Climate change has become one of the most urgent risks globally. Taking voluntary and proactive measures to identify and manage climate change risks and opportunities is essential for harmonizing financial and economic activities, social well-being, and the Earth's ecology. To mitigate the impact of climate change on business operations, the Company has established a climate change risk management mechanism, which follows the guidance of the TCFD framework and aligns with the SKFH Sustainable Finance Policy. We have incorporated "climate change risk" into the Company's risk management policy and continuously seek improvement by integrating it with our existing corporate risk management framework. We employ three lines of defense for internal control to manage climate change risks effectively.

Climate Risk Management Framework

The Company's climate change risk management is divided into three lines of defense, with responsibilities assigned accordingly. The business units are responsible for risk adaptation and mitigation actions, while the risk management unit conducts regular risk identification and establishes a climate change matrix. Through scenario analysis and stress testing, the impact of climate change risks is assessed, and relevant indicators are set for monitoring. The audit unit later verifies and provides recommendations.

Climate Risk Management Mechanism

Climate Change Risk Management Guidelines	Establish investment and financing procedures that consider climate change risks Depending business characteristics, choose to establish engagement mechanisms with counterparties or clients to encourage them to take measures to mitigate their climate change risks
Investing and Financing Activities	Incorporate climate factors into investment, financing, and real estate related regulations Identify industries with potential controversial issues Conduct climate risk assessments for carbon-intensive industries before making investments. If the transaction involves a carbon-intensive industry, conduct a climate risk assessment.
Risk Management for Insurance Products	Follow the Principles of Sustainable Insurance (PSI), actively incorporate ESG issues into insurance product decision-making and develop sustainable insurance products to assist policyholders in exploring solutions to environmental changes and other challenges
Operating Activities	Set up a "Business Crisis Response Team" to establish crisis response measures and the emergency reporting regulations Implement a Business Continuity Management System (BCMS) to reduce the likelihood or extent of operational disruptions Promulgate environmental policies to integrate the concept of low carbon into various business operations to minimize our impact on the environment