Geopolitical tensions, extreme weather events, and technological breakthroughs intensified and presented as both challenges and opportunities in 2023. In response to rapidly evolving circumstances, TCFHC firmly believes that focusing on accountable and robust corporate governance, adopting disruptive technologies for low-carbon transition, and advancing sustainable development reciprocally with society are our pivot strategies. These strategies represent flourishing prospects for which our employees, clients, and shareholders endeavor to collaborate closely and collectively. 

In this light, I would like to reiterate our commitment to advancing sustainable development. To enhance momentum and oversight for implementation in a top-down manner, we upgraded the "Sustainability Management Committee" to a functional committee, and elevated the "Sustainability Office" to a formal management unit led by CEO, who currently serves as the Chief Sustainability Officer of TCFHC. 

Robust Corporate Governance

The economy grew steadily in 2023 with private consumption sharply recovered in the aftermath of the pandemic, driven by strong consumer confidence and corporate investment. Nevertheless, high interest rates and inflation held back consumption and investment, while the ongoing Russia-Ukraine war and the Israel-Palestine conflict intensified geopolitical risks reflected in global financial markets.

On the other hand, climate change and technological advances are dominating the risks landscape as highlighted in "The Global Risks Report 2024" published by the World Economic Forum. While the Artificial Intelligence (AI) is quickly adopted across industries, we should be cautious about the rise of "misinformation and disinformation". Considering that "extreme weather events", "critical change to Earth systems", and "biodiversity loss and ecosystem collapse" are on the long-term top 10 risks list and associated with the environment, we understand that the pursuit of sustainable development needs to pay further attention to non-conventional challenges.

Facing the rapid-changing environment and risk outlook, we are devoted to advancing accountable and robust corporate governance and reinforcing management of emerging risks. Regarding corporate governance, building upon existing customer engagement and synergy created across subsidiaries, we are improving asset quality consistently. The consolidated net profit after-tax reached NT$17.878 billion, and the after-tax return on net worth and after-tax return on assets were 7.66% and 0.39%, respectively. Earnings per share after tax were NT$1.17. To enhance climate risk governance, in addition to formulating a new climate risk appetite statement and reviewing the overall tolerance of climate-related risks, we have further improved nature-related risk identification and management procedures. In December 2023, we were honored as the first public financial holding company from Taiwan to participate in the Forum of the Task Force on Nature-related Financial Disclosures (TNFD). This recognition reflects our relentless efforts to incorporate emerging risk management and disclosure frameworks in investment and financing decisions, as well as our extensive collaboration with clients to enhance climate actions, ecological conservation, and protection of natural capital.

Innovation and Sustainability

Considering various physical and transitional risks brought about by global warming, we consistently implement low-carbon transition through financial innovation which benefiting climate mitigation and adaptation actions. In 2023, we joined the Science Based Targets initiatives (SBTi), set a 2050 net-zero target, and became the first state-owned financial holding company passed the SBTi mid-term carbon reduction target review in August. Every year we not only conduct greenhouse gas inventories at all locations at home and abroad, but also improve energy efficiency and renewable energy usage by conserving, self-producing, and purchasing green energy. Furthermore, we have introduced the carbon footprint disclosure and internal carbon pricing mechanisms to enhance internal carbon awareness and coordinate our actions on climate change, ecological reservation and natural capital protection with external stakeholders.

To support Taiwan’s 2050 Net-Zero Emission Pathway and curb carbon emissions society-wide, we have proactively informed our corporate clients of international trends, such as the EU Carbon Border Adjustment Mechanism (CBAM), disclosed relevant information, and promoted ESG transition through loan and credit business channels. At the end of March, for example, TCB invited more than 700 companies to join an "ESG Targeted Industries Engagement Forum" where 3 sustainable transition approaches were introduced to our SME clients to understand the value of sustainable investment and ESG solutions. In order to encourage SMEs to introduce ESG for strategic transformation, TCB works with Dun & Bradstreet, Inc., the world’s largest commercial data company, to affiliate SMEs with emerging carbon reduction trends of the global supply chains, perform structured greenhouse gas inventory checks, keep track of product carbon footprints, and prepare short, medium, and long-term carbon reduction plans, etc. Another event of "Sustainable Cooperation of SMEs - The Century Island Wedding of TCB and ESG" was held in December, during which the CommonWealth Magazine and the Taiwan Carbon Solution Exchange witnessed the milestone that we were the 1st company engaged with 5,000 SMEs that agreed to carry out carbon reduction plans.

In addition, TCB invested NT$73.8 billion in green energy businesses and the issue of sustainable use-of-proceeds bonds in 2023. The cumulative issuance of ESG bonds also led among all state-owned banks, reaching NT$8 billion and granted us as the first state-owned financial institution issue bonds in all the 3 categories of sustainable use-of-proceeds bonds: green bonds, social bonds, and sustainability bonds.

