Climate Strategy and Management

To address the impacts of global climate change, ECOVE conducts climate risk and opportunity assessments in its three major business areas: waste management, recycling, and renewable energy. We regularly identify sources of risk and assess their potential impacts, establish relevant operational standards, and mitigate the operational impacts caused by these risks. Since 2020, we have implemented the management framework of the Task Force on Climate-related Financial Disclosures (TCFD) and continued to assess climate change risks related to our operations in 2022. This enables us to enhance the organization's resilience in response to climate change.

Climate Governance and High-Level Management

ECOVE focuses on the development of a circular economy and categorizes its subsidiary businesses into three main areas: waste management, recycling, and renewable energy, based on their attributes. Under the "Risk Management Guidelines," ECOVE has established a "Risk Management Implementation Committee" that reports relevant operational risks to the Board of Directors annually. The Company identifies and assesses physical risks such as high temperature, typhoons, thunderstorms, floods, droughts, as well as regulatory, market, and technological transformation risks that may arise from climate change and formulates corresponding response strategies.

Being an investment holding company, all of ECOVE's relevant investment budgets must be approved by the Board of Directors. The management team prepares an annual "Business Operations and Development (including development focus, goals, and strategies in each area)" report at the end of each year, which serves as the basis for the following year's "Operating Budget." This report is then submitted to the Board of Directors for review. Through explanations provided by the management team, the Board of Directors is fully informed about significant business plans and development strategies for the Company's future. After discussions, inquiries, and recommendations from the Board of Directors, a consensus is reached to finalize the financial planning for the next year.

Under the "Sustainability Development Committee," ECOVE includes three major groups: social engagement, environmental protection, and corporate governance. Each group sets annual work objectives to fulfill corporate responsibilities. At the end of each year, the "Sustainable Development Committee" reports to the Board of Directors on the current year's performance and next year's work plan to familiarize the Board of Directors with the Company's goals, performance, and plans in the implementation of corporate social responsibility and corporate governance related to climate issues, so that the Board of Directors can indirectly achieve the purpose of monitoring and supervision.

Risk Identification, Assessment, and Management Strategies

The highest committee responsible for climate-related matters within ECOVE is the Risk Management Execution Committee, composed of the Board of Directors, Chairman, Audit Unit, President, Executive Secretary, and department heads of subsidiary companies. The Risk Management Committee is convened on a quarterly basis to discuss and identify prioritized risk issues and propose control measures. In addition, the audit results related to climate change risk of each subsidiary, compilation of material or immediate risk issues, are reported to the Risk Management Executive Committee. The Risk Management Executive Committee shall compile the risk assessment results to be provided as a reference for the audit unit to draw up the annual audit plan. The audit office will report the audit results to the Board of Directors to facilitate the board's monitoring of climate-related issues.

In accordance with the "Risk Management Regulations", ECOVE systematically identifies climate risks that may be faced during operations. Climate risk consists of two major types, transformational and physical, which are further differentiated into regulations, technology, market, reputation, and immediate and long-term. Opportunities are divided into five categories namely, resource efficiency, energy sources, products and services, market, and resilience. The risk and opportunity matrices are evaluated and drawn based on the two consideration factors of incidence rate and impact. After discussion by the Risk Management Committee, the material risks and opportunities which ECOVE may face are determined, and effective actions are adopted to manage risks or harness the possible opportunities so as to strengthen the operational system and competitiveness of the Company and its subsidiaries. Short-term is defined as within 1 year, mid-term as 2025, and long- term as 2030. Incidence rate is divided into seven levels, expressed as percentages. Impact is divided into five levels, and is divided into financial aspects, capacity or service locations, personnel injuries, regulations, consequences of reputation, etc. In pursuit of optimal efficiency, the Risk Management Committee convenes regularly on a quarterly basis to propose control measures, incorporating climate change issues. This is done to continually monitor and assess the effectiveness of the implemented control measures through audits, aiding the Board of Directors and General Manager in ensuring effective risk control.

Climate Risk Scenario Analysis

ECOVE's climate risks can be classified into two main categories: transition risks and physical risks, further divided into regulatory, technological, market, and reputational risks, as well as immediate and long-term risks. Opportunities are divided into five categories namely, resource efficiency, energy sources, products and services, market, and resilience. ECOVE conducts scenario analysis based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). We refer to various sources of information such as the Taiwan Climate Change Projection Information and Adaptation Knowledge Platform (TCCIP), Representative Concentration Pathways (RCPs), Shared Socioeconomic Pathways (SSPs), International Renewable Energy Agency (IRENA), and National Science and Technology Center for Disaster Reduction (NCDR) to assess the financial impacts of risks and opportunities.

Climate Indicators and Targets

ECOVE's business model is highly correlated with environmental sustainability, and the Company has developed various incentive schemes that are directly or indirectly related to climate change. The reward mechanisms are linked to initiatives aimed at improving waste collection volume, incineration power generation, operational efficiency, water conservation, energy conservation, resource efficiency, and efficiency improvements (including labor savings). Furthermore, ECOVE's subsidiary companies actively participate in external environmental assessment programs and have received awards such as the National Enterprise Environmental Protection Award, evaluations by the Environmental Protection Administration, and various prestigious awards in energy conservation and carbon reduction. Monetary incentives are also provided to recognize their achievements. Each subsidiary company has established key performance indicators including incineration volume, input volume, chemical usage for pollution prevention, generation of derived waste, post-treatment exhaust emission concentration, and cumulative capacity of solar power installations (MW). ECOVE continuously monitors and reviews these indicators to enhance its performance in these areas.

Greenhouse Gas Inventory

In response to the government's net-zero carbon policy, ECOVE is conducting comprehensive greenhouse gas emission inventories. Regular organizational-level greenhouse gas inventories are conducted for units with operational control, and third-party certifications are obtained. In addition, self- assessments are carried out for other operated incineration plants. The reduction targets are set based on the 2022 baseline year. For the headquarters building, the targets are a 20% reduction by 2024, a 40% reduction by 2026, and achieving net-zero by 2030. For the waste management, recycling, and renewable energy sectors with long-term operational control, a 15% reduction target by 2026 and achieving net-zero by 2050 are set.

ECOVE Environment Service Corp. conducts regular organizational greenhouse gas inventories for the waste incineration plants under its operational control. The base year was originally set as 2014 but adjusted to 2022 to align with the current carbon inventory. The results of the inventory are shown in the following table, and emissions intensity is used as a control measure. The emissions intensity for 2022 is 456 kgCO2/t, a 5% decrease from 2021, and a 21% decrease compared to 2014.