Climate Change Risk-FETnet

Environmental Sustainability

Climate Change Risk

In response to the potential effects of climate change on our operations, FET adheres to the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). We implement a comprehensive approach to managing climate risks, focusing on corporate governance, strategy, risk management, indicators and targets. We continuously identify risks and opportunities related to climate impacts throughout our value chain. We evaluate the financial impact and scale of each risk factor under various scenarios, reviewing and implementing response measures accordingly. Additionally, we establish measurement indicators and objective management to ensure the progress and effectiveness of our action plan.

Governance：FET incorporates risk management across four key areas: financial risk, strategic and operational risk, information security risk, and environmental and energy risk. Climate change issues are integrated into the Company's overall risk assessment framework through its Enterprise Risk Management Framework (ERMF), and are managed via multi-disciplinary, company-wide risk management processes. The identified risks and assessment outcomes are regularly reported to the Board of Directors.

Strategy：FET consistently engages in discussions regarding climate issues, aligns with the objectives of the Paris Climate Agreement, and references global climate and industry trends to carry out internal and external surveys. These surveys aim to identify potential risks and opportunities to our business operations arising from short-, medium-, and long-term climate change, both in terms of transition and physical risks. We also propose countermeasures for the identified risks, and in the future, FET will further enhance its integration with financial information.

Process of Risk Identification

Climate Change Risk Matrix & Risk Type and Risk Level

Supplementary Note: Impact timeframe - short term (1-3 years), medium term (3-5 years), long term (more than 5 years)

Risk Identification Countermeasures

The table below describes the impact period, response measures, and adaptation plans in light of the potential impact of key climate change transition risks, such as the failure of government emission reduction and higher power generation costs resulting in higher electricity prices. Additionally, the table addresses physical risks, including the increased frequency of strong typhoons and extreme rainfall. It is important to note that the relevant response measures cover 100% of both existing and new operating sites.

Note: Adaptation measures are applicable to all (100%) existing and newly constructed base stations and data centers, both currently in use and planned for the next 50 years. These measures are designed to align with the use of base stations in conjunction with core data centers. Furthermore, they are reinforced in a timely manner per the principle of extending the service life to address potential impacts from long-term climate scenarios.

Scenario Simulation Analysis

In order to assess the potential effects of climate-related risks on business strategies and decisions, FET has conducted a financial impact analysis for climate scenarios. This analysis specifically examines the physical risk of more frequent severe typhoons and heavy rainfall, as well as the transition risk associated with government failure to reduce emissions and the resulting increase in power generation costs and electricity prices.

Note 1: IEA B2DS is the scenario where global warming is below 2 degrees Celsius in transition risk
Note 2: According to "Carbon pricing options for Taiwan" by the LSE Grantham Research Institute on Climate Change and the Environment, an important British research institute on climate change, and Vivid Economics, it is suggested that the starting rate of carbon fees can be US$10 per ton
Note 3: IEA STEPS is the scenario where global warming reaches 2.6 degrees Celsius in transition risk
Note 4: RCP 2.6 is the warming mitigation scenario in the physical risk. This scenario assumes that the radiation per square meter will increase by 2.6W/m2 in 2100, that is, the warming range in Taiwan may remain 1.17 degrees Celsius higher than the temperature before the industrial revolution
Note 5: A grade four typhoon has a wind speed of 58 m/s or more and wind gusts of scale 17 or more
Note 6: A grade five typhoon has a wind speed of 70 m/s or more and wind gusts of scale 17 or more
Note 7: RCP 8.5 scenario is the scenario of maintaining the status quo in the physical risk; this scenario assumes that the radiation will continue to increase to more than 8.5 W/m2, and the carbon dioxide concentration will be greater than 1,370 ppm, that is, the warming range in Taiwan may remain 3.49 degrees Celsius higher than the temperature before the industrial revolution.

Risk Management

The FET Risk Management and Information Security Committee implements risk management across various areas of the Company, including finance, strategy, operations, information security, and environmental and energy risks. This is achieved through the operation of different levels of organizations and responsibilities. FET has developed a " Risk Management Policy" based on the "ISO 31000 Risk Management Guidelines," which has been approved by the Board of Directors. This policy serves as the guiding principles for all business groups in their implementation of risk management. The risk assessment focuses primarily on the Company itself. Each business group conducts annual and regular risk assessments, formulates risk management strategies and plans, and considers the economic, environmental, and social aspects of corporate governance issues that have significant impacts on customers, investors, and other stakeholders. The results and performance of sustainability promotion in the current year are reported to the Board of Directors on a regular basis. The third report of the tenth session of the Board of Directors has been submitted.

Targets and Indicators

Energy use is the primary concern for the telecommunications industry when it comes to addressing climate change. FET has developed indicators, including greenhouse gas emissions, energy consumption, and water resources, to assess the effectiveness of our management practices. We not only establish medium- and long-term targets for each response measure mentioned above, but also conduct annual reviews to track our progress. Furthermore, we make ongoing adjustments based on external environmental trends, aiming to minimize the impact of climate change through target management.

FET has established a science-based reduction target in line with the global goal of limiting warming to below 1.5 degrees Celsius. The company aims to achieve net zero emissions by 2048. Additionally, FET has officially announced its participation in the international renewable energy initiative RE100. The objective is to fully transition to renewable energy sources in offices, stores, and major data centers by 2030, and achieve 100% renewable energy usage company-wide by 2040. FET will progressively increase the capacity of renewable energy installations to facilitate this energy transition. The company has also implemented management indicators and targets for energy consumption in the aforementioned energy-intensive areas, and is actively promoting energy-saving programs.

Greenhouse Gas Emission

Since 2015, FET has implemented the ISO 14064-1 Greenhouse Gas Inventory and established medium- and long-term goals for managing greenhouse gas emissions. By 2030, FET aims to reduce total greenhouse gas emissions in Scope 1 and 2 by 43.6% compared to 2021 levels, and reduce Scope 3 emissions by 42% within the same timeframe.

Note 1: FET adopted ISO 14064- 1: 2018 for its 2019 GHG inventories.
Note 2: In accordance with the GHG Protocol standards, FET established a more precise calculation model for Scope 3 emissions in 2021. As this year provides the most complete dataset and serves as the base year approved under the SBTi emission reduction target, 2021 was selected as the baseline for GHG inventory and target setting.
Note 3: The Scope 3 part has been verified by a third party.

Climate Opportunities

To seize the opportunities from climate change, FET invests in the changes of two dimensions. One is to create new business markets and invest in new renewable energy businesses, and the other is to invest in business operations to be more energy-saving/ carbon-saving and cost saving. To create new business markets, FET invests in renewable energy businesses with its subsidiary (Prime EcoPower) to assist FET to build solar power and energy storage systems and smart grid-building. FET integrates core technologies including big data, artificial intelligence, and the Internet of Things to develop innovative services, such as Smart NB-IoT Streetlights and 5G remote diagnostic project to mitigate climate change. As for changes made for business operations, FET adopts more energy saving technologies and facilities in new data center to reduce carbon and save costs, as well as Self-built solar power plant, used as power generation.

These projects bring FET an annual opportunity of TWD 468.9M.
These projects bring FET an annual cost of TWD 905.09M, including capital expenditures and operating costs for Prime EcoPower Co., Ltd., “Taoyuan City Smart NB-IoT streetlights Project" related expenses, software and system research and development in 5G Remote Diagnosis project, investment cost for cloud computing center to adopt the latest energy-saving technology, self-construction cost (materials and equipment) of renewable energy systems.

ENVIRONMENTAL SUSTAINABILITY