Climate-related Risk Strategies
Climate Policy
Commitment | FENC aligns with the Paris Agreement by setting its carbon reduction targets and responding to climate change with the overarching goal of limiting the temperature increase to 1.5°C above pre-industrial levels. Through phased decarbonizing actions targeting its own operations and forming coalitions with supply chain partners, FENC is promoting green transformation and building climate resilience within the industry. |
Target | As the world moves towards carbon reduction in the net zero era, FENC stays in line with this trend and boosts its competitiveness by recalibrating its carbon reduction targets upward in 2024. With 2020 as the base year, the Company is aiming for 30% reduction in scopes 1 and 2 GHG emissions by 2025 as the near-term target, 50% by 2030 as the mid-term target, and net zero emissions by 2050 as the long-term target. At FENC’s Polyester Business, the target has been set for 42% reduction in scope 3 emissions by 2030 with 2022 as the base year. At Textile Business, the target has been set for 35% reduction in scope 3 emissions by 2034 with 2023 as the base year. To support the net zero vision and steer carbon reduction actions within the industry chain, FENC has also established new targets for the low-carbon transition in 2024, setting the trajectory for 50% carbon reduction, 50% green raw materials and 50% green products by 2030. By transforming the entire operation through the low-carbon model, including the raw materials, production processes and products, FENC is leading the industry into a green future. |
Strategy | 1. Improve energy efficiency. 2. Adopt low-emission fuel alternatives. 3. Develop renewable energy. 4. Utilize CCU. 5. Foster raw material transition. |
Note: The scope of the commitment includes our own operations as well as key value chain partners, including raw material suppliers and other business partners. |
Building Climate Resilience
The effects of climate change and global warming are growing severe. To mitigate and adapt to climate risks, FENC adopted the Task Force on Climate-related Financial Disclosures (TCFD) assessment in 2019. Each year, the Company discloses the results in its annual Sustainability Report and on the Company website. In 2023, the Company issued its first TCFD Report. Leveraging the TCFD framework and sustainability disclosure standards from IFRS S2 Climate-related Disclosures, the report is an assessment of climate-related financial risks and opportunities on FENC Businesses and production sites with which the Company wishes to cultivate a resilience mindset.
⇥ FENC Climate-Related Financial Disclosures (TCFD) Report
The Role of the Governing Body in the Governance of Climate-Related Risks and Opportunities
The Board of FENC, which serves as the highest governing and decision-making entity for climate and environmental sustainability issues, is responsible for reviewing major decisions and strategic directions concerning these issues and taking climate-related risks and opportunities into account while making business decisions. To strengthen implementation and oversight regarding sustainability issues, the Board established the Sustainability Committee in 2020 in accordance with the Sustainable Development Principles. As the governing body for climate and environmental sustainability, the Sustainability Committee is tasked with reviewing climate and environmental sustainability policies and management guidelines, supervising project execution, monitoring progress, consolidating material issues and presenting the issues to the Board. The goal is to ensure the fulfillment of compliance obligations and operation of risk control mechanisms in order to respond to stakeholder expectations and enhance sustainable climate and environmental governance.
The Role of Management Levels in the Governance of Climate-Related Risks and Opportunities
At the management level, FENC has instituted the "Corporate Sustainability Implementation Committee," serving as the highest management-level committee for the company's climate and environmental sustainability issues. This committee comprehensively manages and advances initiatives addressing climate-related risks and opportunities. Tasked with executing matters related to corporate sustainable development, the committee comprises senior executives, including the Presidents and Chief Operating Officers of each Business, heads of domestic and overseas production and operation sites, and dedicated personnel from the Corporate Sustainability Team under the Chairman's Office. Headed by the President of Executive Management Headquarters as the convener, the committee regularly reports the execution outcomes of sustainability projects to the highest governing body. The Energy Task Force and Environment, Occupational Safety and Health and Community Relations Management Task Force are established under the Sustainability Implementation Committee to reinforce and oversee the management of material risks and opportunities related to climate and environmental sustainability. The task forces are also tasked with preparing action plans, implementing projects and ensuring risk control in alignment with the targets approved by the governing body.
