Climate Governance Framework

Climate Governance Framework and Identification of Short-, Medium-, and Long-Term Climate-Related Risks and Opportunities

The company identifies short-, medium-, and long-term climate-related risks and opportunities, as well as their impacts and response measures on the company’s business model, strategy, and financial planning.

To address the operational impacts of climate change, in May 2020 the company passed the Risk Management Policy, incorporating extreme climate change into the category of environmental risks. Risk assessment factors, evaluation results of the concrete impacts on the company, and corresponding response measures are reported to the Board of Directors annually, ensuring that the Board understands both the effects of climate change on the company and the mitigation actions taken. On November 1, 2024, the company reported to the Board of Directors on short-, medium-, and long-term climate-related risks and opportunities, including their impacts on the company’s business model, strategy, and financial planning, as well as related countermeasures.

Potential Short-Term and Medium-/Long-Term Risks and Opportunities from Climate Change, and Corresponding Response Measures

Risk Category	Climate-Related Issues	Short-Term Risks	Medium-/Long-Term Risks	Risk Assessment of Business Impacts	Opportunities Identified	Response Mechanism
Transition Risks	Impact of voluntary initiatives (SBTi).	Voluntary commitments to SBTi and uncertainty in market signals.	1. Medium-Term: Strengthened emission reporting obligations, costs of transitioning to a low-carbon economy, changes in customer behavior, increased stakeholder concerns and negative feedback, as well as rising requirements and regulations for products and services. 2. Long-Term: Increased costs of greenhouse gas emissions (cap-and-trade systems, carbon taxes, energy taxes, etc.).	To address risks related to changes in compliance requirements and green standards, the company has begun responding to relevant international regulations. The goal is to align with international standards and gradually meet commitments, while mitigating risks associated with renewable energy costs.	1. Adoption of low-emission energy and equipment. 2. Expansion of low-carbon product and service development.	1. The company has started to understand and respond to relevant international standards, such as voluntary initiatives (SBTi commitments, i.e., the Science Based Targets initiative) and the increasing costs of greenhouse gas emissions (cap-and-trade, carbon taxes, energy taxes, etc.). The company monitors regulatory changes and formulates corresponding measures. The estimated costs arising from such measures are regularly reported to the Board of Directors. 2. In terms of green product design, the company actively invests in research and development, building a portfolio of high energy-conversion efficiency and low-carbon products to help customers reduce costs and improve efficiency.
Environmental Risks	Impact of Extreme Climate Events on Production and Operations	1. Typhoons, heavy rainfall, and strong winds may cause power outages to chiller systems, damage to facilities, and water tower malfunctions. 2. Flooding may lead to supplier shutdowns or transportation disruptions, affecting product deliveries.	1. Increasing frequency of extreme weather events. 2. Climate change affecting supply and delivery risks.	1. In the event of power outages or equipment damage, protective measures and emergency drills have been implemented, with regular maintenance and servicing conducted on a routine basis. 2. The company has established 2–3 equivalent alternative material sources and supplier arrangements across different regions to reduce supply disruptions, along with scheduling and phased delivery planning.	Replacement of outdated equipment in line with local incentive programs, applying for subsidies and energy-saving grants	1. To address changes caused by external force majeure factors, rolling reviews and adjustments are conducted for internal response measures, including replacement of outdated equipment, inventory preparation, and production line scheduling. 2. Each plant regularly conducts disaster-prevention training, establishes emergency response teams, and prepares disaster recovery plans to ensure business continuity in case of operational disruptions caused by disasters. 3. Insurance is purchased for company-owned assets to mitigate potential losses from extreme climate events. Risk is transferred and losses compensated through insurance. For example, in 2023, Yangzhou plant was impacted by a rainstorm and strong winds; due to effective emergency preparedness, facility damage was minor (approx. RMB 80,000), with partial compensation covered by insurance. 4. Establish a supply chain backup management mechanism.
