Excellence in Governance｜Climate Change

Nuvoton always explore new markets actively, continuously maintaining the profitability of the company's operations, and investing in strategic patent layouts. To ensure integrity in management and compliance with laws, it constantly monitors domestic and international policies and emerging risks that may affect the company. It regularly promotes the core values of integrity in management, establishes a robust corporate culture, and develops a sustainable new situation.

SDGS

SDG 9 Industry, Innovation and Infrastructure

100

Integrity management education and training

0.52

NTD

EPS

1984

Patents Granted

Accumulated approved patents globally

Operations and Governance

Climate Change

Business Integrity

ESG Risk Strategy

Information Security

Climate Change Management Framework (TCFD)

For	Strategy and Action	2024 implementation status
Governance	The Board of Directors is the highest supervision unit for climate change management and is responsible for reviewing annual risk management reports, implementation reports and audit reports to ensure the effective implementation of climate-related risk management systems. The Sustainability Committee is the driving organization responsible for implementing and managing climate change risks and opportunities. It reports to the Board of Directors every year on corporate governance and sustainable development operational risk issues ( including climate change issues ) , risk assessments and control measures. The board of directors makes decisions on important issues. The Finance Center is responsible for identifying and assessing the risks and opportunities of climate change, and coordinating regular climate change discussion meetings, convening the risk management team to identify the physical risks, transformation risks and opportunities of climate change, and guiding the proposal of corresponding improvement countermeasures and goals.	The Sustainability Committee reports to the Board of Directors every year on issues such as carbon emissions, water resources, power supply risks, natural disasters and regulations related to climate change. The Chairman of the Sustainability Committee reports to the Board of Directors on a quarterly basis, including greenhouse gas emissions, reduction measures in various areas, and related derived environmental issues and activities.
Strategy	Identify short, medium and long-term climate-related risks and opportunities based on the TCFD framework ( define the management period: Short-term: 2025; Medium- to Long-term: 2026–2030). Actively develop solutions in the hope of reducing the operational and financial impacts caused by climate change to enhance organizational climate resilience. Introducing scenario analysis to understand the impact of climate change on Nuvoton.	Each unit identifies climate risks and opportunities as a result. 2023 to identify the impact of climate change on Nuvoton.
Risk management	Identify climate change risks and opportunities based on the TCFD framework. Based on climate risk identification results, plan and implement relevant response plans. Integrate climate risk identification and assessment into corporate risk management processes.	Assess the qualitative financial impact of each unit's identification of significant. climate-related risks and opportunities. Adopt processes such as identification, assessment, treatment and monitoring to manage possible climate risks.
Metrics and targets	Set management indicators related to climate change. Discover greenhouse gas emissions and assess impacts. Set climate change management goals and review goal achievement and performance.	In 2024, the following future targets for risks were set: Promote water reduction: Reduce water consumption by 10% by 2030 compared to the 2021 baseline year. Digital transformation: Reduce labor costs for product development through digital transformation. On the basis of the 2021 baseline year, Nuvoton's global Scope 1 greenhouse gas emissions will be reduced by >73% by 2025 and >77% by 2030. By 2026, complete the establishment of a carbon accounting platform for Nuvoton Taiwan: Create a carbon accounting system for each product through internal carbon emissions statistics. Nuvoton Taiwan supplier greenhouse gas emission management: Establish and collect baseline greenhouse gas emissions and reduction targets from major suppliers, aiming for a 15% reduction by 2030 compared to the 2021 baseline year. Use of natural gas boilers and local scrubber for process exhaust gas treatment: Energy savings, including an electricity saving of 220kWh/year and the installation of 2 process exhaust gas treatment devices using natural gas. In 2025, it is planned to install another exhaust gas treatment device and one natural gas boiler to replace the electric boiler. Increase energy-saving equipment: Replace pumps and chillers with energy-saving ones and take other measures to reduce greenhouse gas emissions, with a target of 1.4% reduction compared to the 2021 baseline year. Diverse energy use: Achieve 1.43% of total electricity consumption from solar power (Taiwan plant). Monitor government incentive policies: Continuously monitor government incentive policies and inform relevant departments of specific details to evaluate and utilize these incentives. Obtain and implement third-party certifications including ISO 14064, ISO 50001, and ISO 22301 to establish a BCP/BCM system, thereby enhancing Nuvoton's operational resilience: Nuvoton Japan plans to achieve ISO 50001 certification by 2025. For more details, please refer to TCFD Report ''Climate Change-related Metrics and Targets.''

Climate Change Risk and Opportunity Assessment Process

Climate risk and opportunity identification and response practices

In terms of climate risks/opportunities, Nuvoton identifies the types of risks/opportunities that the affected areas (Taiwan and Japan) may encounter, as well as potential financial or operational impacts, and formulates response measures for each risk/opportunity.

