Optimizing climate risk management practices: a hierarchical classification of TCFD risks in Taiwan’s electronics industry

In the wake of the Intergovernmental Panel on Climate Change (IPCC) AR6 report, there is escalating certainty regarding anthropogenic climate change and its concomitant uncertainties impacting corporate risk profiles and global financial stability. The lack of comprehensive climate risk identification contributes to this uncertainty. Despite its significance as a major global exporter, the Taiwanese electronics industry faces a significant empirical research gap regarding the corporate-level impacts of climate risks, resulting in an ambiguous risk landscape. Literature indicates that research related to the Task Force on Climate-related Financial Disclosures (TCFD) is still in its nascent stage, particularly in corporations’ strategic implementation of climate risk management. More climate risk identification is needed within this strategic domain to improve climate risk management. Based on the TCFD’s risk classification framework, we employed thematic analysis to identify 49 risk events within Taiwan’s electronics industry, thereby expanding the TCFD’s original list of risks and introducing a new category – climate risk events. Following this categorization, we applied the Analytic Hierarchy Process (AHP) to prioritize the materiality of these climate risk events. Subsequently, we incorporated vulnerability analysis to underscore its criticality in corporate climate risk management. This study highlights that acute physical risks, particularly power outages and water scarcity, dominate climate risk concerns within Taiwan’s electronics industry, whereas transition risks remain largely underestimated in corporate risk assessments. Furthermore, the findings reveal that vulnerability, measured through disclosure gaps, has a limited yet notable impact on risk prioritization, underscoring the need for more transparent and standardized climate risk reporting. By integrating hierarchical classification, materiality assessment, and vulnerability analysis, this study provides empirical evidence to support Taiwanese policymakers and industry practitioners in refining climate risk disclosure frameworks and strengthening corporate resilience strategies.Inadequate climate risk disclosures within Taiwan’s electronics industry undermine vulnerability management and overall resilience. Firms should conduct systematic vulnerability assessments.Taiwan’s electronics industry remains overly focused on acute physical risks while neglecting transition risks. A more balanced approach is required to incorporate transition risks and enhance long-term sustainability.Taiwan’s electronics industry should adopt comprehensive scenario planning, aligned with TCFD guidelines, to address both acute and chronic risks, including extreme weather events, water scarcity, and policy shifts such as carbon pricing.Policymakers and corporate actors within Taiwan’s electronics industry must undertake material risk assessments, grounded in decision science and tailored to operational realities.Cross-sectoral climate resilience strategies are needed. Taiwan’s electronics industry should collaborate across its value chain, such as energy, logistics, and other relevant industries, to develop shared risk management platforms and cross-industry guidelines that better align with TCFD and International Financial Reporting Standards (IFRS) S2.