Climate-Related Risks and Opportunities Affecting FENC’s Prospects
The climate-related risks and opportunities that could reasonably be expected to affect FENC’s prospects, along with their respective time horizons, are identified in the following table:
Topic | Climate-Related Risks and Opportunities | Potentially Effected Time Horizon | |||
Type | Description | Short-term | Medium-term | Long-term | |
Greenhouse Gas Emissions (Emissions Management) | Transition Risks | Increasingly stringent domestic and international carbon control policies and regulations could lead to the increase in the compliance costs or the risk of pecuniary penalties related to carbon control. | ◎ | ◎ | ◎ |
Greenhouse Gas Emissions (Sustainable Products) | Opportunities | Increasing market demand for low-carbon products, investment in the R&D of sustainable products and reduction of the carbon footprint of existing products may lead to higher market share and revenue of sustainable products. | ◎ | ◎ |
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Energy Management | Physical Risks | Chemical manufacturing processes are inseparable from energy use. External extreme weather events or inadequate internal management of energy-consuming equipment may lead to low energy stability and energy supply interruptions, resulting in reduced capacity, operational interruptions and operating losses. | ◎ | ◎ | ◎ |
Opportunities Efficiency | Enhancing energy efficiency may effectively reduce energy consumption and energy expenditures. | ◎ | ◎ | ◎ | |
Water Management | Physical Risks | External extreme weather events may lead to water shortages, resulting in the risk of reduced capacity and operational interruptions. | ◎ |
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Transition Risks | Inadequate water resources management may lead to water pollution violations, resulting in pecuniary penalties. | ◎ |
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Opportunities Efficiency | Enhancing water efficiency and implementing water resources management may effectively reduce water procurement costs. | ◎ | ◎ |
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Current and Anticipated Impacts of Climate-related Risks and Opportunities on Business Model and Value Chain
FENC categorizes the magnitude and timeframes of climate-related risks and opportunities to evaluate their current and anticipated impacts on the business model and value chain of its Production Business. Details are as follows:
Topic | Climate-Related Risks and Opportunities | Impacts on Business Model | Impacts on Value Chain | |||
Type | Description | Current | Anticipated | Current | Anticipated | |
Greenhouse Gas Emissions (Emissions Management) | Transition | Due to the increasingly stringent domestic and international carbon control policies and regulations, the compliance costs or the risk of fines related to carbon control increase. | To address carbon fee risks, FENC has established internal inventory and compliance mechanisms in line with current carbon fee and reduction requirements. | As the carbon fee system grows extensive and regulations become more stringent, FENC must increase and enhance carbon reduction technologies during production, such as low-emission raw material alternatives and energy efficiency improvement, to maintain production flexibility. | No Direct Impact | FENC’s procurement costs could increase as upstream suppliers raise the price of raw materials due to carbon fees. |
Greenhouse Gas Emissions (Sustainable Products) | Opportunities | Due to increasing market demand for low-carbon products, investing in the R&D of sustainable products and reducing the carbon footprint of existing products to expand the market share of sustainable products and increase revenue. | FENC has introduced low-emission raw material alternatives into certain product lines and developed sustainable products to meet market demand. | With rising market demand, FENC must accelerate the mass production of sustainable products and the adoption of low-carbon technologies to expand market share. | FENC’s sustainable products are favored by downstream customers. | To reach decarbonization targets, downstream customers may increase their demand for FENC’s sustainable products. |
Energy Management | Physical Risks | Chemical manufacturing processes are inseparable from energy use. If external extreme weather events or poor internal management of energy-consuming equipment lead to low energy stability and cause energy supply interruptions, it will result in reduced capacity, operational interruptions, and consequently operating losses. | Energy supply has not caused a significant impact on production capacity allocation or process operation. However, considering factors such as extreme climate and aging equipment, FENC has incorporated contingency energy supply and dispatch into management planning in advance to reduce potential risks in the future. | The increase of extreme weather events or equipment failures may lead to insufficient energy supply and reduced production capacity. FENC continues to establish contingency energy supply and dispatch strategies to maintain process stability. | No Direct Impact | The instability of energy acquisition by upstream suppliers may lead to delays in raw material delivery, consequently impacting FENC’s production schedule and delivery commitments. |
Opportunities | Enhancing energy efficiency to effectively reduce energy consumption and energy expenditures. | Energy efficiency has been improved through process optimization and enhancement of energy management systems. | FENC may ensure process stability and reduce the reliance on external energy sources through continuous investments in energy efficiency and equipment upgrades. | No Direct Impact | No Direct Impact | |
Water Management | Physical Risks | If external extreme weather events lead to water shortages, it will result in the risk of reduced capacity and operational interruptions. | There are currently no direct impacts. FENC production sites have implemented drainage quality monitoring and management. | Extreme weather may lead to insufficient water supply, resulting in reduced production capacity, operational interruptions and increased operating costs. FENC must continuously implement contingency water supply and recycling measures to maintain process stability. | No Direct Impact | Water scarcity may affect the production capacity of upstream suppliers, which impacts FENC’s manufacturing processes and product delivery capabilities. |
Transition | Facing regulatory fines due to water pollution caused by the failure to properly implement water resources management. | There are currently no direct impacts. FENC production sites have implemented drainage quality monitoring and management. | Inadequate water resources management may lead to the risk of pecuniary penalties or production suspension due to discharge violations and affect operational stability. FENC must continue reinforcing water quality monitoring and management to keep discharge quality compliant with regulatory standards. | No Direct Impact | Inadequate water management or discharge by upstream suppliers may lead to production restrictions due to water shortages or violations, consequently disrupting raw material supply to FENC, affecting production site operations and impacting production schedules and product delivery. | |
Opportunities | Enhancing water resources utilization efficiency and implementing water resources management to effectively reduce water resources procurement costs. | FENC production sites are continuously implementing water recycling and monitoring measures to enhance water efficiency. | Expanding water recycling and management systems could enhance the resilience to water shortages at FENC production sites under extreme weather conditions and reduce the water cost per unit of production. | No Direct Impact | No Direct Impact | |
Impacts of Climate-Related Risks and Opportunities on Strategy and Decision-making
FENC has established well-defined climate transition and action strategies for climate risk adaptation and mitigation based on the impacts of transition and physical risks and opportunities, refining production models through responsible actions to co-create a green future with value chain partners.
