Sustainable Finance

■ Sustainable Lending Business

Global temperatures continue to rise, and extreme climate events are becoming more frequent. Climate change has become a major global risk issue, and countries around the world have proposed carbon reduction targets. Taiwan's government has also formulated the Green Finance Action Plan 3.0 to encourage financial institutions to use funds to support the sustainable development of industries and enterprises. E.SUN Bank has long been committed to environmental sustainability and responds to international trends and domestic policies, by continuously supporting corporate sustainability transformation and promoting industry progress towards net-zero targets through green credit, sustainability-linked loans, and ESG industries credit.

Balance unit: NT$ million

Sustainable lending		Outstanding balance as of 2021	Outstanding balance as of 2022
Green Loans		18,726	53,741
Sustainable-Linked Loans		10,681	40,642
Total value of sustainable lending		29,407	94,383
Total value of corporate lending		782,957	866,051
Percentage over total corporate lending		3.76%	10.90%

Loans to ESG Industries

In 2022, E.SUN continued to invest resources in industries that are friendly to the environment and society, such as industries involved in green power generation, energy conservation and environmental protection, circular economy, medical care and education, and supported key industrial development policies promulgated by the government.

(NT$M)

Loans to ESG industries	Industry categories	Outstanding loan balance as of 2021	Outstanding loan balance as of 2022
Environmental-friendly Industries	Solar power	883	1,055
	Bicycles	6,000	7,112
	LED	729	732
	Batteries	2,576	2,929
	Electric vehicles	353	114
	Circular economy	3,144	3,439
Social-friendly Industries	Medical care	22,733	24,454
	Education	7,105	6,161
	Sports & Fitness	4,206	4,360
	Telecommunications and fixed network	3,540	4,176
	Network communications and internet	4,924	6,456
	Industrial robots	83	17
Innovative industries*	5+2 Innovative Industries and supply chains	205,188	211,410
	Total loans to ESG industries	261,464	272,415

* Based on the definition of the government's 5+2 Innovative Industries, while excluding the defense sector and sub-industries with higher sustainability risks in the related supply chain (such as cement, plastic, steel, etc.). Overlapped lending has been excluded.

Green Loans

E.SUN established relevant bylaws and regulations with reference to the Loan Market Association's Green Loan Principles. The purpose of this is to support business sustainability and extend green loans for green projects to assist enterprises in investing in clean energy, energy storage systems, water resources and environmental pollution control, environmental protection products or equipment, and green buildings, etc. As of 2022, the balance totaled NT$53.7 billion, with an annual growth of 133%.

Development in the past three years：

* Installed capacity: In 2022, the disclosure method was adjusted, and the supported project site installed capacity was recognized according to the credit amount participation ratio of the case (i.e., allocated amount/total project amount). If calculated according to the new disclosure method, the installed capacity of wind power and solar photovoltaic in 2021 should be 398MW and 353MW, respectively.
* Expected carbon reduction: According to the installed capacity of the project site supported by E.SUN (including projects under construction) × 80% (financing ratio) × 8,760 hours × wind power capacity
* Social cost of carbon is calculated by $190 USD/ton of CO2, based on the research data in "Report on the Social Cost of Greenhouse Gases"(U.S. EPA, 2022)

Sustainability Linked Loans

To encourage companies to establish and achieve ESG development goals, and to continue investing in sustainability-related initiatives, E.SUN Bank refers to the LMA Sustainability Linked Loan Principles, designs relevant regulations and operating procedures, and establishes an ESG assessment form. We evaluate the company's actual investment in ESG, sets sustainable development goals through joint discussions with companies, and provides financial service benefits if the company achieves those goals. By 2022, a total of 139 cases have been approved, with a balance of NT$40.6 billion (NT$10.7 billion in 2021). In 2023, E.SUN will continue to promote sustainability linked loans, encouraging more companies to set ESG goals, while incorporating performance into the evaluation of business units to guide them to grasp customer sustainability development progress, and enhancing their impact on the environment and society.

