Climate Change
Climate change risk is an important risk that businesses cannot afford to ignore. By publishing the TCFD report, TBB expects to facilitate understanding of the environmental, social, and governance importance of climate risk and call attention to the urgency of climate action.
In response to the risks and opportunities arising from extreme weathers, natural disasters, energy crises, and low carbon economy transition, TBB started following the FSB TCFD recommendations and the FSC Guidelines for Domestic Banks' Climate Risk Financial Disclosure to implement climate-related risk and opportunity management. March towards the Paris Agreement and the target of keeping the temperature increase to within 1.5°C above pre-industrial levels. Implement Science Based Targets (SBTs) with Net Zero by 2050 as the vision. Set practical net zero targets and work actively to reduce own carbon emissions and modify asset allocation in investing/financing activities. Exercise influence as a financial institution to increase climate resilience and join the effort to create a net zero future.
This report is prepared in accordance with the Guidelines for Domestic Banks' Climate Risk Financial Disclosure released by the Financial Supervisory Commission ("FSC") and the Task Force on Climate-Related Financial Disclosures ("TCFD") created by the Financial Stability Board ("FSB"). It is also based on the Best Practices in Climate Risk Management by Domestic Banks published by the Bankers Association of The Republic of China as well as the four pillars, governance, strategy, risk management, and metrics and targets.
Aspects | Details |
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Governance |
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Strategy |
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Risk Management |
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Metrics and Targets |
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The outstanding balance of medium- and long-term loans to the high polluting/energy intensive industries was NT$65.776 billion in 2022, which accounted for 10.80% of the total outstanding balance of medium- and long-term loans. The investment is NT$21.410 billion or 24.93% of total investment and is classified as carbon asset exposure. The trend of the loan and investment balance and distribution for the Bank in the last three years are shown as follows:
TBB considers including carbon fees as a factor in the internal credit rating assessment for borrowers, measuring changes in customers' default risk, and analyzing changes in expected losses from credit risk in the future.
- Risk identification:
26 of the regulated businesses on the Mandatory Greenhouse Gas Reporting System of the Environmental Protection Administration of the Executive Yuan are borrowers at TBB. - Risk Analysis:
Carbon intensive industries will face increasingly restrictive low carbon regulations in the future, such as collection of carbon tax/fee and impact on operational and profit performance from production equipment replacement and other transition risks. They can lead to difficult debt recovery and have an impact on TBB's expected losses from credit risk. - Assumptions:
The assessment is based on the Network for Greening the Financial System (NGFS) model:- 2050 net zero
- Delayed transition
- NCDs(Climate Change Response Act)
- Assessment Results:
The degrees of financial impact of potential increases in credit losses are shown in the table below.
NGFS scenario (Financial impact amount: NT$ million) | 2025 | 2030 | 2050 |
---|---|---|---|
2050 net zero |
Moderate (7.26) |
Moderate (10.28) |
Moderate (19.71) |
Delayed transition |
- |
- |
Moderate (18.84) |
NCDs (Climate Change Response Act) |
Mild (0.84) |
Mild (0.84) |
Mild (0.84) |
For the purpose of understanding its exposure to physical risk in different regions, TBB performed physical risk scenario analysis on all business activities in 2021 based on the Taiwan Disaster Risk Map published by the NCDR climate change disaster risk mitigation platform. In order to refine the precision of climate risk analysis types, ranges, and hazards for an accurate overview of physical risk exposure, TBB adopted the UNEP FI recommended external climate risk database in 2022 and implemented climate physical risk database and damage models, which expanded the scope of physical risk quantification to cover all offices and real estate collaterals in Taiwan.
- Risk identification:
- Offices: Conduct a physical risk analysis on all offices and own real estate in Taiwan.
- Real estate collaterals: Conduct a physical risk analysis on all domestic real estate collaterals.
- Risk Analysis:
- Extreme heat, Coastal flooding, Land subsidence, River flooding, Extreme winds, Forest fire
- Assumptions:
Enter parameters: Address of real estate, economic service life of building, material of building, and year of construction. - Analysis method:
- General Circulation Models:Choose IPCC AR5 CMIP5 and IPCC AR6 CMIP6 projection of global temperature increase.
- Regional Climate Models: Analyze regional climate models for specific physical risks and disasters.
- Assessment Results:
1. Assessment Results:
2050 scenario | RCP8.5 | RCP2.6 |
---|---|---|
Financial impact (NT$ million) |
42.86 Moderate |
37.83 Moderate |
2. 2. Real estate collaterals:
2050 scenario | RCP8.5 | RCP2.6 |
---|---|---|
Financial impact (NT$ million) |
5,519.25 Extremely high |
4,864.19 Extremely high |
Change in LTV ratio (%) | 0.40% Slight change |
0.35% Slight change |
Note: Real estate value impairment (%): based on UNEP FI recommended external climate risk database.
