In recent years, energy security and climate risks have increasingly converged, turning climate-related risks from issues of environmental compliance or emissions reduction into material financial concerns affecting corporate resilience, capital allocation, supply chain stability, and long-term competitiveness. The 2026 blockade of the Strait of Hormuz—described as “the largest global energy security threat in history”—underscored how geopolitical disruptions can permanently reshape perceptions of fossil fuel reliability and accelerate the shift toward renewable energy, electrification, and low-carbon systems. This broader trend was already identified in the IEA’s World Energy Outlook 2024, which warned that geopolitical tensions are exposing the structural vulnerabilities of fossil fuel-dependent and centralized energy supply chains, especially for Asian economies reliant on imported crude oil, natural gas, and fossil-based feedstocks. At the same time, physical climate risks are intensifying: the past 11 years have been the hottest on record, the remaining 1.5°C carbon budget could soon be exhausted, and even full implementation of current national commitments could still lead to around 2.5°C of warming by century’s end. Companies therefore face a dual climate risk: transition risks from changes in energy markets, carbon pricing, policy, and demand, and physical risks from extreme heat, drought, floods, typhoons, and supply chain disruptions.
Against this backdrop, climate transition should no longer be understood simply as a carbon reduction responsibility. It should be viewed as a long-term corporate strategy for responding to energy security risks, climate impacts, and market restructuring. For high-carbon companies, excessive reliance on fossil fuels and high-carbon products not only increases exposure to carbon costs, demand transition, and regulatory changes, but also heightens vulnerability to geopolitical conflicts and energy supply disruptions. By contrast, renewable energy, electrification, low-carbon processes, alternative feedstocks, and product portfolio adjustments are increasingly becoming important strategic tools for companies to reduce dependence on fossil fuels, strengthen operational resilience, and maintain competitiveness.
This trend is also reflected in changes to global sustainability disclosure systems. IFRS S2 Climate-related Disclosures brings climate risks and opportunities clearly into the assessment of financial materiality, requiring companies to disclose how climate-related issues affect their governance, strategy, risk management, metrics, and targets. In particular, with respect to transition plans, IFRS S2 does not merely require companies to disclose greenhouse gas emissions or make net-zero pledges. It requires companies to explain their specific strategies for responding to climate-related risks and opportunities, including mitigation and adaptation actions, business model and value chain adjustments, resource allocation, short-, medium-, and long-term targets, scenario analysis, key assumptions, and progress against previous plans.In other words, the core of climate disclosure under IFRS S2 is not whether a company has made a symbolic net-zero commitment, but whether its transition plan is executable, measurable, and financially credible. If a company has set a net-zero target or claims to be pursuing a low-carbon transition, it must disclose how it will implement that target through capital expenditure, research and development investment, supply chain management, product strategy, and governance mechanisms. This means that climate transition plans are gradually moving from corporate social responsibility or sustainability communication documents to an important information base for investors assessing long-term corporate value, risk management capability, and transition credibility.
However, there remains a significant gap between current corporate practice and these requirements. Assessments by the World Benchmarking Alliance of globally influential companies show that although many companies have set net-zero or emissions reduction targets, only a small number disclose concrete decarbonization actions, expected greenhouse gas reduction benefits, and the financial resources required. Only about 2.6% of companies disclose all key steps in transition planning. WBA therefore emphasizes that climate transition plans should not merely serve as compliance or reputation management tools. They should become core governance tools for companies to manage transition risks, energy security, supply chain pressures, and long-term competitiveness.
Taiwanese companies face the same institutional and market pressures. As a critical node in global semiconductor, steel, petrochemical, and electronics manufacturing supply chains, Taiwanese companies must respond not only to domestic carbon fees, energy transition policies, and sustainability disclosure systems, but also to expectations from international customers, financial institutions, and investors regarding renewable energy use, Scope 3 emissions, low-carbon products, and the credibility of transition plans. As the Financial Supervisory Commission promotes alignment with IFRS Sustainability Disclosure Standards, climate information disclosure will gradually shift from voluntary and narrative-based reporting to institutionalized disclosure that is comparable, verifiable, and financially material.
Based on this context, this assessment focuses on Formosa Petrochemical, China Steel Corporation, and TSMC, Taiwan’s three largest corporate emitters. Together, their emissions account for approximately 20% of Taiwan’s total emissions. The research framework is based on the recommendations of IFRS S2 Climate-related Disclosures and also references assessment results related to Taiwanese companies from WBA, Climate Action 100+ (CA100+), the Transition Pathway Initiative (TPI), and InfluenceMap. The report evaluates their climate performance across six dimensions: target setting, climate risks and opportunities, climate engagement, key metrics, governance and accountability, and just transition.
