Climate Change Risk and Opportunity Management

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Climate Change Risk and Opportunity Assessment

Climate Change Risk and Opportunity Matrix

Aspect of Risk: Transition

Policy and Legal Regulations: Imposing of carbon tax/fee
Description of Scenario	Singapore imposes carbon tax and increases fee rates. Taiwan imposes carbon tax/fee, assuming that the rate is calculated according to the first-stage rate in Singapore.
Potential Financial Impacts	The annual operating cost of the Singapore fab will increase, and it is estimated that it will not exceed NT$40 million. The annual operating cost of the Taiwan fabs will increase, and it is estimated that it will not exceed NT$200 million.
UMC’s Response	Build UMC’s own solar power generation facilities. Promote energy-saving plans and greenhouse gas reduction plans.

Policy and Legal Regulations: Green energy policies increase the company’s investment pressures
Description of Scenario	Regulations require expanded installation of renewable energy in Taiwan, or pay a monetary substitution.
Potential Financial Impacts	The annual operating cost of the Taiwan fabs will increase, and it is estimated that it will not exceed NT$200 million.
UMC’s Response	Expand Company’s own renewable energy installations and energy storage facilities, or purchase renewable energy certificates

Policy and Legal Regulations: Green energy policies cause risk of power instability or shortage
Description of Scenario	Impacts from voltage drops include reduced revenue and increased costs
Potential Financial Impacts	Estimated annual financial impact is less than NT$50 million
UMC’s Response	Evaluate installing additional generators

Policy and Legal Regulations: Water surcharges imposed
Description of Scenario	Taiwan imposes water surcharge, assuming a rate of NT$3/ton is used as the basis for estimation
Potential Financial Impacts	Annual operating costs is estimated to increase by no more than NT$40 million
UMC’s Response	Improve the production efficiency of manufacturing process, reduce water consumption, and increase water recovery rate

Policy and Legal Regulations: Customers’ green energy requirements
Description of Scenario	Green electricity must be purchased due to the requirement of the customer, assuming that 1% of green power is needed
Potential Financial Impacts	Annual electricity cost is estimated to increase by about NT$40 million
UMC’s Response	Increase the installation of UMC’s own renewable energy power generation facilities Obtain renewable energy through renewable energy power purchase agreements Purchase of renewable energy certificates

Aspect of Risk: Physical

Short-Term
Potential Risk	Increases in intensity and frequency of typhoons, storms, and natural disasters result in employee inability to go to work, damage to fab facilities, and interruption of energy/resource supplies Changes in water quality due to changes in water sources
UMC’s Response	Conduct flood potential and risk improvement assessment Promote enterprise continuous operation management system Globalize factories and supply chains Supplier water risk assessments Conduct water quality risk assessment

Long-Term
Potential Risk	Rising sea levels from global warming unfortunately cause inland flooding, resulting in reduced clean water sources, water shortages, and abnormalities and damages to important fab infrastructures
UMC’s Response	Expand water recovery and reuse to reduce pressure on water demand Use limited water resources efficiently Evaluate the introduction of new water sources R&D for water resource early warning tools Include fab location within considerations for future site selection Establish water status contingency plan

Aspect of Risk: Physical

Long-Term: Water shortage affects water supply
Description of Scenario	Daily deduction in tap water supply increases operating costs
Potential Financial Impacts	If the supply is reduced within 20%, it is estimated that the daily impact will be about NT$3 million
UMC’s Response	Contract water tanker and private water sources to make up for water shortages Storage tanks have already been installed in all fabs to improve water storage control flexibility Continue to pay attention to and monitor the government's capacity to strengthen cross-regional dispatching of water resources

Long-Term: Increased loading for air conditioning caused by global warming
Description of Scenario	According to the RCP8.5 scenario, the global mean surface temperature will rise by 0.9-1.7°C by 2040. As temperatures rise before 2040, HVAC power consumption will increase by 4.7%-9.0%.
Potential Financial Impacts	Estimated annual impact is about NT$110 million.
UMC’s Response	Introduce green-building design: 1. Implement energy-saving measures for building enclosures and air-conditioning systems to reduce building temperatures 2. Grow plants to increase greenery and reduce urban heat island effects

Aspect of Risk: Transition

Technology/Markets
Potential Risk	Commitment to new technology investment Stakeholders such as consumers, customers, investors, etc. demand that enterprises provide green products and exert their influence in the supply chain to indirectly eliminate energy/water-consuming products
UMC’s Response	Promote product environmental impact life cycle analysis and certification and carry out source reduction. UMC has already obtained carbon footprint and water footprint certifications, and continues to promote greenhouse gas reduction, energy saving, and water saving projects.

Reputation
Potential Risk	Customer preferences change Bad reputation causes negative feedback
UMC’s Response	Continue to develop technologies that can reduce chip power consumption, and develop a variety of energy management chips. Study the latest market trends.

First Climate-related Opportunities

Product/ Service
Increasing demand for low carbon product
UMC’s Response	Continue to develop technologies related to customer and market demand. For example, the 22uLP technology has been developed to provide better low-power-consumption and power management performance. It is estimated that the compound annual growth rate from 2020 to 2023 will be up to three digits.

Secondary Climate-related Opportunities

UMC also takes into account its core technology and human resources when seeking opportunities to enhance its operational competitiveness in terms of resource efficiency, energy sources, water resources, products/services, markets, and reputation.

Resource Efficiency

UMC’s Response

Respond to policies promoted by the government to reduce greenhouse gas emissions and improve overall equipment and fab operation efficiency.
Promote voluntary water saving plans every year, reduce water consumption and wastewater discharge, improve water use efficiency, and ensure water resource stability.
Due to effective water resources management, monitoring and contingency plans, UMC's tolerance to extreme rainfall and drought is higher than that of other enterprises.

Energy Source
UMC’s Response	In addition to increases in renewable energy investment, UMC has also changed the company's articles of association to include energy technology services and energy/resource conservation technology-related consulting services, etc. Install solar power systems and apply for renewable energy certification.

Water Resources
UMC’s Response	Develop and apply diversified water sources; in addition to increasing water recovery and reuse in each fab, UMC also includes rainwater, condensate water, and reclaimed water as water sources. Water management plans and diversified water sources will reduce UMC’s risk in water-stressed areas.

Product/Service/Market/Business reputation

UMC’s Response

Implement ISO 22301 BCM to improve organizational resilience, reducing physical impacts from climate change and risks of customer supply chain disruption.
Obtain energy-saving, high-efficiency, low-carbon-related patents.
Provide technical and consulting services, and collaborate with governmental units and partners from the same or other industries to improve community relations.
UMC serves as an association representative in communicating with governmental units, and offers advice on water resource management. UMC also organizes water-saving activities for manufacturers in the Science Park, serving as a committee member to provide consulting services for the industry.
Collaborate with suppliers to promote the "Triple R League" program and engage in exchange on water, energy and resource recovery, reuse and reduction.
UMC’s Energy Saving Service Team supplies schools, social welfare organizations and other community groups with technical consultations and engineering improvement services for water savings and sanitation, thus enhancing the corporate social image.
Collaborate with suppliers to promote the Triple R League program, the Energy Saving Service Team, and the Eco Echo Award initiative; carry out water, energy and resource recovery, reuse and reduction; promote greenhouse gas reduction and ecological conservation work; and participate in external advocacy activities initiated by industry and social associations. All　of these are done with the intention that, by providing practical experience and advice on actual implementation, UMC will facilitate government and related organizations to formulate good and feasible policies and regulations.

csr@umc.com

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