Topic | Climate-Related Risks | Changes in Business Model and Resource Allocation | |
Type | Current | Anticipated | |
Greenhouse Gas Emissions (Emissions Management) | Transition Risks |
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Energy Management | Physical Risks |
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Water Management | Physical Risks |
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Transition Risks |
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Topic | Climate-Related Risks | Changes in Business Model and Resource Allocation | |
Type | Current | Anticipated | |
Greenhouse Gas Emissions (Sustainable Products) | Opportunities |
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Energy Management | Opportunities |
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Water Management | Opportunities |
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Impacts of Climate-Related Risks and Opportunities on Financial Position, Financial Performance and Cash Flows
FENC conducts financial impact assessments on the risk mitigation strategies. Based on the identified material climate-related risks and opportunities, the Company conducts strategic planning and risk control to achieve its climate targets, detailing their effects on its financial position and performance, which include the income statement (revenue and expenses), the statement of cash flows and the balance sheet (assets and liabilities, capital and financing). Details are provided below:
Topic | Climate-Related Risks and Opportunities | Financial Impacts During the Reporting Period |
Type | ||
Greenhouse Gas Emissions (Emissions Management) | Transition Risks | Through measures related to strategies such as improving energy efficiency, developing and procuring renewable energy, introducing alternative fuels, conducting regular external testing and verification of GHG emissions, conducting policy outreach and implementing carbon reduction management in response to Taiwan’s carbon fee regulations, financial statement categories primarily impacted are property, plant and equipment (including construction in progress and prepayments for equipment), operating costs (such as depreciation, green power procurement and carbon fees) and cash flows. |
Greenhouse Gas Emissions (Sustainable Products) | Opportunities | Through measures related to strategies such as the research, development and promotion of sustainable products as well as obtaining sustainable product certifications, financial statement categories primarily impacted are property, plant and equipment (including construction in progress and prepayments for equipment), operating costs (such as certification fees, training expenses and consulting and assurance fees) and cash flows. |
Energy Management | Physical Risks | Through measures related to maintaining the operational reliability of energy-consuming equipment, financial statement categories primarily impacted are property, plant and equipment (including construction in progress and prepayments for equipment), operating costs (such as depreciation) and cash flows. |
Opportunities | Through measures related to strategies such as improving energy efficiency and conducting regular external audits of the ISO 50001 energy management system, financial statement categories primarily impacted are property, plant and equipment (including construction in progress and prepayments for equipment), operating costs (such as depreciation, repair and maintenance expenses, certification fees and green power expenditures) and cash flows. | |
Water Management | Physical Risks/Transition Risks | Through measures related to wastewater management, such as adding, updating, replacing or maintaining facilities, or strategies such as conducting regular inspections and testing and obtaining discharge permits, financial statement categories primarily impacted are property, plant and equipment (including construction in progress and prepayments for equipment), operating costs (such as depreciation, certification fees and environmental, health and safety expenditures) and cash flows. |
Opportunities | Through measures related to water conservation and recycling projects and strategies such as establishing water efficiency management systems, financial statement categories primarily impacted are property, plant and equipment (including construction in progress and prepayments for equipment), operating costs (such as certification fees and environmental, health and safety expenditures) and cash flows. |
Climate-Related Scenario Analysis and Assessment of Climate Resilience
FENC assessed the impacts of climate-related risks and opportunities through scenario analysis and determined corresponding operational strategies and measures to enhance resilience. Considering the progressing domestic and international climate policies and uncertain environmental changes to come, time and circumstances are factors that may alter the impacts of climate risks and opportunities on a corporation. It is FENC’s intention to evaluate the resilience of its operations regarding material climate issues through scenario analysis to examine the impacts of climate risks and opportunities and modify business strategies accordingly.
The assessment of climate issues identified risks and opportunities related to GHG emissions as having the highest potential financial impacts. Given the high degree of uncertainty associated with such risks and opportunities, scenario analysis for material climate-related issues was conducted to assess the resilience of FENC in the face of climate risks.
The following sections describe the results of the scenario analysis regarding material climate risks and opportunities related to GHG, as well as the assessed impacts on business strategies and models.
Climate transition risks and opportunities are analyzed across different timeframes, with the magnitude of impact presented as low, medium or high to assess the future impact of each risk and opportunity on FENC. According to the effect of each issue on the revenue contribution of production sites, the magnitude of impact of the risks and opportunities are classified into four tiers, 0% as no impact; less than 10% as low impact; 10% to 30% as medium impact; over 30% as high impact.