First, target setting. This study examines whether companies have set short-, medium-, and long-term greenhouse gas reduction targets aligned with the Paris Agreement’s 1.5°C pathway, and further assesses whether those targets cover Scope 1, Scope 2, and material Scope 3 emissions. The analysis focuses on the choice of baseline year, target boundaries, emissions coverage, the appropriateness of absolute emissions reduction and carbon intensity indicators, and whether companies clearly disclose the reasons for revising targets. This dimension aims to prevent companies from overstating progress by adjusting baseline years or emissions boundaries, while ensuring that targets are science-based and externally verifiable.
Second, climate risks and opportunities. Under IFRS S2, companies should disclose the effects of climate-related risks and opportunities on their business models, strategies, and financial prospects. Therefore, this study not only examines whether companies describe climate risks, but also assesses whether they translate scenario analysis into concrete financial impact assessments. The analysis covers carbon prices, energy prices, changes in product demand, asset impairment, revenue structure, cash flow, and capital expenditure needs. If companies remain at the level of qualitative risk descriptions without explaining specific impacts on financial position and operational strategy, they will be unable to meet investors’ need for decision-useful information.
Third, climate engagement. Climate transition involves interactions among a company’s own operations, supply chains, customers, markets, and policy environment. This study therefore examines whether companies have engaged with stakeholders that have material emissions impacts across the value chain, including supplier emissions reduction requirements, customer demand for low-carbon products, feedstock or product transition, and the alignment of industry association policy positions. Especially in sectors where Scope 3 emissions are significant, companies that do not establish engagement strategies for major upstream and downstream emissions sources may fail to cover material emissions hotspots in their transition plans.
Fourth, key metrics. This study treats capital expenditure, R&D investment, low-carbon investment, decarbonization strategy, product portfolio adjustment, and the phase-out of high-carbon assets as core indicators for assessing the credibility of transition plans. If companies claim to be pursuing net-zero transition, they should further disclose whether their resource allocation is aligned with their emissions reduction targets, including whether they are gradually reducing carbon lock-in assets, investing in science-based low-carbon technologies, and quantifying the expected contribution of each reduction measure to emissions reductions. A transition plan that lacks capital allocation and implementation indicators cannot be considered substantively credible.
Fifth, governance and accountability. IFRS S2 emphasizes the role of boards and management in governing climate-related risks and opportunities. This study therefore examines whether corporate boards regularly oversee climate risks, whether they possess the skills and competencies needed to assess climate issues, and whether executive remuneration is linked to concrete climate performance. If companies merely include climate issues under general ESG management without establishing clear accountability, oversight mechanisms, and performance links, their climate governance may remain largely formalistic.
Sixth, just transition. Low-carbon transition may have distributional impacts on workers, communities, and supply chains. This study therefore incorporates just transition into the assessment of corporate transition plans, examining whether companies identify potentially affected groups and propose corresponding measures for social dialogue, reskilling, job transfers, supply chain support, and community engagement. This dimension emphasizes that a credible climate transition plan must not only reduce emissions, but also avoid creating new social risks in the process of transition.
Key Findings on the Three Companies
Formosa Petrochemical
Formosa Petrochemical’s current shortcomings lie in the disconnect between its climate targets and actual emissions trends, as well as the fact that the scale of its low-carbon products remains far too small to alter its existing high-carbon revenue structure. Over the past three years, Formosa Petrochemical’s average annual Scope 1 and Scope 2 emissions have exceeded 20 million tonnes, while its Scope 3 emissions have reached more than 50 million tonnes. Yet the company has not set short-, medium-, or long-term targets for Scope 3 emissions. For the oil, gas, and petrochemical sector, a net-zero commitment cannot be considered complete if it does not address emissions from product use.
At the same time, although Formosa Petrochemical has begun developing low-carbon products, the scale of its plans remains far too small compared with its existing core products. The company has identified sustainable aviation fuel (SAF) as a low-carbon product direction, but even assuming a target annual production volume of 50,000 tonnes, this is minimal compared with its projected 2026 sales of 2.145 million tonnes of ethylene, 1.714 million tonnes of propylene, and 294,000 tonnes of butadiene. SAF would account for only about 1.2% of the combined sales volume of these three basic petrochemical products. This suggests that SAF currently remains a limited low-carbon product initiative, rather than evidence that Formosa Petrochemical has begun a business model shift capable of materially affecting its core revenue and product structure.
