永豐金證券 SinoPac Subsidiaries

Index Sustainability Climate and Environment Governance Climate-related Information

Climate-related Information

Governance Risk management Strategy Metric & Target Carbon Inventory of Scope 3 Financed Emissions Nature-related Risk Strategy and Management

Strategy

Governance
Risk management
Strategy
Metric & Target
Carbon Inventory of Scope 3 Financed Emissions
Nature-related Risk Strategy and Management

SinoPac Securities has established a "Climate-Related Risk and Opportunity Management Guidelines" to clearly define risk management procedures for identifying, measuring, monitoring, and developing mitigation or adaptation measures for climate-related risks and opportunities. Annually, SinoPac Securities uses an internal questionnaire to identify how climate risks and opportunities impact its business, strategy, and finances. It also establishes management mechanisms for identification, measurement, monitoring, and reporting. Using qualitative and quantitative methods, SinoPac Securities develops response measures or monitoring mechanisms for climate-related risks and opportunities of concern. The following table shows the climate risks identified by SinoPac Securities in 2024:

Risk Category	Transition Risk
Risk Event	Economic Changes Caused by the Announcement of Climate Change-Related Regulations and Policies.
Potential Financial Impact	The promulgation and implementation of net-zero policies in various countries will affect overall sales of specific products and services. For example, the proportion of electric vehicles sold or the establishment of new building energy efficiency standards will lead to significant increases or decreases in the output value of specific industries, potentially impacting their business or revenue.
Likely to Occur Period	Long-Term
Material Rank" (Likelihood of Occurrence * Impact Severity)	9

Risk Category	Transition Risk
Risk Event	Stricter Carbon Pricing and Taxation, or Stricter Policies or Regulations on Emissions, Carbon Reduction Targets, and Reporting Obligations.
Potential Financial Impact	Stricter carbon pricing and taxation policies (such as domestic carbon fees) or energy conservation and electricity consumption policies or regulations (such as those for large electricity users) may reduce the operating profits of credit facilities and investees, impacting the company's debt or income.
Likely to Occur Period	Medium-Term
Material Rank" (Likelihood of Occurrence * Impact Severity)	9

Risk Category	Transition Risk
Risk Event	Impacts on the company's future development due to technological improvements or emerging technologies.
Potential Financial Impact	Failure to successfully develop financial technology and lead green finance flows towards paperless and energy-saving and carbon-reduction through digital finance and electronic services may reduce customer willingness to engage with the company and impact revenue.
Likely to Occur Period	Long-Term
Material Rank" (Likelihood of Occurrence * Impact Severity)	4

Risk Category	Transition Risk
Risk Event	Changing customer behavior and increasing awareness of environmental sustainability.
Potential Financial Impact	Increased awareness of environmental sustainability or extreme weather events could impact high-energy-consuming/high-carbon-emitting companies, leading to difficulties in recovering credit claims or diminishing investment value.
Likely to Occur Period	Medium-Term
Material Rank" (Likelihood of Occurrence * Impact Severity)	9

Risk Category	Transition Risk
Risk Event	Changing energy mix leading to reduced power supply stability.
Potential Financial Impact	Renewable energy sources are often intermittent. Without improved grid infrastructure or energy storage support measures amidst these energy mix changes, power supply instability and power outages could occur, impacting or disrupting business operations.
Likely to Occur Period	Long-Term
Material Rank" (Likelihood of Occurrence * Impact Severity)	9

Risk Category	Transition Risk
Risk Event	Rising commodity prices.
Potential Financial Impact	Due to the widespread impact of the EU Carbon Border Adjustment Mechanism (CBAM), global carbon tariffs on imported goods are gradually increasing, potentially pushing up commodity prices and impacting their business or revenue.
Likely to Occur Period	Medium-Term
Material Rank" (Likelihood of Occurrence * Impact Severity)	12

Risk Category	Transition Risk
Risk Event	Increased stakeholder attention to climate change.
Potential Financial Impact	Failure to actively address stakeholder concerns about climate issues, failure to provide green products, or inadequate carbon reduction efforts could damage a company's reputation, leading to loss of business and customers, revenue declines, and loss of investor favor.
Likely to Occur Period	Long-Term
Material Rank" (Likelihood of Occurrence * Impact Severity)	2