■ Sustainable Investment Business

2022 Results

E.SUN continues to invest in environment- and community-friendly industries. In 2022, E.SUN issued 1 social bond with a total amount of NT$1.1 billion for the first time, along with NT$7.3 billion worth of green bonds. Following the issuance of the country's first green bond in 2017 with a total of 7 NT Dollar Denominated and 1 U.S. Dollar Denominated sustainable bonds, E.SUN ranks first among Taiwan's domestic banks in terms of the sustainable bonds issuance scale. E.SUN adopts a financial management strategy that integrates the concept of sustainable development, the funds raised are lent to support green investment plans involving renewable energy, greenhouse gas reduction, and water resource conservation, as well as socially beneficial investment plans such as basic service requirements, affordable housing, socioeconomic advancement, and protection of interests and rights.

Sustainable Bonds issuance

Green Bonds	USD	60,000,000
	TWD	14,400,000,000
Sustainability Bonds	TWD	1,600,000,000
Social Bonds	TWD	1,100,000,000

2022 Sustainable Bonds issuance volume	TWD	8,400,000,000
2022 bonds issuance volume	TWD	13,400,000,000
Percentage over total bonds issuance		62.69%

E.SUN assists companies to raise funds for sustainable development goals. In recent years, E.SUN has acted as the underwriter of 22 green bonds, 7 sustainability bonds, and 2 social bonds, with a total underwriting amount of approximately NT$8.8 billion in 2022, accumulating a total of more than NT$23 billion by the end of 2022. Through its competence in the financial industry, E.SUN helps companies fulfill their needs in ESG and make contribution to Taiwan's sustainable development, continuing to expand the underwriting volume at an annual rate of 23.26% in 2022, striving to become the top brand in sustainable bond market.

Sustainable Bonds underwriting

2022 Sustainable Bonds underwriting volume	TWD	8,807,928,000
2022 overall Sustainable Bonds volume	TWD	113,442,338,000
Proportion of underwriting volume in the year		7.76%

E.SUN provides advisory services through underwriting sustainable bond process as well as financing offshore wind power and solar power projects. Green energy is the key to Net-Zero Emissions, the development of zero-carbon energy sources such as offshore wind power and solar power can promote the transformation of energy and power supply structures to low-carbon or zero-carbon structures. E.SUN provides sustainability related project hedging services and financial services to support environmentally friendly projects. In 2022, E.SUN provided Interest Rate Swap (IRS) hedging services for 5 new offshore wind power and solar energy project finance, worth NT$6.8 billion, accumulating a total of approximately NT$18.6 billion by the end of 2022. E.SUN will continue to unleash its financial expertise to exert its influence and assist enterprises in implementing environmentally friendly projects and giving full support to government policies.

■ Retail Banking

Sustainable Loans and Mortgages

E.SUN pays constant attention to environmental and social issues and launches a diverse range of ESG loans and mortgages to help customers build their beautiful and sustainable home. These products include "green buildings mortgage," " solar roof loan," " electric vehicle loan," and"care-free mortgage" As of the end of 2022, E.SUN assisted more than 11,557 customers in achieving their sustainable ideals. The balance of sustainable loans and mortgages reached NT$121.16 billion, accounting for 12.55% of the total retail banking balance.

(NT$M)

Dimensions	Loan and Mortgage Projects that promote sustainability	2022		Percentage of the total retail banking balance (%)
		Number of cases	Loan balance
Environment	Green buildings mortgage (Promotes purchase of certified green buildings)	760	11,338.26	12.55 %
	Solar roof loan (Assists individual households or small business in setting up rooftop solar power generation equipment)	5	11.64
	Electric vehicle loan (Encourages the purchase of electric vehicles)	2	5.37
Society	Care-free mortgage (Provides young people and lower income families with affordable housing solutions, granting them housing subsidies and grace periods to assist them in forming their own families.)	11,155	108,720.86
	Reconstruction of urban unsafe and old buildings loan (Responds to the government's policy, and assists customers in rebuilding unsafe and old houses to enhance their living safety)	49	822.63
	New Immigrants Dream Loan (Assists new immigrants in meeting their financial needs for work and life in Taiwan)	269	267.88
	Total number of cases and loan balance	11,557	121,167

