Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEX

ANNEX - SECOND PARTY OPINION
TOKYO GAS CO., LTD.
TRANSITION BOND (#2)

Prepared by: DNV Business Assurance Japan K.K.
Location: Kobe, Japan
Date: November 24, 2022
Ref. Nr.: PRJN-460515-2022-AST-JPN-1

This opinion is prepared based on the Tokyo Gas Transition Finance Framework Second Party Opinion(hereinafter, "Master SPO") (Ref. Nr.: PRJN-326328-2021-AST-JPN-01-rev1 *November 24, 2022), which
was assessed against to the Tokyo Gas Transition Finance Framework (hereinafter, "Framework").
*For more information on the ANNEX - Second Party Opinion, see following DNV website
https://www.dnv.jp/news/page-227965 Release of a new evaluation service (Master SPO + ANNEX)

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Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEX

Executive Summary
DNV Business Assurance Japan K.K. (hereinafter, "DNV") confirmed that the Tokyo Gas
Transition Bond (#2) issued by Tokyo Gas Co., Ltd. (hereinafter, "Tokyo Gas"), meets thevarious principles and guidelines requirements for such bond issuance and is planned to beissued and managed through appropriate internal processes, based on the Framework*1
which has been assessed its eligibility*2.
*1: Tokyo Gas Transition Finance Framework Second Party Opinion*2: Tokyo Gas Transition Finance Framework

Table-1 shows an outline of the Tokyo Gas Transition Bond (#2) and ANNEX - Second Party
Opinion. The additional items to be assessed in the ANNEX - Second Party Opinion are
Element-1 (Use of Proceeds) and Element-4 (Reporting) which are under the use ofproceeds bond (response to the four elements). The conformances against to the criteria forthe other elements has already been assessed its eligibility in accordance with Framework.
Table-1 Tokyo Gas Transition Bond (#2) ANNEX - Second Party Opinion
Target financeTargetorganization
Targetframework
Targeted

Tokyo Gas Transition Bond (#2)
Tokyo Gas Co., Ltd.
Tokyo Gas Transition Finance Framework
Tokyo Gas Transition Finance Framework Second Party Opinion

external review

Ref. Nr.: PRJN-326328-2021-AST-JPN-01-rev0 *Issued February 10, 2022
Criteria for Climate Transition FinanceTarget criteria-

Climate Transition Finance Handbook (ICMA, 2020)-

Basic Guidelines on Climate Transition Finance (FSA, METI, and MoE, 2021).

Criteria for the use of proceeds bond-Green Bond Principles (ICMA, 2021)-

Green Bond Guidelines (MoE, 2020)
Disclosure element-1 (Transition
strategy and governance)

Climate Transition

Disclosure element-2 (Environmental

Finance (response tomateriality)

the four disclosure

Disclosure element-3 (Science-based

elements)

strategy)
Disclosure element-4 (Transparencyof implementation)-

Confirmed reliance on Framework-

Confirmed reliance on Framework-

Confirmed reliance on Framework-

Confirmed reliance on Framework

Confirmed reliance on the Framework. Additional
assessment was implemented as follows:

Bonds with specificuse of proceeds

Element-1(response to the four(Use of proceeds)

elements)-

・ Development project of a water electrolysis cellstack (Tsurumi Ward, Yokohama, Kanagawa)・ Methanation demonstration testing (Tsurumi
Ward, Yokohama, Kanagawa)・ Danish onshore wind power project (Denmark)Page 2 of 26

Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEX

・ Biomass power generation projects (Fushiki
Manyofuto Biomass Power Plant, Ichihara
Yawatafuto Biomass Power Plant)
Element-2(Process for project
evaluation and-Confirmed reliance on Framework-

Confirmed reliance on Framework-

Confirmed reliance on the Framework. Additional

selection)
Element-3(Management ofproceeds)

Element-4(Reporting)assessment was implemented as follows:・ Allocation of proceeds: items and categories
・ Environmental benefits: Annual CO2 reduction (tCO2/year)

DNV, as an external reviewer, evaluated the eligibility of the use of proceeds and reportingfor the Tokyo Gas Transition Bond (#2), based on an assessment of the Framework andother relevant documents and information provided by Tokyo Gas. DNV also confirmed that
there were no changes to the other items (in accordance with the framework).

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Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEX

Contents
Executive Summary

2

I.

Scope and Objectives

5

Ⅱ.

Responsibilities of Tokyo Gas and DNV

6Ⅲ.

Basis of DNV’s Opinion

6

Ⅳ.

Work Undertaken

9V.

Findings and DNV's Opinion

10

Ⅵ.

Assessment Conclusion

22

Schedule-1 Tokyo Gas Transition Bond (#2) Eligible Projects

24

Revision history
Date of issue
24/11/2022

Remarks
Prepared and issued as Tokyo Gas Transition Bond (#2) ANNEX - Second Party
OpinionDisclaimer
Our assessment relies on the premise that the data and information provided by Issuer to us as part of our review procedures have been provided in good faith.
Because of the selected nature (sampling) and other inherent limitation of both procedures and systems of internal control, there remains the unavoidable riskthat errors or irregularities, possibly significant, may not have been detected. Limited depth of evidence gathering including inquiry and analytical procedures andlimited sampling at lower levels in the organization were applied as per Scope of work. DNV expressly disclaims any liability or co-responsibility for any decision aperson or an entity may make based on this Statement.

Statement of Competence and Independence
DNV applies its own management standards and compliance policies for quality control, in accordance with ISO/IEC 17021:2011 - Conformity Assessment
Requirements for bodies providing audit and certification of management systems, and accordingly maintains a comprehensive system of quality control, including
documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. We
have complied with the DNV Code of Conduct1 during the assessment and maintain independence where required by relevant ethical requirements. This
engagement work was carried out by an independent team of sustainability assurance professionals. DNV was not involved in the preparation of statements ordata included in the Framework except for this Statement. DNV maintains complete impartiality toward stakeholders interviewed during the assessment process.

1 DNV Code of Conduct is available from DNV website (www.DNV.com)

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Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEXI.

Scope and Objectives

DNV has been commissioned by Tokyo Gas to provide a pre-issuance assessment on theTransition Bond. Our objective has been to implement an assessment on whether Tokyo
Gas meet the criteria established on CTFH・CTFBG and GBP・GBGLs, which are the criteria
for bonds with the specific use of proceeds, to provide ANNEX - Second Party Opinion
regarding the eligibility of the Transition Bond.
DNV, as an independent external reviewer, has identified no real or perceived conflict ofinterest associated with the delivery of this ANNEX - Second Party Opinion for Tokyo Gas.
In this report, no assurance is provided regarding the financial performance of the BOND,
the value of any investments in the BOND, or the long-term environmental benefits ofthe transaction.
(1) Scope of review*
The review assessed the following elements and confirmed their alignment with the gist of GBP/GLP:☒

Use of proceeds☐

Process for project evaluation and selection☐

Management of proceeds☒

Reporting＊ The scope of review is to be applied as a part of the evaluation of the transition finance with use ofproceeds.
＊ DNV has already reviewed the four disclosure elements of CTFH/CTFBG, "Process for Project Evaluationand Selection", and "Management of Proceeds" and has exposed our opinion below. DNV also confirmed
through our assessment with Tokyo Gas that there were no changes in the Transition Bond to be
implemented this time or additional assessments required.
"Tokyo Gas Transition Finance Framework Second Party Opinion"
Ref. Nr.: PRJN-326328-2021-AST-JPN-01-rev0 *Issued February 10, 2022

(2) Role(s) of review provider☒

Consultancy (incl. #2 opinion)☐

Certification☐

Verification☐

Ratings☐

Other (please specify):

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Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEX(3) Standards/guidelines to be applied
No.

Standards/guidelines

Scheme owner

1.

Climate Transition Finance Handbook (CTFH)*1

International Capital Market Association(ICMA), 2020

2.

Basic Guidelines on Climate Transition Finance (CTFBG)*1

Financial Services Agency, Ministry of
Economy, Trade and Industry, Ministry of
the Environment, 2021

3.

Green Bond Principles (GBP)*2

International Capital Market Association(ICMA), 2021

4.

Green Bond Guidelines (GBGLs)*2

Ministry of the Environment, 2020

*1

Climate transition: The concept of climate transition focuses principally on the credibility of an issuer’s
climate change-related commitments and practices (quoted from CTFH and CTFBG).

*2

It confirms compliance with the four core elements (use of proceeds, process for project evaluation andselection, management of proceeds, and reporting) that must be met when implementing as abond/loan that meets the four elements of transition and has a specific use of proceeds (quoted fromCTFBG).

Ⅱ.

Responsibilities of Tokyo Gas and DNVTokyo Gas has provided the information and data used by DNV during the delivery of thisreview. DNV’s ANNEX - Second Party Opinion represents an independent opinion and isintended to inform Tokyo Gas and other interested stakeholders in the Tokyo Gas Transition
Bond (#2) as to whether the established criteria have been met, based on the information
provided to us. In our work we have relied on the information and the facts presented to us
by Tokyo Gas. DNV is not responsible for any aspect of the nominated projects and assets
referred to in this opinion and cannot be held liable if estimates, findings, opinions, orconclusions are incorrect. Thus, DNV shall not be held liable if any of the information or data
provided by Tokyo Gas’s management and used as a basis for this assessment were notcorrect or complete.

Ⅲ.

Basis of DNV’s Opinion

To provide a more flexible ANNEX - Second Party Opinion for the issuer, Tokyo Gas, DNV
identified the key assessment targets and carried out assessments in accordance with its
procedures.
DNV, as an independent external reviewer, provides ANNEX - Second Party Opinion
according to the protocol.
Our Protocol includes a set of suitable criteria that can be used to underpin DNV’s opinion.
The overarching principle behind the Climate Transition Finance with an use of proceeds
bond as the basis for the opinion are as follows:“provide an investment opportunity with transparent sustainability credentials”

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Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEX“enable capital-raising and investment for new and existing projects with environmental
benefits"
As per our Protocol, the criteria against which the Tokyo Gas Transition Bond (#2) has
been grouped into common elements bellow.
The additional assessment for this ANNEX - Second Party Opinion covers Element 1 andElement 4 out of the four common elements of (2) GBPs/GBGLs.