Category	Risk Type	Time of occurrence	Risk Description	Potential financial or operational impact	Response Approach
Technology	The cost of transition to low-carbon technologies	Short-, mid- and long-term	Developing low-carbon products will increase R&D and production costs, including additional R&D expenses, process conversion, equipment upgrades, and personnel training. Immature technology may lead to additional operational expenses, and different energy efficiency standards across countries require product diversification, further increasing costs. If low-carbon products fail to meet customer expectations, revenue may decrease. In addition, low-carbon operations, such as using electric vehicles and energy-saving designs, also increase costs. Carbon taxes increase raw material costs and operational expenses.	Increased operating costs Reduced income Increase in costs	Evaluate market demand, formulate product strategies, and ensure product design aligns with consumer preferences to address the low-carbon transition. Improve design and production efficiency through digital transformation and AI technology, while enhancing supply chain management to increase resilience. For capital allocation, as capital expenditures for low-carbon transition increase, it may be necessary to make timely adjustments, and develop financing plans to support the required investments for the transition.
Policies and Regulations	Increase pricing on greenhouse gas emissions	Short term	Carbon taxes increase operating costs for enterprises, possibly requiring higher product prices, which can affect sales. In response to greenhouse gas policies, low-carbon raw materials and processes increase procurement costs. The global supply chain faces different climate policies in various countries, increasing supply chain uncertainty and risk.	Increased operating cost Reduced income	Increase investment in low-carbon equipment to reduce greenhouse gas emissions. At the same time, enhance supply chain resilience through diversification and sourcing alternative raw materials to reduce raw material cost risks, and establish stable supply chain relationships to withstand price fluctuations.

Physical risk

Category	Risk Type	Time of occurrence	Risk Description	Potential financial or operational impact	Response Approach
Immediacy	Increased severity of extreme weather events such as typhoons and droughts	Short term	Drought-induced water restrictions lead to decreased factory capacity, affecting revenue, and necessitating water conservation measures or the search for alternative water sources, thereby increasing costs. Raw material supply is affected, increasing procurement costs, and domestic water supply in the factory area is limited, potentially suspending some services. Extreme weather may damage equipment, raising maintenance and operational expenses, and supply chain disruptions further impact revenue, potentially eroding customer trust and investment willingness.	Direct cost increase Increased operating cost Reduced income Reduced access to capital	Add water storage facilities, enhance the efficiency of process water treatment facilities, and increase water recovery rates to improve drought response capabilities. Strengthen supply chain management, regularly assess suppliers vulnerable to climate impacts, and enhance their resilience. Utilize climate monitoring technology for early warning, improve the durability of buildings and infrastructure, and ensure business continuity to enhance operational resilience.
Long term	Average temperature rise	Short-, mid- and long-term	Add water storage facilities, enhance the efficiency of process water treatment facilities, and increase water recovery rates to improve drought response capabilities. Strengthen supply chain management, regularly assess suppliers vulnerable to climate impacts, and enhance their resilience. Utilize climate monitoring technology for early warning, improve the durability of buildings and infrastructure, and ensure business continuity to enhance operational resilience.	Increased operating costs	Increase investment to enhance the health and safety improvements of the operating environment, avoid health hazards, and reduce the risk of heat stroke among personnel.

Chance

Category	Risk Type	Time of occurrence	Potential financial or operational impact	Response Approach
Toughness	Energy substitution/diversification	Short-, mid- and long-term	increasing income Operating costs reduced Operating expenses decreased	Install solar power systems and use natural gas equipment to reduce carbon emissions through diverse energy sources. Plan to increase the use of renewable energy and strengthen carbon management, including providing customers with carbon footprint reports and adding energy-saving devices. Achieve net carbon zero through carbon reduction efforts and purchasing carbon offsets, increasing customer trust.
products and services	R&D and innovation to develop new products and services	Short-, Mid- and Long-term	Increase in operating income Operating costs reduced	Increase investment in R&D and innovation, focusing on the development of low-carbon products and improving energy efficiency. Collaborate with suppliers to choose low-carbon raw materials, enhance the environmental standards of products and the supply chain, and meet market demand for low-carbon products. Increase the visibility of low-carbon products by expanding sales channels and strengthening marketing campaigns, adhere to sustainability principles, and enhance brand image.
Market	Participate in incentive policies	Short-, mid- and long-term	Operating cost reduction Increase access to capital	Continuously track and plan to apply for government incentive policies, formulate and implement carbon reduction targets and strategies. Conduct greenhouse gas inventories, communicate with stakeholders to reach consensus, and identify and manage sustainability risks, meeting financial institution assessment standards to strengthen sustainability management plans.
Products and services	Develop climate adaptation solutions	Short-, mid- and long-term	Increase in operating income Operating cost reduction	Establish BCP/BCM systems, select suppliers that meet standards, and increase development and evaluation costs. Introduce and obtain ISO 14064, ISO 50001 and ISO 22301 certifications, increasing maintenance and IT construction costs, and investing necessary IT and human resources.