Climate Change Management Framework

Governance

The Board of Directors regularly reviews risks and opportunities related to climate change.

• ESG Steering Committee: The ESG Steering Committee is TSMC's top organization in climate change management. The ESG Steering Committee is chaired by the Chairman of TSMC, and the chair of the ESG Committee serves as the executive secretary. It reviews TSMC's climate change strategies and goals every six months and reports to the Board of Directors. (The CSR Executive Committee was renamed as the ESG Steering Committee in 2021 and the meeting frequency has increased from biannually to quarterly)
• Energy Saving and Carbon Emission Reduction Committee: The Energy Saving and Carbon Emission Reduction Committee is the Company's management organization for taking action on climate change risk and opportunity. It is chaired by the Senior Vice President of Fab Operations. Every quarter, this Committee formulates management plans, reviews implementation status, and discusses future plans.
• RM Steering Committee: The RM Steering Committee reports to the Audit Committee annually on the risk environment, primary risk management items, risk assessment, and response measures. The Audit Committee then reports and discusses major items with the Board of Directors.

• The ESG Steering Committee is comprised of senior executives from various TSMC organizations and formulates long-term 2030 goals and development strategies for climate change and renewable energies. For more details, please refer to the ESG Management Platform section of this report.
• The executive secretary of the ESG Steering Committee reported to the Board and received support on sustainable development strategies and progress for green manufacturing, joining the RE100, purchasing renewable energies, long-term goals, and other related projects. (The reporting frequency has been increased from biannually to quarterly since 2021.)
• The Energy Saving and Carbon Emission Reduction Committee defined five major energy conservation teams for different process technologies to conserve more energy from production equipment and fab facilities. As an incentive for the energy conservation teams, the Energy-Saving and Carbon Reduction Committee awarded Energy Conservation Model Awards and Energy Conservation Innovation Awards according to the teams' success with energy conservation targets and innovative ideas.
• The Chair of the RM Steering Committee gave an annual report to the Audit Committee/Board of Directors on water, energy risks, renewable energy demands, and other topics related to climate change.
• The Committee also carried out 460 energy-saving measures across 8 different categories and was able to conserve an additional 500 GWh in energy consumption. For more details, please refer to the Increase Energy Efficiency section of this report.

Strategies

According to interdepartmental discussions on climate risks and opportunities, the Committee identified 8 opportunities and 11 risks. For more details, please refer to the Climate Change Risk and Opportunity Matrix section of this report.

Completed qualitative assessment on the financial impact of climate risk and opportunities and formulated risk mitigation measures accordingly (for more details, please refer to the Financial Impact Analysis of Climate Change section of this report); also implemented quantitative assessment of the financial impact from major climate risks.

Based on the 2-degree scenario of global warming set forth by the Intergovernmental Panel on Climate Change (IPCC), the committee analyzed climate risks in production & operation processes and formulated mitigation measures in compliance with the Climate Risk Adaptation Standards; also established TSMC's climate change strategy to strive towards Net Zero Emission.

Risk Management

Use the TCFD framework to develop a process for identifying climate risks

Held TCFD workshops and, through interdepartmental discussions, jointly identified, prioritized, and assessed the financial impact of climate risks/opportunities.

Formulate response measures based on the risks/opportunities identified and prioritized

Reported the assessment results of the climate risk/opportunities and relevant action plans to the ESG Committee Chair.

Integrate climate risks identification and assessment in the Enterprise Risk Management (ERM) process

For more details, please refer to the 6.3 Risk Management section in the 2020 TSMC Annual Report.

Indicators and Targets

Set management metrics related to climate change

Established the following as climate change performance indicators: GHG emissions per unit product, environmental footprint per unit product, amount of renewable energy purchased, total amount of electricity saved, improved production efficiency, and days of production interruption due to climate disasters. For more details, please refer to the Climate Change and Energy Management Strategies, Goals, and Outcomes section of this report.

Review impact on TSMC operations based on carbon inventory, carbon footprint, and life cycle analysis; also evaluated Scope 1, 2 & 3 risks and corresponding mitigation strategies

In accordance with carbon inventory results, the risks of Scope 1 emissions were reduced effectively because of continuous implementation of carbon reduction actions; the risk of Scope 2 indirect GHG emissions due to electricity consumption and the risk of Scope 3 due to supplier indirect emissions continue to increase. For more details, please refer to the Greenhouse Gases (GHG) Inventory section of this report.

Set climate change management targets and review progress & performance

Set climate change and energy management goals for 2030 in accordance with climate change performance indicators; senior executives performed regular reviews on implementation performance. For more details, please refer to the section entitled Climate Change and Energy Management Strategies, Goals, and Achievements and GHG Reduction Best Practices sections of this report.