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Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEXPart of (1) and (2) has already been assessed for eligibility. Detailed results of theeligibility assessment for such parts of (1) and (2) can be found in the "Tokyo Gas
Transition Finance Framework Second Party Opinion (hereinafter, "Master SPO")" (Ref.
Ref. Nr.: PRJN-326328-2021-AST-JPN-01-rev1 *November 24, 2022).
(1) Four elements of CTFH/CTFBG (disclosure elements)
Principle One: Issuer’s climate transition strategy and governance
The financing purpose should be for enabling an issuer’s climate change strategy.

Principle Two: Business model environmental materiality
The planned climate transition trajectory should be relevant to the environmentally-material partsof the issuer’s business model.

Principle Three: Transition is science-based including targets and pathway
Issuer’s climate strategy should reference science-based targets and transition pathways.

Principle Four: Implementation transparency
Market communication in connection with the offer of a financing instrument which has the aim offunding the issuer’s climate transition strategy should also provide transparency of the underlying
investment program.

(2) Four elements of GBP/GBGLs
Principle One: Use of Proceeds *Subject to additional assessment of ANNEX - Second Party
OpinionThe Use of Proceeds criteria are guided by the requirement that an issuer of a transition financewith specific use of proceeds must use the funds raised to bond eligible activities. The eligible
activities should produce clear environmental benefits.

Principle Two: Process for Project Evaluation and Selection
The Project Evaluation and Selection criteria are guided by the requirements that an issuer of atransition finance should outline the process it follows when determining eligibility of an investmentusing the proceeds from transition finance, and outline any impact objectives it will consider.

Principle Three: Management of Proceeds
The Management of Proceeds criteria are guided by the requirements that a transition financeshould be tracked within the issuing organization, that separate portfolios should be created whennecessary and that a declaration of how unallocated funds will be handled should be made.

Principle Four: Reporting *Subject to additional assessment of ANNEX - Second Party Opinion
The Reporting criteria are guided by the recommendation that at least Sustainability Reporting to
the bond investors should be made of the use of bond proceeds and that quantitative and/or
qualitative performance indicators should be used, where feasible.

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Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEXⅣ.

Work Undertaken

Our work constituted a comprehensive review of the available information, based on theunderstanding that this information was provided to us by the issuer in good faith. We
have not performed an audit or other tests to check the veracity of the information
provided to us. The work undertaken to form our opinion included:
The assessment work that forms DNV's opinion includes
i. Pre-funding assessment (ANNEX - Second Party Opinion)•

Assessment of additional documentary evidence provided by Tokyo Gas on the Tokyo
Gas Transition Finance and supplemented assessment by a comprehensive desktop
research. These checks refer to current assessment best practice and standards
methodologies;•

Discussions with Tokyo Gas, and review of relevant documentation;•

Documentation of findings against each element of the criteria to be additionallyassessed.

ii. Post-funding assessment (periodic review) (*not included in this report)•

Interviews with fundraiser managers and review of relevant documentation.

•

Site surveys and inspections (if required).

•Documentation of post-issuance assessment results.

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Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEXV.

Findings and DNV's Opinion

DNV’s findings and opinion are as described below.
Please see Schedule-1 and Schedule-2 for details.
GBP/GBGLs-1.

Use of Proceeds

Tokyo Gas has defined the criteria applied to eligible projects as transition projects
which meet Tokyo Gas transition strategy and related handbook, principle andguidelines (CTF-H and CTF-BG).
The proceeds of the Tokyo Gas Transition Bond (#2) will be used for the following fiveprojects (MFR-01, MFR-02, WE-01, BE-01, and BE-02). Please see Schedule-1 fordetails.
All five projects are eligible projects that are aligned with either or both of theTechnology Roadmap in Gas Sector (METI, February 2022) and the Transition
Roadmap for Power Sector, in addition to the Tokyo Gas Transition Finance
Framework.
The amount of proceeds of the Tokyo Gas Transition Bond (#2) will be disclosed infuture documents relating to the bond issuance. DNV confirmed at the time of thisassessment that the proceeds will be used for new investments. The actual allocation
results will be reported on an annual basis in accordance with GBP/GBGLs-4.Reporting.

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Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEX

Project MFR-01: Development of a low-cost water electrolysis cell stack-Through this development project, Tokyo Gas aims to rapidly establish a technology
for low-cost mass production of water electrolysis cell stacks by combining thetechnologies and insights of Tokyo Gas and SCREEN Holdings Co., Ltd. on production
methods of fuel cells and their cell stacks, which have been developed over many
years.

-

In conjunction with this development, Tokyo Gas will also develop technology for thesystemization of water electrolysis equipment to reduce the cost of green hydrogenproduction and aim to achieve the Japanese government’s hydrogen supply cost
target of 30 yen/Nm3-H2 by 2030 at the early stage and to further reduce the cost ofhydrogen production.

-

From the above perspective, DNV has confirmed that the development of a low-costwater electrolysis cell stack is a transition project that is consistent with the "Tokyo
Gas Roadmap for Transitioning to Carbon Neutrality", carbon recycling in theTransition Roadmap in Gas Sector, hydrogen and ammonia utilization in theTransition Roadmap for Power Sector, and the basic energy plan, which aims toestablish and implement hydrogen production technology to ensure a stable andlarge-volume supply of low-cost hydrogen in the long term.

Figure-1 MFR-01 Development of a low-cost water electrolysis cell stack

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Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEX

Table-2 Project MFR-01 Outlines of development of a low-cost water electrolysis cell stack
Project name:

Development of a low-cost water electrolysis cell stack

Location:

Tsurumi Ward, Yokohama City, Kanagawa Prefecture

Capacity:

Further expansion has been considered after the developed
capacity 1m3/hr.

Operation started:

2021: Started joint development with SCREEN(By 2023: aim to establish manufacturing technology within
two years)

Other:

Decarbonization of gas and electricity / green hydrogenproduction by water electrolysis
Contribution to reducing the cost of hydrogen production as
set out in Compass 2030

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Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEX

Project MFR-02: Methanation demonstration testing-

Tokyo Gas conducts the methanation demonstration testing with the aim of acquiring
a range of technologies and know-how, from the procurement of electricity fromrenewable energy sources to the production and utilization of e-methane (synthetic
methane), grasping the competence values and issues of each equipment, andgaining insights on the efficiency of the system as a whole.

-

In addition to the demonstration of the Sabatier method, which is an existingmethanation technology, Tokyo Gas is also developing innovative methanation
technologies such as Hybrid Sabatier, which is expected to achieve higher efficiency
and lower costs, in collaboration with various organizations including national
research institutes, universities and companies, with the aim of practical application.
The demonstration facility has started operation in March 2022 and the testing is
progressing as planned.

-

From the above perspective, DNV has confirmed that the methanation demonstration
testing is a transition project that is consistent with the "Tokyo Gas Roadmap forTransitioning to Carbon Neutrality", the Transition Roadmap in Gas Sector, etc. as atechnological development to accelerate social implementation, including carbon
recycling, with a view to the era of carbon neutrality.

Image-1 Project MFR-02 Methanation demonstration testing

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Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEX

Table-3 Project MFR-02 Outlines of methanation demonstration testing
Project name:Methanation demonstration testing

Location:

Tokyo Gas Yokohama Techno Station (Tsurumi Ward,
Yokohama City)

Capacity:

e-methane (synthetic methane) production: 12.5 m3/hr.

Operation started:

March 2022: Started operation of demonstration facility

Other:

Decarbonization of gas and electricity / innovative
methanation, etc.
Initiatives for methanation as set out in Compass 2030, andfor technological development & demonstration testing toensure that synthetic methane accounts for 1% of the city
gas supply by 2030

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Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEX

Project WE-01: Danish onshore wind power project-

DNV has confirmed that the development and operation project in collaboration with
the Danish company EWII S/I, is classified as an onshore wind power project,negative environmental factors were considered and resulted no significant issues
were found, and that there are no fossil fuel-based back-up power sources.

-

Tokyo Gas defines the expansion of wind power and other renewable energy sources
as a key initiative (transition eligibility project categories and eligibility criteria) toachieve the "Tokyo Gas Roadmap for Transitioning to Carbon Neutrality" andtransition targets in its own Tokyo Gas Transition Finance Framework.

-

The annual CO2 reduction is estimated to be approximately 78,561 t-CO2/year(calculated by multiplying the planned annual power generation with interest by theaverage CO2 emission factor (974.7 g-CO2/kWh) for thermal power generation in
Denmark).

Existing projects●︓プロジェクト所在

Photo-2 Project WE-01 Danish onshore wind power project

Table-4 Project WE-01 Danish onshore wind power project
Name of power plant(project name):

Danish onshore wind power project

Location:

Denmark

Capacity:

54.5 MW, 10 sites & 22 units(Project total: 0.85 - 3.6 MW scale/unit)

Operation started:
Other:

Estimated environmental
benefits:

Started operation gradually since 2000
Acquisition of a 50% stake in EWII Production, adeveloper and operator of renewable energy
projects, and approximately 27 MW of EWII
Production's interest on onshore wind power
Approx. 78,561 t-CO2/year

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Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEX

Project BE-01: Fushiki Manyofuto Biomass Power Plant (Takaoka, Toyama)-

The Fushiki Manyofuto Biomass Power Plant is classified as a renewable energy
expansion project in the Tokyo Gas’s framework.

-

DNV has confirmed that negative environmental factors were considered and resulted
no significant issues were found, wood pellets produced from properly managed
forests (suppliers are required FSC certification) are used as biomass fuel, and thatthe life cycle CO2 emitted from transportation of the biomass fuel, etc. is less thanthat emitted from thermal power generation in Japan.

-

Tokyo Gas defines the expansion of biomass power and other renewable energy
sources as a key initiative (transition eligibility project categories and eligibility
criteria) to achieve the "Tokyo Gas Roadmap for Transitioning to Carbon Neutrality"
and transition targets in its own Tokyo Gas Transition Finance Framework. In the
power generation sector, biomass power generation is a decarbonized power sourcethat has currently been put to practical use and is also consistent with the Transition
Roadmap for Power Sector, which calls for promoting a steady decarbonization. The
biomass power plant started commercial operation in July 2022 and is running asplanned.