	Reduction of carbon emissions Exhaust gas management Water management	1. Implementation of China’s dual-control energy policy to curb carbon emissions, leading to production line shutdowns or supply disruptions. 2. Excessive power consumption and management issues caused by outdated equipment. 3. Use of organic solvents such as acetone and isopropanol in the production process generates volatile organic compounds (VOCs) during wiping and cleaning, requiring appropriate supervision and control of organic content.	1. Increased investment risks in high-carbon assets. 2. Rising costs of greenhouse gas emissions. 3. With global climate change, water supply stabilization has become a challenge faced by many countries.	1. Under the impact of China’s dual-control energy policy, related supply and delivery have been affected. 2. Greenhouse gas reduction: Since 2023, the company has conducted greenhouse gas monitoring and inventories, using 2023 as the baseline year. The carbon intensity reduction target is to decrease by 2% by 2025 compared to 2023. 3. VOC emissions exceeding the threshold (one metric ton per quarter) are subject to air pollution fees, which are currently well controlled. 4. Water management: In response to sustainable development planning and global water resource scarcity, the company set 2023 as the baseline year, aiming to reduce water consumption intensity by 1.5% by 2025.	Replacement of air compressors and high-energy-consuming machinery, with technical upgrades and improvements, combined with local subsidy applications. In addition to saving energy and reducing costs, this also enhances production efficiency and effectiveness.	1. Adoption of green energy and green procurement to achieve the goal of becoming a low-carbon enterprise. 2. The Taiwan headquarters plant and office building is certified as a new Silver-level Green Building with seismic resistance, equipped with a total heat exchanger and CO2 outdoor air control system. The basement is fitted with a rainwater and condensate water recovery system, which supplies irrigation water for the building’s landscaping, conserving water resources, reducing environmental impact, and improving energy efficiency. 3. In response to the implementation of China’s dual-control energy policy, the company has reviewed and replaced outdated machinery and air compressors, reducing power consumption and costs, cutting carbon emissions, and improving production efficiency and effectiveness.
	Low-carbon products and services	In response to the Paris Agreement, countries worldwide are actively reducing greenhouse gas emissions, dedicating efforts to the development and application of low-carbon products, and driving rapid and diversified product innovation.	1. In response to bans issued by the United States, Europe, and other countries prohibiting the sale of gasoline and diesel vehicles starting in 2030, the cost of transitioning to low-carbon technologies has significantly increased. 2. Imposition of carbon fees (e.g., carbon tariffs on imported products with high carbon content).	Increased Costs and Expenses	1. In response to ESG-related regulations and the push toward net-zero carbon emissions, various industries are gradually replacing products with LED-based, low-carbon, energy-saving, and intelligent alternatives, creating substantial business opportunities. 2. Supporting multiple low-carbon and environmentally friendly industries such as electric vehicles, bicycles, and street lighting, the company has accumulated extensive project experience, providing customers with energy-saving products. 3. Became a member of the MIH Alliance in 2021. 4. As an energy-saving, low-carbon, and green product, LEDs are being accelerated in their applications across energy-efficient lighting, electric vehicles, and the healthcare industry.	Actively promoting digitalized services and the development of low-carbon products externally, in 2024 the company obtained energy-saving labels and CNS Marks for multiple products, offering customers a wider range of high-quality green products.
	Acquisition of renewable energy (green energy) equipment	1. Saving electricity expenses 2. Stable power supply	Aligned with the national “2050 Net Zero Emissions” policy – Net Zero Transition Goals	Edison Opto and its subsidiary Edison - Litek Opto: Investment expenditures for the acquisition and replacement of green energy equipment. Subsidiary Yangzhou Edison Opto: Construction of distributed rooftop photovoltaic power generation equipment at the China plant. The supplier contract term is longer (20 years) with higher variability.	Reducing electricity expenses and carbon emissions. Construction of solar power generation equipment provides electricity for the company’s own plants, with surplus power sold back to the grid.	1. In 2024, Edison Opto replaced the chiller units on the 8th and 10th floors of the Zhonghe plant. 2. Total expenditure for the chiller units was NT$2,026,500 (tax included). The estimated annual savings in electricity costs for 2024 are approximately NT$279,000, with an estimated reduction of 45.62 metric tons of CO2e per year. 3. Edison Opto’s subsidiary, Edison Opto Yangzhou, collaborated with a local vendor in 2023 to build rooftop solar photovoltaic power generation equipment. By October 2024, it has saved a total of RMB 280,042 in electricity costs.