Climate Change Risk and Countermeasures

Faced with extreme weather events caused by global warming, as well as the widespread impacts of energy transition and climate change on business operations and social development, FocalTech recognizes the importance of managing climate-related risks and opportunities for sustainable corporate operations. Beginning in fiscal 2022, the company will systematically establish a climate change management system encompassing governance, strategy, risk management, and metrics and targets, in accordance with the Task Force on Climate-related Financial Disclosures (TCFD) framework.

All operations are coordinated and driven by the Sustainability Team, which is responsible for identifying and analyzing the potential operational impacts and transformation opportunities brought about by climate change, and formulating corresponding management strategies and action plans. Implementation results and major issues are regularly reported to the Board of Directors, who provide ultimate oversight and guidance, ensuring that climate change risks and opportunities are effectively integrated into the company's overall governance and decision-making processes, strengthening the organization's resilience and competitiveness in the face of climate change trends.

By continuously monitoring the risks and opportunities of climate change, we can develop corresponding strategies.

Collect and monitor international trends and changes in laws and regulations, examine operational performance in response to climate change, reduce corporate operational risks, and achieve corporate sustainable development goals.

• Conduct annual climate change risk and opportunity assessments.
• Develop response plans based on the annual assessment results.
• Continuously monitor the effectiveness of response plans annually.
• The Board of Directors oversees the planning and implementation of these plans.

FocalTech has established a Sustainability Development Group, led by the Head of Corporate Governance and the Executive Secretary of the Board of Directors. The group holds meetings annually to discuss topics such as climate change risks and opportunities that may arise from the company's operations, energy and resource efficiency, and environmental impacts throughout the product lifecycle. The group develops implementation plans to seize opportunities, create new opportunities, and mitigate operational risks. The group reports on implementation progress to the Board of Directors based on materiality.

Given the immediate risks of extreme weather events such as short-term heavy rain or drought brought about by climate change, the company is strengthening its disaster preparedness efforts in the short term to mitigate the operational impact of extreme weather events. Its medium- to long-term strategies include optimizing energy efficiency, promoting green procurement, establishing environmental awareness education programs, and collaborating with its supply chain to reduce carbon emissions. By implementing comprehensive contingency plans and mobilizing manpower and materials, FocalTech is continuously committed to strengthening its own resilience and that of its supply chain to mitigate the potential risks and losses associated with climate change.In addition, to address the transition risks of climate change, the company has continued to strengthen its product design direction, moving towards reducing energy consumption to meet the environmental requirements of the global market, while also strengthening green procurement and reducing carbon emissions in the supply chain. The company also actively cooperates with industry partners to jointly reduce the challenges and uncertainties brought about by transition risks.

FocalTech follows the process outlined above to identify, assess, and manage risks. Through Sustainability Group meetings, relevant members are convened to discuss and identify climate change risks and opportunities. These discussions, informed by the TCFD framework, focus on transition risks (policies and regulations, technology, markets, reputation), physical risks (immediate and long-term), and opportunities (resource efficiency, energy sources, products/services, markets, and resilience).

1. Market risk

• Reason: Major customers (such as Apple) are raising their standards for supply chain sustainability, and market trends are shifting toward low-carbon, high-efficiency products. Failure to meet these standards could result in lost orders and damage to brand trust.
• Company Response: Actively developing low-carbon technologies and high-efficiency products to enhance ESG performance, and collaborating with major customers to promote joint carbon reduction initiatives to strengthen customer relationships and market competitiveness.

2. Regulatory risks

• Reason: Global climate policies are tightening, such as Taiwan's Climate Change Response Act and the EU Carbon Border Adjustment Mechanism (CBAM), which require companies to disclose carbon emissions and develop carbon reduction plans, increasing compliance pressure and operating costs.
• Company response: FocalTech is responding to increasingly stringent global climate policies and carbon management requirements by strengthening carbon inventory and information disclosure, planning medium- and long-term carbon reduction goals, and deploying renewable energy, thereby reducing operational risks and ensuring compliance.

1. Low-carbon technology innovation

• Opportunity Description: Global demand for high-efficiency, low-carbon products is surging. FocalTech can tap into emerging markets and enhance its brand value through innovation in power management, energy storage, and green products.
• Driven Strategy: Increase investment in low-carbon technology R&D, launch new products that meet international sustainability standards, and expand market share of low-carbon products through marketing promotions.

FocalTech Electronics has further set goals based on the indicators developed by the TCFD climate risks and opportunities:

• Set the goal of net zero emissions by 2050.
• In addition to completing the ISO 14064-1:2018 greenhouse gas inventory and verification in 2024, we will continue to conduct annual ISO 14064-1:2018 greenhouse gas inventory and verification. We will quantify and report greenhouse gas emissions in accordance with the ISO 14064-1:2018 standard, and verify the information through a third-party organization to ensure the accuracy and reliability of the information. This will help the company monitor and manage greenhouse gas emissions and demonstrate its commitment to climate change.
• Continue to reduce greenhouse gas emissions each year.