-The annual CO2 reduction is estimated to be approximately 140,000 t-CO2/year(calculated by multiplying the planned annual power generation by the average CO2
emission factor (0.60 kg-CO2/kWh) for thermal power generation in Japan minus thelife cycle CO2 associated with biomass power generation).

Image-3 Project BE-01 Fushiki Manyofuto Biomass Power Plant

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Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEX

Table-5 Project BE-01 Outlines of Fushiki Manyofuto Biomass Power Plant
Name of power plant

Fushiki Manyofuto Biomass Power Plant(project name):
Location:

Takaoka City, Toyama Prefecture

Capacity:

51.5 MW(Circulating fluidized bed, wood pellets (FSC
certified), PKS (suppliers are required toobtain third-party certification))

Operation started:
Other:

July 2022
Acquisition of biomass projects owned byfunds managed by the Equis Group. Together
with project BE-02, approximately 126,000
kW is accumulated towards Tokyo Gas's
target of 6 million kW of renewable energy
transaction volume in 2030.

Estimated environmental

Approx. 140,000 t-CO2/year (provisional)

benefits:

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Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEX

Project BE-02: Ichihara Yawatafuto Biomass Power Plant (Ichihara, Chiba)-

The Ichihara Yawatafuto Biomass Power Plant is classified as a renewable energy
expansion project in the Tokyo Gas’s framework.

-

Specifically, DNV has confirmed that negative environmental factors were considered
and resulted no significant issues were found, wood pellets produced from properly
managed forests (suppliers are required FSC certification) are used as biomass fuel,and that the life cycle CO2 emitted from transportation of the biomass fuel, etc. is lessthan that emitted from thermal power generation in Japan.

-

Tokyo Gas defines the expansion of biomass power and other renewable energy
sources as a key initiative (transition eligibility project categories and eligibility
criteria) to achieve the "Tokyo Gas Roadmap for Transitioning to Carbon Neutrality"
and transition targets in its own Tokyo Gas Transition Finance Framework. In the
power generation sector, biomass power generation is a decarbonized power sourcethat has currently been put to practical use and is also consistent with the Transition
Roadmap for Power Sector, which calls for promoting a steady decarbonization.

-

The annual CO2 reduction is estimated to be approximately 130,000 t-CO2/year(calculated by multiplying the planned annual power generation by the average CO2
emission factor (0.60 kg-CO2/kWh) for thermal power generation in Japan minus thelife cycle CO2 associated with biomass power generation).

Image-4 Project BE-02 Ichihara Yawatafuto Biomass Power Plant

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Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEX

Table-6 Project BE-02 Outlines of Ichihara Yawatafuto Biomass Power Plant
Name of power plant

Ichihara Yawatafuto Biomass Power Plant(project name):
Location:

Ichihara City, Chiba Prefecture

Capacity:

75.0 MW(Circulating fluidized bed, wood pellets (FSC
certified))

Operation started:

Scheduled to start operation in January 2024
(currently under construction)

Other:

Acquisition of biomass projects owned byfunds managed by the Equis Group. Together
with project BE-01, approximately 126,000
kW is accumulated towards Tokyo Gas's
target of 6 million kW of renewable energy
transaction volume in 2030.

Estimated environmental

Approx. 130,000 t-CO2/year (provisional)

benefits:

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Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEX

GBP/GBGLs-4.

Reporting

DNV confirms that Tokyo Gas will report on the Transition Bond (#2) until theproceeds are allocated, and disclose information on the status of the allocation, theprojects to which the proceeds have been allocated or the environmental benefits.
DNV also confirmed that environmental benefits will be reported until the completionof the redemption or repayment of the Transition Bond.
DNV also confirmed that Tokyo Gas plans to disclose in a timely manner any
significant events, such as major changes in the allocation plan of proceeds.
The report will be disclosed on the issuer’s website.
<Allocation status>
Allocated amount per project

Unallocated amount of proceedsAmount of allocated proceeds as existing expenditure<Environmental benefits>Environmental benefits will be disclosed on the issuer’s website to the extent
practicable, including an overview of each project and the impacts.
*Report the calculation results of environmental benefits based on planned
power generation.

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Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEX

Use of Proceeds reporting:☒

Project-by-project☐

On a project portfolio basis☐

Linkage to individual bond(s)☐Other (please specify):☐

GB refinanced share of total investment☐

Semi-annual

Information reported:☒

Allocated amounts☐

Other (please specify):

Frequency:☒

Annual☐Other (please specify):

Impact reporting (Environmental Impact):☒

Project-by-project☐

On a project portfolio basis☐

Linkage to individual bond(s)☐Other (please specify):

Frequency:☒

Every year☐

Other (please specify):☐

Every six months

Information reported (expected or ex-post):☒☒

GHG Emissions / Savings☐

Energy savings

Other ESG indicators (please specify):
Equipment completion of installation,size, year of operation, etc.

Means of Disclosure☐

Information published in financial report☐

Information published in sustainability report☒

Other (please specify): on Tokyo Gas web site

(Integrated Report)☐

Information published in ad hoc documents☐

Reporting reviewed (if yes, please specify which parts of the reporting are subject to external
review)

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Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEX

Ⅵ.

Assessment Conclusion
On the basis of the information provided by Tokyo Gas and the work undertaken, it is
DNV’s opinion that the Tokyo Gas Transition Bond (#2) meets the criteria established in
the Protocol, and that it is aligned with the following stated definition or purpose of thebonds that specify the use of proceeds within the CTFH/CTFBG and GBP/GBGLs:“provide an investment opportunity with transparent sustainability credentials”“enable capital-raising and investment for new and existing projects withenvironmental benefits"

DNV Business Assurance Japan K.K.
November 24, 2022

Mark Robinson

Naoki Maeda

Manager, Sustainability Services

Managing Director

DNV Business Assurance, Australia

DNV Business Assurance Japan K.K.

Masato Kanedome

Masahito Seiwa

Project Leader

Assessor

DNV Business Assurance Japan K.K.

DNV Business Assurance Japan K.K.

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Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEX
About DNV
Driven by our purpose of safeguarding life, property and the environment, DNV enables organisations to advance thesafety and sustainability of their business. Combining leading technical and operational expertise, risk methodology andin-depth industry knowledge, we empower our customers’ decisions and actions with trust and confidence. We
continuously invest in research and collaborative innovation to provide customers and society with operational andtechnological foresight.
With our origins stretching back to 1864, our reach today is global. Operating in more than 100 countries, our 16,000
professionals are dedicated to helping customers make the world safer, smarter and greener.

Disclaimer
Responsibilities of the Management of the Issuer and the Second-Party Opinion Providers, DNV: The management ofIssuer has provided the information and data used by DNV during the delivery of this review. Our statement represents
an independent opinion and is intended to inform the Issuer management and other interested stakeholders in the Bond
as to whether the established criteria have been met, based on the information provided to us. In our work we haverelied on the information and the facts presented to us by the Issuer. DNV is not responsible for any aspect of thenominated assets referred to in this opinion and cannot be held liable if estimates, findings, opinions, or conclusions areincorrect. Thus, DNV shall not be held liable if any of the information or data provided by the Issuer’s management andused as a basis for this assessment were not correct or complete.

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Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEX

Schedule-1 Tokyo Gas Transition Bond (#2) Eligible Projects
Eligible Criteria (partly extracted from theframework)

Hydrogenproduction

1)

Technol
ogicaldevelopment
towarddecarbonizationofgaseousenergy2)Methanation

No.

(Developmentof low-cost
technology for
MFRgreen hydrogen01
production bywaterelectrolysis)(Developmentof innovative
methanation
technology)

MFR02

Project Overview
R&D and demonstration jointly with SCREEN of
the core components "water electrolysis cellstack" and "manufacturing equipment for waterelectrolysis cell stack" towards building a waterelectrolysis system that contributes to low-costgreen hydrogen production.
*New allocation (look back)<Estimated environmental benefits>(Contribute to medium- to large-scaledemonstration and commercial expansion of
zero-emissions electricity and gas
decarbonization through the use of hydrogen)
Methanation demonstration testing with the aimof acquiring a range of technologies and knowhow, from the procurement of electricity fromrenewable energy sources to the production andutilization of synthetic methane, grasping thecompetence values and issues of waterelectrolysis and methanation equipment, andgaining insights on the efficiency of the system
as a whole.
*New allocation (look back)<Estimated environmental benefits>(Contribute to medium- to large-scaledemonstration and commercial expansion
towards gas decarbonization through thedevelopment of an entire methanation system)

Page 24 of 26

Development of a low-cost water electrolysis cell
stack
Location: Tsurumi Ward, Yokohama City,
Kanagawa Prefecture
Capacity: Further expansion has been consideredafter the already-developed 1m3/hr. (By 2023: aim
to establish manufacturing technology within two
years)

Methanation demonstration testing
Location: Tsurumi Ward, Yokohama City,
Kanagawa Prefecture
Capacity: Synthetic methane production: 12.5
m3/hr.
Planned: Start operation of demonstration facilities
in March 2022 (currently in operation)

Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEX

Eligible Criteria (partly extracted from theframework)(Expenditureondevelopment,
construction,
operation andrenovation of
onshore wind
power plants
and acquisitionof interests)

3)

Expansionofrenewableenergysources

4)No.

Project Overview
A joint project with the Danish company EWII
on renewable energy development projects in
the Nordic countries.