Topic | Climate-Related Risks and Opportunities | Magnitude of Impact | |||
Type | Description | ||||
Short-term | Medium-term | Long-term | |||
Greenhouse Gas Emissions (Emissions Management) | Transition Risks
Carbon pricing mechanism | Due to the increasingly stringent domestic and international carbon control policies and regulations, the compliance costs or the risk of fines related to carbon control increase. | Low | Medium | Medium |
Transition Risks
Carbon border tax | Due to the increasingly stringent domestic and international carbon control policies and regulations, the compliance costs or the risk of fines related to carbon control increase. | Low | Low | Medium | |
Opportunities
Use of lower-emission sources of energy | Investing in renewable energy power generation facilities can effectively enhance the control over renewable energy costs, thereby reducing the acquisition cost of renewable energy and effectively achieving the renewable energy usage targets. | Medium | Medium | Medium | |
Greenhouse Gas Emissions (Sustainable Products) | Opportunities
Development or expansion of low-emission goods and services | Due to increasing market demand for low-carbon products, efforts are invested in the R&D of sustainable products and reduction of the carbon footprint of existing products to increase the market share of and revenue from sustainable products. | Medium | Medium | Medium |
Opportunities
Access to new markets | Due to increasing market demand for low-carbon products, efforts are invested in the R&D of sustainable products and reduction of the carbon footprint of existing products to increase the market share of and revenue from sustainable products. | Medium | Medium | Medium | |
Based on the evaluation, the "carbon pricing mechanism" and "carbon border tax" under greenhouse gas emission risks have higher potential financial impacts; the following elaborates on the climate resilience assessments for these two items:
● Selected Scenarios: FENC comprehensively considers various potential climate scenarios to gain in-depth insights into the series of climate-related risks and opportunities that may be faced over time. For the current year, FENC primarily references the latest "Global Energy and Climate Model" report released by the IEA in 2025 and adopts the 2050 Net Zero Emissions (NZE) scenario. Under this scenario, the energy sector does not rely on external emissions reductions to achieve net-zero targets and maintains a >50% probability of limiting the rise in global average temperature to within 1.5°C by 2100.
● Time Horizon: 2025-2050
● Scope of Analysis: The scope of analysis covers the regions of major operation sites (Taiwan, mainland China, Vietnam, Japan, U.S., and Malaysia).
Topic | Climate-Related Risks and Opportunities | Key Assumptions | Assessment of Impacts and Resilience | |
Type | Description | |||
Greenhouse Gas Emissions (Emissions Management) | Transition Risks
Carbon pricing mechanism | Due to the increasingly stringent domestic and international carbon control policies and regulations, the compliance costs or the risk of fines related to carbon control increase. | 1. For operation sites located in Taiwan, referencing the "Regulations Governing Carbon Fee Collection" under the Climate Change Response Act to estimate carbon fee amounts. 2. For operation sites located outside Taiwan, based on the IEA‘s World Energy Outlook (WEO 2025), assuming wide implementation of carbon pricing under the NZE scenario, reaching 90 USD/tCO2e (2030) and 200 USD/tCO2e (2050) for emerging economies, and 140 USD/tCO2e (2030) and 250 USD/tCO2e (2050) for developed economies. | Impacts: According to the results of the scenario analysis, under the 2050 Net Zero Emissions (NZE) scenario, the implementation of carbon fee/tax policies by governments worldwide will lead to an increase in FENC’s operational costs. It is estimated that the financial impact will account for 2.2% of the Production Business revenue in 2030 and 3.8% in 2035. Resilience: To address the potential financial impacts of climate change and carbon fee systems, FENC has submitted its voluntary reduction plan in accordance with the "Regulations Governing Carbon Fee Collection" announced by the competent authority in Taiwan, and expects to meet the established carbon reduction progress annually. Since FENC is expected to be eligible for the competent authority's preferential rates, the impact of carbon fees on the Company’s operations and financials will be limited. FENC will continue to strengthen the carbon management resilience of its operation sites and adopt carbon reduction strategies, including improve energy efficiency, adopt low-emission fuel alternatives, develop renewable energy, utilize CCU, and foster raw material transition, to maintain long-term competitiveness and climate adaptive capacity. |
Transition Risks
Carbon border tax | Due to the increasingly stringent domestic and international carbon control policies and regulations, the compliance costs or the risk of fines related to carbon control increase. | With the EU’s scheduled implementation of the Carbon Border Adjustment Mechanism (CBAM) starting in 2026, and the potential for other countries or economic zones to develop and promote similar carbon border adjustment or carbon tariff policies, global carbon pricing systems are expected to gradually converge. Under this scenario, to mitigate carbon leakage risks, countries may impose corresponding carbon border fees or tariffs on imports from regions with laxer carbon regulations. FENC further assumes that future export markets may include PET resin under the scope of such mechanisms, impacting product export cost structures and market competitiveness. | Impacts: FENC anticipates that by 2030, the EU will include polymers (including PET resin) under the scope of products subject to the Carbon Border Adjustment Mechanism (CBAM). When FENC’s PET resin is exported to the EU, they may be subject to carbon border adjustment fees if product carbon emissions exceed local standards. By 2050, as more countries adopt carbon tariff systems, exported PET resin may face additional carbon costs. Failure to continuously reduce carbon emissions from PET resin will impact FENC's operational costs. It is estimated that the financial impact will account for 0.2% of the Production Business revenue in 2030 and 0.4% in 2035. Resilience: The financial impact of this risk is positively correlated with carbon emissions per unit of product. FENC will reduce the carbon footprint of production processes by implementing strategies including expanding the use of low-carbon alternative raw materials, improve energy efficiency, adopt low-emission fuel alternatives, and develop renewable energy. | |
Qualitative scenario analysis is employed for the resilience assessment of additional climate-related risks and opportunities.