【Retail banking business】-
2022 ESG-related Products and Number of Individual Customer Participating

Item	Description	Number of customers participating	Number of customer
Reconstruction of urban unsafe and old buildings loan	We will engage customers to reconstruct old buildings into modern, eco-friendly, and energy efficient housing that meets social needs. It will also improve the overall quality and functionality of urban areas for daily life and improve the safety of housing.	21	117,379
Green buildings mortgage	We encourage customers to choose eco-friendly, energy efficient green buildings that generate less waste when purchasing houses.	335
ESG credit cards	A portion of revenue from credit card payments is used to construct libraries in rural areas and support environmental and wildlife conservation.	115,161
Green consumption	For World Earth Day, we encourage customers to purchase electric scooters, organic food products, and eco-friendly products.	3,222
Credit / lending clients in retail banking segment	Number of customers approved for mortgages, credit loans, and credit cards in 2022.	-	400,535

■ Inclusive Finance

Dementia-Friendly Financial Plan

E.SUN has partnered with the Taipei City Hospital to promote a dementia-friendly plan. The Interdisciplinary Immersive Education Development Center of Taipei Hospital integrates neurologists, clinical psychologists, and standardized teachers to provide professional courses on dementia trends and empathetic services to E.SUN employees using innovative simulation training modules. Employees interact with trained standardized teachers to enhance the service skills of "watching, asking, staying, and calling": watching - identifying people with dementia, asking - discovering and addressing their needs, staying - providing appropriate assistance, and calling - notifying their family or relevant authorities. This improves employees' recognition and empathetic services for customers with dementia.

Inclusive Finance Wealth Management Product - Microinsurance
Disadvantaged and underserved groups

In 2022, E.SUN cooperated with insurance companies and county/city governments to expand the impact of microinsurance, by assisting economically disadvantaged and special status individuals to obtain basic insurance coverage with lower premiums. This includes providing basic microinsurance for economically disadvantaged elderly aged 65-75 in Tainan City with estimated over 8,000 beneficiaries, and for low-income households, the near-poor households, and individuals with impairments in Hualien County, protecting disadvantaged families and covering their daily needs.

(NT$ Thousand)

Insurance Products	Targeted Clients	Number of Cases	Premium
Microinsurance	Economically disadvantaged individuals with specific status and their family members: 1. Low-income and the near-poor individuals 2. Indigenous people, farmers, fishermen 3. Individuals with impairments 4. Family members mentioned above	52	17
Small Amount Whole Life Insurance	1. People with limited budget 2. Elderly people 3. Fresh graduates	17	792
Spillover-effect Insurance	Health-conscious people	1,238	22,986
	Total	1,307	23,795

Inclusive Finance Loan Product
Provide comprehensive financial services to support the development of microbusinesses.
Provide comprehensive financial services to support the development of microbusinesses.

Acquiring funds has always been a huge challenge for SMEs, and for microbusinesses, it is even more critical to their stable operation. E.SUN issues social bonds to provide the necessary funds for microbusiness operations. Through three major actions - "business financial advisory, funding assistance, and efficient services" E.SUN helps enterprises strengthen their financial structure, quickly provides capital using digital technology, and supports their growth.

• Business financial advisory : E.SUN collaborates with cross-industry partners (e.g., Taiwan regional revitalization foundation, Townway, etc.) to hold financial seminars, helping over 20 start-up teams establish basic knowledge for business operations, financial planning and management skills.
• Funding assistance: By integrating resources from Taiwan SMEG(Small & Medium Enterprise Credit Gurantee Fund of Taiwan), E.SUN develops diverse financing plans for enterprises at different stages of development (startup, growth, maturity).
• Efficient services: Utilizing AI and digital technology, E.SUN offers microbusinesses online loan calculation services, allowing business owners to quickly obtain loan amount and interest rate information without time and space constraints.

