Environmental Sustainability

TCFD

Issue Date：2023/06/30

Task Force on Climate-related Financial Disclosures

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 three 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

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).

Risk/Opportunity	Category	Time	Issues
Transition Risks	Policy and Legal	Short-term Medium-term Long-term	Increased costs for GHG emissions due to the national policy of Net Zero Emissions Necessity in the investment in renewable energy owing to national renewable energy policy Increased operating costs arising from addition of other sustainability-related laws and regulations
	Technology	Short-term Medium-term Long-term	Failure in new technology investment (e.g. a technology developed not meeting the low-carbon benefits, rendering failure of the new technology invested) Missed involvement in the low-carbon R&D trend for failure of investment in the low-carbon transformation technologies
	Market	Short-term Medium-term Long-term	Changes in customer behaviors (e.g. elevated consumer awareness for climate change or shift in product/service demands)
	Reputation	Medium-term Long-term	Impact to reputation from litigation risks Impact to reputation due to carbon reduction performance of suppliers not as expected
Physical Risks	Acute	Short-term Medium-term	Damage to facility/equipment due to increased severity of extreme weather events like typhoon or flood Product supply disruption/delay arising from impacts to supplier operation and production due to extreme weather events
	Chronic	Medium-term Long-term	Increased energy consumption due to rising average temperature Damage to assets arising from long-term changes in climate environment (e.g. precipitation patterns, temperature, or sea level) Impact on supplier operation and production arising from long-term changes in climate environment (e.g. precipitation patterns, temperature, or sea level)

Note: the short-term is defined as the present to 2025; the medium-term as 2026-2030; and the long-term as 2031-2050.

Risk Management

The questionnaire designed by Chunghwa Telecom employed the Delphi method. After collection of the opinions and feedbacks from various departments via interviews regarding the risk categories and opportunity categories, the analytic hierarchy process (AHP) was adopted to analyze climate risks and opportunities. The hierarchy diagram is designed and created in line with the climate change risks and opportunities proposed by the TCFD. The risk categories and opportunity categories are compared against each other in pairs to assess the corresponding significance of risk categories and opportunity categories. Finally, the weight and priority of the respective risk categories and opportunity categories are determined.

Based on the analysis results, the weight of climate-related opportunities is 0.735, the weight of climate-related transition risks is 0.207, and the weight of climate-related physical risks is 0.058. Chunghwa Telecom sets the ones among the climate-related opportunities, as well as the climate-related transition risks and physical risks, with the highest weight as the material risk/opportunity categories, so the material risk category are policy and legal risks as well as acute risks; the climate-related opportunities are energy source.

Climate-related opportunities (0.735)	Climate-related transition risks (0.207)	Climate-related physical risks (0.058)
Resource efficiency (0.075)	Policy and legal risks (0.648)	Acute risks (0.75)
Energy source (0.435)	Technology risks (0.041)	Chronic risks (0.25)
Products and services (0.029)	Market risks (0.11)
Markets (0.094)	Reputation risks (0.201)
Resilience (0.367)	Policy and legal risks (0.648)

The Environmental Group conducts risk assessments for climate change risks, formulates necessary mitigation measures, and determines risk levels based on the risk matrix. The Risk Management Committee performs the overall risk assessment and review on the basis of the assessment and analysis results of respective institutions, tracks and monitors, as well as reports to the Board of Directors in a timely fashion.

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.

Corresponding Material Risk/Opportunity	Metric	Target	Performance in 2022
Policy and Legal (Net Zero by 2050 in Taiwan)	GHG emissions (Scope 1, 2, and 3)	Net Zero by 2050 A 50% reduction of carbon emissions in Scope 1 and 2 by 2030 compared with 2020 levels A 22.5% reduction of carbon emissions in Scope 3 compared with 2021 levels	Total emissions in Scope 1 and 2 reduced by 9.64% compared with the base year levels Emissions in Scope 3 reduced by 4.61% compared with base year levels
	Renewable energy use	RE100 by 2040	24.05 million kWh used, accounting for approximately 1.73%
	PUE of IDCs	1.5 by 2030	A PUE of 1.647 for IDCs
Acute Risks	Severity of climate disasters	Deployment of relevant plans in line with the short, medium and long-term climate change adaptation plans	Please see Attachment TCFD Adaptation Plans for Climate Change in the Short-/Mid-/Long-term of Chunghwa Telecom
Energy Source	IDCs Percentage of renewable energy	RE100 by 2030	18.90 million kWh used, accounting for approximately 12.7%