Acquisition, through a Tokyo Gas subsidiary, of
a 50% stake in EWII's sub-subsidiary EWII
Production, which develops and operates
WE-01 renewable energy projects, and approximately
27 MW of EWII Production's interests inonshore wind power.
*New allocation (look back)Danish onshore wind power project
Location: Denmark
Capacity: 54.5 MW, 10 sites & 22 units(Project total: 0.85 - 3.6 MW scale/unit)
Planned: Start operation gradually since 2000
(currently in operation)<Estimated environmental benefits>
78,561 t-CO2/year *Interests only

Renewableenergysources(Expenditureondevelopment,
construction,
operation andrenovation of
biomass
power plants
andacquisition ofinterests)

Acquisition of two biomass projects (Fushiki
Manyofuto Biomass Power Plant and Ichihara
Yawatafuto Biomass Power Plant) owned by
BE-01 funds managed by the Equis Group. FIT
projects.
Approximately 126,000 kW is accumulated
towards Tokyo Gas's target of 6 million kW ofrenewable energy transaction volume in 2030.
*New allocation (look back)<Estimated environmental benefits>
BE-01: Approx. 140,000 t-CO2/year
BE-02 (provisional)
BE-02: Approx. 130,000 t-CO2/year(provisional)

Page 25 of 26

Fushiki Manyofuto Biomass Power Plant
Location: Takaoka City, Toyama Prefecture
Capacity: 51.5 MW(Circulating fluidized bed, wood pellets (FSC
certified), PKS (suppliers are required to obtain
third-party certification))
Planned: Start operation in July 2022 (currently inoperation)
Ichihara Yawatafuto Biomass Power Plant
Location (planned): Ichihara City, Chiba Prefecture
Capacity: 75.0 MW(Circulating fluidized bed, wood pellets (FSC
certified))
Planned: Start operation in January 2024 (currently
under construction)

Tokyo Gas Co., Ltd. Transition Bond (#2) Second Party Opinion ANNEX

Eligible Criteria (partly extracted from theframework)

No.

Project Overview

Other transition-eligible project categories: *No allocation for this time
Advanced utilization of natural gas (fuel conversion to city gas, introduction of high-efficiency equipment), power generation and CHP, area energy use, carbonneutral LNG, utilization of CCS technology, zero-emissions for own thermal power

Page 26 of 26

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

SECOND PARTY OPINION
TOKYO GAS CO., LTD.
TRANSITION FINANCE FRAMEWORK

Prepared by: DNV Business Assurance Japan K.K.
Location: Kobe, Japan
Date: 24 Nobember 2022
Ref. Nr.: PRJN-326328-2021-AST-JPN-02

Page 1 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Executive SummaryTokyo Gas Co., Ltd. (hereinafter, Tokyo Gas, including Tokyo Gas Group) was established in
October 1885 as Tokyo Gas Company. Currently, Tokyo Gas and its 200 subsidiaries andaffiliates are engaged in the gas businesses, electric power businesses, overseas businesses,
energy-related businesses and community development service (real estate) businesses.
Tokyo Gas has formulated "Compass 2030" as the Tokyo Gas Group's management vision in
2019. Based on "Compass 2030," Tokyo Gas will strengthen its efforts to lead the transition
to a decarbonized society, including the challenge of achieving net-zero CO2 emissions, andTokyo Gas has formulated a medium-term management plan (FY2020-2022) in 2020 thatwill lay the foundation for future growth and expansion in recognition of changes in themarket environment over the medium to long term. Tokyo Gas has also formulated a
medium-term management plan (2020-2022).
In promoting these efforts, Tokyo Gas issued the Tokyo Gas Green Bond in 2020, and thenin November 2021, set forth the transition efforts “Compass Action” as a roadmap for thetransition to carbon neutrality. These efforts are also consistent with the technology
roadmap for the gas sector developed by the Japan Gas Association and the Ministry of
Economy, Trade and Industry (METI) in January 2022 with the aim of promoting transition
finance.
Tokyo Gas raised investment capital as transition finance to contribute to the transition
strategy to lead the efforts for the transition to a decarbonized society, and also engaged indialogue with investors and a wide range of marked participants. Tokyo Gas has establishedthe Tokyo Gas Transition Finance Framework (hereinafter, "Framework") in order to carryout funds for in a manner that conform to the internationally recognized frameworks.
DNV Business Assurance Japan K.K. (hereinafter, "DNV"), as an external reviewer,
evaluated the eligibility of the framework (issued in February 2022) and the Tokyo Gas
Transition Bond (issued in March 2022). This time, DNV updated the eligibility assessment of
the framework along with the revision for the year 2022 of the Green Bond Guidelines(Ministry of the Environment) and Green Loan Guidelines (Ministry of the Environment).
Specifically, DNV provided the eligibility evaluation for frameworks against the following
handbook, principle and guidelines which are widely recognized:- Climate Transition Finance Handbook (International Capital Market Association,
2020, hereinafter CTFH)- Basic Guidelines on Climate Transition Finance (Financial Services Agency, Ministry of
Economy, Trade and Industry, Ministry of the Environment, 2021 hereinafter, CTFBG)- Green Bond Principles (International Capital Market Association, 2021 hereinafter GBP)
- Green Bond Guidelines (Ministry of the Environment, 2022, hereinafter GBGLs)*updated- Green Loan Principles (Loan Market Association (LMA) and others, 2021 hereinafter
GLP)

Page 2 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1- Green Loan Guidelines (Ministry of the Environment, 2022, hereinafter GLGLs)*updated

The following is a summary of the assessment results for each common element indicated in
the above framework. Followings (CTF-1 ~ CTF-4) are findings and opinions of DNV against
the four common elements of the CTFH and CTFBG (disclosure elements); Followings(GBP/GLP-1 ~ GBP/GLP-4) are findings and opinions of DNV against the four common
elements of GBP/GBGLs and GLP/GLGLs as a transition finance with Use of Proceeds.
<CTF eligibility assessment results>
CTF-1. fundraiser’s Climate Transition Strategy and Governance:
The transition strategy of the fundraiser Tokyo Gas sets net-zero CO2 emissions by
2050 as a long-term goal consistent with the goals of the Paris Agreement in its
management vision “Compass 2030”, and in line with the pathway of the Japan Gas
Association's Action Plan for the challenge for 2050 gas carbon neutral and the Ministryof Economy, Trade and Industry's Technology Roadmap for the Gas Sector. In
addition, Tokyo Gas's transition strategy will contribute to the realization of supply-side
and demand-side carbon neutrality as a key initiative presented in various plans andstrategies for decarbonization in Japan. In terms of governance and disclosure related
to implementation of the finance, an internal structure and information disclosure
process based on TCFD*1 have been established. These are disclosed within theframework and other documents, and meet the disclosure elements of CTF-1. *1: Task
Force on Climate-related Financial Disclosures

CTF-2. Business model environmental materiality：
Tokyo Gas cites “climate change” under the theme of “leading net-zero CO2 emissions
as leading company dealing with natural gas”, and the environmental materiality ofTokyo Gas’s business model is closely related to its efforts to contribute to thetransformation of energy supply, including its core business of gas supply. The
identification of materiality is based on analysis and evaluation methods that take into
account the positive and negative aspects of their business, using GRI*1, ISO 26000,
TCFD, etc. As part of Tokyo Gas’s efforts to address environmental materiality, TokyoGas has included activities that not only reduce emissions from their own businessactivities, but also contribute to the reduction of SCOPE3 and other companies.
Furthermore, the contribution to the SDGs (see below) is also taken into account. These
are disclosed within the framework and other documents, and meet the disclosure
elements of CTF-2. *1: Global Reporting Initiative (an international standard providing ESG-related reporting,management and analysis tools)

CTF-3. Climate transition strategy to be ‘science-based’ including targets andpathways：
Tokyo Gas's Transition Strategy is defined by science-based targets and pathways.
Specifically, it is consistent with the technology roadmap in the gas sector of the Japan

Page 3 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Gas Association and the Ministry of Economy, Trade and Industry described in CTF-1,
and in addition to reducing CO2 emissions from the company’s own activities, long-termand short-to-medium-term goals that take into account SCOPE3 and contribution to
reduction are indexed and quantified, and the process of achieving these goals is
clarified. These are disclosed within the framework and this second party opinion andmeet the disclosure elements of CTF-3.
CTF-4. Implementation transparency：
Tokyo Gas has outlined its basic investment plan for the implementation of its transition
strategy, as well as the outcomes and impacts of the implementation. Specifically, underthe “Compass Action”, Tokyo Gas plans to invest approximately 2 trillion yen in growthareas, including decarbonization, by 2030, and it includes projects to be implemented
through transition finance. For future overall and individual investment plans, it was
confirmed that the investment required to implement the transition strategy is planned
to be implemented based on the internal management system and process inconsideration of CTF-1 to CTF-3. These are disclosed in the framework, otherdocuments and this second party opinion, and meet the disclosure elements of CTF-4.
<GBP/GLP eligibility assessment results>
GBP/GLP-1. Use of Proceeds:
Tokyo Gas defines the eligibility criteria for the use of proceeds as transition projects,
which contribute directly or indirectly to the realization of transition strategies and goals.
Specifically, transition projects are indicated by the eligible project categories of ① to ④,
which are classified into the following initiatives 1) to 2) below, and the proceeds will beallocated to finance or refinance for one or more these R&D, business development,
construction, operation, refurbishment, and other related expenditures. DNV has
confirmed that these transition projects are consistent with the elements of CTF-1 to 4.
The transition projects have been evaluated by Tokyo Gas as having a clear
environmental benefit on the transition strategy and are expected to contribute directly
and indirectly to the SDGs. These processes are in line with GBP-1.
The following is an overview of the three projects for which the proceeds by thetransition bond are planned to be used.
Table Tokyo Gas Transition Finance Eligible Project Category
Low and decarbonization
initiatives*1)

Low carbonization
with natural gas

2)

Decarbonization ofgas and electricity

Eligible project categories①Advanced use of natural gas(Fuel conversion to natural gas, high-efficiency gas appliances, area energyuse, strengthening resilience)② Introduction of carbon-neutral LNG and use of CCUS technology③Decarbonization of gaseous energy④ Expansion of renewable energy sources and achieving zero emission of gasfired power

Page 4 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1*In addition to 1) and 2), Tokyo Gas is committed to “reducing its own CO2 emissions”, and is introducing
ultra high-efficiency fuel cells, solar power generation, CCUs and carbon-neutral LNG into its facilities, aswell as converting its company-owned vehicles to HEVs, FCVs and EVs.

