Analysis of Material Issues : Taiwan Business Bank

Stakeholder

Analysis of Material Issues

Procedures for the Analysis of Material Topics Material Topic Analysis Matrix List of Material Topics and Explanation of Differences in 2023 Management Guidelines for Material Topics and Major Achievements Management Guidelines for Evaluation and Target

Procedures for the Analysis of Material Topics

Step 1 Identification of stakeholders

8 key stakeholder groups

Step 2 Collect sustainability issues

Following GRI Reporting Standards 2021 and other internationally accepted sustainability standards and regulations, as well as sustainable investing rating mechanisms and topics followed by domestic and foreign financial institutions, 17 sustainability topics were summarized according to these standards.

Step 3 Impact analysis

Define positive and negative impacts. Identified 23 specific impact topics.

Step 4 Questionnaires and data analysis

Selected corresponding departments by positive/negative impact topics, and had 23 senior managers of the Bank complete positive/negative impact questionnaires and financial materiality questionnaires.
The degree of impact of each impact topic and average probability of occurrence were calculated.

Step 5 Materiality valuation

Positive impact: If Degree of impact is greater than Medium and Probability of occurrence is greater than High, then add to the list of material topics.
Negative impact: Negative impacts are catastrophic (irreversible), so negative impacts greater than Medium will be added to key impact topics.

Step 6 Confirm the order of material topics

Results of the questionnaire and the external impact assessment were used to create a dual materiality analysis matrix and a material topic analysis matrix, and describe the management guidelines and performance indicators for material topics.

Step 7 Confirmed by the Sustainable Development Committee

Material Issue Analysis Matrix

List of Material Topics and Explanation of Differences in 2023

Priority¹	Material Topic	Corresponding GRI standards and topic specific standards	Reasons for Materiality	Explanation of Differences	Boundaries of impact and degree of involvement in the value chain
					Internal Stakeholders			External Stakeholders²
					Scope of impact on value chain			Scope of impact on value chain/Cause of impact/Coverage of business activities³/Coverage of business activities⁴
					Upstream⁵	TBB	Downstream⁶	Upstream					Downstream
					Employees	TBB	Shareholder	Suppliers/partners	Government	NGO/Charity groups	External consultants	Media	Customers
1	Legal compliance	GRI 2-27 GRI 3-3	The Bank complies with relevant laws and regulations, establishes management and control mechanisms, responds to relevant government policies, and implements policies strongly promoted by the government to prevent money laundering, combat financing of terrorism, and prevent fraud. We believe that proactive compliance with business-related laws and regulations is mandatory for the sustainable development of enterprises.	Not adjusted.	Direct	Direct	Direct	-	Indirect/Business operation/>50%	-	-	Indirect/Business operation/>50%	-
2	Information security	GRI 3-3 GRI 418-1	The development of financial business depends on a stable information system and involves a large amount of business transactions and information retention. Information security systems and management strategies should be refined to effectively protect the rights and interests of the company and customers.	Not adjusted.	Direct	Direct	Direct	Business relationship/Supply chain/>50%	Indirect/Business operation/>50%	-	-	-	Direct/Products and services//>50%
3	Risk management	Custom material topics	As the financial environment changes rapidly, technology advances, products and businesses become more complex, and emerging risks become more diversified, in order to effectively control the risks of the entire bank, the Bank has established an integrated risk management system and manages the rationality of risks and rewards on the basis of the statutory capital ratio, in order to achieve operational goals and effectively manage business risks and other risks, avoid business losses, and maintain the stability of the overall financial and economic structure.	New material topic added.	Direct	Direct	Direct	Business relationship/Supply chain/>50%	Indirect/Business operation/>50%	-	-	-	Direct/Product, service/>50%
4	Operational performance and resilience	GRI 3-3 GRI 205-1 ~ 205-3 GRI 206-1	Business disruption may make customers encounter transaction difficulties and lose confidence, leading to lawsuits, credit rating downgrading, and negative impact on the rights of employees. Ensuring business continuity and enhancing financial stability may attract more business opportunities and increase stability of financial markets.	New material topic added.	Direct	Direct	Direct	Business relationship/Supply chain/>50%	Indirect/Business operation/>50%	-	-	Indirect/Business operation/>50%	Direct/Product, service/>50%
5	Corporate governance	GRI 3-3 GRI 205-1~205-3 GRI 206-1	Good corporate governance is beneficial for optimizing the organizational operation and sustainable development, strengthening the stability and transparency of business operations, and enhancing the long-term value and competitiveness of enterprises, which is the foundation of business operations.	Not adjusted.	Direct	Direct	Direct	-	Indirect/Business operation/>50%	-	-	Indirect/Business operation/>50%	-
6	Investing and financing climate action	GRI 3-3 GRI 201-2 GRI 203-2	Regarding risks and opportunities arising from extreme weather, natural disasters, energy crisis, and low-carbon economy transition, the Bank takes a practical approach and sets net-zero targets. The Bank actively enforces reduction of its own carbon emissions and adjust asset allocation in financing activities in an effort to strengthen climate resilience. TBB exercise the influence as a financial intermediary and combines its core competencies to promote ESG financing, ESG investing and related financial services. By guiding capital flows into sustainability projects, TBB hopes to guide industries, investors, and consumers to focus on sustainable development and advance toward a future of net-zero.	Integration of topics: The original "Sustainable Finance", "Responsible Investment" and "Climate Change Strategy and Management" were adjusted and merged into "Investing and Financing Climate Action".	-	Direct	Indirect	-	Indirect/Business operation/>50%	-	Business relationship/Business operation/>50%	-	Direct/Product, service/>50%
7	Digital finance and innovation	GRI 3-3 GRI 203-2 GRI 417-1 & 417-2	With the advent of the digital financial era, traditional financial products have been severely impacted. The Bank actively adopts digital innovation technologies to change the existing operating model, effectively improving the efficiency of financial services, reducing transaction costs and creating new business opportunities, so as to achieve the goal of sustainable operations.	New material topic added.	Direct	Direct	Direct	Business relationship/Supply chains/>50%	Indirect/Indirect/>50%	-	-	Indirect/Business operation/>50%	Direct/Products and services/>50%