Risk Category	Physical Risk
Risk Event	The increased frequency and severity of extreme weather events such as typhoons and heavy rainfall.
Potential Financial Impact	Damage to the operational headquarters, locations, factories, and assets of the invested enterprises, thereby affecting debt and impacting the value of the investment position, such as climate-sensitive assets (such as agriculture and real estate.)
Likely to Occur Period	Medium-Term
Material Rank" (Likelihood of Occurrence * Impact Severity)	6

Risk Category	Physical Risk
Risk Event	The increased frequency and severity of extreme weather events such as landslides and slope disasters.
Potential Financial Impact	Damage to the operational headquarters, locations, factories, and assets of the invested enterprises, thereby affecting debt and impacting the value of the investment position, such as climate-sensitive assets (such as agriculture and real estate.)
Likely to Occur Period	Medium-Term
Material Rank" (Likelihood of Occurrence * Impact Severity)	6

Risk Category	Physical Risk
Risk Event	The increased frequency and severity of extreme weather events such as droughts and water shortages.
Potential Financial Impact	Due to the increased probability of droughts and water shortages, water-intensive industries such as manufacturing, agriculture, and semiconductors could suffer from water shortages, impacting corporate debt and affecting the value of investment portfolios.
Likely to Occur Period	Medium-Term
Material Rank" (Likelihood of Occurrence * Impact Severity)	4

Risk Category	Physical Risk
Risk Event	Global sea level rise could flood low-lying areas, leading to asset damage.
Potential Financial Impact	Damage to operational premises or equipment, operational disruptions, or casualties.
Likely to Occur Period	Long-Term
Material Rank" (Likelihood of Occurrence * Impact Severity)	2

Risk Category	Physical Risk
Risk Event	Rising average temperatures
Potential Financial Impact	This has led to a decline in the expected value of some climate-sensitive assets (such as agriculture and real estate.)
Likely to Occur Period	Long-Term
Material Rank" (Likelihood of Occurrence * Impact Severity)	6

Note: Likelihood of occurrence* refers to the degree of impact. The larger the number, the higher the risk.

Based on the table above, we have identified highly significant climate risks, and their mitigation and adaptation measures are as follows:

Risk Category	Risk Event	Mitigation and Adaptation Measures
Transition Risk	Rising Commodity Prices	"The Customer Relationship Working Group of Sustainability Promotion Group is responsible for promoting and deepening the development of responsible investment and sustainable financial products and services. Investment units carefully evaluate investments in companies with high climate risk. The company has established "Key Points for Responsible Investment Management" as guidelines for promoting and implementing responsible investment. The company's Risk Management Department is coordinating the "TCFD Scenario Simulation Financial Impact Quantification Analysis Project." Based on the quantified financial impact, the responsible units will evaluate and adjust existing strategies and policies for sustainable financial development, sustainable products and services, green energy, and environmental energy management to enhance climate resilience."
Transition Risk	Economic changes caused by the issuance of climate change-related regulations and policies	The Customer Relationship Working Group within the Company's Sustainability Promotion Group is responsible for promoting and deepening the development of responsible investment and sustainable financial products and services. On March 15, 2022, SinoPac Financial Holdings, the parent company, officially approved its net zero target, committing to achieving net zero emissions for its own operations by 2030 and for its entire asset portfolio by2050. SinoPac Financial Holdings has established science-based targets (SBTs) and verified them in January 2024. These will serve as a mid-term checkpoint towards the 2050 net zero target, and the company will regularly track its progress towards achieving these targets. In line with the financial holding company's policies, the Company has planned to gradually exit investments in fuel coal and unconventional oil and gas, and has established a "Decarbonization Statement" for fuel coal mining and power generation, as well as related unconventional oil and gas activities. The Risk Management Department coordinated the "TCFD Scenario Simulation Financial Impact Quantification Analysis" and established the TCFD Implementation Team. Based on the quantified financial impact, the team evaluated and adjusted existing strategies and policies for sustainable financial development, sustainable products and services, green energy, and environmental energy management to enhance climate resilience.
Transition Risk	Carbon pricing and carbon taxes, or stricter policies or regulations on emissions, carbon reduction targets, and reporting obligations	The Customer Relationship Working Group within the Company's Sustainability Promotion Group is responsible for promoting and deepening the development of responsible investment and sustainable financial products and services. Our parent company, SinoPac Financial Holdings, has pledged to achieve net zero emissions across its entire asset portfolio by 2050 and has established short-, medium-, and long-term goals for net zero. This target was validated by the Science-Based Target (SBT) in January 2024. In line with the financial holding company's commitment, the Company has established a carbon inventory, monitoring, and disclosure mechanism within its investment and financing businesses under the Partnership for Carbon Accounting Financial Institutions (PCAF). The Company is actively collaborating with its investment and financing partners and plans to gradually exit investments in fuel coal and unconventional oil and gas. The Company has established the "Key Points for Responsible Investment Management" as guidelines for promoting and implementing responsible investment. The Company's Risk Management Department is coordinating the "TCFD Scenario Simulation Financial Impact Quantification Analysis Project." Responsible units will evaluate and adjust existing strategies and policies for sustainable financial development, sustainable products and services, green energy, and environmental energy management based on the quantified financial impacts to enhance climate resilience.
Transition Risk	Customer behavior changes and increased awareness of environmental sustainability	SinoPac Financial Holdings, the parent company, has pledged to achieve net-zero emissions across its entire asset portfolio by 2050 and has established short-, medium-, and long-term goals. In line with the financial holding company's commitment, the Company plans to gradually exit investments in fuel coal and unconventional oil and gas, and is actively engaging with investors and financing partners in high-carbon-emitting industries to support their transition to decarbonization. The Company has established "Key Points for Responsible Investment Management" as a guideline for promoting and implementing responsible investment. The first line of defense is to assess climate risks when conducting relevant business, especially implementing climate-related mitigation measures for clients in industries particularly exposed to climate risks. Reference should be taken to ESG rating mechanisms developed by professional institutions, constituent stocks of ESG-related benchmark indices, and other external ESG-related resources or tools to enhance assessments. ESG risk analysis should be strengthened for "sensitive industries." Where known, if the assessment indicates a potential for worsening ESG risks in the future, the Company will avoid undertaking such projects. The Company's Risk Management Department is coordinating the "TCFD Scenario Simulation Financial Impact Quantification Analysis Project." Responsible units will evaluate and adjust existing strategies and policies for sustainable financial development, sustainable products and services, green energy, and environmental energy management based on the quantified financial impacts to enhance climate resilience.
Transition Risk	Changes in energy structure have led to a decline in the stability of power supply	The Company has established "Key Points for Responsible Investment Management" as guidelines for promoting and implementing responsible investment. The first line of defense should assess climate risks when conducting relevant business, particularly in industries exposed to climate risks, and implement climate-related mitigation measures for clients in these sectors. The Company's Risk Management Department is coordinating the "TCFD Scenario Simulation Financial Impact Quantification Project." Based on the quantified financial impacts, the responsible units will assess and adjust existing strategies and policies across sustainable finance development, sustainable products and services, green energy, and environmental energy management to enhance climate resilience.

The climate opportunities identified by SinoPac Securities in 2024 are shown in the following table:

Opportunity Type	Resource Efficiency
Opportunity Event	Improved energy resource efficiency
Potential Opportunity Impact	Improve energy efficiency by incorporating green building design into operating locations or company-owned buildings, replacing energy-saving equipment to improve energy efficiency, or relocating computer rooms to more efficient buildings to reduce energy consumption and operating costs.
Possible Occurrence	Short-term
Period Response Action	Incorporate ESG issues into building or renovation design, employ energy-saving equipment and reuse materials, maintain flexible space planning to reduce installation and disassembly frequency, and prioritize ventilation and energy efficiency in computer room design, or relocate computer rooms to external specialized facilities to reduce operating costs and carbon emissions.

