Climate Risks and Opportunities and Related Financial Disclosures (TCFD)

To address potential risks and business disruptions brought by climate change, Acer Gadget refers to the TCFD framework (Task Force on Climate-related Financial Disclosures) to identify climate risks and estimate financial impacts. The Company aims to gradually establish a climate risk management system to inform future adjustments to business strategies and financial decisions.

● Asset damage: Extreme weather (e.g., typhoons, floods, droughts) may damage facilities or equipment, with repair costs estimated at ~NT$1 million per incident. This represents a typical physical risk to be factored into capex and insurance planning.

● Operational downtime: Office closures for several days could cause indirect losses. For example, with monthly fixed costs of NT$0.5 million, a 5-day shutdown may result in ~NT$0.1 million in losses. Such risks will be considered in business continuity and insurance coverage.

● Production and supply chain disruption: Extreme weather may block upstream transport or cause material shortages, delaying production and deliveries. For example, if Acer Gadget purchases NT$200 million in inventory monthly, a two-week disruption could result in ~NT$100 million in potential lost orders. Although no such losses have occurred to date, the growing frequency and intensity of extreme events highlight potential risks. Scenario analysis and financial impact assessments will help strengthen resilience and response capacity.

● Impact and response: Such losses could severely affect cash flow and customer trust. Planned measures include strengthening supply chain resilience through backup agreements with diverse suppliers, setting safety stock levels for key materials, and evaluating suppliers’ climate risk disclosures.

● Market impact: Extreme weather may disrupt logistics, infrastructure, or consumer demand in target markets, reducing revenue. For example, if a typhoon cuts seasonal sales by 10% from an expected NT$500 million, losses could reach ~NT$50 million. Such events affect short-term results and may also pressure inventory turnover and cash flow.

● Carbon tax and compliance: Stricter global rules may require Acer Gadget to pay carbon taxes or invest in emission reduction. Scope 1 and 2 baselines are already set per GRI 201-2.

Assuming a carbon tax of NT$500 per ton of CO₂, Acer Gadget’s total emissions are:
Scope 1 + Scope 2 = 0.26+43.34 = 43.6 tCO2e
Carbon tax cost: 43.6 tCO2e x NT$500/ton = NT$21,800.
Although internal carbon pricing has not yet been adopted, Acer Gadget is monitoring policy trends such as EU CBAM (Carbon Border Adjustment Mechanism) and IFRS S2 (International Financial Reporting
Standards: Climate-related Disclosures), and assessing potential impacts on supply chain, low-carbon investment, and financial planning. An internal review is in progress, with continued tracking to decide on possible adoption.

● Equipment upgrades: ~NT$30M one-time NRE with ODM partners for low-carbon upgrades, expected to cut Scope 1 and 2 emissions depending on efficiency.

● Water and waste management costs: 719 m³ water and 1,989.8 kg waste in 2024; costs to be evaluated for reduction, treatment, and recycling.

● Rising demand for eco-friendly products may cut Acer Gadget’s market share if unmet; a 10% annual growth on a NT$200M line could mean ~NT$20M loss.
1. Specifically 10% demand growth on NT$200M revenue = ~NT$20M.
2. If Acer Gadget fails to keep pace with market growth, annual losses could reach ~NT$20M.
To address this risk, Acer Gadget will closely monitor consumer demand and market trends and adjust its product lines accordingly.

The supply chain is a critical part of climate governance, as it affects both production efficiency and climate risk management. Acer Gadget will focus on three areas to strengthen supply chain resilience and sustainability in responding to climate risks:

● Diversified supplier selection: In line with GRI 2-6 and GRI 201-2, Acer Gadget sources from multiple regions to enhance supply chain resilience. This spreads risk and helps ensure continuity even if one region is disrupted by extreme weather or natural disasters. Key components are distributed across Asia, Europe, and the Americas. To further strengthen climate adaptation, the Company is extending risk management to include backup sourcing and off-site storage.

● Critical resource reserves: To address extreme weather or supply disruptions, Acer Gadget will maintain safety stock of key materials and components to reduce short-term production interruptions. This supports supply stability and overall resilience. In line with GRI 308-2, the Company conducts regular risk assessments to identify vulnerable resources or suppliers and adjust inventory strategies accordingly. As noted in SASB TC-HW-440a.1, Acer Gadget also uses inventory management systems for dynamic monitoring and adjustment to prevent shortages or surpluses from affecting production.

● Supplier carbon emissions management: In line with GRI 308-2, Acer Gadget evaluates suppliers’ carbon performance as part of environmental risk management. Partnerships are based on environmental results, and suppliers with high emissions or limited reduction efforts may be required to improve or face discontinued cooperation.

● Collaborating for green transition: In line with GRI 308-2, Acer Gadget works with suppliers to advance green transition and reduce the overall supply chain footprint. This includes co- developing sustainable materials and products, improving supply chain environmental performance, and driving greater efficiency with lower emissions.

● Supplier ESG evaluation and management: Acer Gadget has established an ESG assessment mechanism and completed evaluations of 25 key suppliers in 2024, covering environmental, social, and governance aspects. Results guide supply chain risk management and partner selection, with future application in climate risk adaptation to enhance overall resilience and sustainability (see Section 4.5).

● Use of data analytics and forecasting tools: In line with GRI 308-2, Acer Gadget applies data analysis and forecasting to improve anticipation of extreme weather and other climate risks. Datadriven adjustments strengthen supply chain responsiveness and reduce business impacts, for example by using weather data to guide early resource allocation.

● Emergency planning and response mechanisms: In line with GRI 308-2, Acer Gadget will establish and implement comprehensive supply chain contingency plans for natural disasters and other climate risks. Actions include engaging disaster-resilient suppliers and logistics partners and diversifying transport routes to ensure continuity under extreme conditions.