Climate Change Mitigation and Adaptation
Climate Change Mitigation Strategy
In response to international attention and the government's commitment to achieving net-zero emissions by 2050, and with reference to the global rail transport sector's strategies for addressing climate change risks, THSRC fully acknowledges the potential impacts and challenges that climate change may pose to sustainable operations and has proactively introduced various climate change mitigation and adaptation measures.
In 2024, THSRC implemented a mechanism to evaluate climate-related risks and opportunities based on the Task Force on Climate-Related Financial Disclosures (TCFD) framework's four major recommendations and eleven recommended disclosures. The objective is to assess the impact of climate change on the Company, implement systematic adaptation measures to mitigate the Company's effects, and improve operational resilience. The TCFD requirements encompass the following four recommendations:
Governance
The Company has established the "Sustainable Development Promotion Committee" under the "Sustainable Development & Nominating Committee" of the Board. The Sustainable Development Promotion Committee is overseen by the Board and the Chairman and is composed of the President and senior executives from managerial departments. There are six sustainability working teams under the Sustainable Development Promotion Committee and their roles and responsibilities are focusing on internal corporate issues related to sustainable management, and reports implementations and achievements to the Sustainable Development & Nominating Committee and the Board every year. For more information regarding the sustainable governance framework, the responsibilities of each sustainability team, and operations in 2025, please refer to the "Sustainable Governance" chapter.
To align with IFRS S2 "Climate-related Disclosures," THSRC adopted a dual-track mechanism to incorporate climate risks into the risk management framework. The Quality Assurance Office oversees overall risk management and reports regularly to the Audit Committee. Strategies, metrics, and targets related to climate risk are planned and implemented by the Environmental Sustainability Team under the Sustainable Development Promotion Committee. They report regularly to the Board of Directors and the Sustainability & Nominating Committee. Their organizational structure and operations are as follows:
Strategy
THSRC referenced the framework in IFRS S2 "Climate-related Disclosures" to identify climate change risks and opportunities and continued to implement and disclose scenario analysis and financial quantification of risks. THSRC completed the latest round of climate risk and opportunity assessment in 2024 and considered the industry characteristics of the rail transportation industry and focused on internal disaster management actions. THSRC then identified 3 moderate and 3 high risks from a total of 12 climate risks. They included 2 transition risks and 4 physical risks. Climate change presents both risks and potential business opportunities. THSRC leverages its advantages in low-carbon transportation industry to improve energy efficiency and will continue to expand investment in renewable energy equipment at stations and maintenance depots. The assessment identified a total of 2 climate-related opportunities.
The Company also incorporated the timeline of potential impacts from climate risks and opportunities into the transition plan. The periods of impact are classified as short-term (2024 – 2026), medium-term (2027 – 2035), and long-term (2036 – 2050).
The Company has identified the following short, medium, and long-term financial impacts based on the strategy for managing climate-related risks (typhoons, heavy rainfall, and carbon pricing mechanisms):
Based on climate risk identification results, THSRC prioritized the top three risks and analyzed their potential financial impacts on operations under different scenarios. For transition risks, as the Ministry of Environment will levy carbon fees starting this year, THSRC referenced records from the meetings of the Carbon Fee Rate Review Committee to simulate the financial impact if the transportation industry is included in carbon fee collection by 2030. For the two types of physical risks, THSRC used studies from journal Tropical Cyclone Research and Review (TCRR) on changes in typhoon activities in East Asia (Note 1) and the intermediate emissions scenario (SSP2-4.5) and very high emissions scenario (SSP5-8.5) in the IPCC Sixth Assessment Report (AR6) to analyze the financial impact of typhoons in the mid and late 21st century. Physical risks include events other than typhoons. THSRC also used historical landslide repair and the fixed annual expenditures for preventive slope reinforcement to estimate the impact of future heavy rainfall.