GBP/GLP-2. Process for Project Evaluation and Selection:
Tokyo Gas will confirm that the transition project meets the GBP-1 eligibility project
categories and does not conflict with the exclusion criteria set out in the framework in
advance. Specifically, the accounting department and the business unit responsible forthe project will comprehensively evaluate and select the project, and the final decision
will be made by the accounting officer. These processes are in line with implement GBP2.
GBP/GLP-3. Management of Proceeds:
The proceeds are managed by the accounting department using an internal system tomanage the allocation of proceeds to each project on a quarterly basis. Even if theproceeds are allocated through an affiliate or subsidiary, there is a system in place totrack the fact that the proceeds have been allocated. The proceeds are managed in cash
or cash equivalents in an amount equal to the unallocated proceeds until the full amountof the proceeds has been allocated.
GBP/GLP-4. Reporting:
Until the full amount of the proceeds is allocated, Tokyo Gas will disclose the status of
the allocation (allocated/unallocated amount, new/refinancing) on the Tokyo Gas
website. In addition, the outline of the projects and their environmental benefits will be
disclosed on the Tokyo Gas website to the extent practicable (in the case of projects
under construction, the progress and expected environmental benefits will be included).
Furthermore, any changes in transition strategy or pathways, or significant changes inallocation plans or results will be reported in a timely manner or in reporting.
Based on an assessment of the framework and other relevant documents and information
provided by Tokyo Gas, DNV has confirmed that the framework meets the criteria required by
the relevant framework and eligibility as transition finance.

Page 5 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Table of Contents
Executive Summary

2

I. Introduction

7

II. Scope and Objectives

17

Ⅲ. Responsibilities of Tokyo Gas and DNV

18Ⅳ. Basis of DNV’s Opinion

18

Ⅴ. Work Undertaken

20

Ⅵ. Findings and DNV’s Opinion

21

Ⅶ. Assessment Conclusion

31

Schedule-1 Tokyo Gas Transition Finance Nominated Project33

Schedule-2 Climate Transition Finance Eligibility Assessment Protocol

35

Schedule-3 Green Bond (Transition Finance with specific use of proceeds) Eligibility Assessment
Protocol42

Schedule-4 Basic Guidelines on Climate Transition Finance Eligibility Checklist

48

Schedule-5 Green Bond Guidelines (Transition Finance with specific use of proceeds) Eligibility
Assessment

75

Schedule-6 Green Loan Guidelines (Transition Finance Loan with specific use of proceeds) Eligibility
Assessment

89

List of reference documents

105

Revision history
Revision
numberDate of issue0

10/2/20221

24/11/2022

Remarks
InitialUpdated the eligibility assessment along with the revision for the year
2022 of GBGLs and GLGLs

Disclaimer
Our assessment relies on the premise that the data and information provided by Issuer to us as part of our review procedures have been provided in good faith.
Because of the selected nature (sampling) and other inherent limitation of both procedures and systems of internal control, there remains the unavoidable risk thaterrors or irregularities, possibly significant, may not have been detected. Limited depth of evidence gathering including inquiry and analytical procedures and limited
sampling at lower levels in the organization were applied as per scope of work. DNV expressly disclaims any liability or co-responsibility for any decision a person or anentity may make based on this Statement.

Statement of Competence and Independence
DNV applies its own management standards and compliance policies for quality control, in accordance with ISO/IEC 17021:2011 - Conformity Assessment Requirements
for bodies providing audit and certification of management systems, and accordingly maintains a comprehensive system of quality control, including documented
policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. We have compliedwith the DNV Code of Conduct 1 during the assessment and maintain independence where required by relevant ethical requirements. This engagement work was carriedout by an independent team of sustainability assurance professionals. DNV was not involved in the preparation of statements or data included in the Framework except
for this Statement. DNV maintains complete impartiality toward stakeholders interviewed during the assessment process.
1 DNV Code of Conduct is available from DNV website (www.DNV.com)

Page 6 of 105

I. Introductioni.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

About the Fundraiser
Tokyo Gas Co., Ltd. (hereinafter, Tokyo Gas, including Tokyo Gas Group) wasestablished in October 1885 as Tokyo Gas Company. Tokyo Gas is developing thefollowing five businesses*1 with 200 subsidiaries and affiliates including Tokyo Gas.
*1: Compiled by DNV based on the Tokyo Gas website

Gas business: Supply of city gas for domestic, commercial, industrial
and power generation. And procurement and sales of
LNG, which is the raw material for city gas.

Electricity business: Conducts from fuel procurement to power generationand sales. Ownership, wholesale, large-lot andsmall-lot sales of various power plants including
renewable energy sources as a new electric powercompany.

Overseas Business: Business development focusing on overseas resource
development, renewable energy business, and LNG
infrastructure business to realize the goals set forthin the management vision "Compass 2030”.

Energy-related business : Providing solutions such as LNG terminals, pipelines,
district heating and cooling, and energy services byleveraging Tokyo Gas’s technological expertise andknow-how in the LNG value chain
Community development services: Real estate (office and residential) rental
business, mainly in cities. Through joint projects withbusiness partners, Tokyo Gas is actively involved incommunity-based energy proposals and urban
development.

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Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

ii.

Fundraiser's Initiatives for ESG/SDGs
The Tokyo Gas’s approach to promoting sustainability is “to contributes to theachievement of a sustainable society by creating social and financial value from thesolution of social issues through its business activities, and by engaging in enduringcorporate management”. Based on this concept, Tokyo Gas aims to contribute to theachievement of the Sustainable Development Goals (SDGs) set by the United Nations
by addressing materiality (key sustainability issues) through its business activities.
Of these, the sustainability issue (materiality) primarily relevant to Transition Financeis "Leading net-zero CO2 emissions as leading company dealing with natural gas".
Table-1 Relationship between materiality (key sustainability issues) and SDGs
Sustainability issues

Contributing to the SDGs through the efforts(Materiality)
Climate change

Leadership in theeffort to achieve
Net-Zero CO2 as aleading company innatural gas

Access to energy
Safety and disaster
preparedness
Creation of customer
value
Resource efficiency andrecycling society

Sound relations
with society

Establishment ofrelationships with
communities
Diversity
Satisfaction throughwork and laborproductivity

Actions as a
responsible
company

Supply chain
management
Information security
Governance andcompliance

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Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

iii. Fundraiser's Environmental Initiatives
Tokyo Gas formulated its management vision, "Compass 2030" in November 2019,
and announced "Compass Action" in November 2021 as a concrete pathway torealize Compass 2030. “Compass 2030” and the “Compass Action” provide an
overall picture of the initiatives and measures to achieve a balance between theenvironment and business management. In this document, Tokyo Gas presents aroadmap for the transitioning to carbon neutrality (Figure-1).
The roadmap for transitioning to carbon neutrality calls for an accelerated transition
period ending in 2030, with global business activities contributing 17 million tons of
CO2 emission reduction by 2030, and a period of carbon neutrality ending in 2050,
with the challenge of achieving net zero CO2 emissions by 2050.
Tokyo Gas's roadmap for transitioning to carbon neutrality includes not only its own
CO2 emissions from its business activities (SCOPE 1 and 2), but also the CO2
emission reduction of society as a whole through approaches to both raw material
procurement and the CO2 emission reduction contributions of its customers (SCOPE
3) (Figure-2).
In addition, Tokyo Gas clearly states in its "Compass Action" that it will "lead theway in responsible transitions" and is actively addressing "climate change" as asustainability issue (materiality) by participating in various external initiatives asshown in Table-2.

TOKYO GAS GROUP "ROADMAP FOR TRANSITIONING TO CARBON NEUTRALITY".
(EXTRACT FROM COMPASS ACTION)
1.

Use natural gas as low-carbon
solution2.

Decarbonize gas & electricity

3.

Reduce in-house CO2 emissions

1., 2.: Contribute to CO2 reduction at customers

3.: Net zero in-house emissions

Page 9 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Figure 1: Tokyo Gas Group Compass Action "Roadmap for Transitioning to Carbon Neutrality

Figure-2 Greenhouse gas emissions in Tokyo Gas LNG value chain (FY2020)

Page 10 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Table-2 Tokyo Gas’s Participation in External Initiatives and Efforts
External Initiatives

Tokyo Gas's Efforts

UN Global Compact

In March 2016, Tokyo Gas announced its support for the United
Nations Global Compact to promote sustainability from a global
perspective as a good member of the international community.

Sustainable(See Table-1) Based on the concept of promoting sustainability,
which is "to contributes to the achievement of a sustainable
society by creating social and financial value from the solution ofsocial issues through its business activities, and by engaging inenduring corporate management", Tokyo Gas aims to make abroad contribution to the achievement of the SDGs through its
business activities.

Development Goals(SDGs)

Task Force on Climaterelated Financial
Disclosures (TCFD)

Challenge Zero

Tokyo Gas has decided to support the TCFD recommendationsin May 2019. Tokyo Gas discloses information in line with TCFD
recommendations from FY2020 and plans to continue to disclose
appropriate information on the impact of climate change on theTokyo Gas Group's business activities and efforts to address it.
Tokyo Gas has decided to support “Challenge Zero (Challenge
Net-Zero Carbon Innovation)”, which is a new initiative of
Nippon Keidanren (Japan Business Federation) that strongly
promotes and encourages the innovation actions that companies
and organizations are taking on, both domestically andinternationally, with the aim of realizing a "decarbonizedsociety," which is the long-term goal of the Paris Agreement,
the international framework for combating climate change. Also,
Tokyo Gas has announced the its specific innovation initiatives(listed in the "Companies Taking on the Zero-Emission
Challenge” by the Ministry of Economy, Trade and Industry).

iv. About the Transition Finance Framework
In advancing the environmental initiatives "Leading the Transition to 'CO2 Net Zero'" which
set forth in “Compass 2030”, Tokyo Gas issued transition finance for transition activities torealize the Carbon Neutral Challenge 2050*1 set forth by the Japan Gas Association (JGA)
and the sector-specific technology roadmap*2 set forth by the Ministry of Economy, Tradeand Industry (METI). Also, Tokyo Gas engaged in dialogue with investors and a wide rangeof marked participants and has established the Tokyo Gas Transition Finance Framework(hereinafter, "Framework") in order to carry out funds for in a manner that conform to theinternationally recognized frameworks.
The criteria which this framework specifically referred to is described in (3) of Section II
below.
*1: Japan Gas Association: Carbon Neutral Challenge 2050 on 24th November 2020
*2: Ministry of Economy, Trade and Industry (METI): Technology roadmap for the gas sector on"Transition Finance" on February 2022.