¹ Priority order is based on dual materiality analysis.

² External stakeholder groups impacted by the company's business activities, including the environment, society, customers and end users, and external employees (e.g. supply chains and contractors).

³ Business operations, products/services and/or activities or positions on the supply chain with external impacts.

⁴ Percentage of business operations, products/services and/or supply chain and other business activities included in the impact assessment.

⁵ Please see 1.2.2 Current Status - Activities, value chain, and other business relationships.

⁶ Please see 1.2.2 Current Status - Activities, value chain, and other business relationships.

Management Guidelines for Material Topics and Major Achievement

Priority	Topics	Responsible Unit	Impact category and description	Policy	Commitments	Action
1	Legal compliance	Corporate Governance Unit	Actual and potential negative impact - Violation of legal regulations: [Economy] Violation of finance and corporate governance related regulations may be subject to fines and business interruption, which can affect stakeholders' rights. [Environment] Failure to comply with environmental regulations causes damage to the ecosystem and pollution to the environment. [People] Violation of social and labor regulations compromises rights of customers, employees or other stakeholders.	Compliance is the responsibility of the Board, senior management, and all employees.	Familiarize every employee with laws and regulations and ethical guidelines relevant to their roles.	Resolve actual negative impact: devise improvement measures in response to penalties imposed by the competent authority. Prevent potential negative impact: Organize compliance self assessments for each department. Organize "Compliance Officer Seminars" for compliance officers at banking and securities branches. Organize "AML/CFT Seminars" for banking and securities branches.
2	Information security	Customer Rights Unit	Potential negative impact - Inadequate information security management: [Economy/People] Negligence in information and cyber security may trigger business disruption and lead to serious damage or legal liability and adverse effects on stakeholders' rights.	Compliance with the Cyber Security Management Policy	Ensure confidentiality, integrity, and availability of information and communication systems and IT assets and reduce business risk.	Prevent potential negative impact: Enforce the annual cyber security maintenance program.
3	Risk Management	Corporate Governance Unit	Potential negative impact - Inadequate risk management: [Economy] Inadequate management of external emerging risks or internal credit, market, operation, IRRBB, liquidity, and other risks cause the bank to incur major violation of the rules or business losses, damaging stability of the overall financial or economic structure.	To effectively manage risks of the entire bank, the Bank established guidelines including the "Risk Management Policy", the "Credit Risk Management Guidelines", the "Market Risk Management Guidelines", the "Operational Risk Management Guidelines", the " Interest Rate Risk in the Banking Book Management Guidelines", and the "Liquidity Risk Management Guidelines". All regulations and their related risk limits are approved by the Board of Directors (Managing Directors), among which the content of the Risk Management Policy is as follows: Establish a risk management mechanism for identification, measurement, supervision, control, information reporting, and response strategies, construct an integrated risk management system, adopt a business model guided by appropriate risk management, and control the rationality of risk and return under the statutory capital adequacy ratio to achieve operational objectives and enhance shareholder equity. It covers credit risk, market risk, operational risk, bank book interest rate risk, liquidity risk, management of other risks, and capital adequacy management.	Maintain adequate capital and achieve reasonable risk and return within the Bank’s credit risk tolerance.	Prevent potential negative impact: The Bank has established business guidelines and handbooks for various units to follow. In addition to informing all units of related rules, the Bank organizes policy advocacy sessions and training to raise awareness on different levels of the organization and help the personnel involved understand and enforce risk management and their responsibilities. To facilitate the design and execution of the internal control system, the Bank follows a multi-level practice that establishes three lines of defense for internal control and clearly defines roles and responsibilities for each line. The practice helps all units understand their roles in the overall risk and control framework and strengthens communication and coordination in risk management and internal control related tasks in order to maintain an adequate and effective internal control system.
4	Operational performance and resilience	Customer Rights Unit	Potential negative impact - Disruption of business operations: [Economy] Business disruption may make customers encounter transaction difficulties, lose confidence, and withdraw large funds. In addition, disruption may lead to lawsuits, credit rating downgrading, and higher costs of capital. If more than one bank is affected, disruption may threaten market stability and have an impact on the entire economy. [People] The rights and livelihoods of TBB employees or those of employees on the supply chain are affected by business disruption. Potential positive impact - Enhance operational resilience: [Economy] ensure business continuity, enhance financial stability, and attract more business opportunities; and reduce the default risk, facilitate economic growth and increase stability of financial markets.	Establish the "Disaster Recovery Procedures for the Information Center of Taiwan Business Bank," "Information System Management Procedures for the Information Technology Department of Taiwan Business Bank," "Information Security and Maintenance Procedures for Taiwan Business Bank," and "Regulations Governing Operational Continuity of Information Systems for Taiwan Business Bank," and other related regulations.	Keep strengthening disaster response capabilities and build an adequate IT system backup mechanism for better disaster response. Restore the minimum acceptable level of service within the promised recovery time in case of a disaster in order to protect customers' rights.	Prevent potential negative impact; manage actual positive impact: Enforce the annual cyber security maintenance program. Organize regular offsite IT center disaster recovery drills to verify the backup center's offsite recovery capacity. Perform business impact analysis on various threats in order to devise adequate backup measures to ensure business continuity during severe business disruption.