Impact valuation

Note: The reduced social cost is calculated as the number of total clients of small business loan x average number of small business employees x unemployment benefits for each unemployed person

Inclusive finance loan product

(NT$ Million)

Project	Targeted Clients	2020		2021		2022
		Number of clients	Amount	Number of clients	Amount	Number of clients	Amount
Startup loan Helping star-ups sustain by offering quick access to financing	Microbusinesses	2,592	2,182	2,871	2,069	2,523	1,606
Distinct local business loan Providing financing exclusively to businesses with local characteristics, balancing the gap between urban and rural		1,099	5,891	1,160	5,469	1,181	5,316
Social innovation enterprise loan(Smile & Hope Loan included) Helping social enterprises and social innovation enterprises grow and become financially healthy		21	70	26	79	45	112
Commercial mortgage Loan for procurement of office and manufacturing facility		4,137	36,906	4,042	37,527	3,957	37,981
Working capital loan Working capital for small businesses		16,064	64,903	17,614	64,991	17,760	66,183
				Total Number of clients and amount		19,267	104,164
Residential subsidy loans Assisting low-income families with home improvement and home purchases	Poor and low-income individuals	874	1,300	993	1,496	1,154	1,759
Debt negotiation and repayment plan services Debt restructuring for families facing incidents		1,768	248	2,951	995	1,826	495
Earthquake disaster victims Post-disaster reconstruction loan service		21	14	17	11	14	8
				Total Number of clients and amount		2,994	2,262
Student loans Assisting outstanding students in financing their overseas studies	Young people	288	200	284	197	285	191
Loans for startup funding for young entrepreneurs Assisting young start-up entrepreneurs to build their businesses and creating a conducive environment		206	85	373	178	521	242
				Total Number of clients and amount		806	433
Reverse mortgage Helping the elderly to revitalize their real estate and regularly allocating stable living funds	Elderly people	-	-	-	-	3	2.45
				Total Number of clients and amount		23,069	106,861

■ FinTech and Innovation

E.SUN has long focused on fintech development, with a technology team of over 1,300 experts responsible for overall digital development, intelligent applications, IT research, and data security management. Through cross-team collaboration and continuous improvement, E.SUN enhanced digital financial technology efficiency. Information acts like the organization's nervous system, AI serves as the brain, digital is the agile limbs, and data security is the immune system. Only by having all these elements can a stable organic system be formed. Being the first bank in Taiwan to apply artificial intelligence deeply to various businesses and to build a core system with open cloud-native technology and microservices architecture, E.SUN has achieved remarkable results in intelligent finance, inclusive finance, and scenario-based finance. In recent years, E.SUN has actively introduced agile methodologies and explored cloud computing applications. In the past three years, more than 80% of fund purchases, 96% of loan applications, and 99% of foreign exchange transactions have been completed through digital channels, with the active number of e.Fingo digital members reaching 97%. Specific achievements are as follows:

■ Services Supported

Digital foundation

Capitalizing on the technological capacity of E.SUN, we continue to develop infrastructures for digital transformation and endeavor to fulfill our sustainability commitments by adopting eco-friendly practices, conserving energy, and creating the value of environmental sustainability.

Topics	Strategy Directions
AI Technology	AI Cloud is the main research and development environment in E.SUN AI, providing data scientists with a platform for data processing, modeling, testing, and sharing. It is an innovative sandbox that has nurtured many mature and stable AI models.
	E.SUN's self-built MLaaS (Machine Learning as a Service) platform has provided more than 50 AI services, allowing developers to quickly and flexibly deploy and use APIs of AI models, becoming an important bridge connecting mature AI models and business systems.
Operational Resilience	To improve the quality of digital infrastructures, E.SUN builds SD-WAN network architecture for overseas branches.
Resource efficiency	Provide the virtualization, private cloud environment and implement monitoring management tools to allocate IT resource more efficiently.
	In order to increase productivity, we implement the collaboration platforms in development process and digital tools.
Agility and Resilience	From 2022, enlarging the use of container platform and reserving the flexibility of using public clouds.
	Cloud Service has the diversity and high availability, and complement with on-premises services, more information service requests will be achieved by using both cloud and on-premises service. At the same time, the security of using cloud services is ensured through a security management framework.
Security Monitoring	Improving existing processes and utilizing automated integration technology to accelerate incident response times and enhance the SOC's (Security Operation Center) proactive cybersecurity monitoring team's incident response and investigation skills, expand the overall risk visibility, and effectively reduce the impact of incidents.

