Precision 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

5.77

NTD

EPS

4954

特許

Accumulated approved patents globally

Operations and Governance

Climate Change

Business Integrity

Information Security

Climate Change Management Framework (TCFD)

For	Strategy and Action	2023 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 is within 3 years, medium-term is 3 to 6 years, and long-term is more than 6 years. ) 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.	Set the following risk-specific future goals for 2023 Promote water consumption reduction: Reduce water consumption by 10 % by 2030 based on the 2020 base year. Digital Transformation: Reduce product development labor costs through digital transformation. Install fluorine-containing gas reduction equipment: Based on the base year of 2020 , process fluorine-containing gas emissions must be reduced by 75 % by 2030. Complete the establishment of a carbon accounting system in 2025. Through internal carbon emission statistics, establish a carbon accounting system for each product and store sufficient carbon rights to achieve sustainable operations. Supplier greenhouse gas emission management: Establish and collect greenhouse gas emission baselines and reduction targets of major suppliers , and reduce greenhouse gas emissions of major suppliers by 15% in 2030 (base year 2020 ). Natural gas boilers and process tail gas treatment equipment (local scrubber) : save energy, including saving 150k kWh / year and building 2 process tail gas treatment equipment using natural gas. Increase energy-saving equipment: including LED lamps, etc. to reduce greenhouse gas emissions, with the goal of reducing 2% based on the base year of 2022. Multiple energy utilization: 1% of total electricity consumption by 2024 (Taiwan factory ). Monitor government incentive policies: Continue to pay attention to the incentive policies launched by the government, and notify relevant departments of specific information about incentive programs for evaluation and utilization.

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 and medium term	Greenhouse gas emission reduction requirements are becoming increasingly clear, and companies need to invest additional capital expenditures in the research and development of low-carbon products and services to provide green products and services. The research and development of green products will increase research and development expenses; if old products and services are not replaced with low-carbon products and services, we may face the loss of customers and reduce revenue.	Increased operating costs Reduced income Increase in costs	Advance market demand research : Assess the risks of energy-saving laws and regulations in various countries to formulate and produce production plans for each country, fully understand market demand and consumer preferences in advance, improve the grasp of customer needs, and ensure that low-carbon products are consistent with market demand. , reduce the time to adjust product design; focus R&D on the innovation and optimization of low-carbon products, improve product performance, reduce costs, and improve market acceptance, plan in advance and respond to changes in energy-saving standards in various countries, reduce the area of product development and Products with reduced greenhouse gas content and the development of green products that meet the energy-saving markets of various countries. Improve design and production efficiency : Promote digital transformation, introduce artificial intelligence technology, improve low-carbon design efficiency, reduce development costs and negative financial impacts that may be derived from an increase in the number of product developments; strengthen digitalization including procurement and logistics and other operating activities Transform, evaluate and plan to increase the resilience of supply chains in various regions to meet the product needs of customers in various regions. Improve the resilience of the supply chain : Assess the capabilities and reliability of suppliers, select partners that meet environmental protection requirements , and establish long-term and stable cooperative relationships with them; conduct risk assessments on the supply chain, establish plans to deal with supply chain interruptions, and ensure Supply chain stability and reliability. Appropriate capital allocation : As capital expenditures related to low-carbon transformation increase, capital allocation will need to be readjusted, and new financing plans may also be needed to ensure the stability of initial cash investment.
Policies and Regulations	Increase pricing on greenhouse gas emissions	Short term	In response to the increasingly stringent regulations related to greenhouse gas reduction and the increase in greenhouse gas emission pricing, if the intensity of supervision continues to increase, the expenditure on carbon taxes and fees will increase, and the cost of greenhouse gas management will increase. Greenhouse gas emissions generated during corporate operations may be levied carbon taxes and fees, which will increase operating expenses; managing greenhouse gas emissions will increase operating costs.	Increased operating cost Reduced income	Increase investment in low-carbon equipment: Install fluorine-containing greenhouse gas reduction equipment to reduce greenhouse gas emissions. Increase supply chain resilience: ensure diversified sources of raw material supply, and find alternative raw materials or change product designs to reduce demand for specific raw materials and reduce raw material cost risks; establish long-term and stable supply chain relationships to reduce raw material costs The impact of price fluctuations on businesses.