5	Corporate Governance	Corporate Governance Unit	Potential negative impact - Inadequate corporate governance: [Economy] Impacts on overall financial or economic structure arising from negative impacts on stakeholders' rights from unsatisfactory corporate governance performance and major negligence, failure to adhere to ethical corporate management, corruption or falsification or similar conduct.	Implement corporate governance guidelines to create a stronger corporate governance organization and system while enforcing corporate governance and ethical corporate management in order to protect stakeholders' rights and enhance Board effectiveness.	The Board of Directors follows the Articles of Incorporation, shareholders’ meeting resolutions, and laws and regulations to perform their duties, and create a mutually beneficial environment for the Bank and its stakeholders based on ethics and integrity as well as an emphasis on corporate governance.	Preventing potential negative impact: Promote board diversity and fulfillment of board member roles, and enforce business integrity and ethics as well as compliance training and build a culture of integrity.
6	Investing and financing climate action	Sustainable Finance Unit	Potential negative impact - failure of investing and financing climate actions: [Economy] Failure to assist financing recipients in starting low carbon transition effectively may turn potentially high risk assets into stranded assets, leading to higher financial risks. [Environment] Failed climate actions may lead to higher carbon emissions and other environmental impact, including reduced biodiversity. Failure to reduce or offset carbon footprint caused by business activities will accelerate global warming and cause long term damage to the natural environment. [People] Climate change has an impact on people's livelihoods and increases health and safety risks. Extreme weathers disrupt financial services and society. Actual positive impact - Develop products and services contributing to low carbon transition: [Economy] Redirect funds to low carbon industries, facilitate development of this industry, create new business opportunities and jobs, and reduce the economic risks arising from extreme weathers. [Environment] Support low carbon technology through green finance, which contributes to lower carbon emissions, increase climate resilience, and maintain biodiversity.	Support enterprises committed to environmental protection, social responsibility, and corporate governance and avoid investing in controversial instruments. Follow the competent authority's Guidelines for Domestic Banks' Climate Risk Financial Disclosure and identify climate change related risks and opportunities; implement response plans, and develop climate governance policy. Integrate ESG issues into the development strategies and processes of financing, wealth management, and credit card businesses. Support the global trend of carbon reduction and follow the government's policy while directing customers' attention and action to ESG risks and opportunities. Reject loan applications from controversial customers. When processing loan applications, search applicants on government websites for background data on environmental protection, workplace safety, food safety, and employee pension contribution rates and make these data part of the key factors for financing.	Exercise due care and uphold ethical corporate management. Perform climate change risk and opportunity analysis regularly to strengthen climate change governance of the Bank; assess financial impacts to reduce risk while grasping business opportunities. Continue to disclose information regarding carbon emissions and reduction of the Bank. Follow the ESG practice and offer green loan products as part of the commitment to the environment and society. Support businesses implementing environmentally friendly and green developments and avoid working with businesses with environmental and social risks. Encourage customers to support environmentally friendly spending through green diet and green transportation and pay attention to environmental sustainability. Support environmentally friendly and green industries and avoid establishing loan business relationship with controversial enterprises.	Preventing potential negative impact: Finish signing the Equator Principles and incorporate the Equator Principles into the lending process. Engage in ESG investments to support environmental sustainability and social issue related actions. Managing actual positive impact: Select investments with caution and continue to monitor after transactions. Sign and implement the Task Force on Climate-related Financial Disclosures (TCFD) framework. Continue to fill out the CDP questionnaires for climate change.
7	Digital finance and innovation	Customer Rights Unit	Potential negative impact - Digital divide and digital isolation: [Economy] If a company falls behind in digital transition, it may become less competitive in the market, leading to lower capital liquidity, loss of customers, and business interruption, which could have an impact on overall economic activities and growth. [People] In the transition to digital business, there may be certain groups (such as the elderly and the digital illiterate) who are unable to effectively use digital banking services. The inability leads economic difficulties and social isolation for these groups. Furthermore, it may also cause a digital skill gap in the job market and employment challenges for certain talent. Actual and potential positive impact - Digital finance and innovation: [Economy] Effectively increase efficiency of financial services, reduce transaction costs, and create new economic opportunities to attract more investment and facilitate economic growth. [Environment] Reduce the need for physical branch locations and reduce consumption of resources and traffic or transaction related carbon emissions. [People] Digital business can be extended to previously unreachable regions and create convenience. It also makes information of banking products and services more readily accessible.	Utilize digital innovations to change existing business models and transform them into a customer value and experience oriented system to create new value and sustainable advantages for the Bank and achieve digital governance targets.	Develop more friendly and customer centric omnichannel financial services that emphasize user experience.	Prevent potential negative impact and manage actual and potential positive impact: Create more friendly and customer centric omnichannel financial services by utilizing innovative fintech and data to drive growth and implementing digital processes and channels to provide a revamped and better user experience. Combine social media and digital marketing to encourage customers to use online and mobile banking services as well as mobile payments. Meet the demand for mobile banking services and provide a more streamlined digital banking experience on different platforms.

