SinoPac Subsidiaries

Economic changes from climate-related laws and policies

• Tighter policies or regulations on GHG reduction, energy saving, or environmental and energy efficiency may increase operating costs or lead to penalties for non-compliance.

• Net-zero policies adopted by various countries will change overall sales of certain products and services (e.g., share of electric vehicles, new building energy-efficiency standards), causing sharp rises or falls in output value of certain industries and potentially affecting their business or revenue.

• Low-carbon policies pushed by governments at home and abroad will accelerate depreciation of equipment in high-carbon industries (e.g., fossil fuels), which will be written off early and lose value, creating "stranded assets."

Long term

Tighter policies or regulations on carbon pricing, carbon taxes, or emission/reduction targets and reporting obligations

• If investment or underwriting targets are in high-energy-consumption, high-pollution, or high-climate-risk industries, net-zero commitments and SBT reduction targets may reduce the Company's business opportunities and revenue.

• If investees' revenue and profit fall because of carbon fees/taxes, reduction targets, or tighter energy-saving regulations, investment returns will be affected.

Medium term

Changes in customer behavior and rising environmental sustainability awareness

• Investors' attention to environmental issues gives related financial products potential for growth; failing to keep pace may affect business development and company growth.
•  If rising sustainability awareness or extreme weather hurts high-energy-consumption industries and reduces the value of investees, investment returns will be affected.

Medium term

Technological improvements or emerging technologies affecting future development

• If investees fail to develop fintech or follow the FSC's fintech roadmap, cannot grasp customer needs, or suffer higher costs and lower profit from technical errors or failed transitions, revenue and investment returns may be affected.

Medium term

Energy mix changes reducing the stability of power supply

• If investees are hit by reduced power supply stability, operational stability and profitability will suffer, lowering investment returns.

Long term

Rising raw material prices

• If investees are affected by carbon tax costs under CBAM (EU Carbon Border Adjustment Mechanism) or by higher raw material prices, profits and investment returns will decline.

Medium term

Increased stakeholder attention to climate change

• Climate change is a stakeholder concern; insufficient effort would affect corporate image.

Long term

More frequent and severe typhoons, heavy rainfall, and other extreme weather

• Damage to investees' headquarters, sites, plants, and assets, affecting claims and investment position values, e.g., climate-sensitive assets (agriculture, real estate).

Medium term

More frequent and severe landslides, slope disasters, and other extreme weather

• Same impact as above.

Medium term

More frequent and severe drought, water shortage, and other extreme weather

• Higher drought/shortage probability may harm water-intensive industries (manufacturing, agriculture, semiconductors), affecting claims or investment position values.

Medium term

Global sea level rise flooding some low-lying areas and damaging assets

• Damage to premises or equipment, business interruption, or casualties.

Long term

Wildfires

• Lower expected value of some climate-sensitive assets (agriculture, real estate).

Long term

Litigation or liability claims arising from failure to establish climate/nature governance, reduce GHG emissions, adequately disclose climate/nature risks, or adjust business strategy, or from environmental harm or third-party property loss caused by borrowers/investees

• Reputational damage or more investor lawsuits.

Long term

Economic changes from climate-related laws and policies

• SinoPac Securities set up a "Customer Relations" group to promote and deepen responsible investment and develop sustainable finance products and services.

• On March 15, 2022, the parent, SinoPac Holdings, formally adopted net-zero targets: net zero in its own operations before 2030 and across its full asset portfolio before 2050.

• SinoPac Holdings set science-based targets (SBT), validated in January 2024. In line with the parent, the target is that by 2027, investment balances in listed securities validated by SBTi reach 38% of the total, as an interim checkpoint toward 2050 net zero, with regular tracking.

• In line with the Holdings' policy and net-zero strategy, the Company plans to phase out fuel coal and unconventional oil and gas investments, and has issued "decarbonization statements" and concrete action plans for fuel coal mining and power generation and unconventional oil and gas positions.

• The Risk Management Department coordinates the "TCFD scenario simulation financial impact quantification analysis" and a TCFD task force, and adjusts overall sustainable finance development, sustainable products and services, and green energy and environmental/energy management strategies and policies based on the quantified impacts.