Topic | Resilience Assessment Description |
Energy Management | FENC ensures the stability of its production operations by maintaining energy-consuming equipment with precision and building energy storage systems. The Company also enhances its readiness against power fluctuation risks by detailing the inventory of critical equipment, standardizing maintenance and repair plans across all production sites and installing energy storage facilities in phases. Meanwhile, all production sites support governmental energy policies and conduct regular outreach programs, keeping the management mechanisms in line with regulatory requirements. The multi-faceted energy management strategies has buttressed FENC with tremendous operational resilience as the Company tackles climate change and energy supply challenges. |
Water Management | FENC has established comprehensive water pollution prevention and water recycling systems. By installing the continuous water monitoring system (CWMS) with real-time monitoring of critical process data, such as dissolved oxygen and mixed liquor suspended solids (MLSS), the Company monitors effluent quality with accuracy and ensures regulatory compliance. To enhance water efficiency, FENC has implemented the ISO 46001 water efficiency management systems, maximizing resource reuse rates by integrating the analysis of water consumption per unit of production, utilizing reverse osmosis/membrane bioreactor reclamation systems and implementing rainwater recycling projects. As water supply risks emerge with extreme weather events, FENC has prepared itself with contingency plans for emergency water supply, including alternative water sources and inter-plant water networks as mutual aid. Through equipment replacement and upgrades, rigorous job qualification certification and emergency response assessments, FENC has built a high degree of operational resilience, which enhances water supply stability and environmental compliance management. |
Scenario for Risks and Opportunities
Scenario | SSP5-8.5 | NZE |
Type | Physical risks | Transition risks and opportunities |
Detail | The SSP5-8.5 scenario is presented in the IPCC’s Sixth Assessment Report (AR6) under the assumption of absence in climate actions from all countries, which would result in the highest CO2 concentration. It could be regarded as the most stringent climate scenario. Adopting this scenario would help FENC assess the degree of impacts under the most extreme climate challenges. | The NZE scenario is published by IEA. To limit the global temperature rise to 1.5 °C, the NZE scenario represents a path to net zero emissions by 2050 for the world and is considered the most extreme reduction scenario. As the surge of carbon reduction policies sweeps through the world, adopting the NZE scenario would help FENC gain competitive advantages by taking preemptive strikes. |
Parameter | Assuming the worst-case climate change scenario (SSP5-8.5), it is projected that by 2050, the average annual total precipitation in East Asia will surge by 15%, and the heaviest single-day precipitation will increase by 20% in intensity, accompanied by the occurrence of extreme weather events such as typhoons, floods and rainstorms. | Assuming the NZE scenario, carbon fees/taxes are levied across all sectors in all regions: By 2050, the carbon price will rise to US$250/tCO2e in advanced economies and US$200/ tCO2e in selected emerging markets and developing economies. |
Projected Temperature Rise by the End of This Century | >4℃ | ～ 1.5℃ (Consistent with the commitment under the Paris Agreement) |
Note: “Selected emerging markets and developing economies” is a regional category used in the International Energy Agency’s World Energy Outlook, which includes Brazil, mainland China, India, Indonesia and South Africa. |
Current and Anticipated Direct Mitigation and Adaptation Efforts for Climate-Related Risks and Opportunities
Topic | Opportunities Resource Efficiency | Direct Mitigation and Adaptation Efforts | |
Type | Current | Anticipated | |
Greenhouse Gas Emissions (Emissions Management) | Transition Risks |
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Greenhouse Gas Emissions (Sustainable Products) | Opportunities |
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Energy Management | Physical Risks |
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Opportunities |
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Water Management | Physical Risks |
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Transition Risks |
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Opportunities |
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Note: The target year for the anticipated plan is 2030. The boundary encompasses all of the Company’s existing operating sites, as well as planned new operating sites. |
Each plant assesses specific climate physical risks relevant to its local operating environment, such as extreme heat, typhoons, heavy rainfall-induced flooding, and external grid instability. By conducting detailed inventories of critical energy-consuming and cooling systems, facilities integrate these assets into the risk management framework. Furthermore, they establish preventive maintenance plans, increase inspection frequencies, and implement flood backup mechanisms, thereby mitigating the operational risks of overheating equipment, efficiency degradation, or natural disaster-induced downtime. Simultaneously, based on the regional climate risk profiles and grid reliability, each facility formulates tailored energy management and emergency response strategies, including the establishment of on-site back-up power systems and energy dispatch mechanisms—to ensure operational resilience and minimize production disruptions during severe weather events.
