HFC Management InitiativeHFC Management Initiative
As a corporate citizen, HFC is also actively and progressively planning to manage climate change related issues. We take the impact of climate change seriously and signed up to support the Task Force on Climate-related Financial Disclosures (TCFD) and follow the framework recommended by the international Financial Stability Board (FSB) for climate risk and opportunity management actions and disclosures.As a corporate citizen, HFC is also actively and progressively planning to manage climate change related issues. We take the impact of climate change seriously and signed up to support the Task Force on Climate-related Financial Disclosures (TCFD) and follow the framework recommended by the international Financial Stability Board (FSB) for climate risk and opportunity management actions and disclosures.
| Aspect HFC | Management Initiative | Implementation status in 2023 |
| Governance | The board of directors is the highest supervisory and governing body for climate change issues. The management and control mechanism for relevant issues is established under the ESG Committee, under which various task forces are established, including the environmental sustainability, the corporate governance, and the social participation task forces to respond to different stakeholders’ issues of concern and work with the relevant departments to plan and execute ESG projects. They hold meetings at least twice a year and report their operations and results to the Board of Directors at least once per year. |
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| Strategy |
| We identified a total of four risk topics and four opportunity topics, and set objectives and management actions accordingly. |
| Risk Management | HFC integrates the concept of climate risk into all operations and business contents, identifies potential climate risks/opportunities, analyze risks/opportunities, evaluates and decides on countermeasures, and manages them centrally and implements them at different levels according to their characteristics and impact levels in order to effectively control risks and opportunities. | Based on the identified risks and opportunities, we propose measures to incorporate them into the Company's policies and implement them, which include the following:
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| Indicators and targets |
| We completed the greenhouse gas inventory of the subsidiaries listed in the consolidated statements in 2023, and expects to obtain an external verification declaration in 2024. |
2 ESG Sustainability Management Committee meetings were held, with a report presented to the Board of Directors on December 14th.2 ESG Sustainability Management Committee meetings were held, with a report presented to the Board of Directors on December 14th.
Climate Change Risk and Opportunity Identification ProcessClimate Change Risk and Opportunity Identification Process
We have made reference to international literature, collected and examined domestic and international industrial climate-related risks and issues, screened and compiled them, and examined the impact of climate change risks and opportunities from different perspectives through internal discussions, and then conducted a comprehensive assessment based on the likelihood of impact and the degree of impact to complete the ranking of materiality. Through the above evaluation procedure, we have identified four climate change risk issues and four climate change opportunity issues, and the potential impacts and adaptive actions for the relatively material climate change issues are described below:We have made reference to international literature, collected and examined domestic and international industrial climate-related risks and issues, screened and compiled them, and examined the impact of climate change risks and opportunities from different perspectives through internal discussions, and then conducted a comprehensive assessment based on the likelihood of impact and the degree of impact to complete the ranking of materiality. Through the above evaluation procedure, we have identified four climate change risk issues and four climate change opportunity issues, and the potential impacts and adaptive actions for the relatively material climate change issues are described below:
Material Climate Risk Identification Results and Adaptive ActionsMaterial Climate Risk Identification Results and Adaptive Actions
Material climate risk identification results and adaptive actions Material climate risk identification results and adaptive actions
| Category | Climate Change Risk Issues | Potential impact on company operations | Impact period | Extent of financial impact | Adaptation management strategies and goals |
| Physical risk | |||||
| Immediate risk | Increased severity of extreme weather events, such as typhoons and floods | The damage caused by climate change to solar power sites as well as the potential impact of the solar power sites on the environment will influence the perception of the public of the enterprise. | Mid- and long-term | Losses or business interruption caused by natural disasters may not only increase costs but reduce revenue. | Use appropriate building materials for solar power sites with safety as the principle; for example, use reinforcing steel as the construction benchmark to respond to the solar power sites in the nearshore areas. |
