Climate Change Initiatives

Basic Concept

In alignment with the Moriroku Group Sustainability Policy, our objective is to become a“400-year company,”a trusted and valued entity that is widely recognized as a leader in sustainable business practices. We are committed to engaging in business activities that prioritize the interests of all stakeholders and contribute to addressing social challenges, with the aim of fostering a sustainable society.

We have identified climate change as a critical sustainability issue and in October 2022, we expressed support for the recommendations made by the Task Force on Climate-related Financial Disclosure (TCFD). In line with this recommendation, we will work to enhance information disclosure in the following areas: governance, strategy, risk management, and indicators and targets. This will enable us to reduce our environmental impact and increase our corporate value.

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Disclosure based on TCFD recommendations

Governance Structure for Environmental Issues

At Moriroku Group, the Board of Directors deliberates and resolves on basic policies, important issues, and the setting of important targets regarding sustainability management, including climate change issues. KPIs related to environmental issues are incorporated into the mid-term management plan and reflected in the target setting of each operating company.

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Sustainability Committee

To actively promote sustainability management throughout the Moriroku Group, the Sustainability Committee, chaired by the president of Moriroku Holdings and vice-chaired by the director in charge of sustainability, is held four times a year. The committee is responsible for formulating Group policies, identifying key sustainability issues, discussing sustainability strategies, and monitoring the status of efforts to address key issues. The Committee's decisions are reported to the Board of Directors twice a year and incorporated into the Group's overall plan based on the supervision and advice of outside directors. The Sustainability Promotion Office of Moriroku Holdings provides secretariat services to the Committee, which works closely with Moriroku Technology and Moriroku Chemicals.

Linkage between Climate Change Response and Executive Compensation

Effective with the fiscal year ending March 31, 2023, we have decided to include the achievement of key KPIs (GHG emissions reduction rate of 50% (target: end of FY2030), renewable energy adoption rate of 55% (target: end of FY2030)) as a portion of executive compensation.

Strategy

Scenario Selection

In analyzing potential scenarios, the Moriroku Group assumed a "1.5-2°C scenario," which represents a scenario in which decarbonization policies are pursued, and a "4°C scenario," which represents a scenario in which decarbonization policies are implemented to a limited extent. The Group then analyzed the impact of these scenarios on the business.

Scenario-based analysis of main risks/opportunities and discussion of countermeasures

The Sustainability Committee identified key risks and opportunities related to climate change, and discussed measures to address them. The table below lists the main climate change-related risks and opportunities that were gleaned from these discussions with regards to the Group’s businesses.

The time frames listed in the table were assumed to be as follows: by 2025 for short-term, by 2030 for medium-term, and by 2050 for long-term.

Moriroku Group - Analysis of risks/opportunities related to climate change (as of November 2022)

Time frames: 4-10 years (by 2030) for medium-term, 11-25 years (by 2050)

• Moriroku Group - Analysis of risks/opportunities related to climate change (as of November 2022) （PDF:35 KB）

Medium-term: 4 to 10 years (2030) Long-term: 11 to 25 years (2050)

• Analysis of Climate Change Risks and Opportunities (as of November 202●)

Physical risk (analysis based on 4°C scenario)

Risk Management

Process for determining and monitoring key risks

The Moriroku Group has established the materiality of sustainability issues that should be taken on by the Group as a whole, according to its understanding and analysis of the current status of each operating company, and a close examination of risks common to the Group overall. We then identify high-priority risks by analyzing these key issues comprehensively, in terms of their impact and importance to the Group, from the perspective of Group-wide management.

Risks and decision-making processes with regards to the issue of climate change are established through discussions within the Board of Directors meetings. The Group also works to review these risks and opportunities as needed, in response to changes in the business environment and the progress of business strategies. These are discussed first within the Sustainability Committee, then presented as proposals to the Board of Directors.

Metrics and goals

Medium-Term Targets

The Moriroku Group has set a goal to reduce GHG emissions in Scope 1 and 2 by 50% by the end of FY2030 (base fiscal year: 2019). We will work to steadily reduce emissions in Scope 1 and 2, through the implementation of measures such as renewable energy, while also working with suppliers to gain an understanding of and reduce emissions in Scope 3, in order to achieve our KPIs.

• Reference: Key KPIs for the promotion of sustainability

Scope 1, 2, and 3 emissions (Total across three companies)

Breakdown of Scope 3 emissions (Total across three companies)