TCAN recommends that Formosa Petrochemical re-examine its baseline year and emissions reduction pathway, establish Scope 3 targets, and go beyond disclosing SAF production volumes. The company should further explain how SAF, circular materials, alternative feedstocks, and deep decarbonization technologies will gradually increase their share, replace high-carbon products, and affect its revenue structure and capital allocation. It should also strengthen value-chain engagement, climate policy alignment, and just transition planning.
Climate Performance Assessment of FPCC
China Steel Corporation
China Steel Corporation’s current shortcomings lie in the inconsistency of its emissions reduction targets. Across different plans, CSC has changed its baseline year and reduction timeline. This baseline adjustment allows its 2030 emissions level to be about 450,000 tonnes higher than under its original target, while also delaying the absolute reduction target that was originally supposed to be achieved by 2030. CSC’s carbon emissions intensity in 2024 remained at 2.33 tonnes CO2e per tonne of steel, while its actual scrap input ratio was only about 4%. If CSC maintains its existing production level and scrap ratio, it would need to achieve a substantive emissions reduction of 33.6% by 2030 to meet the science-based requirements of the SBTi steel sector guidance.
In addition, blast furnace life extension will further deepen transition risks. CSC plans to keep Dragon Steel’s No. 1 blast furnace and CSC’s No. 4 blast furnace operating until around 2040. This could lock in nearly 9 million tonnes of annual CO2e emissions by then. TCAN recommends that CSC improve transparency regarding changes to its targets, clearly explain absolute emissions levels for each target year and the contribution of each reduction measure, and promptly assess a timeline for phasing out blast furnaces. CSC should also expand investment in low-carbon steelmaking and establish substantive engagement mechanisms and quantitative indicators for high-carbon suppliers, industry association climate positions, and the labor impacts of transition.
Climate Performance Assessment of CSC
TSMC
TSMC’s current shortcomings lie in the fact that, although it has a relatively complete climate governance structure, renewable energy commitments, and supply chain engagement measures, its emissions continue to rise alongside advanced process development and capacity expansion. Its medium-term reduction targets are not yet sufficiently aligned with its 2050 net-zero pathway.
This gap is particularly evident in renewable energy use. TSMC’s overseas subsidiaries and global offices have achieved 100% renewable energy use for several consecutive years. However, its domestic fabs, which account for most of the company’s electricity consumption, advanced process capacity, and Scope 2 emissions, still have a renewable energy use rate of only about 6.2%, revealing a clear gap between domestic and overseas renewable energy performance. Although TSMC has signed 7.3 GW of renewable energy contracts, it still faces a shortfall of more than 10TWh in meeting its RE60 commitment by 2030. If this gap is not filled with locally sourced renewable electricity in Taiwan, it will further intensify pressure on Taiwan’s power supply system.
In terms of energy efficiency, TSMC has also not fully met its target of doubling energy efficiency five years after each process technology enters mass production. For its 5-nanometer process, energy efficiency had improved by only 0.6 times in the fifth year of mass production. Its Self-determined Reduction Plan also places too much emphasis on low-technical-threshold measures such as LED lighting replacement, while measures targeting major electricity hotspots—such as process equipment, EUV energy consumption, and fab facility systems—remain insufficient.
TCAN recommends that TSMC promptly follow SBTi requirements to set absolute reduction pathways covering Scope 1, Scope 2, and Scope 3 emissions; propose renewable energy procurement plans broken down by year and region; and establish KPIs such as electricity use by technology node, electricity use per mask layer, and energy consumption per wafer pass.
Climate Performance Assessment of TSMC
This report is being released ahead of the three companies’ shareholders’ meetings to help their combined base of more than four million shareholder accounts call on the companies to incorporate climate risk into corporate governance and investment decision-making. China Steel Corporation will hold its shareholders’ meeting on May 22, Formosa Petrochemical on May 26, and TSMC on June 4. Shareholders’ meetings should not only be occasions for reviewing business performance; they should also serve as critical moments to assess whether companies are capable of managing energy and climate risks.
As IFRS S2 increasingly requires companies to disclose climate transition plans, investors should not only examine whether a company has announced a net-zero commitment. They should also ask whether its emissions reduction targets are credible, whether its capital expenditure supports the transition, whether the board is fulfilling its oversight responsibilities, and whether climate risks are reflected in operational and financial planning. Shareholders’ meetings provide an important opportunity for investors to directly request explanations and commitments from companies. This report can serve as a basis for questioning, engagement, and oversight to accelerate corporate transition.
