Sustainability
Since 2022, Welhunt has adopted the TCFD framework by the Financial Stability Board to guide disclosures on governance, strategy, risk management, and metrics. Engaging multiple departments, we rigorously assessed climate risks and opportunities, using the findings to set strategic goals and action plans for mitigation and adaptation. These efforts aim to enhance operational resilience and identify new business opportunities, and in May 2023, we became a TCFD supporter.
Governance
In 2023, with support from external climate risk consultants, the ESG Department led a cross-departmental reassessment of climate risks and opportunities, developing targeted response measures. In 2024, significant risks and opportunities were further quantified financially, with the Chairman and CFO overseeing impact identification, issue validation, and financial impact verification.
Strategy
We assessed and identified risks and opportunities that could significantly impact Welhunt’s operations based on three dimensions: the time of occurrence, the likelihood of occurrence, and the degree of impact. The table illustrates these findings, and we have formulated initial mitigation strategies accordingly.
Welhunt’s climate change-related risks and opportunities matrix
Figure
| Risk/Opportunity category | Item |
|---|---|
| Physical risk: Immediate | Growing seriousness of extreme weather incidents, including floods and typhoons |
| Physical risk: Long-term | Changes in precipitation trends and abrupt alterations in climate patterns |
| Transition risk: Policy/laws and regulations | Total emissions and carbon pricing mechanism |
| Transition risk: Policy/laws and regulations | Mandatory regulations for products and services |
| Transition risk: Markets | Changes in customer preferences |
| Transition risk: Reputation | Increased stakeholder concerns and negative feedback |
List of Welhunt’s material climate risks and opportunities
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Welhunt’s climate-related risks
| Risk | Description of risk | Timing of occurrence of impact | Description of impact on the Company | Potential financial impact | Countermeasures | |
|---|---|---|---|---|---|---|
| Transition risk | Changes in customer preferences. | Tighter regulations, clients’ transition to low-carbon options, and heightened environmental awareness among end-consumers will drive a market shift towards low-carbon energy products. This shift will lead to reduced demand for traditional energy, consequently impacting our revenues. | Long term | The rapid growth of renewable energy, the low-carbon transition, and stricter carbon pricing mechanisms will drive changes in the energy preferences of our clients. They will increasingly seek low-carbon alternatives, reducing their reliance on traditional energy, which will impact our revenue. Simultaneously, traditional energy suppliers are closing mines in response to stricter regulations, reducing our traditional energy sources and flexibility in supply scheduling. | The growing demand from customers for low-carbon products may impact the revenue of existing high-carbon products, such as traditional energy and steel. At the same time, to meet customer demand, entering the trade of new low-carbon energy products could lead to an increase in Welhunt’s operational costs. | We analyze our counterparties’ low-carbon transition strategies, assess the potential impact on our current operations, and explore research opportunities for new business opportunities. |
| Increased stakeholder concerns and negative feedback | The global reliance on fossil fuels means that climate change will not be mitigated in the short term. Concerns from stakeholders (such as banks, environmental groups, and governments) may damage the reputation of companies in the fossil fuel value chain and even negatively impact their financial performance. Some financial institutions and institutional investors have already announced plans to cease or withdraw investments and financing for high-carbon or highly polluting companies, such as mining firms, making it difficult for these companies to secure sufficient operating capital. | Medium term | While we do not directly produce or use fossil fuels, as an indirect trader, we can still be significantly impacted if stakeholders like clients, financial institutions, or government departments impose restrictions on products due to energy transition. For example, if financial institutions start demanding carbon reduction targets from high-carbon companies, reduce credit availability or withdraw funding, we and our clients could encounter financing challenges, affecting the scale and timeline of transactions. | If Welhunt fails to meet its climate goals or take proactive climate adaptation measures, this may negatively affect stakeholders’ (such as banks’) evaluations of the Company. As a result, Welhunt could face stricter borrowing conditions, leading to an increase in financing costs. | In addition to strengthening its own capital, Welhunt actively implements a diversified business strategy that extends beyond products. Simultaneously, the Company maintains communication and a positive relationship with banks, conveying balanced information. | |
