Excellence Optoelectronics Co., Ltd.(EOI) TCFD report

Foreword

According to the 2024 Global Risks Report , "failure to mitigate climate change" and "failure to adapt to climate change" rank among the one or two most likely risks in the world within ten years . The report also points out that climate and environmental risks will increase in the next five to ten years. As the world's most serious threat, the climate crisis has become a major challenge facing global sustainable development. Therefore, it is urgent to identify climate change risks early, strengthen climate resilience adjustments, and reduce the operational impacts and impacts that climate change may bring . EOI Optoelectronics conducts indicator comparisons in accordance with the Task Force on Climate-Related Financial Disclosures (TCFD ) to identify risks and opportunities related to climate change.

About this report

Report scope

The information disclosed in this report covers the period from January 1, 2024 to December 31 , 2024 ; the report scope is set to the Taiwan headquarters of EOI Ltd., and does not include other subsidiaries, operating bases and other companies in the consolidated financial report. investment company.

writing principles

This report follows the Financial Stability Board (FSB)’s “Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)” framework, which is based on governance, strategy, Written on the core elements of Risk Management and Metrics and Targets.

TCFD

governance

Climate Governance Architecture

Upgrade the Audit and Risk Management Committee and the Corporate Governance and Sustainability Committee from functional committees under the Board of Directors to board-level entities. This enhances the Group’s ability to effectively manage climate change and integrate climate risk and opportunity governance into business operations and asset management. The Audit and Risk Management Committee serves as the highest supervisory body for risk management within the Group, with the President acting as the Chief Risk Officer. Department heads and business representatives serve as risk management personnel, forming specialized Risk Response Teams for different events. The President’s Office, Finance Department, and Plant Affairs Department are responsible for climate change risk prevention and response management. They review potential risks related to their respective areas and update the Potential Risk Identification Table and Risk Distribution Analysis accordingly.

Risk Management

Integrate climate risk into overall risk management policy

Incorporate corporate ongoing operational risks, climate change and natural disasters into EOI Group's risk management policies, and regularly report risk management operations to the board of directors. Incorporate climate change risks into the EOI Sustainable Development Code of Practice.

Climate Change Risk/Opportunity Identification Process

Set physical risks, transformation risks and opportunity projects based on the climate-related risk and opportunity categories defined by TCFD, and conduct joint meetings with the general manager, heads of internal units and external consultants to evaluate and focus on the risks that will be encountered in the company's daily operations. Based on the climate change risks and future potential opportunities, the company's climate change management policy is formulated through corporate governance and sustainability committee meetings and attention to domestic and foreign regulatory trends.

Strategy

In the face of the increasingly serious climate change, which may cause potential risks and impacts on corporate operations, but at the same time, it may also create opportunities under climate change. According to the TCFD information disclosure recommendations, EOI discloses actual and potential climate-related information for business, organization and financial planning. Impact and formulate corresponding management policies:

Climate Change Risks And Management Approaches

Risk	Risk Category	Risk Project	Illustrate	Short, Medium and Long Term Identification	Potential Operational and Financial Impact(Description of Risk Impact)	Management Policy
Physical Risk	Immediateness - typhoon/heavy rainfall	Damage to operating equipment	Abnormal events caused by extreme weather conditions such as typhoons and heavy rainfall (such as flooding due to extreme rainfall, etc.) cause damage to EOI's operating buildings, operations and information equipment, and have a direct impact on the operating base.	long	Typhoons or heavy rainfall events may prevent employees from working or damage factory equipment, resulting in operational interruption or financial losses.	Formulate an emergency response plan for major natural disasters. After the disaster occurs, set up an emergency response team, set up faxes, contact numbers and related necessary equipment, designate 24-hour contact standby personnel, accept telephone and fax notifications, and respond immediately to emergencies. processing and post-disaster recovery.
		supply chain disruption	Due to the frequent occurrence of extreme weather events, the supply of raw materials and energy is unstable, which in turn interrupts the operation or production of EOI's supply plants. This has caused EOI's supply chain to be interrupted, resulting in the inability to produce or operational problems.	short	Extreme weather may cause delays in supplier shipments and logistics, leading to production interruptions and affecting subsequent shipments or breach of contract compensation.	1. Each supplier has a mechanism to prepare its own large water storage equipment and purchase water sources from outside to prevent supply chain interruptions. 2. With risk diversification as the core, when developing new suppliers, it is important to consider having production lines in different regions. In the event of a major climate event, the same materials can be supplied by different factories. 3. A small number of material supply chains in China have occasional power outages, resulting in delivery delays, and overtime work is required to compensate for working hours. 4. The factory area is equipped with automatic sprinkler systems and water storage systems. Flooding, drought, strong winds and other abnormalities can easily cause power interruptions. The park is equipped with two sets of power supply systems. 5. Conduct regular supplier evaluations. 6. The Taiwan factory currently has a local procurement ratio of > 80% and continues to increase the local procurement ratio.
	Long Term - Climate Change Impacts	Shortage of raw materials and water shortage	Long-term climate change has led to drastic changes in the global environment, such as droughts and water shortages, which in turn have led to shortages in the supply of raw materials. In turn, EOI cannot operate normally due to the shortage of raw materials.	long	Various PCB supply chains require a large amount of water due to their manufacturing process characteristics, and have experienced drought and water shortage problems.
Transformation Risk	Policies and regulations	Carbon Fee/Energy Tax	Government policies are in line with the carbon neutrality goal of the 2050 Paris Agreement. Therefore, greenhouse gas reduction requirements, energy conservation and power consumption policies or regulations have become stricter, which may increase operating costs, such as rising electricity bills or the imposition of carbon fees, carbon taxes and other costs in the future.	middle	In the future, you may have to pay carbon fees in Taiwan, and you will have to pay carbon taxes when exporting to Europe and the United States, which will lead to an increase in operating costs.	Import ISO14064 and set an annual carbon reduction target (1 % ).
		cap/trade	In the future, the climate change response law will enter the mandatory reduction stage, and total greenhouse gas control and emission trading will be implemented. For EOI, costs may increase in the future due to total emission control or the need to purchase carbon rights.	middle	In addition to the increased cost of purchasing carbon rights, under the cap control, carbon reduction will also become one of the primary goals of operations.	1. Packaging design is minimal. 2. Set up local factory for production.
	technical risk	Demand for low-carbon products and services	Regulations in Taiwan and other countries have increasingly stringent low-carbon requirements for products. Companies must carefully manage product carbon emissions, energy and water consumption in the production process, or air pollution control.	middle	In order to meet the low-carbon demand, resources need to be invested to reduce energy consumption, improve production efficiency or product performance, which will increase operating costs.	1. In the ESG meeting, relevant departments were joined to discuss reducing electronic material waste , optimizing power efficiency, and selecting environmentally friendly electronic materials in circuit design . 2. The materials are made of electronic components that are more resistant to high temperatures; the design incorporates temperature detection control components and introduces a current de-rating mechanism; dynamic voltage adjustment reduces IC load. 3. New manufacturers of production materials must provide a green product guarantee letter when logging in.
	market risk	Changing consumer behavior and preferences	market risk Changing consumer behavior and preferences Customers prefer to produce more energy-saving and low-carbon products to cater to consumer preferences and require supply chains to reduce product carbon footprints. middle In response to customer needs, green product design may be developed, which requires a large amount of resources and costs to be invested in the process.	middle	In response to customer needs, green product design may be developed, which requires a large amount of resources and costs to be invested in the process.
	Reputation risk	climate change	Customers' impressions of whether EOI is committed to low-carbon transformation and concerned about climate change may indirectly affect the company's goodwill and earnings; and if the company fails to actively engage in climate change issues of concern to stakeholders, it may affect the company's image and Credibility.	middle	Unmanaged climate risks may affect stakeholders’ assessment of the company and may also reduce investors’ willingness to invest.	Introduce TCFD to implement climate governance and disclosure.

