Chang Hwa Bank|Corporate Social Responsibility-Material Topics Analysis

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Stakeholder Engagement & Material Topics Analysis

In order to promote the Bank's core concept of sustainable development, the Bank actively established a smooth and diversified communication channel, engaged all parties to understand and respond to the expectations of various stakeholders, and refined the Bank's operation management measures and engagement process through the engagement results, so as to facilitate sustainable operation and development.
The Bank ceaselessly maintains good communication with stakeholders, conducts identification of stakeholders, analysis and identification of material topics every year, and the materiality assessment process and identification results of major topics are verified by a third-party independent assurance provider. The communication with various stakeholders, and identification results, targets and implementation of major topics are reported to the Board of Directors every year.

Step 1: Identifying Stakeholders
Through a questionnaire, the business management units of the Bank followed the five major aspects of the AA1000 Stakeholder Engagement Standard: impact, attention, responsibility, dependence, and diverse perspectives to identify communities which have material connections and impact with the Bank. In 2024, the results of stakeholder identification were divided into seven categories of competent authorities, customers, employees, investors, media, suppliers, community and non-profit organizations (NPOs)/non-governmental organizations (NGOs).

Category	Importance
Competent Authorities (Including other government agencies)	The Bank actively cooperates with the government's policies and complies with competent authorities' and other government agencies relevant laws and plans and regulations to create a sound business environment.
Customers (Including potential customers)	The Bank places customer needs at its core, considering requirements of diverse demographics and potential customers to develop inclusive, accessible, and convenient products and services. We focus on delivering superior customer experiences while safeguarding customer rights and creating enterprise value.
Employees (Including union group)	Employees represent critical assets that influence the Bank's core competitiveness. Employee rights, working conditions, and professional development are key factors in workforce quality. Through multiple channels, we listen to individual employee voices and actively communicate and coordinate with labor unions to maintain a stable workplace environment and achieve excellence together.
Investors (Including shareholders and domestic and international evaluation organizations)	Long-term investor support provides the foundation for the Bank's steady growth. Evaluations by domestic and international rating organizations serve as important reference points for investor decision-making.
Media	The Bank discloses ESG-related information to the public through the media. This serves not only as a communication channel for conveying our principles and messages to external stakeholders but also as an important avenue for understanding horizontal comparisons within domestic and international industries and peer development trends.
Suppliers (Including contractors)	Suppliers and contractors are partners in the Bank's sustainable operations and growth. Through achieving aligned sustainability consciousness, we jointly implement sustainable operations.
Communities and NPOs/ NGOs	Corporations and society maintain a mutually beneficial relationship. Through continuous social participation and collaboration with non-profit organizations (NPOs) and non-governmental organizations (NGOs) such as industry associations, community organizations, charitable foundations, and academic research institutions, we focus on the land, natural environment, and residents, communities, and ethnic groups that may be affected by the Bank's business activities, jointly promoting harmonious development between nature and humanity.

Step 2: Collecting Topics
Referring to the relevant guidelines on material topic of GRI 2021, the Bank reviewed its own operational activities, the context of sustainable development, future work plans, value chain relationship and the opinions of stakeholders, such as stakeholders' questionnaires, customer/employee satisfaction surveys, questions from shareholder meetings and investor conference, opinion exchange channels, attributes of customer complaints, etc., and referred to international sustainable development trends and standards (such as SDGs), industry focus orientation, etc., to extensively collect sustainable topics that may be involved in the Bank's operations in multiple ways, aggregating a total of 23 topics.
Step 3: Analyzing the Material of Topics
The Bank's sustainability topic materiality analysis conducts " External impact on society and the environment” and " Internal impact on the business” from different perspectives, and then uses these two assessment results as two axes to identify sustainability topics with double materiality. The framework is as follows:

The Material of External Impact on Society and Environment

Reference for materiality ranking verification and adjustment

A. Stakeholder Perspectives: Collection of stakeholder opinions through various channels, including external stakeholder questionnaires, internal "Sustainability Topic Materiality Assessment Questionnaires," business communication outcomes, and customer complaint feedback.
B. Sustainability Topic Due Diligence: Through business management units, we conduct sustainability topic due diligence based on information and data collected from various internal channels and indicators, including performance evaluation results, risk management status, financial conditions, compliance and penalties, and grievance mechanisms.

Analysis
The Bank reviewed and updated the "Impact level" and "Probability" based on the identification results of material topics in the previous fiscal year (2023), using the information and data of multiple due diligence indicators and re-ranked the material of the topics based on the actual or potential, qualitative or quantitative, financial or non-financial, positive and negative impacts on society and environment that may be caused during the operation, and assign the weight on "Impact level" of human rights impact, taking into account practical operation and engagement with various stakeholders (including customer and employee questionnaires and various communication channels), annual trend changes, comparison with other banks ,reasonableness of results, and opinions from external professional consultants to complete the significance identification.

Result: Matrix of External Sustainability Impact (Negative and Positive)

Significant Changes in Material Topics of the Year

The materiality assessment has identified 2 new material topics: "Business Integrity" and "Talent Attraction and Retention." All other topics remain consistent with those identified in the previous reporting cycle.

Business Integrity
The topic "Business Integrity" is of high concern to financial regulatory authorities. In 2024, the Bank received a complaint regarding one incident of unethical conduct by a former employee during customer service from June 2013 to November 2014. Upon receiving the complaint, the Bank immediately conducted an investigation and proactive reporting, and has made appropriate improvements and dispositions regarding the deficiencies. The competent authority imposed a corrective action in May 2024, which is not a major penalty case. To demonstrate the Bank's emphasis on business integrity, this has been elevated to a material topic.
Talent Attraction and Retention
The topic "Talent Attraction and Retention" pertains to employee compensation, benefits, and working conditions, and is highly valued by both internal and external stakeholders (including current employees and potential recruits). It also serves as an indicator of market position. Given that the Bank has experienced a continuous slight increase in turnover rates over the past three years, this topic has been elevated to material status.

The Material of Internal Impact on the Business

The Bank has linked sustainability topics to its risk appetite across 16 operational risk categories, assessing the potential financial impacts and risks these topics may pose to overall operations—such as the extent of impact on capital, revenue and profitability, market strategy, human resources and organizational structure, and reputation. Based on the assessment results, the top three sustainability topics with the most material internal impact on the business are identified as “Business Performance and Profitability,” “Information Security and Data Privacy,” and “Innovation of Digital Finance.” The results of the materiality of Internal impact on the business assessment, corresponding risk management indicators, and related management measures have been incorporated into the Bank’s Risk Appetite Statement, which has been approved by the Board of Directors. These indicators are also embedded in the Bank’s overall risk monitoring and management framework, enabling timely adjustments to daily business decision-making processes in response to evolving risks.

Double Materiality

(1) Assessment result:

The following chart shows the Bank's double materiality matrix based on the “Impact level on the business" (X-axis) and “Impact level on society and the environment" (Y-axis):

(2) Countermeasures of Double Material Topics