2. Welhunt’s climate-related opportunities
| Opportunity | Description of risk | Timing of opportunity | Description of impact on the Company | Potential financial impact | Countermeasures |
|---|---|---|---|---|---|
| Development or broadening of low-carbon goods and services | The requirements of carbon reduction regulations and policies will bring changes to the current commodity market dominated by fossil fuels. Low-carbon energy-related commodities will become the new mainstream, presenting a blue ocean opportunity that many companies are actively investing in to gain a competitive edge. | Medium term | As Welhunt ventures into low-carbon product trading, it not only contributes to diversifying the Company’s revenue sources but also enhances stakeholders’ confidence in our operations, providing ongoing support in all aspects. | In addition to increasing revenue sources, diversification of traded products reduces the impact of economic cycles or major events on a single product, thereby enhancing operational stability. With the support of banks, Welhunt’s cost of capital is unlikely to increase, and the Company’s low-carbon transition efforts may even enable it to secure financing at lower costs. | 1. To augment non-traditional energy revenue, Welhunt is actively conducting research on energy transition-related commodities, including copper, lithium, cobalt, nickel, biofuels (such as wood pellets and sustainable aviation fuel), liquefied natural gas, renewable energy certificates, and carbon credits. This research aims to identify opportunities for entering the trade of these new products. 2. Welhunt is actively participating in carbon credit trading by engaging in both mandatory carbon market quota trading and voluntary carbon market transactions, thereby creating new sources of revenue. |
| Expansion into additional sectors | Climate change is causing environmental impacts, which in turn are creating opportunities in industries such as renewable energy, smart manufacturing, energy-efficient materials, and the circular economy. | Medium term Long term | Welhunt currently has a single industry focus and could consider expanding into other markets through mergers and acquisitions, strategic partnerships, or equity investments to enter different industries. | By investing in business models that align with ESG concepts, Welhunt can capitalize on investment opportunities arising from the global energy transition, thereby achieving additional investment returns. | 1. Welhunt’s proactive engagement in sustainable finance initiatives within the financial industry, including involvement in green fixed deposits and ESG-related private placement equity funds supports the sustainable transformation of financial markets while creating new revenue streams. 2. Conducting extensive research on low-carbon technologies such as solar energy and carbon capture, conducting careful assessments for equity investments or strategic partnerships. |
Assessment results of financial impacts from climate risks and opportunities
Unit: Financial impact as a percentage of approximate net profit
| Risk / Opportunity type | Opportunities | Transition risk | |
|---|---|---|---|
| Development or broadening of low-carbon goods and services | Development or broadening of low-carbon goods and services | Increased stakeholder concerns and negative feedback | |
| Expansion into alternative fuel market | Participation in carbon trading | Increased financing costs | |
| Assessment year | Medium term – 2030 | ||
| Impact on net profit | 0.1%~1.0% | 0.5%~1.5% | <0.1% |
Risk Management
To understand the impact of climate change on the Company’s operations, we progressively focus on and manage significant risks and opportunities through the identification mechanism outlined below.
- Gather data on climate-related risks and opportunities in the energy trade and mining sector
- Examine and assess climate-related risks and opportunities
- Verify significant climate risks and opportunities
- Obtain senior management approval
Indicators and targets
The table below provides details on how the indicators respond to the changing trends of risks and opportunities.