Risk Management
Procedures for identifying, assessing, and sequencing climate-related risks
THSRC referred to TCFD guidelines and information disclosure practices of the international rail industry to conduct cross-departmental interviews and discussions. The Company adopted potential impact levels, vulnerability, and likelihood to create a climate risk matrix to prioritize risks and integrated internal natural disaster management and response mechanisms and identify climate-related risks and opportunities. THSRC used qualitative assessments to identify the extent of climate change impacts on operations and financial performance, using these results to guide future risk reviews and decision-making while enhancing climate risk management measures and resilience.
Procedures for identifying, assessing, and monitoring climate-related risks and integrated management systems
THSRC established the "Risk Management Policies" and "Risk Management Procedures" to identify risks affecting operations and profitability in business and operations. They mainly address seven major categories of risks including strategy, operations, environment (including climate change risks), finance, information, legal compliance, and ethics. THSRC assesses the integrity of corporate risk management and effectiveness of risk control and thus evaluates the risk assessment of major domestic and international ESG issues to establish an operational framework. THSRC will continue responding to internal and external environmental changes by reviewing and revising risk management policies, using medium and long-term risk strategy planning and targets to strengthen the Company's risk awareness and achieve sustainable development. The risk management promotion units and implementation units compile information reported by business units regarding risk categories, items, scenarios, and control measures. They evaluate risk impact, probability of occurrence, and the adequacy of control measures, and integrate risk analyses and key management priorities from current and previous years to prepare a risk management implementation report. The report is submitted to the President and Chairman each year before being presented to the Audit Committee and the Board of Directors.
Indicators and Targets
THSRC has committed to echoing global and domestic carbon reduction and net-zero goals, with the aim of formulating performance reduction and quantitative targets for greenhouse gases, water resource management, and energy management, as shown in the table below. For information on the relevant target achievements and other environmental-related performance in 2025, please refer to the "Low-Carbon Operation and Environmental Sustainability" subsection in this section.
Notes:
1. Electricity, water, and carbon reduction rates are calculated based on corresponding intensity indicators, and reduction targets compared to the base year (the previous year) are established as the basis for the internal energy management mechanism.
2. The scope for electricity-saving indicators and target setting covers stations (including the Taoyuan Operation Management Center, excluding commercial areas, parking lots, and the allocated electricity consumption of public areas shared with the Taiwan Railways Administration at Nangang, Taipei, and Banqiao stations) and maintenance depots. Relevant performance of train operations and the headquarters office is presented in the subsections "Energy and Waste Management."
3. The scope for water-saving indicators and target setting covers stations (including the Taoyuan Operation Management Center, excluding commercial areas, parking lots, and the allocated water consumption of public areas shared with the Taiwan Railways Administration at Nangang, Taipei, and Banqiao stations) and maintenance depots.
4. The scope for greenhouse gas indicators and target setting covers the electricity and gasoline/diesel consumption of train operations, stations (including the allocated electricity consumption of public areas shared with the Taiwan Railways Administration at Nangang, Taipei, and Banqiao stations, as well as the Taoyuan Operation Management Center, but excluding commercial areas and parking lots), maintenance depots, and the headquarters office.
5. The emission factor of electricity is referred to the latest announcement from the Ministry of Economic Affairs.
6. THSRC used data from internal inventories for these statistics, and the data does not include emissions from refrigerants, welding rods, CO2 fire extinguishers, and Scope 3 emissions.
7. The 2024 gasoline and diesel emission factors are based on the GHG Emission Factor Management Table Version 6.0.4 (June 2019) of the Ministry of Environment. The emission factors for 2025 were based on the latest GHG emission factors announced by the Ministry of Environment on February 5, 2024. The emission factors for 2025 were based on the latest GHG emission factors announced by the Ministry of Environment on February 5, 2024.
8. GHG Emission = the amount of Electricity Consumption / Diesel procurement x the emission factor Global warming potential (GWP)；Global Warming Potential (GWP) used in the Greenhouse Gas Inventory is from Intergovernmental Panel on Climate Change (IPCC)'s sixth version assessment report in 2021.