The Company implements location-specific water adaptation strategies based on the water stress levels and physical climate risk profiles of each manufacturing site. For facilities located in areas with high water stress or susceptible to severe droughts, we prioritize establishing secondary water sources, deploying cross-facility backup supply pipelines, and formulating emergency water trucking plans to ensure operational resilience during extreme dry spells or supply disruptions. For facilities in lower water-risk regions, management focuses on enhancing in-plant water recycling efficiency, implementing regular conservation measures, and monitoring water quality, thereby comprehensively mitigating drought and water supply risks across all operations.
Processes for the Identification, Assessment, Prioritization and Monitoring of Climate-Related Risks and Opportunities
The following sections further illustrate the systematic approach FENC has adopted to manage climate-related risks and opportunities. The implementation is divided into a four-pillar structure, including identification, assessment, prioritization and monitoring, as detailed below:
- Identification: Internal and external information is collected and applicable standards from the Sustainability Accounting Standards Board (SASB) are consulted to establish the list of climate issues in a systematic manner with continuous refinement.
- Assessment: FENC units, including the production sites within the reporting scope, convene to assess the likelihood and magnitude of financial impacts of climate-related issues within their respective industries through survey mechanisms.
- Prioritization: After consolidating and analyzing the surveys, results are ranked from high to low materiality with thresholds established as the basis for the preliminary screening of material sustainability issues. After the preliminary prioritization, actual operations and development directions are taken into account, and inter-departmental discussions are conducted as qualitative materiality judgements to supplement the quantitative results for the selection of material climate issues and related risks and opportunities, which are then submitted to the Sustainability Committee and the Board for approval.
- Monitoring: Changes in climate-related risks and opportunities are continuously monitored. The governance mechanism and management effectiveness are also regularly reviewed to make necessary adjustments and improvements in order to fortify FENC’s climate resilience and overall risk management performance.
FENC has established comprehensive climate-related risk and opportunity management processes, which comply with and are integrated into the corporate risk management policies. Functioning as the management unit for climate-related risks and opportunities, the Sustainability Implementation Committee is responsible for formulating action plans, executing specific projects and implementing risk control based on targets ratified by the governing body.
FENC first conducted a comprehensive inventory of domestic and international climate trends, focusing on transition and physical risks. Transition risks encompass policy and legal risks, such as carbon pricing and carbon border taxes (e.g., CBAM) and climate litigation; the impact of licensing and regulation and policy incentives; technology risks arising from high electricity prices and scarce renewable energy; market risks resulting from shifts in market demand for low carbon products and a decline in orders as customers pivot to low-carbon suppliers; and reputation risks stemming from damages to the corporate image for failing to meet the expectations of investors and brand customers. Physical risks comprise acute physical risks, such as typhoons and rainstorms; and chronic physical risks, such as increased cooling power consumption and heat hazards caused by prolonged heat waves, frequent water shortages driven by shifts in long-term precipitation patterns, and the flooding of coastal plant premises and ports induced by rising sea levels.
To identify climate-related risks and opportunities, FENC integrated the aforementioned issues into the sustainability issues of the SASB industry standards and the IFRS S2 Industry-based Guidance on Implementing Climate-related Disclosures, consolidating climate issues highly relevant to corporate operations. During the identification process, FENC concurrently consulted international sustainability ratings and guidelines as well as peer benchmarking practices, while synthesizing industry regulations, stakeholder feedback and additional international trends to serve as the foundation for subsequent assessment and strategy formulation.
During the assessment stage of climate-related risks and opportunities, FENC leverages the sustainability issues listed in the SASB industry standards and their described scenarios as a basis to analyze and determine the relevance of each issue to corporate operations. FENC further examines qualitative factors, such as existing management measures and potential scenarios affected by the current management status of the issues (e.g., assessing the magnitude of operational impacts under a hypothetical extreme weather event), to assist the management in comprehending potential impacts under various scenarios.
During the assessment stage of climate-related risks and opportunities, the magnitude of financial impacts and likelihood of each climate issue are taken into consideration, while the scale of FENC’s assets, revenue and operating costs are also considered as the basis for analysis. The likelihood and magnitude of financial impacts of each climate issue are assigned scores ranging from 1 to 5 and weighted with multipliers. The issues are then ranked based on the scores.
The magnitude of financial impacts and likelihood of each climate issue are taken into consideration, while the scale of FENC’s assets, revenue and operating costs are also considered as the basis for analysis. The likelihood and magnitude of financial impacts of each climate issue are assigned scores ranging from 1 to 5 and weighted with multipliers. The issues are then ranked based on the scores.
Identification Outcome of Material Climate Risks and Opportunities
Through survey mechanisms and analysis, FENC identified seven material climate risks and opportunities, which were determined by establishing a cumulative impact threshold of the top 75% and integrating the feedback of senior management with the approval of the Sustainability Committee and the Board.
