Climate and Nature Governance

Climate and Nature Governance Strategies
In the face of threats from extreme weather and the loss of natural capital, strengthening climate and natural ecosystem resilience while advancing both environmental conservation and shared well-being is an unavoidable challenge for business today. KGI Life is committed to its sustainable transition by aligning with international standards, strengthening its climate and nature management in line with the Task Force on Climate-related Financial Disclosures (TCFD) and Taskforce on Nature-related Financial Disclosures (TNFD) frameworks, and benchmarking against IFRS S1 and S2, the Sustainability Disclosure Standards issued by the International Financial Reporting Standards (IFRS) Foundation to ensure the quality and verifiability of its information.

TCFD

TNFD

TCFD

TNFD

The Company follows the LEAP approach developed by the TNFD to progressively strengthen its disclosures on nature-related risks across governance, strategy, risk management, and metrics and targets. This serves as a crucial foundation for enhancing sustainable governance and overall risk management effectiveness.

The Four Phases of the LEAP Approach

Analysis of Nature Dependencies and Impacts

An analysis of the Company's 2025 investees identified the electric power supply industry and the petroleum and coal products manufacturing industry as the two sectors with the highest degrees of nature dependency and impact.

Priority Industry 01

Electric Power Supply Industry

Power generation can consume large volumes of water, affecting ecosystems and the climate. The Company has begun tracking and managing its investees in this industry.

Priority Industry 02

Petroleum and Coal Products Manufacturing Industry

Mining coal and building drilling platforms can lead to deforestation and the destruction of terrestrial habitats. The Company will continue to monitor changes in portfolio risk.

Note: The 2025 analysis excludes mutual funds and ETFs.

Domestic Location Analysis in Nature-Sensitive Areas

None of KGI Life's domestic operating sites are located within legally designated environmentally sensitive areas. Only one operating site lies within one kilometer of such an area, representing 0.66% of all operating sites; the remaining 99.34% are not adjacent to legally designated environmentally sensitive areas.

The analysis confirmed that none of the operating sites of KGI Life's domestic electric power supply industry investees are located within legally designated environmentally sensitive areas for water and forests. Although about 15% of investee sites are adjacent to these areas, they represent only about 0.03% of the Company's total investment exposure, which is considered a controllable risk.

Location Results — Domestic Operating Sites

1 site Operating sites adjacent (within 1 km) to legally designated sensitive areas
0.66% Share of operating sites adjacent (within 1 km) to legally designated sensitive areas
151 sites Operating sites not adjacent (within 1 km) to legally designated sensitive areas
99.34% Share of operating sites not adjacent (within 1 km) to legally designated sensitive areas

Location Results — Domestic Investees

15.00% Share of investee sites adjacent to legally designated sensitive areas
0.03% Share of exposure adjacent to legally designated sensitive areas
85.00% Share of investee sites not adjacent to legally designated sensitive areas
0.05% Share of exposure not adjacent to legally designated sensitive areas
Currently showing the map and location results for domestic operating sites. Press Enter or Space to switch to the map and location results for domestic investees. Currently showing the map and location results for domestic investees. Press Enter or Space to switch to the map of domestic operating sites.

Foreign Location Analysis in Nature-Sensitive Areas

A review of the Company's overseas electric power supply industry investees confirmed that none of their sites are located within foreign forest protection areas or within one kilometer of them.

Global map of KGI Life's overseas investee operating sites and forest protection areas
Open North America detail map
Open Europe detail map
Open Asia detail map
Overview of Overseas Investee Operating Sites and Forest Protection Areas

Response Measures

The Company will continue to strengthen its evaluation of investment targets. If an investment involves major environmental pollution, has a major environmental impact, or carries substantial nature-related risks, it will adjust its investment strategy. It will also continue to monitor the proximity of its electric power supply industry investees to legally designated sensitive areas to support the conservation of natural ecosystems.

Nature-related Risks

Electric Power Supply Industry

Physical Risk

Reduced precipitation lowers river flows, leaving nuclear power plants with insufficient cooling water and causing damage to facilities, lower generation efficiency, and business interruption.

Transition Risk

Nuclear power generation may provoke public debate and controversy, eroding reputation and reducing revenue.

Petroleum and Coal Products Manufacturing Industry

Physical Risk

Declining soil stability, degradation of terrestrial ecosystems, and extreme weather may damage facilities and interrupt operations.

Transition Risk

Stricter regulatory requirements for waste treatment may increase compliance costs and even lead to litigation, fines, or loss of licenses.

Financial Impact on Investees
  • Lower revenue, asset value, and share price / net worth
  • Higher operating costs, compliance expenses, and liabilities
  • Possible early retirement of fixed assets
Financial Impact on KGI Life
  • Lower financial asset value, investment income, and interest income
  • Higher bond default rate
  • Reputation may be affected

Nature-related Opportunities

Electric Power Supply Industry

Resource Efficiency

Renewable energy such as wind and solar reduces impacts on species and cuts pollution, while strengthening energy resilience and supply security.

Market

The solar and wind power industries can capture rising demand for low-ecological-impact energy solutions, improving overall profitability.

Petroleum and Coal Products Manufacturing Industry

Resource Efficiency

Introducing wastewater recycling and reuse systems to recover process water during oil and gas production and gas treatment, thereby reducing groundwater withdrawal.

Sustainable Use of Natural Resources

Waste generated during production can be used as raw material by other industries.

