FET followed Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) to present a comprehensive inventory of key climate changes, energy risks and FET management, with a focus on corporate governance, strategy, risk management, indicators and targets. FET identified six major climate change risks, while also evaluating the process and scale of financial impacts related to those risks and related countermeasures in the event of an increase in global temperatures by 2 degrees Celsius.
TCFD Guide Framework-Governance
FET’s Board-level “Risk Management Committee” is the company’s highest risk governance body and hold regular discussion with the board of directors on key corporate risk management issues, including climate change risks. Under the Risk Management Committee is an “Environment and Energy Management Committee” which is responsible for promoting and executing climate change related policies. For more details on the organizational framework and operations of the Risk Management Committee, see section 4.4 Operational Risk Management. For more details on the Environment and Energy Management Committee see section 6.1.3 Environmental and Energy Management.
FET uses a climate change risk matrix to identify and prioritize related risks, while also drawing up risk pathways in order to better understand the impact of different key risk factors on company operations and establishing an inventory of adaptive strategies. FET has analyzed our greatest entity risk factor of this year – severe typhoon’s increase frequency of occurrence – with a quantitative assessment on financial impact. According to our analysis, “Maintenance cost and damaged value of equipment caused by strong wind” is our main potential loss event (accounts for 93.63% of total loss amount), followed by “Maintenance cost and damaged value of equipment caused by flooding” (accounts for 4.09% of total loss amount). Due to most base stations and machine rooms are located within the building or at the top floors, flooding has little impact on equipment. As for the base station equipment (ex. Antennas or power supplies) and machine room equipment (ex. Generators, air-cooled chillers or cooling towers) damaged by strong wind, FET has minimized the financial risk caused by strong typhoons with insurance transfer. In the future, the company will seek to further quantify the scale of potential financial impacts for these risks, to more precisely evaluate how climate change risk factors will influence FET’s corporate governance and commercial strategy.
Risk management includes identifying climate change risk factors and Climate Change Risk Response:
Identifying Climate Change Risk Factors-This year FET used a climate change risk matrix to identify and prioritize related risks. FET then conducted an evaluation based on degree of potential impact, vulnerabilities and likelihood of occurrence, classifying climate risk as high, medium and low risk. This categorization mainly references three aspects to calculate risk value and distribution in the risk matrix. Those risk values that fall in the top 30% or the first quadrant are considered key risk factors and include costs and expenses on low carbon technology transformation, increased frequency of severe typhoons, increased frequency of extreme rainfall, energy policy uncertainty, increase in average temperatures and increase in the cost of greenhouse gas emissions. The identification process is detailed below
Climate Change Risk Response
Targets and Indicators
In terms of mitigating climate change, the biggest issue for the telecommunications industry is energy use. Every year, in response to the global objective of keeping increases in temperature to under 20C degrees Celsius, FET tracks the energy use of its base stations, machine rooms, stores and office buildings and drafts science-based volume reduction targets, while also increasing renewable energy installed capacity annually as part of its pursuit of energy transformation. The company also establishes management indicators and targets for energy use in those aforementioned areas of major energy consumption and promotes energy conservation. For more details see 6.1.3 Environmental and Energy Management. In terms of climate change adaptation, every year FET tracks the financial impact of physical risk factors (such as natural disasters), followed by discussion and introduction of improvements.