| Transition risk | |||||
| Transition risk | Changes in customer behavior | As customers become more aware of climate change, their preferences for products/services change, which may result in a change in purchasing decisions, such as a reduction in personal ownership of automobiles, or a customer's request for products and services that go beyond the current requirements for compliance with environmental standards, may result in a loss of market share if not provided or met. | Medium term | Decrease in market share affects the Company's revenue | We actively strive to understand market trends, pay attention to customer needs, and adjust our products and services in real time, such as offering preferential interest rates for eco-friendly vehicles. |
| Uncertainty in market information | Changes in international trends and domestic policy adjustments may lead to changes in the market supply and demand structure. Uncertain market information can affect a company's lead time and operations, such as legislation to reduce the use of fuel vehicles resulting in a decline in the price of used fuel vehicles, which can affect its debt guarantees, incentives for ridesharing or use of public transportation, which can indirectly affect business. | Mid- and long-term | Collateral value and operation preparation time are impacted, and costs rise | We regularly review and understand international and domestic policy trends to keep abreast of market information and prepare in advance for responses and at the same time, continue to develop and design products and services related to environmental protection. | |
| Reputation risk | Client preference shifting | The government's continuous promotion of the development of a low-carbon economy may affect customers' consideration when selecting products. If clients perceive a company as a wrong-doer with respect to climate change, or if it does not have a clear image of environmental protection or climate change mitigation, it will affect the perception of the company. | Mid- and long-term | Poor ESG performance or lack of sustainable products or services of brands affect consumers’ or customers’ willingness to collaborate, resulting in a decrease in revenue | We continue to understand the market trends and actively design and promote green and environmental protection related products and services. |
Material Climate Opportunity Identification Results and Adaptive ActionsMaterial Climate Opportunity Identification Results and Adaptive Actions
| Category | Climate Change Risk Issues | Potential impact on company operations | Impact period | Extent of financial impact | Adaptation management strategies and goals |
| Energy source | Adopt incentive policies | By responding to government policies in the design and planning of products or services and developing new energy services, we can obtain relevant government incentives to reduce operating costs. | Long term | Reduce investment costs and increase revenue | We regularly conduct in-depth research on government policies in order to develop product and service related proposals and actively seek relevant incentives. |
| Products and services | Develop climate adaptation and insurance risk solutions | By combining the diversified products of the parent company Hotai Group, the Company integrates and plans its related services to reduce climate exposure and further increase revenue | Long term | Provide diverse products and services to increase revenue | We actively research and develop relevant systems to maintain a leading business model to increase opportunities for products or services. |
| R&D and innovation of new products and services | By combining the green products of the parent company Hotai Group, the Company designs and plans new products and services to enhance corporate image and brand influence, and gain support from customers and investors. | Long term | Increase new products and service opportunities and strengthen customers’ and investors’ support | We are dedicated to designing new products and services, and strengthening our website and external promotion. | |
| Changes in consumer preferences | We are developing the business diversification and actively cooperating with the new energy policies of Taipower and various levels of government to develop supporting measures in order to obtain the first opportunity for green energy investment in the market. | Long term | Seize opportunities for investment in green energy early to increase revenue | We are dedicated to designing new products and services, and strengthening our website and external promotion. Increase the target and amount of financing for green industry customers year by year. |
Climate change risk and opportunity scenario analysis Climate change risk and opportunity scenario analysis
Scenario analysis of material opportunity topics: products and services - research and innovation in developing new products and servicesScenario analysis of material opportunity topics: products and services - research and innovation in developing new products and services
A scenario analysis model has been introduced to analyze the financial impacts on material climate risks and opportunities at future time points under climate scenarios. Based on the results of climate change risk identification, the physical risk "increase in the severity of extreme weather events, such as typhoons and floods" is selected for financial quantitative analysis.