Developing and providing high quality, innovative and safe financial services is indispensable for the effective implementation of low-carbon transition. The "Innovation Laboratory (CoLAB)" completed 7 digital projects and 21 digitalization projects in 2023, including utilizing customer experiences, digitizing operational processes, and 1 "Empowering Digital Talents and CoLAB Incubator" project, a total of more than 800 patant applications have been submitted. In order to protect these achievements resulting from R&D sufficiently, the "Taiwan Intellectual Property Management Standards (TIPS)" was introduced in 2020 to accomplish the intellectual property management system. Our collective efforts were rewarded with Level A verification for 4 consecutive years, laying a solid foundation for sustained growth and competitiveness. Moreover, TCB has been granted 223 patents that topped the list of patent applications in the banking industry for 2 consecutive years. As a result, TCB also set a remarkable record of holding the most patents approved at all times among all the banks.

Furthermore, in terms of information security, TCFHC formulated the "Information Security Policy" and appointed a Chief Information Security Officer equivalent to an Executive Vice President, established an information security management system, and formed a task force. In addition to introducing the "ISO 27001 for Information Security Management Systems" to ensure confidentiality, integrity, and availability of the corporate information security management system, TCB adopted the "ISO 22301 for Business Continuity Management Systems" to enhance financial resilience through capacity building of emergency responses and business continuity plans and thus customer rights could be better secured. TCB has also purchased the "Cyber Liability Insurance" for NT$150 million every year since 2022 to mitigate cyber risk and minimize potential losses in any unlikely event that the information systems are compromised.

Social Inclusion

We recognize that promoting sustainable development and net-zero transition needs to center on the imperatives of a just transition and social inclusion. This is to ensure our actions aligned with the pledge of "Leaving No One Behind" (LNOB), which is underscored in the COP26 "Declaration of Just Transition" and is the central, transformative promise of the SDGs. LNOB emphasizes that net zero actions should be people-centered, committed to protecting and improving the well-being of stakeholders, and continuously improving communication and cooperation with employees, clients, suppliers, shareholders and other interested parties.

In order to advance employees’ awareness of environmental sustainability and to establish an atmosphere for the common good, we have been promoting environmental education and protection. Employees are encouraged to embrace ESG expertise by taking courses and certification examinations to further incorporate sustainable development into their daily lives and business activities. We also pay close attention to gender equality and are committed to fostering workplace practices optimal for gender diversity, equality and inclusion. We emphasize the significance of equal rights and opportunities of employees of different genders in terms of hiring, promotion, on-the-job training, childcare, compensation, and so on. 

Following the first-of-its-kind program of "Seed Staff of Long-term Care Services", we have been nurturing trust professionals intensively. As of the end of 2023, there were 630 "Eldercare Financial Planning Consultants" and 81 "Family Trust Planning Consultants" providing clients with professional asset trust planning and LOHAS(Lifestyles of Health and Sustainability) consultation services. Upholding person centered values and improving social well-being, TCB has launched a variety of financial products and services for SMEs, startups, regional revitalization, agricultural/fishery industries, youth and long-term care institutions. Our efforts to promote the "Business Start-up Loan for the Unemployed of the Employment Insurance Act", "Loans for Startup Assistance for Unemployed Middle-aged Persons and Elderly Persons", and "Micro/Women Start-up Loans" were commended by the Ministry of Labor and accounted for a market share of 28.08%.

Over the years, TCFHC’s outstanding performance on ESG has been highly recognized domestically and abroad. In 2023, TCFHC achieved significant milestones by being included for the first time in prestigious sustainability indices such as the "World Index" and "Emerging Market Index" of the Dow Jones Sustainability Indices (DJSI) as well as the Bloomberg Gender Equality Index (GEI). In addition, TCFHC is featured in various other sustainability indices, such as the Morgan Stanley (MSCI) ESG Index, the FTSE4Good Emerging Index, the FTSE4Good Taiwan Sustainability Index, and the Taiwan Corporate Governance 100 Index. Furthermore, TCFHC’s commitment to sustainability was acknowledged with listings in the "CommonWealth Top 100 Citizens of Sustainability", and receiving accolades such as the "National Enterprise Environmental Protection Award - Silver" from the Ministry of Environment, and the "Sustainability Resilience Leadership Award" from the British Standards Institution (BSI).

Recognizing the significant risks posed by global challenges such as the dynamic business environment and climate change, we acknowledge that rare opportunities may also arise. In this light, we emphasize the importance of adopting international initiatives, including SDGs, Principles for Responsible Investment (PRI), Principles for Responsible Banking (PRB), and Principles for Sustainable Insurance (PSI). We are committed to strengthening connections with local communities, enhancing corporate governance, and implementing sustainable development strategies to leverage business strengths and seize opportunities. Through relentless collaboration with employees, clients and investors, we are exploring new values of sustainability.