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Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Fundraiser’s Transition Strategy for Decarbonization(1) Strategies by sector (industry) at the international/national/regional level
Figure-3 shows the scenarios for gas
carbon neutrality set out in the "Carbon
Neutral Challenge 2050" developed by
the Japan Gas Association in November
2020. The Japan Gas Association's
scenario (Figure-3) and Tokyo Gas's
roadmap (Figure-1) are well aligned,
and it is designed to reduce emissions
throughout the gas supply chain,including demand-side, supply-side,
CCUS and overseas contributions. Figure4.2 shows the Ministry of Economy, Tradeand Industry (METI) technology roadmap
by sector.

Figure-3 Scenarios for achieving gas carbon neutral(Japan Gas Association)① Shift to natural gas and advanced use of natural gas(demand side)
Conversion from coal and oil to natural gas
Introducing cogeneration, fuel cell
Introducing high efficient equipment② Decarbonization of Gas (supply side)
Synthetic Methane and hydrogen utlilization
Decarbonization of Gas by innovation by supplier③ CCUS and global avoided emission
R&D and installation of CCUS.
Expand innovative gas technology and engineering to
global, use of carbon neutral LNG

One of the main contributions of the gas
sector to the reduction of CO2 emissions insociety as a whole is the conversion ofcoal, heavy oil and petroleum fuels tonatural gas, which is widely recogzised as a typical transition project. The METI’s gas
sector roadmap shows that, as society as a whole progresses with fuel switching, gas
demand-side (consumption and sales) will increase, and supply-side (gas utility) CO2
emissions will increase (Scope 3 increase) in the short to medium term (Figure-4.1).

In other words, while Tokyo Gas is working to reduce CO2 emissions in its gas businessthrough the introduction of high-efficiency gas appliances and other measures, Tokyo
Gas's Scope 3 CO2 emissions are expected to increase temporarily due to the relatively
high volume of natural gas supplied for fuel conversion. Tokyo Gas is committed toreducing CO2 emissions for society as a whole through the supply of gas for fuelconversion, etc. (contributing to the reduction of CO2 emissions), and the voluntary
reduction of CO2 emissions through the introduction of high-efficiency gas appliancesand other measures (introduction of technologies
Image of Fuel conversion to natural gas
and equipment that will contribute to theCO emission reduction
reduction of the supply of low-carbon gas in the(Demand side)
future) will also contribute to the reduction of
Scope 3 emission reductions. It is considered to
be strategies and initiatives that are closely
CO emission increment
related to the initiatives of METI and the Japan(Supply side)
Gas Association.
2

CO2 emission
from the whole societyv.

2

Fig-4.1 METI Transition Finance Technical Roadmap (Gas sector) Demand/Supply side

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Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Fig-4.2* METI Transition Finance Technical Roadmap (Gas sector)
Town Gas, LP Gas(above) and Shared Technology(below)*: Fig-4.2 is a provisional translation by DNV based on the Japanese version

Page 13 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1(2) Fundraiser's transition strategies
Tokyo Gas has positioned its efforts to achieve its short-, medium- and long-termtargets as transition strategy by embodying the transition initiatives outlined aboveby the Japan Gas Association and the Ministry of Economy, Trade and Industry, as
well as the efforts to achieve Net-Zero CO2 emissions by 2050 outlined in its
management vision "Compass 2030" and "Compass Action".
These targets will contribute to (and support) the implementation of supply-side
and demand-side carbon neutrality as a key initiative outlined in Japan's various
decarbonization plans and strategies.
Table-3 shows the Tokyo Gas’s transition targets. In addition, Table-4 shows the
low and decarbonization initiatives towards Net-Zero CO2 emissions, and Figure-5
shows the roadmap for the transitioning to carbon neutrality, including an overview
of the transition strategy, specific initiatives and timelines.
Although the Transition Strategy of the Japan Gas Association and the Ministry of
Economy, Trade and Industry does not set clear interim targets (base year, specificquantified reduction targets, etc.), Tokyo Gas has set the short-, mid- and longterm targets required by the Transition Strategy from the perspective of its own
activities and contribution to society, together with specific management strategies
and business plans.
TABLE-3 TOKYO GAS TRANSITION TARGETS
MEDIUM-TERM
TARGETS
LONG-TERMTARGETS

Contribution to CO2 reduction by 2030: ▲17 million tonnes＊

Challenge to achieve Net-Zero CO2 towards 2050

Reference: Short-term target: Achieve Net-Zero CO2 and contribute to CO2 reduction of ▲6.5 million tonnes in
2020-2022 (for domestic emissions)＊＊Compared to 2013. Includes in-house emissions (Scope 1 and 2), Scope 3 and reductions at
customers.
Of the▲ 17 million tonnes (target for the global business as a whole), Net-Zero CO2 emissions
from city gas production, company-owned buildings, and company vehicles in Scope 1 and 2(approx. 300,000 tons in FY2020); the decrease in Scope 3 emissions is ▲750,000 tonnes.

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Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Table-4 Low and decarbonization efforts towards Net Zero CO2 of Tokyo Gas
Low and

Project category

decarbonization initiatives
Advanced use of natural gas
1)

Low carbonization with①

natural gas②

2)

Decarbonization of gas
and electricity③(Fuel conversion to natural gas, high-efficiency gas appliances,area energy use, strengthening resilience)
Introduction of carbon-neutral LNG and use of CCUS technology
Development of technology for decarbonization of gaseous energy
Expansion of renewable energy sources and achieving zero emission of④

gas-fired power
We are introducing ultra high-efficiency fuel cells, photovoltaics, CCUs and3)

Reduce in-house CO2
emissions－carbon-neutral LNG in our own facilities, and are converting our company
vehicles to HEVs, FCVs and EVs.

Figure-5 (Figure-1 reprinted) Tokyo Gas Group Compass Action"Roadmap for Transitioning to Carbon Neutrality

Page 15 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1(3) Governance of the fundraiser (sustainability promotion system)
Figure-6 and Figure-7 show Tokyo Gas's sustainability promotion system and its
approach to sustainability promotion.
Tokyo Gas recognizes that the implementation of
the Transition Strategy is one of the ways topromote sustainability, and as an importantmanagement issue, it is deliberated and decided
by a committee that supports the rational
decision-making of the executive officers, and theimplementation of business. These bodies are
responsible for dealing with the environmental
and social issues associated with the
Figure-6 Tokyo Gas Sustainability Promotion Structure
implementation of the transition strategy,
and for monitoring, evaluating and managing transition initiatives. In addition, theSustainability Committee, chaired by the President, has been established as a meeting
body for the promotion of sustainability, and is promoting efforts to address
sustainability issues (materiality) including climate change.

Figure-7 Tokyo Gas's approach to sustainability promotion
Issuer Name: Tokyo Gas Co., Ltd.
Framework Name: Tokyo Gas Transition Finance Framework
Review provider’s Name: DNV Business Assurance Japan K.K.
Date of report: 24 November 2022

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Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

II.

Scope and Objectives

DNV has been commissioned by Tokyo Gas to provide a pre-issuance assessment on Tokyo
Gas’s Transition Finance Framework and the Transition Bonds. Our objective has been to
implement an assessment on whether the Tokyo Gas’s Transition Bonds meet the criteria
established on CTFH・CTFBG, GBP・GBGLs and GLP・GLGLs to provide a second party opinion
on the eligibility of the Tokyo Gas’s Transition Finance Framework and the Transition Bond
to be implemented.
DNV, as an independent external reviewer, has identified no real or perceived conflict ofinterest associated with the delivery of this second-party opinion for Tokyo Gas.
In this report, no assurance is provided regarding the financial performance of the finance,
the value of any investments in the finance, or the long-term environmental benefits of thetransaction.
(1)Scope of review*
The review assessed the following elements and confirmed their alignment with the gist of GBP/GLP:☒.

Use of Proceeds☒.

Process for Project Evaluation and Selection☒.

Management of Proceeds☒.

Reporting*The scope of review is to be applied as a part of the evaluation of the transition finance with use of proceeds*The four disclosure elements of CTFH and CTFBG are included in the scope of review(2) Role(s) of review provider☒

Consultancy (incl. 2nd opinion)☐

Certification☐

Verification☐

Rating☐Other (please specify):(3) Standards/guidelines to be applied
No.

Standards/guidelines

Scheme owner

1.

Climate Transition Finance Handbook(CTFH)*1

2.

Basic Guidelines on Climate Transition Finance (CTFBG) *1

3.

Green Bond Principles (GBP) *2

International Capital Market Association(ICMA), 2020
Financial Services Agency, Ministry of
Economy, Trade and Industry, Ministryof the Environment, 2021
International Capital Market Association(ICMA), 2021

4.

Green Bond Guidelines (GBGLs) *2

Ministry of the Environment, 2022

5.

Green Loan Principles (GLP) *2

Loan Market Association (LMA) andothers, 2021

6.

Green Loan Guidelines (GLGLs) *2

Ministry of the Environment, 2022

Page 17 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1*1

Climate transition: The concept of climate transition focuses principally on the credibility of an issuer’s
climate change-related commitments and practices. (Quoted from CTFH and CTFBG)*2

It confirms compliance with the four core elements (use of proceeds, process for project evaluation andselection, management of proceeds, and reporting) that must be met when implementing as a bond/loanthat meets the four elements of transition and has a specific use of proceeds (quoted from CTFBG).

Ⅲ. Responsibilities of Tokyo Gas and DNVTokyo Gas has provided the information and data used by DNV during the delivery of thisreview. DNV’s second party opinion represents an independent opinion and is intended to
inform Tokyo Gas and other interested stakeholders in the Tokyo Gas’s Transition Finance as towhether the established criteria have been met, based on the information provided to us. In ourwork we have relied on the information and the facts presented to us by Tokyo Gas. DNV is not
responsible for any aspect of the nominated projects and assets referred to in this opinion andcannot be held liable if estimates, findings, opinions, or conclusions are incorrect. Thus, DNV
shall not be held liable if any of the information or data provided by Tokyo Gas’s management
and used as a basis for this assessment were not correct or complete.

