Environmental Sustainability

TCFD

Issue Date：2022/06/30

Task Force on Climate-related Financial Disclosures (TCFD)

Chunghwa Telecom is the first telecom operator in Taiwan that signed up for the Task Force on Climate-related Financial Disclosures (TCFD) initiative. Since 2020, it has been proactively performing analyses concerning the climate-related risks and opportunities based on the TCFD framework. With that, it pushes for efforts for climate change adaptation and mitigation, reducing risks in corporate operation and create opportunities for the industry.

Chunghwa Telecom became the first telecom operator in the world that passed “the conformity check for the TCFD Recommendations on climate-related financial disclosure” with the highest rating “Level 5: Excellence grade” for 2 consecutive years.

Chunghwa Telecom TCFD Disclosure
Chunghwa Telecom has conducted the analysis of climate related risks and opportunities based on the framework proposed by TCFD and has preliminary results. The following are the results of Chunghwa Telecom's implementation according to the four core elements of TCFD: "Governance", "Strategy", "Risk Management", and “Metrics and Targets".

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. The Environmental (E) group is responsible for the management of the company-wide climate change mitigation and adaptation strategies and actions as well as analysis and tracking of risks and opportunities of climate change. The Environmental (E) group compiles and reports results of evaluation and analyses to the Risk Management Committee for the Committee to perform a comprehensive assessment of the climate risks and other risks with the Company and implement necessary mitigation measures in line with the risk levels. The Environmental (E) group shall regularly produce the TCFD Assessment report for the level of the Board of Directors’ reference in business decision-making.

Strategies

In line with the TCFD framework, Chunghwa Telecom formulated the baseline scenario and the 2°C scenario to identify and analyze its business scope and upstream/downstream as well as the short-/mid-/long-term climate risks and opportunities throughout the lifecycles of assets. Based on the analysis results of the climate change project in 2021, the main impact from the physical risks is facility/equipment damages arising from an increased frequency and severity of severe typhoons, and the transition risk is the increased electricity bill derived from changes to the energy mix in Taiwan.

Code	Risk	Risk Level	Time Frame
Code	Risk	Risk Level	Time Frame
R1	Increased sustainability laws and regulations	High	Short-, Mid-term
R2	Increased electricity bill derived from changes to the energy mix in Taiwan	High	Short-, Mid-term
R3	Increased costs from GHG emissions (e.g. additional costs of carbon fee in line with the regulations)	High	Short-, Mid-, Long-term
R4	More costs required to achieve net-zero emissions due to rise of carbon credit prices	Medium	Mid-, Long-term
R5	Replacement with equipment of lower energy consumption (e.g. electric vehicles) to improve energy efficiency	Medium	Short-, Mid-, Long-term
R6	Failed new technology investment (e.g. a technology developed not meeting the low-carbon benefits, rendering failure of the new technology invested)	Low	Short-, Mid-, Long-term
R7	Miss the involvement in the low-carbon R&D trend for failure of investment in the low-carbon transformation technologies	Low	Short-, Mid-, Long-term
R8	Changes in customer behaviors (e.g. elevated consumer awareness for climate change or shift in product/service demands)	Low	Mid-, Long-term
R9	Impact to reputation arising from supplier carbon reduction performance lower than expected	Low	Short-, Mid-, Long-term
R10	Impact to reputation from litigation risks	Low	Mid-, Long-term
R11	Facility/equipment damages arising from an increased frequency and severity of severe typhoons	Medium	Short-, Mid-, Long-term
R12	Facility/equipment damages by floods due to an increased frequency and severity of torrential rain	Low	Short-, Mid-, Long-term
R13	Product supply disruption/delay arising from impacts to supplier operation and production due to extreme weather events	Low	Short-, Mid-, Long-term
R14	Increased energy consumption due to rising average temperature	High	Short-, Mid-, Long-term
R15	Asset damages arising from floods in the low-lying areas along the coasts of Taiwan due to the rising sea levels worldwide	Low	Short-, Mid-, Long-term

Note: the short-term is defined as the present to 2025; the mid-term as 2026-2030; and the long-term as 2030-2050.

Based on the analysis results of the climate change project in 2021, the main impact from the physical risks is facility/equipment damages arising from an increased frequency and severity of severe typhoons, and the transition risk is the increased electricity bill derived from changes to the energy mix in Taiwan. The main climate opportunities include: “industrial transformation driven by popularization of 5G, IoT, and emerging digital technologies.”

Risk Management

The Environmental Group of the Sustainability Development Committee at CHT took reference with the ISO 31000 risk management guidelines and employed the Delphi method to probed into the professional experiences of senior managers of relevant departments. As a result, 10 transition risks and 5 physical risks were identified.

After analysis of the low/medium/high risks with CHT, the Risk Management Committee conducts a comprehensive assessment with the climate change risks and other risks of the Company combined for implementation of necessary mitigation measures in line with the risk levels. After the overall risk assessment based on the results of evaluation and analysis of different institutions, the Risk Management Committee submits the risk assessment results to the Chief Audit Executive for review and reports to the Board of Directors as appropriate.

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.

Type	Item	Metric	Target	Performance in 2021	Action Plan
Risks	Climate mitigation	GHG emissions	Net-zero emissions	The carbon emissions in 2021 is 734,866.729 t-CO₂e, reduced by 7.02% compared to that of previous year Link: Scope 1, 2, and 3 emissions of Chunghwa Telecom	CHT laid out its climate change strategic plan and engaged a series of green energy transition projects, including IDC energy efficiency improvement, renewable energy project site installation and green energy procurement, and energy storage equipment development
Risks	Climate adaptation	Resiliency against climate disasters	Post-disaster survival rate of base stations raised to 96% The overall capacity of mobile emergency communication services increased to 1.5 of the levels in 2016 (base year)	Active compliance with the NCC policies and assistance in achieving the targets in 2021, in which CHT established 20 mobile emergency mobile communication platforms in the period of 2017-2021, making it the service provider with the most platforms available	Works for climate change adaptation were carried out with “Action Plans for Adaptation to Climate Change in the next 20 Years for Chunghwa Telecom Communication Networks” at the core. In 2022, we will expand the scope of our adaption projects towards the supply chain.
Opportunities		Revenue share of green products and services	Estimated year-on-year growth in revenue of green product and service revenue	A NT$15.28 billion of operating revenue from green products in 2021, accounting for 8.54% of the total revenue	CHT offered emerging businesses including the Intelligent Energy Network Service, Cloud-based AI PaaS, and big data project creation.