Opportunity Type	Energy Source
Opportunity Event	Increase the proportion of renewable energy used at operating locations.
Potential Opportunity Impact	Our company is investing in renewable energy by installing solar power systems in its own buildings. This system generates electricity for its own use and sells excess power, achieving emission reductions. This system will have the opportunity to generate non-operating income through market-based transactions. Furthermore, in response to the Ministry of Economic Affairs' "Green Leasing 2.0 Program," we are assisting lessees in commercial office buildings and similar integrated spaces to obtain green electricity and renewable energy certificates through a power-transfer model.
Possible Occurrence	Short-term
Period Response Action	Set short-, medium-, and long-term strategic goals, negotiate green electricity procurement in phases, and gradually increase the proportion of renewable energy use. Regularly review electricity usage at each site by replacing consumable equipment and promoting energy-saving measures. External professional teams will be engaged to analyze electricity efficiency and identify feasible improvement solutions to reduce electricity consumption.

Opportunity Type	Products and Services
Opportunity Event	Increase Green Finance Products and Services.
Potential Opportunity Impact	In line with government environmental policies and current trends, expand the range of green finance products through underwriting green bonds, green energy and environmental projects, or investing in green industries, thereby expanding business opportunities and increasing revenue.
Possible Occurrence	Medium-term
Period Response Action	The Company continues to monitor domestic and international sustainability issues and climate change trends, formulates specific sustainability policies, and establishes a Sustainability Promotion Group under the General Manager as the responsible unit for promoting sustainability. This group will promote various aspects of the Company's five Net Zero strategies, aligning with its sustainability commitment to "mitigating and adapting to climate change," and will be adjusted annually. The Customer Relationship Working Group within Sustainability Promotion Group is responsible for promoting and deepening the development of responsible investment and sustainable financial products and services, aiming to integrate sustainable development with the core financial services. We continuously monitor the market and develop green financial products, providing themed products that meet client needs. We also formulate short-, medium-, and long-term sustainable finance plans and annual key work plans. We actively research and develop green financial products, including green bonds and IPO guidance for green energy companies. We also collaborate with government and relevant agencies to ensure that these products comply with policy and regulatory requirements.

Opportunity Type	Products and Services
Opportunity Event	Client Negotiations
Potential Opportunity Impact	In response to the trend of green and transformative finance, if our company can establish a client-side ESG communication role, assisting and guiding clients in their low-carbon transition through underwriting or investment, and improving operational strategies, we will create a sustainable environment while strengthening existing client relationships and enhancing our corporate image.
Possible Occurrence	Medium-term
Period Response Action	The Customer Relationship Working Group within the Sustainability Promotion Group is responsible for promoting and deepening responsible investment, developing green financial products and services, and working to raise client climate awareness, providing themed products that meet client needs. The Company continues to deepen its transformation engagement, encouraging investment and financing clients to establish SBT targets and develop carbon reduction plans. We also develop transformation financial products and services, collaborating with external professional institutions and vendors to encourage corporate clients to conduct greenhouse gas emissions inventory and verification, identify key indicators for low-carbon transformation, and provide financial solutions to promote low-carbon transformation.

Opportunity Type	Market
Opportunity Event	Increase the issuance of green financial products and green investment, and identify related businesses and opportunities in the market.
Potential Opportunity Impact	Increasing the issuance and investment of green bonds or participating in underwriting cases related to green energy will help enter new markets, seize new business opportunities in the circular economy, and increase operating income.
Possible Occurrence	Medium-term
Period Response Action	Seize new market opportunities, understand investors' and consumers' concerns about climate change and their preferences for green financial products and services, continue to develop green/ESG funds and bonds focused on sustainability, and moderately increase green bond investment balances. Simultaneously, issue green bonds to raise funds for business development, including increasing operational flexibility by diversifying product lines such as renewable energy and environmental sustainability businesses.