| Risks and opportunities | Corresponding indicators | Relationship between indicators and risks/opportunities | |
|---|---|---|---|
| Transition risk | Changes in customer preferences | KYC questionnaire for counterparties – ESG status | With the development of sustainable transition, Welhunt’s clients increasingly demand transparency in upstream value chain information and ESG performance, which may have a potential impact on their business relationship with Welhunt. Therefore, Welhunt utilizes a KYC supplier audit form to monitor counterparties’ performance in Environment (E), Social (S), and Governance (G), serving as a critical measure to address the risks associated with changes in customer preferences. |
| Increased stakeholder concerns and negative feedback | Greenhouse gas-related indicators | The Company’s greenhouse gas emissions, use of renewable energy, electrification of official vehicles, and green procurement practices are commonly used indicators for stakeholders to assess the Company’s climate risk. Financial institutions also consider the Company’s environmental performance as an evaluation criterion for ESG loan incentive programs. Additionally, the completeness of greenhouse gas inventories and third-party verification (percentage of coverage across company sites) may gradually become key indicators in the short to medium term. | |
| Energy-related indicators | |||
| Percentage of green procurement amount | |||
| KYC questionnaire for counterparties – ESG status | As part of sustainable corporate governance, Welhunt’s due diligence, management, and support of suppliers have become a focus for stakeholders such as regulatory authorities, financial institutions, and investors. Welhunt actively incorporates ESG-related indicators into its supplier audit form (KYC) and establishes corresponding selection criteria and support programs to demonstrate its commitment to sustainable transformation to stakeholders. Additionally, understanding the upstream and downstream relationships of suppliers allows for a deeper grasp of the potential for value chain sustainability transformation. This approach facilitates the development of strategic alliances for low-carbon transformation, ensuring the long-term stability of value chain partners. | ||
| Implementation of the TCFD disclosure framework | The disclosure progress of financial impacts caused by climate-related risks and opportunities is a key focus for stakeholders such as regulatory authorities, sustainability rating agencies, investors, and financial institutions. Regularly assessing and disclosing the financial impacts of climate change and transition trends on the Company provides reliable risk and opportunity assessment information. | ||
| Opportunities | Development or broadening of low-carbon goods and services and expansion into additional sectors | Participation in low-carbon transformation initiatives | By closely monitoring the demand for carbon trading and biomass fuel markets, along with relevant regulations and technological trends, and by initiating actions such as developing carbon trading and biomass fuel trading businesses and connecting with trade partners, we aim to seize new product opportunities in low-carbon transformation. |
| Expansion of low-carbon/circular economy product line | |||
| Green investment – Investment amount | Welhunt actively responds to responsible investment by fostering industries aligned with ESG principles and supporting their ESG transformation. We have established the amount of green investment as an important indicator, emphasizing not only investment returns but also closely tracking the decarbonization level of revenue structures. Through these investment amounts, we demonstrate to stakeholders Welhunt’s steadfast commitment to green investment and ESG transformation. | ||
| Percentage of total product revenue generated by environmentally valuable products | Setting ambitious decarbonization targets (with a year-on-year decrease in revenue from high-emission products) can stimulate Welhunt to rapidly adjust its revenue structure (such as introducing biomass fuel trading, carbon credit trading, private equity fund investments, etc.), allowing the Company to mitigate climate transition risks while seizing new revenue opportunities. | ||
Welhunt has established trackable goals for each indicator. This is facilitated through regular internal management of KPIs to monitor risk and opportunity situations. Short- and medium-term targets primarily focus on setting quantitative targets relative to the previous year or the baseline year. Long-term targets are aimed at responding to the 2050 net-zero transition target and establishing the Company’s overall long-term strategy.