Management Guidelines for Evaluation and Target

Priority order	Topics	Assessment and goals
Priority order	Topics	Performance indicator	Year 2023 (Short term) goals	2023 Progress	Year 2024 (Short term) goals	2025-2029 (Medium/Long term) goals
1	Legal Compliance	KPI 1: Each department performs compliance self assessments	Twice a year.	Official letters were issued on June 27 and December 26 to all units of the entire bank and securities head office and branches to perform compliance self assessments for the first and second halves of 2023.	Twice a year.	Twice a year.
		KPI 2: Training completion rate of "Compliance Officer Seminar" for compliance officers at banking and securities branches	Training completion rate 100%	The training completion rate was 100%.3 hours of compliance officer seminar each were held on June 19 and October 19 for the first and second halves of 2023.	Training completion rate 100%	Training completion rate 100%
		KPI 3: Training completion rate of "AML/CFT Seminar" for banking and securities branches	Training completion rate 100%	The training completion rate was 100%.3 hours of 2023 AML/CFT Seminar were held on May 2, 2023. The 2023 AML/CFT on-the-job training - external institution was held for 7 hours by Taipei Foundation of Finance on October 4. The 2023 AML/CFT on-the-job training took place for 2 hours on November 6.	Training completion rate 100%	Training completion rate 100%
2	Information security	KPI 1: Completion rate of damage control or recovery within 36 hours after becoming aware of the following cyber security incidents: core business information is leaked (in a mild/serious case) core business information or core information systems are altered (in a mild/serious case) cyber security incidents classified as "Material Contingency"	100%	100%(None of the cyber security incidents on the left occurred in 2023)	100%	100%
2	Information security	KPI 2: Purchase information security insurance every year	Purchase information security insurance	Coverage was purchased on November 1, 2023.	Renew coverage every year	Renew coverage every year
3	Risk Management	KPI 1: Compliance with the "Regulations Governing the Capital Adequacy and Capital Category of Banks"	The statutory ratio was met.	The statutory ratio was met.	The statutory ratio was met.	The statutory ratio was met.
3	Risk Management	KPI 2: Completion rate for conducting monthly meetings of the Risk Management Committee	100%	100%	100%	100%
4	Operational performance and resilience	KPI: Organize main IT center offsite disaster recovery drills	Twice a year.	Offsite recovery drills at the backup center were completed for the first and second halves of 2023 on May 20, May 22, October 3, and October 4.	Twice a year.	Twice a year.
5	Corporate Governance	KPI 1: Board diversity	Independent directors account for 1/3 of the total number of directors.	5 independent directors account for 1/3 of the Board. Completion rate 100%	Female directors account for 1/3 of the total number of directors	Independent directors and directors of either gender all account for 1/3 of the total number of directors
		KPI 2: Overall/Lowest individual average Board meeting attendance	93%/80%	96.4%/28.6%⁷	94%/82%	95%/84%
		KPI 3: Business integrity and ethics, compliance training	95% passing rate.	The online assessment passing rate was 99.18% in the first half of the year and 99.74% in the second half	96% passing rate.	97% passing rate.