Carbon emissions from investment/financing activities are calculated according to the PCAF methodology to assess the potential impact of climate change risk on the investment/financing portfolios. TBB actively explores opportunities to reduce GHG emissions.
In 2022, total Scope 3 GHG emissions by the Bank was 1,273,195.10 tonne CO2e and total carbon footprint was 5.85 tonneCO2e/NT$ million investment or financing. The scope covered emissions from medium- and long-term loans, power generation project financing, commercial real estate loans, and equity and bond investment portfolios. The asset inventory categories will be expanded by the new PCAF methodology to better monitor overall carbon emissions from financial assets.
Item | 2020 | 2021 | 2022 |
---|---|---|---|
Financed carbon emissions(tonneCO2e) | 1,123,563.89 | 1,152,520.45 | 1,273,195.10 |
Avoided financed carbon emissions (tonneCO2e) {Note 1} | 5.70 | 5.57 | 5.85 |
Data quality score | 2.06 | 2.10 | 1.83 |
Total percentage out of investment/financing portfolios {Note 2} | 12.27% | 11.32% | 11.58% |
Note 1: The Bank takes an active approach to providing green loans by helping customers obtain funds to purchase renewable energy equipment and avoid related carbon emissions and working with customers to complete low carbon transition.
Note 2: The Bank sets carbon reduction targets based on the SBT approach and takes inventory of the asset categories that must be included. The scope covers TBB and its subsidiaries.
Financed carbon emissions by asset class (tonneCO2e) |
2020 | 2021 | 2022 |
---|---|---|---|
Corporate loans | 378,319.03 | 279,972.24 | 337,354.85 |
TWSE/TPEx-listed stocks and bond investment | 678,554.11 | 804,814.00 | 869,638.53 |
Power generation project loans | 13,089.69 | 12,401.39 | 11,884.66 |
Commercial real estate loans | 53,601.06 | 55,332.82 | 54,317.07 |
Carbon emission intensity by asset class (tonneCO2e/NT$ million investment or financing) |
2020 | 2021 | 2022 |
---|---|---|---|
Corporate loans | 4.66 | 3.82 | 3.71 |
TWSE/TPEx-listed stock and bond investment | 6.29 | 6.57 | 7.66 |
Power generation project loans | 14.02 | 12.69 | 5.79 |
Commercial real estate loans | 7.41 | 5.54 | 4.91 |
Data quality score by asset class | 2020 | 2021 | 2022 |
---|---|---|---|
Corporate loans | 1.98 | 1.98 | 2.17 |
TWSE/TPEx-listed stock investment | 1.06 | 1.21 | 1.28 |
Corporate bonds | 2.05 | 2.14 | 1.34 |
Power generation project loans | 2.00 | 2.00 | 2.00 |
Commercial real estate loans | 4.00 | 4.00 | 4.00 |
Financed carbon emission by industry (tonneCO2e) |
2020 | 2021 | 2022 |
---|---|---|---|
Building materials | 286,208.32 | 404,118.08 | 538,039.51 |
Composite utilities | 279,023.16 | 280,583.62 | 214,971.73 |
Aircraft company | 276,368.90 | 197,863.33 | 214,082.66 |
Electronic equipment, instruments and components | 79,591.16 | 56,726.85 | 103,923.44 |
Metals and mining | 33,885.48 | 30,697.84 | 39,186.19 |
Other | 101,796.12 | 114,796.52 | 96,789.85 |
Carbon emission intensity by industry (tonneCO2e/NT$ million investment or financing) |
2020 | 2021 | 2022 |
---|---|---|---|
Building materials | 19.21 | 23.71 | 28.04 |
Composite utilities | 27.39 | 30.06 | 27.22 |
Aircraft company | 7.11 | 5.63 | 6.58 |
Electronic equipment, instruments and components | 3.79 | 2.76 | 4.85 |
Metals and mining | 3.38 | 2.85 | 2.27 |
Other | 1.08 | 1.12 | 0.91 |
Note: Calculation of financed carbon emission and emission intensity by industry does not cover "power generation project loans" or "commercial real estate loans".
Financed carbon emission by geographic region (tonneCO2e) |
2020 | 2021 | 2022 |
---|---|---|---|
Taiwan | 1,007,842.34 | 1,026,092.90 | 1,114,356.73 |
The United States | 9,879.65 | 9,929.47 | 20,726.28 |
Australia | 16,017.31 | 16,649.45 | 17,475.88 |
Japan | 427.55 | 774.10 | 14,804.66 |
China | 5,989.37 | 4,126.95 | 12,425.16 |
Other | 16,716.92 | 27,213.37 | 27,204.66 |
Note: Calculation of financed carbon emissions and emission intensity by geographic regions does not cover "power generation project loans" or "commercial real estate loans".