, Chunghwa Telecom laid out its targets regarding climate risks and opportunities to manage the risks and opportunities of the Company.

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