Ⅳ. Basis of DNV’s Opinion
To provide as much flexibility for the fundraiser, Tokyo Gas as possible, we have adapted ourTokyo Gas Transition Finance assessment methodologies, which incorporates the requirementsof the CTFH, CTFBG, GBP, GBGLs, GLP and GLGLs, to create a Tokyo Gas Transition Finance
Eligibility Assessment Protocol (hereinafter, “Protocol”). Please refer to Schedule-2. The Protocol
is applicable to Tokyo Gas Transition Finance under the CTFH, CTFBG, GBP, GBGLs, GLP and
GLGLs.
DNV, as an independent external reviewer, provides second party opinion according to theprotocol.
Our Protocol includes a set of suitable criteria that can be used to underpin DNV’s opinion.
The overarching principle behind the Climate Transition Finance of Bond and Loan with a specificuse of proceeds as the basis for the opinion are as follows:“provide an investment opportunity with transparent sustainability credentials”“enable capital-raising and investment for new and existing projects with environmental
benefits"
As per our Protocol, the criteria against which the Tokyo Gas Transition Finance has beenreviewed are grouped into common elements bellow, represented by CTFH, CTFBG, GBP,
GBGLs, GLP and GLGLs.

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Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1(1) Four elements of CTFH/CTFBG (disclosure elements)
Principle One: Fundraiser’s climate transition strategy and governance
The financing purpose should be for enabling a fundraiser’s climate change
strategy.
• Principle Two: Business model environmental materiality
The planned climate transition trajectory should be relevant to theenvironmentally-material parts of the fundraiser’s business model.
• Principle Three: Transition is science-based including targets and pathway
Fundraiser’s climate strategy should reference science-based targets and transition
pathways.
• Principle Four: Implementation transparency
Market communication in connection with the offer of a financing instrument which
has the aim of funding the fundraiser’s climate transition strategy should also
provide transparency of the underlying investment program.

•(2) Four elements of GBP/GBGLs and GLP/GLGLs•

Principle One: Use of Proceeds
The Use of Proceeds criteria are guided by the requirement that a fundraiser of atransition finance must use the funds raised to eligible activities. The eligible
activities should produce clear environmental benefits.

•

Principle Two: Process for Project Evaluation and Selection
The Project Evaluation and Selection criteria are guided by the requirements that afundraiser of a transition finance should outline the process it follows when
determining eligibility of an investment using transition finance proceeds, andoutline any impact objectives it will consider.

•

Principle Three: Management of Proceeds
The Management of Proceeds criteria are guided by the requirements that atransition finance should be tracked within the fundraising organization, that
separate portfolios should be created when necessary and that a declaration of
how unallocated funds will be handled should be made.

•Principle Four: Reporting
The Reporting criteria are guided by the recommendation that at least
Sustainability Reporting to the bond investors and loan lenders should be made of
the use of proceeds and that quantitative and/or qualitative performanceindicators should be used, where feasible.

*The GLGLs set out requirements for loan-specific elements (internal reviews). This is identified
in the green loan requirements check in Schedule-6.

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Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ⅴ. Work Undertaken
Our work constituted a comprehensive review of the available information, based on theunderstanding that this information was provided to us by the fundraiser in good faith. We
have not performed an audit or other tests to check the veracity of the information provided
to us. The work undertaken to form our opinion included:i. Pre-funding assessment (Transition Finance Framework and Transition Bonds)•

Creation of a Tokyo Gas-specific Protocol, adapted to the purpose of the Tokyo Gas
Transition Finance, as described above and in Schedule-2 to this assessment;•

Assessment of documentary evidence provided by Tokyo Gas on the Tokyo Gas
Transition Finance and supplemented assessment by a comprehensive desktop
research. These checks refer to current assessment best practice and standards
methodologies;•

Discussions with Tokyo Gas, and review of relevant documentation;•

Documentation of findings against each element of the criteria.

ii. Post-funding assessment (*not included in this report)•

Interview with Tokyo Gas management, and review of the relevant documentation;•

Field research and inspection (if necessary);•

Document creation of post-issuance assessment results

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Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ⅵ. Findings and DNV’s Opinion
DNV’s findings and opinion are as described in (1) and (2) below.
From the CTF-1 to 4 in (1) below are the findings and opinions of DNV against the disclosure
elements of the CTFH and CTFBG.
Please see Schedule-2 for details.
From the GBP 1 to 4 in (2) below are the findings and opinions of DNV against therequirement of the four common disclosure elements of GBP/GBGLs and GLP/GLGLs.
Please see Schedule-3 for details.
(1) Findings and opinions of DNV against the four common elements (disclosure
elements) of CTFH and CTFBG
CTF-1.

Fundraiser’s Climate Transition Strategy and Governance-Tokyo Gas formulated its management vision, "Compass 2030," in November
2019 and "Compass Action" in November 2021 as specific actions to
implement Compass 2030. In the Compass Action, Tokyo Gas has set a longterm targets of Net-Zero CO2 by 2050, which is the goal of the Paris
Agreement, and has set short-term and medium-term targets to achieve that
long-term target. Tokyo Gas disclosed its strategic plan to achieve the above
target as a roadmap for transitioning to carbon neutrality in Compass Action.

-

Based on the science-based long-term targets quantified by Tokyo Gas, DNV
has reviewed and confirmed that Tokyo Gas's targets correspond to achieving
the goals of the Paris Agreement. Tokyo Gas sets environmental corporate
strategies that are important to its business model, based on the identificationof risks and opportunities and scenario analysis using TCFD guidance.

-

Specifically, Tokyo Gas's Transition Strategy incorporates the environmental
targets of the Japan Gas Association and the Ministry of Economy, Trade andIndustry (METI), as well as its action plan to achieve a target of limiting theincrease in average temperature below 2°C using the TCFD. In addition, if it
becomes necessary to review Tokyo Gas’s efforts in order to achieve
continuous emission reductions in the future, Tokyo Gas plans to implement
them as appropriate according to the timeline.

-

Tokyo Gas recognizes that the implementation of the Transition Strategy is
one of the ways to promote sustainability, and has established a system andframework to promote the initiatives specified in “Compass 2030” and“Compass Action” at the management level.

-

The Tokyo Gas’s approach to promoting sustainability is “to contributes to theachievement of a sustainable society by creating social and financial value
from the solution of social issues through its business activities, and by
engaging in enduring corporate management”. Based on this concept, Tokyo
Page 21 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Gas aims to contribute to the achievement of the Sustainable Development
Goals (SDGs) set by the United Nations by addressing materiality (keysustainability issues) through its business activities.
Of these, the sustainability issue (materiality) primarily relevant to Transition
Finance is "Leading net-zero CO2 emissions as leading company dealing withnatural gas".
-CTF-2.

Based on an assessment of the Framework, “Compass 2030”, “Compass
Action” and the Implementation Plan, DNV has confirmed that they are wellaligned with Tokyo Gas's Transition Strategy. Through the assessment, DNV
has confirmed that the implementation plan based on the Transition Strategy
is reliable, ambitious and achievable.

Business model environmental materiality-

Tokyo Gas's Transition efforts include not only emission reductions from its
own business activities (SCOPE 1 and 2), but also SCOPE 3 and activities that
contribute to the reduction at customers. This will contribute to theimplementation of supply-side and demand-side carbon neutrality as animportant initiative indicated in the various plans and strategies for
decarbonization in Japan. In other words, as a natural gas company, Tokyo
Gas's transition efforts directly support the transition of society as a whole,including its own.

-

Tokyo Gas’s Transition Roadmap is well aligned with the Gas Roadmaps of theJapan Gas Association and the Ministry of Economy, Trade and Industry, andtheir specific implementation plans and targets have been set and quantified in
the absolute sense that they must be the optimization to achieve them and thepossibility of further improvement.

-

DNV confirmed that Tokyo Gas's plan to implement its Transition Strategy isclosely linked to the activities of Tokyo Gas's core business and to activities
that contribute to the CO₂ reduction of in society as a whole, thus, contributing
to the environmental aspects of society as a whole and supporting commercial
drive. Tokyo Gas's planned Transition Strategy and Transition Pathway will be
associated with the materiality that Tokyo Gas has achieved through GRI*1,
ISO 26001, TCFD, etc., and will contribute to significant environmental
benefits in both qualitative and quantitative terms.
*1: Global Reporting Initiative (an international standard providing ESG-related reporting,management and analysis methods)

CTF-3.
-

Transition is science-based including targets and pathways
Tokyo Gas has set a transition plan that is consistent with the Paris Agreement
based on science-based evidence, and a transition trajectory that is consistent

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Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

with the goals of the Japan Gas Association and the Ministry of Economy,
Trade and Industry.
-

DNV has confirmed that Tokyo Gas's Transition Strategy is quantified in termsof emission intensity and absolute values based on a consistent measurement
methodology with prescribed assumptions. Transition targets are set
voluntarily based on initiatives using TCFD and other methods to achievesustainable CO2 emission reductions, and they are consistent with the policiesof the benchmarking of the Japan Gas Association and the Ministry of
Economy, Trade and Industry.

TABLE TOKYO GAS TRANSITION TARGETS
MEDIUM-TERM
TARGETS
LONG-TERMTARGETS

Contribution to CO2 reduction by 2030: ▲17 million tonnes＊

Challenge to achieve Net-Zero CO2 towards 2050

Reference: Short-term target: Achieve Net-Zero CO2 and contribute to CO2 reduction of ▲6.5 million tonnes in
2020-2022 (for domestic emissions)＊＊Compared to 2013. Includes in-house emissions (Scope 1 and 2), Scope 3 and reductions at customers.
Of the▲ 17 million tonnes (target for the global business as a whole), Net-Zero CO2 emissions
from city gas production, company-owned buildings, and company vehicles in Scope 1 and 2(approx. 300,000 tons in FY2020); the decrease in Scope 3 emissions is ▲750,000 tonnes.

-

Tokyo Gas's CO2 reduction focuses not only on reducing emissions from its
own business activities (SCOPE 1 and 2), but also on SCOPE 3 and activities
that contribute to the reduction at customers. This will contribute to theimplementation of supply-side and demand-side carbon neutrality as animportant initiative indicated in various plans and strategies for
decarbonization in Japan. In other words, as a natural gas company, Tokyo
Gas's transition initiatives directly support the transition of society as a whole,including its own.