Climate-Related Metrics and Targets
Indicators of Climate Targets | Target Type | Base Year Data | 2025 Annual Target | Short-Term Target （-2030） | Medium-Term Target （2031-2035） | Long-Term Target （2036-2050） | |
Greenhouse Gas Emissions (Emissions Management) | Reduction in GHG Emissions (Scope 1 and 2) (2020 base year) | Absolute Target | 2,432ktCO2e | 30% Reduction | 50% Reduction | 60% Reduction | Achieve Net Zero Emissions by 2050 |
Reduction in GHG Emissions (Scope 1) (2020 base year) | Absolute Target | 1,272ktCO2e | 28% Reduction | 47% Reduction | 57% Reduction | Achieve Net Zero Emissions by 2050 | |
Reduction in GHG Emissions (Scope 2) (2020 base year) | Absolute Target | 1,160ktCO2e | 32% Reduction | 53% Reduction | 64% Reduction | Achieve Net Zero Emissions by 2050 | |
Greenhouse Gas Emissions (Sustainable Products) | Sustainable Products Revenue Ratio (percentage of production business revenue) | Intensity Target | - | 33% | 50% | 60% | 75% |
Energy Management | Reduction in Energy Consumption Per Unit of Production (2020 base year) | Intensity Target | 2.91 GJ/metric ton of production | 10% Reduction | 20% Reduction | 25% Reduction | 40% Reduction |
Water Management | Reduction in Water Withdrawal Per Unit of Production (2020 base year) | Intensity Target | 2.98 kiloliters/metric ton of production | 30% Reduction | 35% Reduction | 40% Reduction | 45% Reduction |
Number of Incidents of Non-Compliance with Local Regulations Regarding Water Pollution Control Operation Standards and Water Discharge Quality | Absolute Target | - | 0 | 0 | 0 | 0 | |
2025 Progress and Indicators for Climate Targets
Indicators of Climate Targets | 2025 Annual Target | 2025 Progress | 2025 Target Achievement Rate | |
Greenhouse Gas Emissions (Emissions Management) | Reduction in GHG Emissions (Scope 1 and 2) (2020 base year) | 30% Reduction | 40% Reduction | Achieved |
Reduction in GHG Emissions (Scope 1) (2020 base year) | 28% Reduction | 35% Reduction | Achieved | |
Reduction in GHG Emissions (Scope 2) (2020 base year) | 32% Reduction | 46% Reduction | Achieved | |
Greenhouse Gas Emissions (Sustainable Products) | Sustainable Products Revenue Ratio (percentage of production business revenue) | 33% | 41% | Achieved |
Energy Management | Reduction in Energy Consumption Per Unit of Production (2020 base year) | 10% Reduction | 8% Reduction | Not Achieved |
Water Management | Reduction in Water Withdrawal Per Unit of Production (2020 base year) | 30% Reduction | 28% Reduction | Not Achieved |
Number of Incidents of Non-Compliance with Local Regulations Regarding Water Pollution Control Operation Standards and Water Discharge Quality | 0 | 0 | Achieved | |
Note: The disclosure of violations against local regulations is based on the list of “material information” referenced in the Taiwan Stock Exchange Corporation Procedures for Verification and Public Handling of Material Information of Securities Listed Companies. A single event resulting in pecuniary penalties of more than NT$1 million cumulatively shall be disclosed. Non-pecuniary penalties resulting in governmental orders of the suspension of work, suspension of business, termination of business, or the revocation or voidance of a permit pertaining to pollution shall be disclosed. |
Climate Transition Plan
To address the risks and opportunities brought by extreme climate, FENC has designed specific and actionable climate transition pathways tailored to the operational models and emission structures of each Business. Based on key assumptions, including feasible carbon reduction technologies, the supply and demand of renewable energy and electricity emission factors, the Company has formulated a climate transition plan aligned with its mitigation and adaptation targets to support the short-, medium- and long-term reduction pathways that will ultimately lead to net-zero emissions. The Production Business focuses on improving energy efficiency, adopting low-emission fuels, incorporating renewable energy, developing CCU and transitioning to low-emission raw material structures. Through systematic process optimization and energy management, FENC is reducing process- and energy-related emissions while ensuring operational stability and cost control.
Climate Transition Plan and Action
Climate Transition Plan | Action |
|---|---|
Improve Energy Efficiency | FENC improves energy efficiency by optimizing the production process, facilities and energy management. Energy projects in the pipeline include new cogeneration systems, which capitalize on thermal and electrical power by recovering waste heat. |
Adopt Low-emission Fuel Alternatives | FENC’s short-term carbon reduction plan calls for substituting high-emission fuels, such as coal or heavy oil, with low-emission alternatives, such as natural gas and biomass fuels. The medium- and long-term plans are to replace natural gas with hydrogen fuels. |
Develop Renewable Energy | FENC is investing heavily in and installing a diverse range of renewable energy equipment and increasing the purchase of renewable electricity annually to boost its percentage in the Company’s energy mix. |
Utilize CCU | The technology is utilized to convert carbon dioxide into usable products. The future plans will focus on the capturing and utilizing the carbon dioxide from the boiler exhaust. |
Foster Raw Material Transition | FENC adopts low-emission raw materials as alternatives, including recycled and biomass options. Leveraging its core technological advantages, the Company is developing environmentally friendly and low-emission materials and expanding the applications of these innovations. |
FENC formulates five major low-carbon transition strategies and establishes near-term targets for the upcoming five years (2026-2030), comprehensively encompassing emissions reduction actions across scope 1, 2 and 3 of greenhouse gas (GHG) emissions:
Scope 1 (Direct Emissions Reduction)
Adopt Low-Emission Fuel Alternatives: FENC is gradually replacing high-emission coal-water slurry and heavy oil boilers with natural gas and biomass fuels. The first natural gas boiler at Hsinpu Chemical Fiber Plant commenced its trial run in December 2025. Upon the full completion of all three units, an estimated 66,098 tCO2e in GHG emissions will be avoided annually. Furthermore, the knitting & dyeing plant of FEPV plans to expand its biomass fuel substitution rate in 2026, with an estimated replacement rate reaching 83%.
