Climate Change

The threat from global warming extends beyond rising sea levels. Warmer climates will lead more hot and humid environments, allowing mosquitos to spread diseases to warm climates. Countries with drier climates will suffer from forest fires of an even greater scale. Released by the World Economic Forum, The Global Risks Report 2021 evaluated critical topics relating to the economy, environment, technology, and public health. The Report assessed related impact and the likelihood of impact, and explained the future risks of stakeholders. The top seven global risks are all environmental. The first is extreme weather events, followed by climate action failure and then natural resource crisis. The ranking shows that climate change remains the topic of greatest concern to global experts and decision makers.

HIWIN is tackling climate challenges head on, employing a project-based approach to analyze risks and evaluate processes. We were able to identify risks in our process equipment and tap water system. We also recognized a growing number of natural disasters and decided to strengthen our climate resiliency to ensure we can recover as quickly as possible to minimize damages after climate disasters.

Our Climate Change Responding Journey

Targets relating to climate risks and opportunities focus on mitigation and adaptation measures. We have also laid down strategies to help us meet our short-, mid-, and long-term targets. In 2021, we decided to employ the TCFD framework to evaluate our climate risks and opportunity, formulating adaptation action plans based on our level of exposure and vulnerability matrix. We then identify significant risks and opportunities and conducted climate risks analyses for laws and regulations, markets, and production to evaluate potential financial impacts.

To ensure HIWIN is saving energy and reducing carbon emissions, we have commission an impartial third party each year to verify our compliance with ISO 14046:2018. In 2021, we disclosed our carbon emissions, carbon reductions from management measures, and related risks and opportunities in response to the CDP. To strengthen our green competitiveness, we remain dedicated to reducing GHG emissions and have set targets to minimize the impact from climate change.

Climate Change Management & Strategies

Governance

1. Establish an ESG Committee to integrate interdepartmental resources and progress in climate actions; the ESG Committee convener shall report to the board
2. Inspect all factories' internal and external environments and analyze risks based on natural disasters in the past
3. Identify potential risks and opportunities that will impact the organization and formulate/ roll out action plans

Strategies

1. Comply with Policy & Regulations
2. Identify Risks and Opportunities
3. Assess potential financial impact based on material risks and opportunities
4. Formulate Strategies & Scenario Analysis

Risk Management

1. Risk control and opportunities; formulate and implement action plans
2. Quantitative analysis on financial impacts to formulate and implement action plans
3. Incorporate into HIWIN's corporate risk management and system management process

Indicators and Targets

1. Action plans (renewable energies, energy conservation measure, water recycling, longterm targets for emergency responses to climate risks)
2. GHG emission disclosure (Scope 1, 2 & 3 emissions data)
3. Confirm mid-to-long term targets

Climate Change Exposure & Vulnerability Matrix

Transition Risks

1. Rising GHG emissions costs
2. Stricter GHG emission reporting requirements
3. Rising raw material costs

Physical Risks

1. Rising average temperatures
2. Increasingly severe extreme climate events, e.g., typhoons and floods
3. Changing rainfall patterns and extreme climate changes

Opportunities

1. Recycle and reuse
2. Reduce water usage and water loss
3. Participate in renewable energy projects and adopt energy conservation measures

Financial Impact from Climate Risks

Type	Item	Climate Risk	Scenario	Timeline	Potential Financial Impact	Measures/Action Plans
Transition Risks	Policy & Regulations	Rising GHG emissions costs	In Taiwan, a new carbon pricing scheme was proposed. Once approved, the carbon pricing scheme will be levied on companies annually based on Scope 1 emissions (refrigerants, gas, diesel, etc.). HIWIN has established energy conservation targets to reduce carbon emission in compliance with national targets (for Scope 1 + Scope 2 emissions). The annual carbon reduction target is 1% less than the previous year, we estimate that we may exceed regulatory emissions levels by 2025 and possibly face penalties.	Shortterm	Increased investments into equipment and costs	Voluntarily reduce carbon emissions and reduce energy usage Receive third-party certification for ISO 14064-1, product carbon footprint inventory, and ISO 50001
				Midterm	Increased operating costs Increased costs from penalties
				Long-term	Increased operating costs Increased costs from penalties
	Policy & Regulations	Stricter GHG emission reporting requirements	Demands from outside stakeholders for HIWIN to disclose GHG emissions and acquire third-party verification (incl. TCFD, ISO14064-1, climate disclosure in ESG reports, and ESG assessments from investing institutions)	Short-term	Increased operating costs
				Mid-term	Increased operating costs
				Long-term	Increased operating costs
	Market	Rising raw material costs	Rising raw material costs from market fluctuations, costs from changing suppliers, and disrupted supplies	Short-term	Reduced demand for products and services Increased operating costs	Diversify raw material sources
Physical Risks	Immediate	Droughts	Disrupted water supplies from reduced rainfall caused by climate change; impacts the supply chain and disrupts production capacity	Short-term	Increased investments into equipment and costs Increased energy and carbon emissions	Store tap water preemptively and partner with water tank trucks Use limited water resources effectively, increase water recycling and reuse, reduce demand for water Install smart water meters to monitor equipment
	Long-term	Rising average temperatures	Increased energy use, costs, and carbon emissions from rising temperatures	Long-term	Increased investments into equipment and costs Increased energy and carbon emissions	Strengthen climate resiliency and adaptation Maintain and repair public facilities

Note:HIWIN is still evaluating the financial impacts of climate change and will be disclosing the information at a later date.

