Climate Change

In order to systematically respond to climate change risks and prevent financial losses, FEDS has been following the framework outlined in the “Task Force on Climate Related Financial Disclosures (TCFD)” guidelines since 2019 to disclose climate change related information. In 2022, FEDS further referred to the Taiwan Stock Exchange Corporation Rules Governing the Preparation and Filing of Sustainability Reports by TWSE/TPEx Listed Companies to assist us in more accurately evaluating the transformation and physical risk opportunities that climate change may face for business operations, and further formulate management policies and preventive measures to actively respond to positive and negative impacts, enhance the company’s climate resilience, and move towards sustainable operation.

Greenhouse Gas Inventory and Climate Change Response Team

In order to improve the ability to respond to climate change and foster the climate risk awareness among corporate members, FEDS has incorporated climate risk issues into the corporate culture from top to bottom to strengthen corporate resilience. In order to enhance the resilience and responsiveness of enterprises to climate change, and cultivate the climate risk awareness of enterprise members, FEDS completed five education and training courses related to sustainable themes, including “Climate Related Financial Disclosure” and the “Preliminary Exploration of IFRS Sustainable Disclosure Standards” etc., in 2023. A total of 182 participants participated, with a total training time of 362 hours.

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Governance

FEDS has established the Greenhouse Gas Inventory and Climate Change Response Group (hereinafter referred to as the “Climate Change Response Group”) to regularly identify climate related shocks, evaluate climate change risks and opportunities, and propose measures to respond to climate shocks. The climate governance structure of FEDS is supervised by the board of directors as the highest supervisory unit. Since 2022, it has reported to the board of directors quarterly on the implementation results of sustainable development projects such as GHG inventory and assurance, climate risk assessment, etc. The board of directors reviewed the content and direction of sustainable work, provided timely suggestions, and supervised the management team to make appropriate adjustments. A total of four reports were conducted in 2023.

Strategy

In order to incorporate the potential impacts of climate change into the overall risk management assessment of enterprises, FEDS refers to the development trend of climate change, estimates the opportunities for risk occurrence and the degree of impact on the department store industry, formulates risk response and mitigation measures and plans, and simulates the possible financial impacts in the future through scenarios. FEDS integrates and manages factors that may affect operations, formulates specific short-term, medium-term and long-term goals, and comprehensively reduces the impact of climate change related risks and opportunities on the Company.

Climate Scenario Assessment

With reference to the official TCFD risk list and other relevant information, FEDS evaluates various climate risk and opportunity issues by the Climate Change Response Group. Finally, 12 key climate risk projects were identified. Based on the RCP 8.5 climate scenario, the impact of possible climate disasters was evaluated. Public climate models and chart websites such as the Taiwan Climate Change Prediction Information and Adaptation Knowledge Platform (TCCIP) and the 3D Disaster Potential Map were used to analyze possible physical climate disasters and evaluate the potential impact as FEDS faces the most extreme climate.

Physical Scenario

IPCC RCP climate scenario types and related indicators adopted by FEDS

  • Estimated scenario: RCP 8.5
  • Estimated period: Mid-century (2050)
  • Climate-related data indicators:
    • Variation in rainfall: The variation in the daily maximum rainfall in Taiwan is estimated to be about -4.8% to 41.7%, and the actual rainfall is about 209.6mm to 283.4mm.
    • Variation in temperature: The annual average temperature in Taiwan increases by about 0.9°C to 2.2°C, and the annual average temperature is expected to reach 21°C to 22.3°C.

In terms of rainfall, based on the RCP 8.5 climate scenario assumptions, the maximum daily rainfall in Taiwan will increase up to 283.4mm. According to the definition of rainfall classification set by the Central Weather Bureau on March 1, 2020, The 24-hour cumulative rainfall of more than 200mm is considered torrential rain, which may cause local flooding or deluge. Taking the area where the head office of FEDS is located as an example, after analysis, it is found that there is no flooding in the location of the head office or the surrounding areas under the scenario of 200mm rainfall in 24 hours. However, under the scenario of 350mm rainfall in 24 hours, there may be about 0.5 to 1.0 meters of water accumulation in the surrounding areas, which may cause obstruction to the transportation of people and goods in terms of physical climate risk. It is necessary to pay close attention to climate-related information for early prevention.

In terms of annual average temperature in Taiwan, where FEDS’s head office and its branches may encounter the risk of temperature increase by 2°C under the RCP 8.5 scenario, and the temperature may reach 21°C to 22.3°C, which may result in the increase in air-conditioning electricity expense, the infrastructure costs and the preservation costs for some products.

Energy Transition Scenario
FEDS conducts a scenario analysis in response to international and domestic regulations to estimate the financial impact of future electricity costs.

With a target to reduce greenhouse gas emissions by 50% for business as usual (BAU) by 2030, if Taiwan’s renewable energy proportion increases from 5.6% in 2019 to the planned 40% in 2030 set by the national energy policy, the electricity unit price of Taiwan Power Company will rise due to the higher cost of renewable energy in Taiwan. Using NT$2.63 per kWh in 2019 as the baseline, the estimated electricity price for 2030 is projected to increase to NT$3.88 per kWh. Consequently, the procurement cost of electricity for FEDS will also increase. As a result, FEDS will continue to implement various energy-saving measures to reduce the impact of electricity consumption.

Identification and Assessment of Climate-Related Risks and Opportunities

FEDS identified 7 climate risk issues and 5 climate opportunity issues through situational analysis, and ranked them based on the degree of impact and likelihood of occurrence for stakeholders. The impact was divided into 3 levels: low, medium, and high, and the likelihood of occurrence was divided into 3 levels: unlikely, possibly, and very likely to evaluate the impact and influence of risks and opportunities.