Utilize CCU: FENC pioneered the world's first AirTek non-isocyanate polyurethane (NIPU) technology, converting industrially captured carbon dioxide into high-performance elastic materials, which reduces carbon emissions during the manufacturing process by up to 58%. The Emerging Technology Carbon Reduction Team has been established to plan for direct carbon capture and utilization from emission exhaust in the future.
Scope 2 (Energy Indirect Emissions Reduction)
Develop Renewable Energy: FENC is expanding renewable energy equipment, such as solar power systems, across its global production sites and signing long-term power purchase agreements. The 10,000 kW solar power system installed by FEPV is completed and commence operations in 2026, which is projected to reduce carbon emissions by approximately 9,997 tCO2e annually. FENC aims to reach a renewable electricity consumption of 290 GWh across its global production sites by 2028.
Improve Energy Efficiency: FENC plans to install a 30 MW cogeneration system at the Vietnam plant by 2030 to enhance the overall utilization efficiency of fuel and thermal energy.
Scope 3 (Value Chain Emissions Reduction)
Foster Raw Material Transition: FENC substitutes traditional fossil feedstocks with recycled PET (rPET) and biomass materials. FENC is committed to achieving the transition target of 50% green products and 50% green raw materials by 2030, reducing the carbon footprint of product life cycles and the supply chain from the source.
FENC has formulated a Net-Zero Transition Plan in alignment with the Paris Agreement’s goal of limiting global warming to 1.5°C. Guided by the spirit of "Just Transition," the Company has established a comprehensive low-carbon transition strategy, a quantified capital allocation plan, and a social impact assessment mechanism to ensure inclusivity and fairness throughout the transition process.
Low-Carbon Transition Capital Allocation and Quantified Investment Targets (2026–2030)
To guarantee the implementation of the transition plan and achieve near-term phased carbon reduction targets over the next five years (2026–2030), the Company has explicitly allocated quantified Capital Expenditures (CapEx) and Operational Expenditures (OpEx) as follows:
GHG Emissions Management Program:
Projected Capital Expenditure (CapEx): TWD 391,455 thousand.
Projected Operational Expenditure (OpEx): TWD 220,041 thousand.
Key Decarbonization Levers: Gradually replacing high-carbon coal-water slurry and heavy oil boilers with natural gas and biomass fuels (e.g., trial operation of the first natural gas boiler at the Hsinpu Chemical Fiber Plant, and increasing the biomass fuel substitution rate to 83% at the knitting & dyeing plant of FEPV); planning a 30MW cogeneration system in the Vietnam plant; and promoting the installation of renewable energy facilities and procurement of renewable electricity across global sites (targeting 290 GWh of renewable electricity for global production sites by 2028).
Sustainable Product Transformation Program:
Projected Capital Expenditure (CapEx): TWD 1,747,764 thousand.
Projected Operational Expenditure (OpEx): TWD 537,699 thousand.
Key Decarbonization Levers: Expanding the application of recycled (rPET) and bio-based raw materials, conducting product life-cycle carbon footprint inventories, and obtaining international sustainability certifications (e.g., GRS, ISCC PLUS) to ensure the achievement of the 2030 target: "50% green products and 50% green raw materials".
Response Strategies and Action Plans for Material Climate-Related Risk
Facing the increasing stringency of domestic and international carbon control policies, which entail compliance costs and potential risk of fines, FENC has planned the following response strategies and action plans to effectively mitigate the risk of GHG emissions and strengthen operational resilience:
Response Strategy | Action Plan |
|---|---|
Enhancing Energy Efficiency | Appropriate budgets annually for energy and emission reduction projects and implement energy efficiency enhancement projects. |
Developing Renewable Energy | Appropriate budgets annually for energy and emission reduction projects and implement energy efficiency enhancement projects. |
Promoting CCU Technology |
|
Promoting CCU Technology | Increase the use of low-emission fuels and continue promoting and researching biomass fuels. |
Promoting CCU Technology |
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Promoting CCU Technology | Propose improvement measures addressing comments raised by the third-party agency verifying the annual GHG inventory. |
Regular Outreach on Policies related to GHG Emissions | Propose improvement measures addressing comments raised by the third-party agency verifying the annual GHG inventory. |
Regular Outreach on Policies related to GHG Emissions |
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To implement the above strategies and fortify climate resilience, FENC projects a total capital expenditure of NT$391,455 thousand by 2030.