Financial Impact from Climate Opportunities

Type	Item	Time-line	Potential Financial Impact	Measures/ Action Plans
Resource efficiency	Recycle and reuse	Short-term	Reduce operating costs Increase waste treatment fees and profitability	Recycle and reuse waste from manufacturing process
Resource efficiency	Reduce water usage and water loss	Short-term	Reduce operating costs	Measures to reduce the use of tap water
Resiliency	Participate in renewable energy projects and adopt energy conservation measures	Long-term	Increase operating costs from purchasing energyefficient materials Benefits from energy conservation	Purchase energyefficient products Install green energy power generators

Note: HIWIN is still evaluating the financial impacts of climate change and will be disclosing the information at a later date.

Certificates

Energy Conservation, Carbon Reduction, and Green Living

Energy Conservation, Carbon Reduction, and Green Living advocating for limited energy consumption in the summer, water conservation, environmental education videos, environmental protection point collection event, and no plastic programs. In 2022, we expect participations rates to reach 80%.

Employees watching a video on environmental protection

A total of 152 employees and their families enjoyed Beautiful Formosa and The Midnight Sky together with HIWIN, pledging to take action and protect this land. 80% of employees that watched the videos felt that they learned more about Taiwan's incredible ecosystems; 95% of employees said that would start to pay more attention to environmental protection; and 45% of employees were inspired to join environmental protection campaigns (e.g. beach cleanups, ocean cleanups, tree planting, etc.)

Employees watching a video on environmental protection、Environmental protection point collection campaign

Environmental Protection Point Collection Campaign

We encourage employees to practice green consumerism and learn more about environmental protection. To such ends, we launched an environmental protection point collection campaign that would introduce employees to green living and select eco-friendlier options. We hope the campaign can instill green consumerism into our employees' daily lives to further minimize the wasting of resources and mitigate environmental impacts. We launched the campaign in September 2021 and a total of 166 employees participated. We will continue to hold the environmental protection point collection campaign every year as we believe that it supports environmental protection and can also introduce employees to eco-friendly products, which makes it all the more meaningful.

Adopt-A-Tree Program

Trees can absorb carbon and are, therefore, recognized as our best allies against climate change. In 2016, HIWIN signed up for Yunlin Technology-based Industrial Park's Adopt-A-Tree Program. We now manage over 4,000 square meters of public facilities. In 2019, we also signed up for Taichung Industrial Parks' Adopt- A-Tree Program, adopting 54 street trees that HIWIN employees will care for, e.g., weeding, fertilizing, pest control, trimming, and overall maintenance.

No Plastic Program

Limiting plastic use is key to mitigating global warming, therefore, we must reduce our use of single-use plastics. In 2021, to support the Environmental Protection Administration's Marine Debris Action Plan, HIWIN banned the use of single-use plastics at HIWIN cafeterias. Employees are now required to prepare their own utensils and containers, which will help reduce 200,000 plastic bag waste. Using 1 plastic bag generates 0.057kg of carbon emissions. The reduction of 200,000 plastic bags reduces 114,000 metric tons of carbon emission each year. (EPA-Lowarbon Campaign Platform announced that 1 plastic bag generates 0.057kg in carbon emissions)

Advocating the No Plastic Program

GHG Inventory & Reduction

HIWIN has instituted policies, asking all production locations to inventory GHG emissions in compliance with EPA's guidelines and regulations, IPCC 2007's GWP, and the EPA's emission coefficient. The inventory has to be verified by a third party each year and the boundaries are to be defined by operating authorization.

We chose 2020 as the base year because we believe HIWIN's data from 2020 are more representative of our operations and more sound.

2017~2021 GHG Emissions

2017~2021 GHG Emissions Intensity

2020 ~ 2021 GHG Inventory and Intensity

Category and Standards	GHG Emissions( MT CO2e)		Emission Intensity( MT CO2e/No. of Employees)
	2020	2021	2020	2021
Scope 1
Direct GHG emissions and removal	9,196	10,063	2.00	2.07
Scope 2
Indirect GHG emissions from purchased energy	121,866	151,144	26.56	31.13
Scope 3
Emissions from transportation and distribution95% raw materials	15,817	4,672	3.45	0.96
Emissions from purchased goods or services95% raw materials	33,118	47,793	13.40	16
Emissions fuel and energy-related activitieselectricity, gas, diesel, natural gases, liquefied petroleum gas)	27,008	28,816	13.40	16
Emissions from handling solid and liquid wasteTotal carbon emissions generated from waste at each HIWIN factory, including shipping	1,334	3,523	13.40	16

Carbon Reduction Milestones & Targets

According to outcomes from our GHG inventory, indirect Scope 2 emissions from purchased electricity accounts for 93.76% of total HIWIN emissions. To meet reduction targets, we have assembled a Management & Review Committee to track carbon reduction progress using emission intensity as the primary indicator. In the future, we will continue to roll out ISO 50001 energy management systems to help us conserve energy and maintain equipment, which can help further reduce carbon emissions from manufacturing processes.