Matrix of Climate-Related Risks and Opportunities

List of Climate-Related Risks and Opportunities

Based on the results of comprehensive analysis, FEDS finally selected 4 major risk and opportunity issues, including renewable energy and carbon reduction related laws and regulations, abnormal weather events such as extreme rainstorm etc., resource usage efficiency, and energy sources. To strengthen the Company’s climate resilience, appropriate management strategies and response measures are proposed as follows:

Climate-Related Risks and Financial Impacts

Policies and Regulations
Regularly check the compatibility of climate change related regulations every year. For high-risk regulations, FEDS includes them in the evaluation of the climate change response group. If identified as a potential risk, the risk will be managed as a key performance indicator for each quarter.


Risk Description

  • The Renewable Energy Development Act may lower the threshold for large electricity users and increase the renewable energy obligation capacity.
  • The Financial Supervisory Commission requires annual greenhouse gas inventory and verification, with disclosure in the annual report.

Potential Financial Impacts

  • Increased renewable energy obligation capacity, and increased purchase of green energy certificates results in higher operating costs.
  • Implementing greenhouse gas inventory and verification activities incurs additional costs for inspection and verification paid to the agencies.

Response Actions

  • FEDS introduces management tools to reduce energy consumption and energy consumption costs, with EUI as the energy management indicator, tracked and controlled by the energy conservation team on a weekly basis.
  • Allocate budget to purchase green energy certificates; increase sustainable peripheral services.
Immediate Physical Risk • Natural Disasters and Damages

Risk Description

  • Due to climate disasters, stores are unable to operate, mountains and rocks collapse, roads are obstructed, personnel cannot attend work, and logistics cannot reach.

  • Damage to buildings, equipment, and injuries to employees or customers due to weather-related disasters.

Potential Financial Impacts

  • The inability of personnel and logistics to reach the stores will lead to a shortage of manpower and insufficient supply of goods, affecting a decrease in revenue.
  • Damage to buildings and equipment leads to a deterioration of the shopping mall environment, a decrease in visitor numbers, and an increase in repair costs, resulting in a loss of revenue.

Response Actions

  • Transfer of risk through insurance.
  • Implement disaster prevention education and training, and strengthen guidance on escape routes.

Climate-Related Opportunities and Financial Impacts

Resource Efficiency - Green Stores

Potential Financial Impacts

  • Adopting green buildings and materials through the hardware facilities of the outlets, and reduce overall operating costs.
  • Implement relevant pollutant disposal methods to enhance the overall organizational environment and enhance customer perception.

Response Actions

  • Integrate the concept of green architecture into department stores, include it in the exhibition plan, and obtain the green building logo.
  • Invest in adopting trees on sidewalks and green areas around the department stores.
Resource Efficiency - Green Intelligence

Potential Financial Impacts

  • Paperless management to reduce paper consumption.
  • Improve the efficiency of property management and implement personnel in-place inspections.

Response Actions

  • All branches in Taiwan has introduced paperless action management, which includes two categories: “inspection APP” and “property management APP”.
  • Continuously seek the feasibility of using APP business management and move towards comprehensive active management.
Resource Efficiency - Green Procurement

Potential Financial Impacts

  • Reduce the impact of purchasing goods on the environment and reduce the carbon footprint of enterprises.

Response Actions

  • Green procurement accounted for 100%.
Energy Sources - Green Energy

Potential Financial Impacts

  • By adopting renewable energy, related energy-saving equipment, and introducing energy management systems at the base, the efficiency of related energy equipment can be improved. Green buildings and materials are used for related hardware facilities, and overall operating costs can be reduced.

Response Actions

  • Launched 29 energy-saving projects and saved 2.13 million kWh of electricity.
  • Complete green energy plan and build 4 solar-powered electricity generating systems.

Risk Management

In order to identify and assess significant impacts or risks related to climate change on its operations, FEDS has established the Climate Change Response Team as a dedicated unit. This team holds regular meetings and conducts questionnaire surveys to evaluate climate change risks, aiming to understand specific potential financial implications. They are also responsible for developing climate risk management actions and goals to mitigate the impacts of climate risks. Furthermore, they establish comprehensive climate management procedures and review climate change response measures on a regular basis.

To ensure that the Board of Directors has a comprehensive understanding of the Company’s climate risks, and to monitor the implementation of risk management and response measures, the Climate Change Response Team reports to the Board of Directors on a quarterly basis regarding greenhouse gas inventories, risk assessments, and relevant response measures.

Indicators and Goals

In order to achieve the net zero emissions target by 2050, FEDS has set four directions of “energy conservation, carbon reduction, green energy, and waste reduction”, and proposed seven green action plans to respond to environmental impacts caused by operational processes through practical actions. Energy conservation and carbon reduction are considered the primary task, with a short-term goal of reducing carbon emissions by 1% annually and a medium to long-term goal of reducing carbon emissions by 30% by 2030, gradually reducing energy intensity and reducing energy resource consumption.

2025

Carbon Reduction Goal

  • 1% carbon reduction per year.

Development Goal

  • Promote carbon reduction courses to enhance colleagues’ awareness
  • Improve emission hot-spots through greenhouse gas inventory
2030

Carbon Reduction Goal

  • 30% reduction in carbon emissions.

Development Goal

  • Continue to obtain the Green Building Label
  • Install solar panels
  • Establish an internal carbon pricing mechanism
2050

Carbon Reduction goal

  • 100% reduction in carbon emissions

Development Goal

  • Invest in carbon reduction technologies