Climate Risk Management | Risk Management and Actions | Climate Action

Risk Management and Actions

The World Meteorological Organization (WMO) stated¹ that “continuing climate change, an increasing occurrence and intensification of extreme events, and severe losses and damage, affect economy, society, and the environment.” On the other hand, after the Paris Agreement came into effect, the world has accelerated its pace towards a low-carbon economy with a common goal of limiting earth’s warming to 2 °C by the end of the century, with efforts directed towards keeping it below 1.5 °C. The coexistence of physical risks from climate change and transition risks arising from stricter international decarbonization policies has placed companies in a “climate risk dilemma”: proactive responses demand substantial transformational investments and associated costs, while passive approaches risk exposing them to significant physical damages and operational disruptions.

Step1.

Risk Identification

Evaluate major climate events with a risk matrix to identify the frequency and impact of risk events
Identify the financial implications of prioritized physical and transition risks

Step2.

Risk Control / Mitigation

Incorporating climate risk as a key issue in continuous management
Develop response strategies and monitoring mechanisms for climate risks

Step3.

Risk Monitoring / Reporting

Continuous monitoring and management of climate risks through the Business Continuity Management (BCM) committee, combined with operational practices to demonstrate organizational resilience

Climate Risk and Opportunity Identification

ASUS identifies priority physical and transition risks based on the impact magnitude and frequency/probability of risk occurrences. These include:

Risk and Opportunity Identification: a bubble matrix mapping ASUS' transition risks (R1-R9) and opportunities (O1-O6) by impact level and period of occurrence.

Material Climate-Related Risks and Opportunities

Based on the aforementioned identification process, ASUS has identified material risks and opportunities with high financial impact, including ‘Carbon Pricing,’ ‘Carbon Credit Opportunities,’ ‘Green Product Design,’ and ‘Innovative Business Opportunities.’ The following describes, by transition risk/opportunity type and time horizon, the impact of each issue on ASUS’s operations and supply chain, assessing their impact on current and future financial performance through scenario simulation.

Climate Risk/ Opportunity	Type	Time Horizon²	Cause	Financial Impact	Value Chain Concentration Point
Carbon Pricing	Transition Risk	Medium-term	EU ETS and China’s expanding carbon market coverage Supplier carbon tax costs passed through to procurement prices	Increased procurement/contract manufacturing costs (operating costs)	Upstream supply chain
Carbon Credit Opportunities	Opportunity	Near-term	Corporate net-zero commitments driving growth in demand for high-quality carbon credits Limited supply of nature-based and technology-based carbon removal, leading to long-term price increases	New revenue from carbon partner services/carbon credit sales Long-term asset appreciation from carbon credit projects	Own operations
Green Product Design	Opportunity	Near-term	EU and other regions continuously updating energy efficiency standards Eco-label products becoming a requirement for corporate procurement	High energy efficiency can command a product premium, boosting revenue Attracting new customers, increasing green-product-related revenue	Own operations
Innovative Business Opportunities	Opportunity	Near-term	Rapidly rising demand for climate disclosure, carbon management, and supply chain decarbonization is driving corporate demand for digitalized, AI-enabled ESG management solutions, enabling commercialization of ASUS’s AI x ESG platform	New revenue streams from SaaS and advisory services Increasing the revenue share of climate-transition-related products and services	Own operations

Climate Change Opportunities

ASUS follows the “Climate Resilient Development” framework as defined by the IPCC AR6, incorporating strategic opportunities that deliver both mitigation and adaptation benefits into its business model planning.

Opportunity identification covers two major categories: mitigation opportunities (creating competitive advantage by reducing greenhouse gas emissions) and adaptation opportunities (providing solutions that respond to the impacts of climate change), and evaluates each opportunity’s financial scale, realization timeline, and required resource allocation. The financial scale of each opportunity is quantified using a market estimation approach, based on publicly available data such as the relevant industry’s market size, market growth rate, and market pricing, combined with ASUS’s existing product and service capabilities and estimated market share, to estimate the potential revenue range of each opportunity. This allows ASUS to gauge the order of magnitude of each business opportunity as a basis for resource allocation and strategic prioritization.
For ASUS, climate mitigation opportunities primarily stem from reducing the carbon footprint of its products and offering low-carbon products to customers. Climate adaptation opportunities derive from the ASUS Carbon Partner Services, which not only assist customers in achieving net-zero targets but also, by procuring high-quality nature-based carbon credits, indirectly protect forests and slow the pace of climate change.

Risk Reduction Opportunities

Reducing the sources of greenhouse gases (GHGs) through human efforts

Increase Revenue from Green Products

Risk Adaptation Opportunities

Propose ways to avoid climate impacts and create opportunities to improve climate change when adapting to actual or expected weather condition and its impacts

Providing Carbon Partner Services

1. https://wmo.int/news/media-centre/rising-temperatures-and-extreme-weather-hit-asia-hard

2. Time horizon: near-term 1-3 years, medium-term 3-10 years, long-term over 10 years.