Tighter policies or regulations on carbon pricing, carbon taxes, or emission/reduction targets and reporting obligations

• The "Customer Relations" group promotes responsible investment and sustainable finance products and services.

• SinoPac Holdings has committed to full-portfolio net zero before 2050 and set short-, medium-, and long-term goals; SBT validated January 2024. For investments, it has built PCAF carbon inventory, monitoring, and disclosure mechanisms, actively engages with investees, and plans to phase out fuel coal and unconventional oil and gas investments.

• SinoPac Securities has adopted the Responsible Investment Management Guidelines as its guide for promoting and implementing responsible investment.

• The Risk Management Department coordinates the TCFD scenario simulation financial impact quantification project; responsible units evaluate and adjust overall sustainable finance development, sustainable products and services, and green energy and environmental/energy management strategies and policies based on the quantified impacts, to enhance climate resilience.

Changes in customer behavior and rising environmental sustainability awareness

• SinoPac Holdings has committed to full-portfolio net zero before 2050 and set short-, medium-, and long-term goals. It plans to phase out fuel coal and unconventional oil and gas investments and actively engages high-emitting investees to help their industries decarbonize.

• The Responsible Investment Management Guidelines serve as the guide for responsible investment.

• The first line must assess climate risk when conducting business, especially for industries heavily affected by climate risk, and take climate-related response measures for such clients.

• Use professional ESG rating mechanisms, ESG benchmark index constituents, or other external ESG resources or tools to strengthen assessment. For "sensitive industries," strengthen ESG risk analysis; where known, avoid deals if the assessment indicates a concern that ESG risk will worsen.

• The Risk Management Department coordinates the TCFD scenario simulation financial impact quantification project (as above).

More green finance products and services

In line with government environmental policy, underwriting green bonds, green energy/environmental projects, or investing in green industries adds green finance products, expands business, and increases revenue.

• The Company tracks sustainability issues and climate trends at home and abroad and sets specific sustainability guidelines. A sustainability promotion group under the President drives work on the Company's five net-zero strategies, in line with the "mitigate and adapt to climate change" commitment, adjusted on a rolling annual basis.

• The "Customer Relations" group promotes responsible investment and sustainable finance products, offers themed products that meet client needs, and drafts short-, medium-, and long-term sustainable finance plans and annual key work plans.

•  The Company actively researches and develops green finance products, including green bonds and guiding green-energy IPOs, working with government and related institutions to ensure products meet policy and regulatory requirements.

Products and services

Engagement with clients

Engaging investees helps companies understand international sustainability and green energy requirements and grasp transition solutions, exercising institutional investors' positive influence. This benefits the environment and consolidates existing client relationships, enhances reputation, improves chances of winning lead-underwriting and advisory mandates, lowers the Company's climate risk, and raises revenue.

Medium term

• The "Customer Relations" group develops green finance products/services and works to raise clients' climate awareness, offering themed products that meet client needs.

• The Company deepens transition engagement, encourages investee clients to set SBT targets and reduction plans, develops transition finance products and services, works with external professional bodies and vendors to encourage corporate clients to conduct and verify GHG inventories, identifies key low-carbon transition indicators, and offers financial solutions.

Markets

More green finance product issuance and green investment; seeking related business and opportunities

Issuing/investing in green bonds or joining underwriting for green-energy industries helps enter new markets, capture circular economy opportunities, and raise revenue.

Medium term

• Seize new market opportunities, understand investor and consumer attention to climate change and demand preferences for green finance, and keep developing green/ESG funds, bonds, and services themed on sustainability. Moderately increase green bond holdings, and issue green bonds to fund business needs, including renewable energy and environmental sustainability businesses, enriching product types and operating flexibility.

Diversifying nature-related financial products

Growing government, investor, and consumer attention to nature-related issues (including biodiversity and nature-friendly practices) creates an emerging market; actively developing diversified nature-related financial products and services raises revenue.

Medium term

• The "Customer Relations" group promotes responsible investment and sustainable finance products; in line with government policy and regulations, expand investment in sustainable finance products, renewable energy, or green industries.

• Strengthen cooperation with government, NGOs, and environmental agencies to ensure products meet market demand and regulations, keep developing and promoting nature-related financial products, and strengthen internal training so staff have the knowledge and expertise to support successful launches and operation.