Opportunity Type	Resilience
Opportunity Event	Cultivate resilience to climate change.
Potential Opportunity Impact	Including climate change-related products in the investment and financing portfolios will help grasp market trends and increase operational flexibility.
Possible Occurrence	Short-term
Period Response Action	The Customer Relationship Working Group within the Company's Sustainability Promotion Group is responsible for promoting and deepening responsible investment, developing green finance/services, and working to raise customer climate awareness, providing relevant themed products that meet customer needs. We monitor market commodities and continuously evaluate and provide relevant thematic products that meet customer needs. We also reference and utilize ESG scoring mechanisms from professional institutions, ESG-related benchmark index constituents, and other external ESG-related resources or tools. We support thematic investments that promote sustainable development and invest in industries or targets that prioritize sustainable development. The Company has established "Key Points of Responsible Investment Management" as guidelines for promoting and implementing responsible investment, and has incorporated ESG issues into the investment analysis and decision-making process, and reviewed ESG information disclosed by investee institutions.

SinoPac Securities, in collaboration with its parent company, SinoPac Financial Holdings' TCFD team, con-ducted physical and transitional risk scenario analyses and a quantitative assessment of financial impacts. These climate scenario analyses were conducted for physical and transitional risks across different parts of the overall value chain (operations, investment and financing businesses) under different climate scenarios and timescales. The methodology and scenarios employed are briefly described below:

Risk Category	Risk Factor	Scenario	Analysis Target	Analysis Results
Physical Risk	Heavy rainfall flooding	SSP1-2.6 SSP2-4.5 SSP5-8.5	The company's own operating locations, owned real estate, and the factory locations of its investment clients.	Under this scenario, the total expected loss for each analyzed target is no more than NT$1.8 million, and the potential financial impact on the company is minimal.
	drought	SSP1-2.6 SSP2-4.5 SSP5-8.5	The company's own operating locations and the factory locations of its investment clients.	Across all scenarios at each time point, the total expected loss for each analyzed target is no more than NT$19.5 million, and the potential financial impact on the company is minimal.
	sea level rise	RCP 2.6 RCP 4.5 RCP 8.5	The company's own operating locations, the company's owned real estate, and the factory locations of its investment clients.	Across all scenarios at each point in time, the total expected loss for each analyzed target is no more than NT$3 million, and the potential financial impact on the company is minimal.
	slope damage	SSP1-2.6 SSP2-4.5 SSP5-8.5	The company's own operating locations, the company's owned real estate, and the factory locations of its investment clients.	Across all scenarios at each time point, the total expected loss for each analyzed target is no more than NT$0.3 million, indicating a minimal potential financial impact on the company.
Transition Risk	Carbon cost payment	International Organization Network for Greening the Financial System (NGFS): Below 2°C Net Zero 2050/1.5°C International Energy Agency (IEA): Sustainable Development Scenario (SDS), approximately equivalent to Below 2°C Net Zero Emissions Scenario (NZE) in 2050, approximately equivalent to Net Zero 2050/1.5°C	Investment positions in "High-Carbon Emission Industries" and "High-Carbon Emission Enterprises Listed by the Ministry of Environment."	The assessment of the overall incremental expected losses from credit and market risks of the investment positions under analysis shows that the potential financial impact on the Company is low under all scenarios and at all time points. The highest expected loss on the Company's investment and financing positions is in the 1.5°C C-NGFS scenario in 2050, approximately NT$1,534 million. This would reduce the Company's capital adequacy ratio by approximately 21%, bringing it to 351% after the reduction, which is still considered a low risk.
Transition Risk	Energy Transition Nationally	Determined Contributions (NDCs)	Ministry of Economic Affairs' "Regulations on the Management of Electricity Users with Contract Capacity Above a Certain Level Required to Install Renewable Energy Power Generation Equipment” List of Large Electricity Users with Capacity Above 5,000 kW.	The potential financial impact of the analyzed customers on the Company is assessed to be low across various timeframes. Under the energy transition scenario, the expected losses for large electricity users over 5,000 kW are projected to be approximately NT$12.1 million, with a maximum loss of approximately NT$12.1 million in the 2025 payment scenario. This is assessed to have a minimal financial impact on the Company.