| Indicator | 2023 targets | 2023 performance | Short-term targets 2025 |
Medium-term targets 2030 |
Long-term targets 2040 |
|---|---|---|---|---|---|
| Carbon credit offset | Internal evaluation of purchase of carbon credits | “Carbon Credit Procurement Proposal” has been approved; the Company will purchase carbon credits equivalent to 10% of the previous year’s greenhouse gas emissions starting in 2024 to offset its environmental impact | Purchase carbon credits equivalent to at least 10% of the previous year’s greenhouse gas emissions for offset each year; long-term, assess the gradual increase of the percentage | ||
| Scope of greenhouse gas inventory | Expand the greenhouse gas inventory boundary for overseas operational sites | The UK subsidiary has been incorporated into the inventory scope | Gradually expand the greenhouse gas inventory boundary, covering a higher percentage of all operational sites | ||
| Pass greenhouse gas inventory verification scope | Continue to pass the greenhouse gas inventory verification | Inventory scope has passed the ISAE 3410 assurance standard | Continue to execute and pass third-party greenhouse gas verification | ||
| Participation in relevant international initiatives | Respond to or join ESG initiatives initiated by suitable associations or NGOs at home or abroad | Participate in TCFD and RE10x10 initiatives, Taiwan Institute for Sustainable Energy (TAISE) | Gradually increase the number of responses to or participation in sustainable initiatives initiated by domestic and foreign associations or NGOs in the long-term | ||
| Expansion of low-carbon/circular economy product line | Evaluating and exploring low-carbon and circular economy business models, including potential research, investment, and M&A |
|
Continue to evaluate and explore low-carbon and circular economy business models, including potential research, investment, and M&A | ||
| Proportion of renewable energy usage | Propose procuring green electricity and evaluate the feasibility of collaborating with green electricity providers | Welhunt has internally approved the green electricity procurement proposal and plans to begin using green electricity in 2024 | Achieve renewable energy purchases of 10% of total electricity consumption at operational sites in Taiwan | Achieve 100% renewable energy usage at operational sites in Taiwan by 2050 | |
| Proportion of official electric vehicles | Launch procurement plan for official electric vehicles | Initiated discussions on the “Official Electric Vehicle Procurement Proposal”; if passed, plan to prioritize electric vehicles starting from 2024 when procuring official vehicles | Prioritize procuring vehicles with environmental energy-saving labels or hybrid/electric vehicles when purchasing new official vehicles | Procure vehicles with environmental energy-saving labels or hybrid/electric vehicles when purchasing new official vehicles | Complete 100% replacement of gasoline-powered official vehicles with hybrid or electric vehicles. Only procure electric business vehicles when purchasing new commercial vehicles |
| Procurement amount | Quantify green procurement amount | Quantified 2023 green procurement amount | Increase green procurement amount year on year, improve green procurement mechanisms and applicable scope (e.g., general procurement, official vehicles, transportation, etc.) | Green procurement amount accounts for an increasing proportion of applicable scopes year on year. | |
| Incorporation of ESG questions into KYC questionnaires | Include ESG questions in KYC questionnaires and distribute to all new or infrequent suppliers. |
|
Distribute KYC questionnaires to all new and infrequent trading partners (suppliers and customers) | Negotiate with counterparties with high ESG risks and provide recommendations to reduce ESG risks | Suspend transactions with counterparties unwilling to improve high ESG risks |
| Implementation of the Task Force on Climate-Related Financial Disclosures (TCFD) framework | Identify transition and physical risks according to the TCFD framework, quantify the impact of climate change on finances, and propose mitigation measures | Quantified the impact of climate transition risks and opportunities on finances and proposed mitigation measures | Continually assess the risks and opportunities associated with climate change and propose mitigation measures in accordance with the Sustainability Disclosure Standards of the International Financial Reporting Standards, specifically Standard S2 | Quantify climate change risks based on various warming scenarios (e.g., IPCC AR6 2-degree, 4-degree warming scenarios) | |
| Percentage of total product revenue generated by environmentally valuable products | Continuously identify environmentally valuable products suitable for trade and research market and business models | Markets and business models research has been conducted on carbon credits, natural gas, and biomass fuel | Environmental value products start generating revenue from 2030 (revenue > 0%) | Revenue from environmental value products accounts for 10% of total product revenue by 2040 | |
| Green investment amount | Seek suitable responsible investment strategy partnerships | Formed a responsible investment strategy partnership with StateSquare Capital | Accumulate NT$1 billion-NT$5 billion in responsible investment strategy partnerships for private equity funds by 2030 | Continue investing in private equity funds established by responsible investment strategy partners | |
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