:::

Task Force on Climate-Related Financial Disclosures

Dedicate to Fulfill Net Zero Emissions

Task Force on Climate-related Financial Disclosures (TCFD) is proposed by the Financial Stability Board (FSB). TSMC adopts four core elements in the TCFD framework, including Governance, Strategy, Risk Management, and Metrics and Targets to manage climate-related risks and opportunities and strive to fulfill the sustainable goal for net zero emissions across the value chain by 2050.

TSMC cares about the impacts of climate on company operations as well as any resulting socio-economic problems such as diseases and food security. To strengthen climate mitigation and adaptation, TSMC's core strategy against potential operational impacts of climate change, TSMC has established four major management strategies for climate change management: Mitigation, Adaptation, Supply Chain Carbon Reduction, and Low carbon Products and Services to strive for net zero transition.

Roadmap to Net Zero Emissions and Milestones

Climate change management is critical to sustainable corporate operations. TSMC has mapped out a roadmap to net zero emissions, setting the goals of zero emissions growth by 2025, gradually reducing emissions to return to 2020 emission levels by 2030, and net zero emissions across the value chain by 2050. Under the Energy Saving and Carbon Reduction Committee's guidance, TSMC has continued to strengthen related actions, expand the use of renewable energy, and diversify energy sources. In 2022, TSMC announced accelerating its RE100 sustainability timetable, moving its target for 100% renewable energy consumption forward to 2040 from 2050.
Direct Emissions from Processes
Scope1
  • Install equipment with F-GHG reduction technologies
  • Develop nitrous oxide reduction equipment
  • Use carbon-neutral natural gas
  • Install equipment with nitrous oxide reduction technologies
  • Develop alternative programs to reduce GHG emissions from processes
  • Launch alternative programs to reduce GHG emissions from processes
Indirect Emissions from Energy Usage
Scope2
  • Use renewable energy
  • Increase energy efficiency of existing processes
  • Develop next-generation energy efficient tools
  • Recycle thermal energy from process tools
  • Increase use of renewable energy
  • Introduce next-generation energy efficient process tools
  • Recycle H2 from EUV lithography process
  • Use 100% renewable energy
  • Increase next-generation energy efficient process tools
Indirect Emissions from
the Value Chain
Scope3
  • Conduct carbon inventory and offer consultations for energy conservation and carbon reduction
  • Request suppliers to set targets, determine management strategies, and develop technologies
  • Develop Zero Waste Manufacturing Center and launch a recycling program for electronic-grade chemicals
  • Request suppliers to use renewable energy
  • Introduce electronic-grade chemicals recycled from waste chemicals
  • Optimize delivery schedules and use low-carbon transportation vehicles
  • Request suppliers to use low-carbon raw materials
  • Collaborate externally for carbon reduction and carbon negative programs

Enforce Climate Governance, Promote Net Zero Transition

At TSMC, the Board oversees climate change governance and the management framework. The ESG Steering Committee is responsible for formulating mid-to-long-term strategies for climate change management. The ESG Committee integrates interdepartmental resources for climate action, and the Energy Saving and Carbon Reduction Committee formulates quarterly adaptation and mitigation plans in response to climate change, reviewing progress, discussing future plans, and quarterly reporting to the Board via the ESG Committee's chairperson. The Risk Management (RM) Executive Council identifies TSMC's climate risks and executes risk mitigations. Risk mitigations are supervised by the Risk Management Steering Committee, which reports progress to the Board.
Board of Directors
Audit and Risk Committee, Compensation and People Development Committee, Nominating, Corporate Governance and Sustainability Committee
supervise all climate change management actions of TSMC
ESG Steering Committee
Decision-making body for climate change management; chaired by the Chairman of TSMC
Risk Management Steering Committee
Advises and approves the prioritization of risk controls against climate change risks and supervises continuous improvements for risk management
Energy Saving and Carbon Reduction Committee
Manages transition and physical risks well as action opportunities of climate change
ESG Committee
Interdepartmental communication platform on climate change issues; reports progress to the Board every quarter
Risk Management Executive Council
Identifies and implements risk controls for climate change risks and continuously improves risk management practices and effectiveness

