Climate Change Risk and Opportunity Management

Sustainability Menu

UMC independently develops an assessment tool by referring to the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations, and through relevant responsible divisions to conduct risk and opportunities analysis base on policies and regulations (including current and emerging regulation), market and technology changes, reputation, legal (including litigation), and physical risks to develop adaptation and mitigation strategies, and review the achievements periodically for the purpose of management by connecting to UMC’s Sustainable Strategy and Blueprint

TCFD Disclosure Framework and UMC Management

Governance	Board of Directors and Functional Committees: The Board oversees climate change risks, opportunities, coping strategies, and related promotion plans. The Board also oversees promotion results, including budget implementation, revision and addition; cost-effectiveness review; and following up on implementation results. It also oversees the Company's major fundraising, issuance, and private placement of equity securities that are related to climate change. (Frequency: At least annually) ESG Steering Committee: Responsible for ESG governance, strategy, objective decision, systems or management guidelines and concrete promotional plans (including climate change), and report to the Board of Directors on a periodic basis. Corporate Sustainability Committee: In charge of setting sustainability direction and objective, enforcing systems or related management guidelines (including climate change). If the results of climate change risk assessment have a significant impact on corporate major decisions, they will be escalated to the ESG Steering Committee for approval. Enterprise Risk Management Committee: The Committee coordinates related divisions to jointly review the Company's internal and external risks (including climate change risks), regularly traces the changes for major company-wide risks, and reports the overall improvement actions to the ESG Steering Committee.
Strategy	According to UMC Climate Change Risk and Opportunity Assessment Methodology, short-term is defined as 3 years; mid-term is defined as 10 years; and long-term is over 10 years. UMC has formulated a climate change policy as the Company's highest guiding principle in responding to climate change, and has established the "UMC Low-Carbon Commitment" as the guideline for promoting its overall plan. Analyze the impact of climate change risks and opportunities on UMC's operations according to the TCFD framework. Conduct climate risk analysis for different scenarios, including transition scenarios based on International Energy Agency NZE (Net Zero), Announced Pledges Scenario (IEA APS), Nationally Determined Contributions (NDCs), Stated Policies Scenario (IEA STEPS), and physical scenarios according to RCP8.5 in fifth assessment report (AR5), SSP1-2.6 and SSP5-8.5 in sixth assessment report (AR6) of the Intergovernmental Panel on Climate Change (IPCC).
Risk Management	Identify possible policies, regulations, markets and technologies transitions, business reputation, and risks that may result in different scenarios for risk and opportunity analysis. Assessment scope includes UMC operation and upstream and downstream of value chain (such as suppliers and customers). With the participation of related divisions in the climate change risk and opportunity assessment task force, UMC developed adaptation and mitigation strategies for top three risks. The overall results and related countermeasures will be submitted to CS Committee for approval. Annual review on risks and opportunities of transitions in policies, regulations, technologies, markets and business reputation; every three to five years, when the IPCC and the Taiwan Climate Change Projection Information and Adaptation Knowledge Platform (TCCIP) updates climate scenarios, re-examinations and on-going corrections on the assessment results of physical risks, transition risks, and opportunities will be carried out.
Metrics and Targets	UMC has established climate-related risk and opportunity assessment management indicators such as water consumption, energy use, greenhouse gas emissions, and the technology development of low energy consumption products. Relevant emission information has been checked in accordance with the Greenhouse Gas (GHG) Protocol and the ISO 14064 Standard, and data verification by a third party has been commissioned. In addition to complying with regulations, the current status also complies with IEEE's standards for fluorinated greenhouse gas. Established standards for new fabs and new equipment to respond to climate change and greenhouse gas reduction regulations. Set year 2025 and year 2030 KPI targets for indicators including greenhouse gas, water, electricity reduction, and product design. For emissions reduction, UMC has also set its net zero by 2050 goal and its 2030 science-based target.

Climate Change Risk and Opportunity Assessment Procedure

Stage	Content
1. Collection of climate scenario data	Collection and updating of weather simulation data of transition scenarios based on NZE, APS, STEPS in IEA, and Nationally Determined Contributions (NDCs), and physical scenarios based on IPCC AR5, AR6, and local government down scale simulation report.
2. Development of UMC climate change risk assessment tool	UMC developed the UMC Climate Change Risk Assessment methodology based on the ISO 14090 Adaptation to Climate Change, the assessment procedure in the UK Climate Impacts Programme (UKCIP), and Task Forced on Climate-related Financial Disclosures (TCFD).
3. Climate change risk and opportunity assessment	Climate Change Risk and Opportunity Assessment Working Group¹ assess the climate change risks and opportunities. Countermeasures of adaptation and mitigation strategies are developed according to identified risks.
4. Assessment Review	The assessment results and related countermeasures will be submitted to CS Committee for approval.
5. Continuous monitoring	Identified risk will be submitted to ERM Committee, they will be reviewed monthly and added into risk pool by corresbonding risk group. If the assessment results are listed as major company-wide risks, ERM committee will simultaneously manage it and trace the implementation progress of countermeasures on a regular basis.