6	Investing and financing climate action	KPI 1: Investment in ESG bonds or related industries or products	Bond investment increases by 3% compared to the previous year.	New investment increases by 193% compared to the previous year.	5% of total bond investment.	7% of total bond investment.
		KPI 2: Percentage of electronic voting at shareholders’ meetings hosted by TWSE/TPEx listed companies	85% participation in electronic voting at shareholders’ meetings hosted by TWSE/TPEx listed companies.	100%	90% participation in electronic voting at shareholders’ meetings hosted by TWSE/TPEx listed companies.	95% participation in electronic voting at shareholders’ meetings hosted by TWSE/TPEx listed companies.
		KPI 3: Total green project loans disbursed for providing financing, assisting individual customers in improving and upgrading their equipment, and purchasing green buildings	NT$20 million in total loans approved.	NT$1,505.9 million	NT$2,000 million in total loans approved.	NT$2,500 million in total loans approved.
		KPI 4: Balance of green financing loans (including green industries and green enterprises)	NT$158 billion	NT$168.1 billion	NT$160 billion	NT$170 billion
		KPI 5: Number of sustainability linked loans	30 or more sustainability-linked loans	32	32 or more sustainability-linked loans	34 or more sustainability-linked loans
		KPI 6: Total loans approved for urban renewal and old building reconstruction	NT$80 billion in total loans approved	NT$ 81.924 billion	NT$90 billion in total loans approved	NT$120 billion in total loans approved
		KPI 7: Number of ESG themed funds launched (with the number of ESG themed funds launched in 2022 as the baseline)	4 funds launched(with the number of ESG themed funds launched in 2022 as the baseline)	5	5 funds launched(with the number of ESG themed funds launched in 2022 as the baseline)	10 funds launched(with the number of ESG themed funds launched in 2022 as the baseline)
		KPI 8: Number of credit cards made of environmentally friendly materials (with the number of cards in circulation in 2020 as the baseline)	Percentage of cards issued reached 23% (with the number of cards issued in 2020 as the baseline)	23.6%	Percentage of cards issued reached 24% (with the number of cards issued in 2020 as the baseline)	Percentage of cards issued reached 25% (with the number of cards issued in 2020 as the baseline)
		KPI 9: Coverage of corporate borrowers in new loans signing the Commitment for Fulfilling Corporate Social Responsibility	89% coverage	89.15%	90% coverage	92% coverage
		KPI 10: Fill out the CDP questionnaires for climate change	Rated B (management level)	B	Rated B (management level)	Rated A- (leadership level)
		KPI 11: Perform TCFD analysis and publicly disclose key information	Completion rate 100%	Disclosed with 100% completion	Completion rate 100%	Completion rate 100%
		KPI 12: Organize third party certification of TCFD report	Completion rate 100%	Organized with 100% completion	Completion rate 100%	Completion rate 100%
		KPI 13: Establish a carbon emissions accounting mechanism for investment and loan portfolios based on financed methodology from PCAF	Completion rate 50%	Implemented with 100% completion	Completion rate 75%	Completion rate 100%
		KPI 14: Complete setting SBT targets	Completion rate 50%	Submitted with 50% completion	Completion rate 100%	Completion rate 100%
7	Digital finance and innovation	KPI 1: Total number of digital financial patents received.	40	45	47	55

⁷The Chair was unable to attend the Board meetings due to medical leave.