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	Due to changes in climate patterns, floods and droughts occur frequently, and the severity of the impact increases, resulting in an increased possibility of damage to machinery, equipment and factories. Operational conditions include the impact on the company's own operations and upstream and downstream manufacturers in the supply chain, as well as transportation disruptions. It will lead to financial and material losses, increase operating expenses, affect operating capacity, and result in reduced revenue.	Direct cost increase Increased operating cost Reduced income Reduced access to capital	Increase water storage facilities: increase water storage facilities and increase water treatment facilities. Supply chain management: Take inventory of suppliers who are vulnerable to extreme climate impacts, require suppliers to strengthen business continuity plans (BCP), and assist suppliers in reducing the impact of climate change; conduct situation assessments for specific raw materials every three years , strengthen and improve the resilience of the supply chain. Increase operational resilience: develop or apply climate monitoring equipment such as weather simulators and observation instruments, implement extreme climate response measures as early as possible, and reduce possible impacts and financial losses; increase investment, strengthen the resilience of buildings to extreme climate, and set up auxiliary equipment power supply to ensure continued operations.
Long term	Average temperature rise	Medium term	As the earth's surface heats up, the number of hot days increases, putting employees at increased risk of heat-related illnesses such as heat exhaustion. Rising temperatures lead to increased demand for electricity. High temperatures reduce personnel productivity , increase personnel health hazard risks, increase electricity consumption during operation, and increase operating expenses.	Increased operating costs	Increase investment to strengthen the health and safety improvement of the operating environment and avoid health hazards. Regularly identify potential risks of global warming and improve human resources management.

Chance

Category	Risk Type	Time of occurrence	Potential financial or operational impact	Response Approach
Toughness	Energy substitution/diversification	Short and medium term	increasing income Operating costs reduced Operating expenses decreased	Establish on-site renewable energy capacity: Install solar power systems within the factory. Increase diversified energy utilization: Replace electricity with natural gas, install local scrubbers that use natural gas, and replace electric boilers with natural gas boilers. The Japanese plant is planning to increase solar power generation in 2023 and implement it in 2024. Strengthen greenhouse gas emission management: In 2024, the Japanese plant will provide customers with carbon footprint reports certified by third parties. It will continue to increase the installation of energy-saving equipment, including LED lighting. Suppliers will be required to set greenhouse gas reduction targets and regularly update their reduction performance. Continuous communication with customers about the reduction of carbon footprint will help gain their trust.
products and services	R&D and innovation to develop new products and services	Short and medium term	Increase in operating income Operating costs reduced	Increase investment in research and innovation: Allocate resources to a dedicated research and development team to support the research and production of low-carbon products. Focus on the development of power management chips, automotive production lines, and third-generation semiconductors. With the rapid progress of the electric vehicle industry, develop semiconductor products related to electric vehicles. Implement artificial intelligence technology to enhance design productivity. Enhance resilience through collaborative value chain: Collaborate with suppliers to assess the carbon emissions of the supply chain and prioritize the selection of raw materials and products that meet low-carbon and environmental standards. Utilize advanced processes and packaging for new products to improve product performance while reducing energy consumption. Business expansion and marketing strategy: Actively expand sales channels and strengthen marketing promotion to communicate the advantages and value of low-carbon products to customers. Increase product visibility and market share.
Market	Participate in incentive policies	Medium term	Operating cost reduction Increase access to capital	Evaluate and plan participation in government incentive policies: Continuously monitor government incentive policies and coordinate with relevant departments to assess and plan for applying for incentive programs. Establish and implement greenhouse gas management: Conduct greenhouse gas inventory and set carbon reduction targets and pathways based on operational conditions. Implement carbon reduction measures to achieve the objectives of applying for incentive policies. Implement sustainability management plan: Identify and manage sustainability risks through self-assessment and stakeholder engagement. Execute risk response and mitigation actions through the internal risk management process of the company, while meeting the evaluation criteria of investment and financing institutions.
Products and services	Develop climate adaptation solutions	Short and medium term	Increase in operating income Operating cost reduction	Establish a BCP/BCM system (Business Continuity Planning/Management) and management systems for suppliers and customers. Implement and obtain third-party certifications including ISO14064 and ISO50001, which will increase maintenance costs, IT system construction, and other operational expenses. Additionally, allocate resources for IT and human resources accordingly.