^1. Climate Change Risk and Opportunity Assessment Working Group members include: procurement, Material Planning & Warehouse Management, Finance, Marketing, Technology Development, Human Resource, Facility Operation, Group Risk Management & Environmental Safety and Health, etc.

Climate Change Risk and Opportunity Matrix

UMC conducts assessment according to the procedure above, 8 transition risks, 5 physical risks, and 5 opportunities are identified. List one financial impact and response plan of risk and opportunity as below, respectively:

Transition Risk: Carbon tax/fee for greenhouse gas emission control risk
Scenario: IEA APS including NDCs
Assumptions:

1. Singapore’s carbon fee rate increases, assuming the rate is increased from SGD$45/tonne CO₂e by 2026 to SGD$80/tonne CO₂e by 2030
2. Taiwan imposes carbon fee, assuming a rate of NT$300/tonne CO₂e
3. Carbon fee are levied in Japan and mainland China, assuming a rate of NT$300/tonne CO₂e in the mid-term, while there are currently no regulations and requirements in the short-term.

Mitigation Plan: Greenhouse gas reduction, and promote three resolutions to achieve Net Zero

Over the past two decades, UMC has carried out several programs for carbon reduction. For the next 30 years, UMC will continue to strive for its Science-Based Targets (SBTs) by enhancing its process technologies, increasing the percentage of renewable energy usage, and investing in emerging carbon reduction measures

Three resolutions to achieve net zero:

(1) Persistent and proactive carbon emissions reduction

(2) 100% renewable energy

(3) Investment in net-zero technologies

Drought worsens and affects production

Scenario: IPCC AR6 SSP5-8.5
Assumptions:

1. When the status of water rationing turns to orange light for 30 days, daily water supply from the water company is reduced by 17%~20%
2. Delivery delays from suppliers due to water constraints

Adaptation Plan: Develop and adopt diverse sources, such as reclaimed water and desalinated water

To reduce dependency on municipal water, the Company has diversified its water sources, include reclaimed water as alternative water sources. UMC Group’s reclaimed water consumption is mainly at Fab 12i in Singapore. When Fab 12i was built, reclaimed water (NEWaterNote) was introduced in the production of 300mm wafers. In 2023, Fab 12i’s reclaimed water reached 3.33 million tonnes, accounting for 97.6% of the fab’s total water withdrawal. UMC's fabs in Taiwan are also actively assessing reclaimed water utilization. Fab 12A in Taiwan introduced the use of reclaimed water in December 2022. Fab12A's reclaimed water usage reached 0.59 million tonnes. The reclaimed water used in Fab 12A and Fab 12i totaled 3.92 million tonnes, an increase of 9.9% compared to 2022. In addition to reclaimed water, UMC's fabs including Hsinchu and Tainan are also collaborating with the government's desalination system to plan the introduction of desalinated water, aiming to expand the usage of reclaimed and desalinated water, and set the goal of reclaimed and desalinated water usage ration of 16%、18%, and 32% in 2024, 2025, and 2030, respectively.

Note: NEWater is reclaimed water supplied by the Singapore Utilities Board after the wastewater has been treated to a high level of quality.

Increase the percentage of sustainable product revenue

Potential benefit and response: UMC is committed to increasing investment in energy-efficient product technologies, and providing semiconductor manufacturing services covering clean technology fields such as power electric vehicles, smart energy management systems, industrial automation, and optimization technologies and systems, so as to reduce carbon emissions in the industrial value chain and the carbon footprint of end products. In order to align technology development with global carbon reduction goals, UMC has set incremental goals through 2030 to expand the proportion of overall revenue derived from sustainable products, and continued to develop related technology according customers and market demands. For example, UMC's 28nm ultra-low power embedded high-voltage platform 28eHV-LP process technology, featuring the industry's smallest SRAM bit cell, offers up to 15% reduction in power consumption without compromising image quality or data rate, addressing the demand for longer battery life of devices. In 2023, UMC produced energy-saving products such as low-power, low-leakage, and power management that accounted for 76.7% of its revenue, with a financial contribution about NTD 131.764 billion¹. The total investment in research and development is NTD 10.717 billion.

It is reported that ICT (Information Communication Technology) electronic end products help to save global energy by 3,900 billion kwh in 2030 in Taiwan Semiconductor supports sustainable development in 2024 latest published by Industrial Technology Research Institue, and the contribution rate from semiconductor in global electronic end products for energy saving is 28.4%, considering the ratio of revenue from energy-efficient products² in UMC in 2023 to output value in global semiconductor³ is 0.82%, it is estimatd to save 9.03 billion kwh, which is equivalent to 4.46 million ton CO₂ emission⁴.

1. The 2023 revenue in UMC is TWD 171.79 billion.
2. It is calculated according to the exchange rate of 30.6821 TWD/USD on December 31, 2023, announced by central bank.
3. It is announced that the output value of global semiconductor is USD 52.68 billion by Semiconductor Industry Association in February in 2024.
4. Carbon emission factor is considered as 0.494 kg/CO₂e

[email protected]

Download

Lastest Sustainability Report