Financial Impact on Investees
  • Higher operational resilience, non-operating income, and share price / net worth
  • Lower operating costs
  • Enhanced reputation and image
Financial Impact on KGI Life
  • Higher asset value, investment income, and interest income
  • Higher revenue
  • Enhanced reputation and image

Nature Physical Risk Scenario Analysis: Water Resources and Drought

Rationale
Drought can significantly impact the day-to-day operations and financial stability of electric power supply industry investees, which in turn affects KGI Life. By assessing drought risk under different climate scenarios, the Company can proactively identify investment risks and adopt corresponding management strategies.
Scope
All domestic electric power supply industry investee operating sites held by KGI Life as of December 31, 2025.
Scenario
An ambitious carbon reduction pathway (SSP1-2.6) and a severe warming scenario (SSP5-8.5).
Time Horizon
2030, 2040, and 2050.
Results

Within the electric power supply industry, dependence on water resources is highest for fossil fuel generation, followed by solar and then wind. Under the SSP1-2.6 scenario, drought risk levels are the same in 2030 and 2040, while by 2050 some sites in Hsinchu fall to a lower drought risk level. Under the SSP5-8.5 scenario, sites in Changhua County face a higher drought risk level in 2040 and 2050 than in 2030, whereas sites in Taoyuan City face a lower level in those years than in 2030, and by 2050 some sites in Hsinchu County fall below both their 2030 and 2040 levels. The drought risk for KGI Life's electric power supply industry investees therefore varies by scenario and time horizon, with most sites located in areas of medium to high drought risk.

TNFD Assess — Water Resources and Drought Scenario Maps

Climate Scenario
Year
Drought risk hazard map for the domestic electric power supply industry under SSP1-2.6 in 2030
Drought risk hazard map for the domestic electric power supply industry under SSP1-2.6 in 2040
Drought risk hazard map for the domestic electric power supply industry under SSP1-2.6 in 2050
Drought risk hazard map for the domestic electric power supply industry under SSP5-8.5 in 2030
Drought risk hazard map for the domestic electric power supply industry under SSP5-8.5 in 2040
Drought risk hazard map for the domestic electric power supply industry under SSP5-8.5 in 2050
Response Measures
Water use is strengthened through water-saving measures such as recycling water, lowering process water consumption, and reusing treated wastewater.

Nature Transition Risk Scenario Analysis: Water Consumption Fee

Rationale
This analysis estimates the water consumption fees investees may pay and the resulting financial impact on them.
Scope
Domestic listed and OTC company stock investees that are large water users, defined as those consuming over 9,000 cubic meters per month in the dry season.
Scenario
Orderly Transition, Disorderly Transition, and Fragmented World.
Time Horizon
2030, 2040, and 2050.
Results
Across all transition scenarios, the ratio of investees' water consumption fees to revenue rises over time. Even under the most severe 2050 Fragmented World scenario, the estimated water cost remains below 1% of revenue, so the risk is considered controllable.
Financial Impact

Estimated water consumption fee as a percentage of investees' revenue under each transition scenario:

Scenario Name
2030
2040
2050
Orderly Transition
0.301%
0.404%
0.514%
Disorderly Transition
0.306%
0.415%
0.525%
Fragmented World
0.306%
0.420%
0.536%
Response Measures
The Company will continue to identify, measure, and monitor nature-related transition risks, and will evaluate whether to maintain these positions.

Nature Transition Risk Scenario Analysis: EU Deforestation Regulation

Rationale
This scenario analysis uses the Forest IQ database to screen for high-deforestation-risk investments and to assess the potential financial impact of holding these positions.
Scope
KGI Life's domestic and foreign equity and debt investments as of December 31, 2025.
Scenario
The FPS+Nature 1.8°C pathway scenario, which simulates policy measures that may be implemented globally.
Time Horizon
2030 and 2050.
Results
The Forest IQ database was used to screen for high-deforestation-risk investments and to estimate deforestation risk costs across different time horizons.
Financial Impact

Estimated deforestation risk cost as a percentage of revenue:

Response Measures
The Company will continue to develop and apply risk management tools such as scenario analysis to regularly identify, measure, and monitor deforestation-related transition risks, which serve as a crucial input for its investment decisions and risk management.

Portfolio Water Metrics

The Company analyzes its listed and OTC investment portfolio using three water management metrics. The review found no holdings in industries that are both highly water-dependent and located in high water-stress areas, and a significant portion of companies have established water management policies, indicating that the overall water risk is controllable.

Highest Water Withdrawal Intensity

Electricity and Gas Supply

Electricity and gas supply ranks highest among the top 10 industries by portfolio weighted-average water withdrawal intensity.

Highly Dependent and High Water Stress

None

There are no holdings in industries that are both highly water-dependent and located in high water-stress areas, so the overall risk is controllable.

Share with Water Management Policies

80%

Within electronic components manufacturing, the industry with higher exposure, 80% of companies have water management policies.

Portfolio Forest Metrics

The Company uses the Forest IQ database established by Global Canopy to analyze the potential deforestation risk in its portfolio, based on whether companies' activities and locations involve key deforestation-linked commodities.

Exposure with Deforestation Risk

2.19%

Share of portfolio exposure linked to companies with deforestation risk.

Zero-Deforestation Policy Disclosed

11.50%

Share of deforestation-risk exposure attributable to companies that have publicly disclosed zero-deforestation policies.

Overall Assessment

Low deforestation risk

The Company will continue to use relevant metrics to enhance the identification and monitoring of, and engagement on, forest-related nature risks.

Note: As the financial industry's deforestation risk is indirect, arising from its financing activities, financial sector investees are excluded from the portfolio deforestation exposure analysis.

Management Conclusion

There are no holdings in industries that are both highly water-dependent and located in high water-stress areas, so the overall water risk is controllable.

Ongoing Management

The Company will continue to use water- and forest-related metrics to identify, measure, and monitor nature-related risks, adjust its investment strategy according to materiality, and encourage investees to strengthen nature risk management through engagement and disclosure.

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