Climate Change

Climate change refers to long-term shifts in temperatures and weather patterns, primarily driven by human activities. In enterprise risk management, it is a systemic risk with two main categories, as outlined in ISO 14090:2019 (Adaptation to climate change). 'Physical risks' include acute events like typhoons and chronic changes like sea-level rise, directly impacting assets and supply chains. 'Transition risks' arise from the shift to a low-carbon economy, encompassing policy changes (e.g., carbon taxes), technological disruption, market shifts, and reputational damage. Unlike traditional risks, climate change is characterized by deep uncertainty and long-term, irreversible impacts, making its integration into strategic planning and ERM frameworks essential for corporate resilience and sustainability.

Applying climate change in ERM involves integrating the TCFD framework or IFRS S2 standards. The process includes three key steps: 1) **Governance and Strategy**: Establish board-level oversight and integrate climate considerations into corporate strategy using scenario analysis to test resilience against various warming pathways (e.g., 1.5°C). 2) **Risk Identification and Quantification**: Systematically identify physical and transition risks across the value chain and quantify their potential financial impacts. 3) **Management and Disclosure**: Develop risk mitigation (e.g., adopting renewables) and adaptation (e.g., climate-proofing assets) plans with clear metrics. A leading Taiwanese tech company, for example, uses this process to assess flood risks for its fabs and evaluate carbon pricing impacts, resulting in strategic investments in water recycling and green energy. This proactive management improves its ESG rating and reduces potential operational disruptions, measurably enhancing long-term value.

Taiwan enterprises face three primary challenges: 1) **Data and Capability Gaps**: A lack of high-resolution, localized climate projection data hinders accurate physical risk assessment, and there is a shortage of talent skilled in both climate science and financial analysis. Solution: Leverage public data for initial screening and partner with expert consultants for quantitative modeling, while investing in internal training. 2) **SME Resource Constraints**: As the backbone of the supply chain, many small and medium-sized enterprises (SMEs) lack the financial and human resources to implement robust climate risk management. Solution: Large corporations should lead supplier engagement programs, while the government can provide subsidies. 3) **Regulatory Uncertainty**: The rapidly evolving landscape of local and international climate regulations (e.g., Taiwan's carbon fee, EU's CBAM) creates compliance uncertainty. Solution: Establish a proactive regulatory tracking process and align internal standards with global best practices like IFRS S2 to stay ahead of changes.

Winners Consulting specializes in Climate Change for Taiwan enterprises, delivering compliant management systems within 90 days. Free consultation: https://winners.com.tw/contact