Climate change governance

After the successive announcement and passage of the UN Sustainable Development Goals (SDGs) and Paris Agreement, adaptation to and mitigation of climate change have become key missions of global economic development. In recognition of the physical and transitional risks and opportunities brought by climate change, we carried out a full inventory of policy and legal, technology, market, and reputation risks and opportunities as countermeasures, and progressively disclosed our actions taken to address climate change in terms of the TCFD core elements of governance, strategy, risk management, and metrics and targets in order to optimize the control of climate-related risks year after year. In March 2022, we signed our support for the Task Force on Climate-related Financial Disclosures (TCFD) published by the Financial Stability Board (FSB), published an independent report, and passed a third-party management audit. In April 2022, we joined the Science-Based Targets initiative (SBTi) and submitted the net zero emissions targets in November of the same year.

Financial impacts of risks, opportunities and countermeasures

Financial impacts of risks and countermeasures

Risk	Potential financial impacts	Key Counteractions
Increased cost of raw materials Uncertainty in the development of new energy conservation and carbon reduction technology	Increased input prices due to the increased cost for carbon reduction of suppliers Difficulties in capturing cost rise trends to affect previously order deployment. increased input prices when suppliers are fined for violations due to ineffective energy conservation and carbon reduction pathways.	Close capture of carbon reduction performance of suppliers and the relevant laws, regulations, and policies. Active review of up/downstream order demands and supply capacity to facilitate early communication and planning (including costs) of supply chain. Regular contacts with customers to understand production line condition and materials demand and prompt and reliable responses to customer demands and reflection of material costs.
Substitution of existing products and services with lower emissions options	Reduced product and service demand due to worries about the quality and supply stability of low-carbon raw materials. Increased uncertainty in procurement deployment for seeking low- carbon materials suppliers to affect the portfolio and source of revenues. Uncertainty in profit space of low-carbon raw materials.	Increased sources for low-emission goods. Enhanced supplier communication for low-emission transition. Strengthened education and training on low emissions for purchasers to facilitate sourcing and screening low-emission goods. Enhanced customer communication for early capture of the exact demand (item, quantity, and budget) for low-emission goods.
Net-zero emission trend GHG total volume control and carbon tax, carbon fee.	Increased operating costs (e.g., higher compliance costs, increased costs resulting from fines and judgments) due to unclear carbon tax policies of different countries and pressure from doubts about practice. Impacts of existing assets due to policy changes. Increased costs for green power procurement and carbon credit.	Continuous GHG reduction actions. Allocation of low-emission risk assets. Planning for long-term deployment of carbon credit Green power investments and green power platform development
ESG investment transition risk	Reduced return on investments from low revenues due to immature innovative technologies of green investees.	Assessment of technology innovation teams in greater detail. Increased investments in and guidance for innovation teams with integrated group resources.
Reputation impact tax, carbon fee.	Negative influence on market presence due to high emissions of imported materials.	Increased proportion of low-emission goods. Continuous green economy development
Decreased production capacity	Unbalanced supply and demand due to decreased capacity and prevention of normal supply resulting from severe weather events of suppliers, such as hurricanes, floods, droughts, and heat waves. Risk of fines for breaches of supply contracts resulting form the damages cause to customers. Increased stock to increase pressure on cash flow	Enhanced capture of the climate adaptation measures and response capacity of suppliers. Appropriate stock increase. Appropriate fund allocation to relieve cashflow pressure.

Financial impacts of opportunities and countermeasures

Opportunity	Potential financial impacts – / +	Key Counteractions
Participation in carbon market	+ Reduced exposure to GHG emissions + Participation in carbon market together with professional environmental assessment and green power platforms to increase operational capacity and revenues.	Provision of methodologies for professional carbon accounting, emission allowance and CCSR trade, carbon assets, and carbon/emission reduction for businesses engaging in carbon trade to improve carbon management capability.
Participation in renewable energy programs	+ Extraction of biogas from livestock wastewater, construction of solar PV stations, investment in the solar energy industry, and returns on investment in low-emission technology. + Reduced exposure to GHG emissions and therefore less sensitivity to changes in cost of carbon	Promotion of the green economy and environmental sustainability by implementing renewables with technologies including fishery and electricity symbiosis and smart culturing.
Improvement of business reputation	+ Active engagement in international climate actions, practice of low- emission strategies, and becoming the first-choice quality supplier of leading manufacturers resulting in increased demand for goods/ services. + Facilitating labor management and planning (e.g., employee recruitment and retention) + Increased financing convenience/capital increase	Improvement of the green business image through engagement with recycling technology and green innovation.
Development of low emission goods and services / Increased efficiency of customer products	+ Cultivation of sources for low-carbon materials resulting in increased venues with low-emission products and services. + Better competitive position to reflect shifting consumer preferences, resulting in increased revenues + Development of recycling and reuse technologies to help implement low-carbon strategies in the value chain, resulting in better competitive position and increased revenues.	Assistance for businesses in realizing recycling and reuse through technology improvement: water recycling, smart culturing, biogas generation, calcium fluoride sludge recycling, solar PV station, and fishery and electricity symbiosis.