Climate Risks and Opportunities Identification Process

To realize TSMC's corporate vision and long-term sustainability value for the stakeholders, the Company commits to establishing a proactive and robust risk management system according to the Risk Management Policy. It adopts a holistic and balanced risk-reward approach to identify and manage key climate-related risks and opportunities which TSMC faces in achieving its strategic objectives. The Board of Directors authorizes the Audit and Risk Committee to review TSMC's Enterprise Risk Management (ERM) framework and risk profile to ensure key risks are within the risk appetite.
Collect
List related risks/opportunities
Identify
Determine material risks/opportunities
Identify Materiality
Develop risk and opportunity matrix
Response Measures & Financial Impacts
Formulate and review response measures and evaluate financial impacts of material issues
In compliance with the TCFD framework, members of the ESG Committee identify and evaluate climate change risks and response measures every two years on behalf of TSMC to uncover potential crises and opportunities. Based on the results in 2022, the top three risks are net zero emissions, impact on company reputation, and uncertainties in the development of new energy-saving/carbon reduction technologies. The top three opportunities are developing low-carbon products and services/increasing energy efficiency in customer products, driving low-carbon manufacturing, and improving the company's reputation.
High
Risk / Opportunity
Low
1
2
3
4
5
6
7
8
1
2
3
4
5
6
1
2
3
4
5
Short term( 1-3 y )
Mid term( 3-10 y )
Long term( >10 y )
Opportunities
1
Participate in renewable energy plans/Participate in carbon trading market
2
Receive rewards from the public sector for offsetting carbon reductions
3
Improve plant energy efficiency
4
Promote water efficiency and diversification
5
Develop low-carbon products and services/Increase energy efficiency in customer products
6
Drive low-carbon manufacturing
7
Increase resilience against natural disasters
8
Improve company reputation
Transition Risks
1
GHG emissions control and carbon taxes/carbon fee
2
Net zero emissions
3
EIA commitment
4
Uncertainties in the development of new energy saving/carbon reduction technologies
5
Impact on company reputation
6
Renewable energy regulations and procurement
Physical Risks
1
Drought (TSMC Operations)
2
Drought (Supply Chain)
3
Rising temperatures
4
Flood (TSMC Operations)
5
Flood (Supply Chain)
Opportunities
1
Participate in renewable energy plans/Participate in carbon trading market
2
Receive rewards from the public sector for offsetting carbon reductions
3
Improve plant energy efficiency
4
Promote water efficiency and diversification
5
Develop low-carbon products and services/Increase energy efficiency in customer products
6
Drive low-carbon manufacturing
7
Increase resilience against natural disasters
8
Improve company reputation
Transition Risks
1
GHG emissions control and carbon taxes/carbon fee
2
Net zero emissions
3
EIA commitment
4
Uncertainties in the development of new energy saving/carbon reduction technologies
5
Impact on company reputation
6
Renewable energy regulations and procurement
Physical Risks
1
Drought (TSMC Operations)
2
Drought (Supply Chain)
3
Rising temperatures
4
Flood (TSMC Operations)
5
Flood (Supply Chain)

Financial Impact Analysis of Climate Risks and Opportunities

TSMC conducts financial impact analysis on the top three physical risks, transition risks, and climate opportunities to formulate strategies to mitigate risks and explore opportunities for the Company's reference. Financial impact analysis of climate-related risks focuses mainly on market and technology-related costs to remove carbon emissions along the pathway to net zero emissions by 2050. As for the estimated financial impact from climate opportunities, the analysis results show that developing low-carbon products and services presents the greatest opportunity for positive financial impacts as the demand for low-carbon products increases.
Risks
0
Opportunities
Technology/Market - Net Zero Emissions (long-term)
1 ~ 2 %
Promoting Lowcarbon and Green Production (mid-term)
< 1 %
Impact on TSMC Reputation (long-term)
1 %
Acute Climate Change - Droughts (short-term)
< 1 %
Increase Facility Energy Efficiency (mid-term)
1 %
Transition
Physical
Unit: Financial Impact by Revenue Percentage

Climate Scenario Analysis

In compliance with TCFD recommendations, TSMC has evaluated the impact of various GHG emission controls on TSMC operations and the supply chain for certain transition and physical risks. TSMC has considered the outcomes when determining the resiliency of strategies and has also referred to the latest physical science basis, published by the International Energy Agency (IEA) and Intergovernmental Panel on Climate Change (IPCC), to develop its climate scenarios. In addition, TSMC has also included potential growth in carbon emissions from growing TSMC operations and new facilities, as well as existing carbon reduction actions, into general evaluations to analyze the potential financial impacts of climate risks.
TSMC and Supply Chains Long-term Risk in SSP5-8.5
USA:Heat Risk
TSMC Arizona is facing Heat risks (daily high temperature greater than 40 ℃ ), and up to 24.8 % of its supply chain is located in high risk areas
China:Flood Risk
TSMC Nanjing is located in a high-risk area for flooding, and up to 22 % of its supply chain is located in high risk areas
Japan/Korea:Flood Risk
Some supply chains face flood risks, up to 22 % in Japan and 10 % in South Korea
Africa, West Asia, India:Heat Risk
Located in high-temperature high-risk areas, but the number of supply chains is relatively small.

Net Zero Strategies and Goals by 2030

TSMC sets mid and long-term goals for the four major management initiatives, including Mitigation, Adaptation, Low-carbon Products and Services, and Supply Chain Carbon Reduction, reviews progress each year and makes rolling adjustments based on external landscapes and trends, hoping to mitigate climate impacts through management by objectives and ensure business continuity.
Climate Change Mitigation Management Strategy
Read More
TSMC's primary climate change mitigation initiatives include promoting low-carbon manufacturing, using renewable energy, and increasing energy efficiency to reduce GHG emissions from TSMC operations.
Climate Change Adaptative Management Strategy
Read More
Resilience against climate disasters is integral to companies. TSMC uses global warming scenarios provided by IPCC to identify disaster factors introduced by extreme climates in existing and new facilities each year and develops Climate Risk Adaptative Standards to strengthen operational resilience.
Low-carbon Products and Services Management Strategy
Read More
TSMC works with upstream suppliers (raw materials and equipment), design ecosystem partners, and downstream businesses (packaging and testing) to consider the product life cycle and take real action to reduce product's carbon footprint. With its innovative leading semiconductor process technologies, TSMC also helps customers produce more advanced, energy-efficient, and eco-friendly products.
Carbon Reduction Management Strategy of the Supply Chain
Read More
TSMC is committed to reducing its supply chain's impact on climate change with the core strategies of develop and purchase energy-efficient green tools and low-carbon supply chain management. The Company also helps suppliers allocate resources efficiently, strengthen carbon reduction capabilities, and build a green low-carbon supply chain. based on its net zero emissions goal and carbon emissions hotspot analysis on the supply chain