Opportunity Category	Opportunity Project	Illustrate	Short, Medium and Long Term Identification	Potential Operational and Financial Impact	Management Policy
Resource Usage Efficiency	Green process; environmentally friendly manufacturing	Following the trend of environmental protection and energy conservation, EOI will introduce environmentally friendly technologies, technologies and equipment into EOI's processes and production lines to reduce the use of electricity, water resources, etc. Through energy-saving measures, the company's energy costs can be reduced.	short	Products comply with energy-saving regulations, meet power-saving features and reduce overall production costs, enhance customers ' willingness to cooperate and create revenue growth.	1. Import ISO14064. 2. Develop high-efficiency LED street lights, optimize design to reduce material usage, use recyclable materials, reduce packaging waste during the production process, and increase freight loading and transportation volume.
Energy Source	Build renewable energy	In the future, the revision of relevant laws and regulations on renewable energy, as well as the development of low-carbon energy construction, purchase of green electricity, related certificates or the construction of solar panels for power generation, etc.	middle	Using green energy reduces carbon fees and product carbon footprints, reduces production costs and increases customers' willingness to cooperate.	Pay attention to developments related to renewable energy and continuously evaluate whether the company needs to purchase it.
Product and Service	Low carbon products	Develop low-carbon, environmentally friendly, and long-lasting products to increase competitiveness.	short	In order to meet the needs of carbon reduction and environmental protection, resources need to be invested in design and development in the early stage, but this may make EOI's products more competitive.	1. Establish soft and firmware capabilities to increase product life. 2. New products are introduced into functional safety systems to ensure the superior quality of product development. 3. Through intelligent design control, the electrical efficiency of car lighting modules is improved and power consumption is reduced.
Market	Develop in line with consumer preferences	In line with market ESG trends, we launch LED products that are more environmentally friendly, energy-saving and have long product life.	short	Developing more energy-saving and longer-lasting products in response to market and customer needs will involve a certain amount of research and development costs, but it may also attract more customers and increase revenue.
Toughness	Build business resilience	Establish disaster prevention mechanisms and mechanisms related to the introduction of climate change risk management to build a more resilient EOI.	middle	Building a disaster prevention mechanism or investing in a prevention mechanism will increase short-term costs, but in the long run, it will make the company more operationally resilient.	1. Introduce TCFD to implement climate governance and disclosure. 2. Set guidelines for managing climate risks and opportunities.