- Assessment scope: The solar power plants under HFC
- Assessment period: 2036-2065
- Climate scenario: Scenario SSP5-8.5 of IPCC AR6 Report
- Assessment description:HFC promotes green energy investment and established He Jun Energy in 2022 to engage in the solar energy business. As of the end of 2023, He Jun Energy had a total of 211 metered power plants in Taiwan, all of which are important assets of the Company. Extreme climate events are one of the short-term risks in the 2023 Global Risk Report. Typhoons and flooding may cause damage to solar power plants, resulting in increased operating costs and reduced power generation revenues. HFC uses scientific scenario analysis to understand the potential financial impact of extreme climate events before they actually occur.
- Driving factors: Solar power plants may suffer losses due to extreme weather events, such as typhoons and floods.
- Potential financial impact: Increasing operating costs
- Assessment results: HFC adopted the SSP5-8.5 high-emission climate scenario in the Assessment Report 6 (AR6) of the Intergovernmental Panel on Climate Change (IPCC) and the flooding risk tool on the “Taiwan Climate Change Projection Information and Adaptation Knowledge Platform (TCCIP)” of the Ministry of Science and Technology to analyze the solar power sites that may experience flooding under the RCP8.5 scenario. The risk is divided into five levels in the analysis results map and level 5 is the highest risk. A total of 112 solar power plants are located in the level 5 risk areas. When typhoons and other extreme weather events strike, a power plant’s power generation performance may decrease, and the power plant or unit may be damaged; thus, it is estimated that the potential exposure amounted to about NT$17 million.
- Countermeasures:The latest natural disaster insurance expenditure is about NT$ 6.28 million per year.
- At the stage of site selection, design and installation, we are careful to ensure the stability of the power generation system. In addition, we have taken waterproofing into account in our wiring and design.
- In order to ensure that the possible impacts of disasters are minimized, each power plant is covered with relevant natural disaster insurance.
Scenario analysis of material opportunity topics: products and services - research and innovation in developing new products and servicesScenario analysis of material opportunity topics: products and services - research and innovation in developing new products and services
While actively promoting energy saving and carbon reduction within the company in response to climate change, HFC also develops its solar energy business. HFC, together with Hotai Motor and Hoyu Investment, established He Jun Energy, which is dedicated to the development of solar power plants and energy storage business in response to the energy transition policy. Furthermore, we also provide a one-stop green solution to our stakeholders, which demonstrates the importance of “green investment” in the realization of net-zero emissions by HFC.
Following the results of the climate change opportunity identification, we selected the " R&D and innovation in developing new products and services" for quantitative financial analysis.
- Assessment scope: The solar power plants under HFC
- Assessment period: 2025
- Assessment description:
Taiwan’s pathway to net zero by 2050 has been announced, and energy transition is one of the four major strategies, which will further increase the demand for green electricity in Taiwan. HFC established He Jun Energy to actively develop the solar power business, which will increase operating revenue.
- Driving factors: The demand for green electricity will increase in the future. Participating in the development of renewable energy, such as solar energy, may increase operating revenue.
- Potential financial impact: Increased income from feed-in tariff of power
- Assessment results: As of the end of 2023, the installed capacity of He Jun Energy’s solar power plant had reached 60.12MW, and the power generated by the plant is now under the feed-in tariff. The annual revenue from electricity sales amounted to NT$200 million.
- Countermeasures: Annual expenditure on advertising and talent training is about NT$ 150,000 to NT$ 500,000.
- With the successive amendments to the Electricity Act and the Renewable Energy Development Act, the government has fully liberalized the use of renewable energy for direct supply, sub-supply, and free trading of electricity to provide businesses with diverse choices when purchasing electricity. In light of the diversified development of the electricity trading market in the future, He Jun Energy encourages its employees to participate in training and obtain relevant certificates, and actively cultivates internal green talents in order to grasp the market opportunities. As of the end of 2023, a total of 3 professionals from He Jun Energy have obtained power trading platform licenses.
- After the installation of the solar power plant, there is a need for good maintenance. Moreover, HFC has entered the solar power market for the first time, and therefore has to actively promote its business expansion and enhance its market recognition.