Catching the Green Wave, Coexistence with the Environment

Walrus Pump's Board of Directors serves as the highest supervisory body for corporate sustainability strategies and practices. In line with the Task Force on Climate-related Financial Disclosures (TCFD) framework, we recognize climate change impacts as a key corporate risk. Moving forward, we will integrate climate-related risk and opportunity management into our internal control systems to further strengthen oversight. The Board's Strategy Committee is the primary governing body responsible for sustainability matters. It leads the Sustainable Development Committee and three functional teams, fostering cross-departmental communication and coordination on corporate sustainability issues. The Strategy Committee is also tasked with implementing and advancing material sustainability topics—including risk management, climate-related initiatives, and GHG inventories—and regularly reports progress and results to the Board of Directors.

In 2022, following TCFD guidelines and industry best practices, Walrus Pump conducted a comprehensive analysis of climate-related risks and opportunities. The assessment reviewed domestic and international benchmarks within the manufacturing sector and across the value chain, taking into account both industry characteristics and our operational context. Conducted jointly by the Strategy Committee, the ESG Committee (now the Sustainable Development Committee), and three functional teams, the analysis identified major risks and opportunities stemming from extreme weather events affecting our Taiwanese operations. Building on this work, we introduced scenario analysis to quantify potential organization-wide risks. The 2024 analysis focused on carbon cost risks, examining their potential financial impacts on the Company's operations. Insights from this assessment will guide strategies to strengthen organizational resilience, enhance adaptive capacity, and establish a comprehensive, enterprise-wide action plan for addressing climate change.

Although carbon costs represent a medium-term risk for Walrus Pump, they remain one of the most pressing global sustainability challenges. We therefore analyze potential carbon costs under different climate scenarios to inform our carbon risk management strategies and strengthen the Company's resilience to the financial impacts of climate change.

This analysis estimates annual greenhouse gas (GHG) emissions based on Walrus Pump's historical annual data, projecting carbon emissions under two scenarios:

• Business-as-usual (BAU): No transformational actions are taken.
• NDC-based reduction strategy: Carbon reductions are aligned with Nationally Determined Contribution (NDC) targets.

In addition, three commonly used international climate policy scenarios were applied to calculate potential carbon pricing: Stated Policies Scenario (STEPS), Announced Pledges Scenario (APS), and Net Zero Emissions by 2050 Scenario (NZE2050). Carbon cost estimates were based on the carbon fee data for each scenario and year published by the International Energy Agency (IEA) in its World Energy Outlook (WEO). For STEPS, Taiwan's announced carbon fee of US$10 per ton was used as a benchmark, with an assumed annual increase of 10%, referencing the London School of Economics' Carbon Pricing Options for Taiwan (2020).

Results: Without any transformational actions, Walrus Pump's carbon cost burden is projected to increase annually under all climate scenarios. In the NZE2050 scenario, the most financially severe, carbon costs would account for 2.75% of gross profit by 2050. Under the NDC-aligned strategy—reducing emissions by 28% by 2030, 38% by 2035, and achieving net zero by 2050—the proportion of carbon costs to gross profit could be reduced from 1.54% to 1.11% in 2030, and from 1.98% to 1.23% in 2035.

In 2022, Walrus Pump voluntarily conducted a greenhouse gas (GHG) inventory covering all operating sites in Taiwan, in accordance with the ISO 14064-1:2018 standard. Beginning in 2027, we plan to engage a third-party verification body to validate our emissions data. Key findings from the 2024 inventory are as follows: Category 1 (Direct Emissions): Account for approximately 16.991% of total emissions, primarily from sources such as gas, diesel generators, vehicle fuel, refrigerants, and septic tanks. Category 2 (Purchased Electricity): The largest source, representing 61.814% of total emissions, due to the electricity-intensive nature of water pump manufacturing. Category 3 & Category 4 (Other Indirect Emissions): Comprising 21.195% of total emissions, these include employee commuting and upstream emissions from purchased electricity. A new audit location, the Nanjing Sanmin Office, was added in 2024. Our internal GHG audit program is scheduled for completion in 2025.

To promote Scope 2 emission reductions, we replaced traditional fluorescent lights at the Sanzhi Plant with LED lighting in 2024—an upgrade equivalent to a reduction of 4,839 kgCO2e annually. Looking ahead, our greenhouse gas reduction plan for the next fiscal year will continue to focus on lowering emissions and energy use through process optimization and equipment upgrades, targeting a 20% organizational emissions reduction by 2025 and progressing toward our long-term goal of net zero by 2050.

Note: This calculation is based on each of the 116 LED units saving 44 watts, with 8-hour daily operation over 250 working days per year, resulting in an annual savings of approximately 10,208 kWh. Using Taiwan's 2024 electricity emission factor (0.474 kgCO2e/kWh), this translates directly to the stated annual reduction of 4,839 kg CO2e.