Excellence Optoelectronics Headquarters Location

project	The potential cost of carbon fees	Potential Costs of Cap Control
Scenario Hypothesis Description	1. Carbon emissions scenario: using IEA Stated Policies Scenario (STEPS), Announced Pledges Scenario (APS) and Net Zero Emissions by 2050 Scenario (NZE) scenarios as future carbon emission estimates. 2. Carbon fee level scenario: Use the Taiwan Ministry of Environment, Greenpeace, EU ETS , NGFS NDC , and NGFS 2050 Net Zero models as estimates of future carbon prices. 3. Model estimation period: 2024 to 2050 .	1. Carbon reduction path setting: EOI assumes a reduction target of 1% (EOI's current target) and 4.2% (SBTi specification) each year. 2. Total control quota amount: Assume that the country starts to implement total control in 2030 , and assume that 50% of the carbon emissions of EOI under the STEPS scenario is EOIs' carbon emission verification quota, and that net zero carbon emissions will be achieved in 2050. Analysis basis. 3. Penalty for emissions exceeding the quota: If the greenhouse gas emissions exceed the total limit and cannot be purchased in the emissions trading market, a fine of NT$3,000 per ton will be imposed. 4. Model estimation period: 2022 to 2050 .
potential financial impact	Take N GFS Taking the NDC model as an example, the carbon fee cost estimate is as follows: Unit: Thousands of New Taiwan Dollars STEPS APS NZE 2030 9,050 7,550 601 2050 28,340 10,950 - 1. Under the STEPS scenario , the carbon fee cost in 2030 is estimated to be NT $ 9,050,000 (accounting for approximately 0.20 % of 2023 revenue ); the carbon fee cost in 2050 is estimated to be NT$ 28,340 Thousand yuan (accounting for approximately 0.65 % of 2023 revenue ) 2. the APS scenario , the carbon fee cost in 2030 is estimated to be NT$ 7,550,000 ( accounting for approximately 0.17% of 2023 revenue ); the carbon fee cost in 2050 is estimated to be NT$ 7,550,000 (accounting for approximately 0.17 % of 2023 revenue) ; 10,950 thousand yuan (accounting for approximately 0.25 % of 2023 revenue ) 3. the NZE scenario, the carbon fee cost in 2030 is estimated to be NT$ 601,000 ( accounting for approximately 0.013 % of 2023 revenue ); net zero emissions will be achieved in 2050 , with no carbon fee-related costs .	Calculated based on reductions of 1 % and 4.2% respectively , the total control cost is estimated as follows: Unit: Thousands of New Taiwan Dollars 1% 4.2% 2030 7,970 12,850 2050 3,390 - 1. In 2030 , if a 1 % annual reduction is used as the target, the expected total control cost will be approximately NT$7,970,000 ( accounting for approximately 0.18 % of 2023 revenue ); With an annual reduction of 4.2% as the target, the expected total control cost is approximately NT$ 3,390,000 (accounting for approximately 0.07 % of 2023 revenue ). 2. In 2050 , if the annual 4.2% reduction is set as the target, the expected total control cost will be approximately NT$ 12,850,000 ( accounting for approximately 0.29 % of 2023 revenue ); if the annual A reduction of 4.2% is set as the target. Since net-zero emissions have been achieved in 2050 , there are no costs related to total volume control.

short term	The energy saving rate is 1%, which meets the 1% annual energy saving requirement of the Energy Bureau. Reduce carbon emissions by 1% by 2024. The amount of packaging materials is reduced by 3%. Materials that are harmful to the environment are prohibited. The circuit conversion efficiency reaches 80%. PCBs combined design to reduce waste. Increase the operating margin of parts by 15% and extend the service life.
mid term	Reduce the waste of resources in the overall supply chain, reduce carbon, improve environmental protection and reuse resources. Using MCU can adjust the current to extend the electronic life. Streamline product architecture and integrate heterogeneous high-end packaging technologies.
long	Plan the development of solar warning systems, smart solar sign systems, solar street light systems, etc. that integrate self-generated power and signal lights and street light systems. Towards system integration of existing products, self-generated power systems and remote platform management.

Four Aspects	Suggested Disclosure Items	page number
Governance	1. Describe the board’s oversight of climate-related risks and opportunities. 2. Describe management’s role in assessing and managing climate-related risks and opportunities.	02
Risk Management	3. Describe the organization's process for identifying and assessing climate-related risks. 4. Describe the organization's processes for managing climate-related risks. 5. Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organization's overall risk management system.	03
Strategy	6. Describe the climate-related risks and opportunities identified by the organization in the short, medium and long term. 7. Describe the impact of climate-related risks and opportunities on the organization's business, strategic and financial planning. 8. Describe the organization's strategic resilience and consider different climate-related scenarios (including 2˚C or more severe scenarios).	04-10
Metrics and Targets	9. Expose the metrics used by the organization to assess climate-related risks and opportunities as part of its strategy and risk management processes. 10. Disclose Scope 1, Scope 2 and Scope 3 (if applicable) greenhouse gas emissions and related risks. 11. Describe the objectives used by the organization to manage climate-related risks and opportunities, and its performance against these objectives.	11