Protecting Patented Technology

As a pioneer of financial technology and digital transformation, E.SUN adopted the Taiwan Intellectual Property Management System (TIPS) in 2020, and passed the TIPS A-Level verification. Through intellectual property risk assessment, patent proposal review mechanism, proposal rewards, intellectual property-related advocacy education, and talent training, E.SUN implements intelligent services and technical advantages.

	Invention patents	Utility patents	Design patents
Announced in 2022	23	16	11
As of the end of 2022	54	76	22

E.SUN's patents cover areas such as data control and information security, identity verification, payment, AI application, interface design, and more. These innovations are applied to create innovative financial services, providing customers with convenient, fast, and secure experiences. Our significant digital business proportion leads Asian financial banks. E.SUN will continue to protect the intellectual property rights of various core businesses, strengthen the business development foundation, and promote corporate governance to move towards sustainable development.

Financial Innovation Applications

Digital Process Optimization, Service Without Interruption

Optimization of digital account opening process experience	Using Intelligent models to identify high-risk customers and applying two sets of OCR (Optical Character Recognition) technology for cross-checking document information, along with the use of RPA (Robotic Process Automation) technology and optimizing the approval process to reduce repetitive manual review and release manpower time, the fastest time required for human review is just 3.1 minutes per case, reducing the waiting time of customers by 80% and down to 4 hours.
Sinyi Realty - Property Automated Valuation Cooperation	In 2022, E.SUN collaborated with Sinyi Realty, allowing customers to obtain the trial calculation results of E.SUN's property automated valuation model 24/7, shortening the waiting time for manual assessment of amounts and interest rate of mortgages and optimizing service experience.
E.SUN Mobile Banking	E.SUN Mobile Banking integrates multiple innovative services, obtaining 11 design patents, 17 new model patents, and 7 invention patents. We achieved high growth in both the number of digital users and the frequency of digital interaction, with over 70% of active users using mobile banking, and will continue to focus on the customer experience and provide diverse services: (1)Multiple Authentication Modules: We offer up to 9 types of verification methods, including voice OTP, SIM card authentication, ATM verification code, and face/fingerprint recognition. Customers can freely choose verification methods according to their habits, scenarios, and services while ensuring transaction safety. (2)Contactless Integrated Financial Services: Customers can use video services to apply for various financial services through E.SUN Mobile Banking, and complete financial transactions with one click through E.SUN's "Fast and Easy Wealth Management" service. Break the limitations of time and space to create a friendly new financial milestone.
E.SUN Wallet	E.SUN Bank has opened E.SUN electronic payment services to both E.SUN Bank customers and non-customers through E.SUN Wallet, expanding the accessibility of E.SUN Wallet's financial services. It has become Taiwan's first digital platform jointly owned by a bank and an electronic payment service provider. In addition, E.SUN Wallet has added the functionality of linking with a E.SUN Bank account or loading their E.SUN credit cards for payment. This expansion has increased E.SUN Wallet's payment coverage from credit cards to all 250 thousand channels of Taiwan Pay. E.SUN also created the first card number checking service on a payment App in Taiwan. This means that cardholders can shop at physical and digital channels by loading their card number onto the E.SUN Wallet App and international mobile payment services before they receive their physical cards.
E.SUN Extremely Fast Revolving Loan	E.SUN Bank offers customers flexible small loan choices. Customers can decide on their desired loan amount and repayment period, and interest is only calculated on the amount utilized. This meets the needs of short-term cash flow or daily expenses.