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Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

CTF-4.

Implementation Transparency-

DNV has confirmed that the investment and deployment plans associated with
Tokyo Gas's Transition Strategy include agreement on future investment andexpenditure. Specifically, under Compass Action, Tokyo Gas plans to invest
approximately 2 trillion yen by 2030 in growth areas including decarbonization,
projects to be implemented through transition finance.

-

DNV confirmed that the overall investment plan (investment amount) for the
future considers CTF-1 to CTF-3 for the investment required to implement thetransition strategy and also confirmed plans to be implemented according to
the appropriate timelines, based on internal management system and process.

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Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1(2) Findings and opinions of DNV against the four common elements of GBP/GBGLs
and GLP/GLGLs*The four elements are used as criteria for transition finance to specify the use of proceeds, and somegreen bonds/loans below can be read as transition finance (bond/loan).

GBP/GLP-1. Use of Proceeds
Tokyo Gas has defined the criteria applied to eligible projects as transition projects whichmeet Transition Strategy and related handbook, principle and guidelines (CTF-H and CTFBG).
Table-5 shows the eligible project categories for transition finance.
Table-5 Tokyo Gas Transition Finance Eligible Project Category
Low and decarbonization
initiatives*1)

2)

Low carbonization withnatural gas

Decarbonization of gas
and electricity

Eligible project categories①Advanced use of natural gas(Fuel conversion to natural gas, high-efficiency gas appliances, area energyuse, strengthening resilience)② Introduction of carbon-neutral LNG and use of CCUS technology③Decarbonization of gaseous energy④ Expansion of renewable energy sources and achieving zero emission of gasfired power*In addition to 1) and 2), Tokyo Gas is committed to “reducing its own CO2 emissions”, and is introducing
ultra high-efficiency fuel cells, solar power generation, CCUs and carbon-neutral LNG into its facilities, aswell as converting its company-owned vehicles to HEVs, FCVs and EVs.

DNV has confirmed that Tokyo Gas plans to allocate the net proceeds from Transition
Finance, excluding expenses, as new investment and refinancing for capital investment,
operating expenses, and R&D related expenses for transition eligible projects that meet
Tokyo Gas's investment plan for implementing its transition strategy.
These are projects that contribute to business transformation projects as exemplified by
CTFH/CTFBG, GBP/GBGLs and GLP/GLGLs, that directly or indirectly support fuelswitching, and that contribute to achieving the goals of the Japan Gas Association and
METI. These projects have been evaluated as having a clear environmental
improvement effect on the Transition Strategy, and are expected to contribute to the
SDGs. These processes are in compliance with the GBP-1.
Table-6 shows the candidate projects and eligibility criteria for transition finance. Also,

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東京ガス株式会社 トランジション・ファイナンス・フレームワーク セカンド・パーティ・オピニオン

Table-6 Transition Finance Eligible Project Candidates and Eligibility Criteria
Eligible project candidates
Initiatives

Eligibility Criteria(Overview of Transition Project)

Categories

Advanced use ofnatural gas

Fuel conversion
to gasInstallation ofhigh-efficiency
gas appliances①

1)Power generation and cogeneration(Combined heat and power)

Use natural gas
as Low-carbon
solution

Area energy use

 Smart Energy Networks, etc.

Carbon-neutral LNG

 Procurement and supply of carbonneutral LNG
 CCU systems at the customer's site②
Use of CCUS technology

Use ofhydrogen andbiogas③2)

Decarbonize gas
and electricity④

 New LNG terminal
 Gas production facilities atsatellites
 Pipeline extension/maintenance Support for the installation of gas
appliances for industrial,commercial and domestic use
 Conventional fuel cell (ENE-FARM)
 Development and introduction ofultra high-efficiency fuel cells
 Gas cogeneration (including nonin-building use), district heating
and cooling VPP in the household andcommercial sectors
 Construction, maintenance andrenewal of high-efficiency LNGfired power stations

Decarbonization of
gaseous energy

Developmentof technology
fordecarbonizationof gaseous
energyExpansion of renewable energy
sourcesZero emission of own gas-fired
power

Page 26 of 105

 CCS (development of large scale
CO2 storage technology using
micro-bubble)
 New hydrogen stations
 Hydrogen pipeline installation
 Maintenance and renewal ofhydrogen production and CCUS
 Procurement of biogas
 Development of low-cost greenhydrogen production technology bywater electrolysis
 Development of innovative
methanation technologies
 Expansion of renewable energy
sources Renewable electricity procurement
 Co-firing and exclusive use ofhydrogen and ammonia in gasfired power plants

東京ガス株式会社 トランジション・ファイナンス・フレームワーク セカンド・パーティ・オピニオン 改訂-1

GBP/GLP-2. Process for Project Evaluation and Selection
Tokyo Gas confirms that the transition projects contribute to the achievement of theTransition Strategy and do not conflict with the pre-defined exclusion criteria (seebelow) in the Framework. Specifically, the Accounting Department and the Business
Units will select projects for appropriation from the eligible project candidates, and thefinal decision on the selected projects will be made by the Accounting Officer.
DNV confirmed that these processes had been established as an internal document ofTokyo Gas and that the plan will be implemented in accordance with the appropriate
processes.
DNV has also confirmed that the transition projects implemented by Tokyo Gas are inline with its management and environmental policies, as well as the transition
strategies, goals and pathways.
< Exclusion Criteria>-

Inappropriate relationships such as unfair trade, bribery, corruption, extortion,embezzlement, etc. that do not comply with the laws of the country ofresidence-

Transactions that can cause social problems such as human rights and theenvironment

Evaluation and selection☒.

Conforms to the issuer’s achievement of☒.

environmental contribution goals☒.

Documented process to determine that projects
fit within defined categories

The project is eligible for use of proceeds☒.

by green bond and transparency isDocumented process to identify and manage
potential ESG risks associated with the project

ensured.
☒The project is evaluated and selected☐

Other (please specify):

based on the published standard summary

Information on Responsibilities and Accountability☒.

Evaluation / Selection criteria subject to☒.

external advice or verification☐

Other (please specify):

Page 27 of 105

In-house assessment

東京ガス株式会社 トランジション・ファイナンス・フレームワーク セカンド・パーティ・オピニオン 改訂-1

GBP/GLP-3. Management of Proceeds
The proceeds will be deposited into Tokyo Gas’s common account, and the accounting
department will manage the allocation for each project by allocating them to affiliates
and subsidiaries using an integrated accounting management system.
This integrated accounting management system and other systems will be traceable
over the redemption or repayment period, and the allocation status will be reviewed
by the accounting department on a quarterly basis. Vouchers relating to the
management of the proceeds will be kept in accordance with document control
regulations.
The net proceeds is planned to be allocated within two years of the issue. If theproceeds are to be used to refinance existing expenditure, it is planned to be allocatedwithin approximately three years from the time of the financing, and the projects thatare determined to be eligible as transition projects at the time of allocation are eligiblein accordance with the process set out in GBP/GLP-2.
The amount of proceeds will be managed in cash or cash equivalents in the sameamount as the unallocated proceeds until the allocation.
If transition financing is to be implemented under this framework in the future, it will
be disclosed in legal documents prior to implementation.

Tracking of Proceeds:☒.

Some or all of the proceeds by green bonds that are planned to be allocated are systematically☐Disclosure of intended types of temporary investment instruments for unallocated proceeds☒.

Other (please specify): Unallocated proceeds are managed in cash or cash equivalents

distinguished or tracked by the issuer.

Additional disclosure:☐

Allocations to future investments only☒.

Allocations to both existing and future☒.

Allocation to individual disbursements☐

Allocation to a portfolio of disbursements☐

Disclosure of portfolio balance of☒.

Other (please specify): includes allocations

investments

unallocated proceeds

through affiliates and subsidiaries.

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東京ガス株式会社 トランジション・ファイナンス・フレームワーク セカンド・パーティ・オピニオン 改訂-1

GBP/GLP-4. Reporting
DNV confirms that the fundraiser will report on the transition finance until the proceeds
are allocated, and disclose information on the status of the allocation, the projects towhich the proceeds have been allocated or the environmental benefits. DNV also
confirmed that environmental benefits will be reported until the completion of theredemption or repayment of the transition financing. DNV confirmed that the fundraiser
will disclose information on a timely basis in the event of a significant change in the
allocation plan or other material event.
The report will be disclosed on the fundraiser’s website.
<Allocation Status>
Allocated Amount

Unallocated amounts (including when they will be allocated and its
management)

Amount of proceeds to be used for refinancing

<Environmental benefit>Environmental benefits are disclosed within the scope of confidentiality, to theextent practicable, and in consideration of the characteristics of the project,including an overview of the project (including progress, completion,
operation, etc.) and the expected environmental benefits (e.g., t-CO2/year).

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東京ガス株式会社 トランジション・ファイナンス・フレームワーク セカンド・パーティ・オピニオン 改訂-1

Use of Proceeds reporting:☒

Project-by-project☒

On a project portfolio basis☐

Linkage to individual bond(s)☐Other (please specify):☐

GB financed share of total investment

Information reported:☒

Allocated amounts☐

Other (please specify):

Frequency:☒

Annual☐Other (please specify):☐

Semi-annual

Impact reporting (Environmental benefit):☒

Project-by-project☐

On a project portfolio basis☐

Linkage to individual bond(s)☐Other (please specify):

Frequency:☒

Annual☐Other (please specify):☐

Semi-annual☐

Energy savings

Information reported (expected or ex-post):☒

GHG Emissions / Savings☒

Other ESG indicators (please
specify): Equipment completion of
installation, size, year of operation,
etc.

Means of Disclosure☐

Information published in financial report☐

Information published in sustainability report☒

Other (please specify): Tokyo Gas web site

(Integrated Report)☐

Information published in ad hoc documents☐

Reporting reviewed (if yes, please specify which parts of the reporting are subject to external
review)

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東京ガス株式会社 トランジション・ファイナンス・フレームワーク セカンド・パーティ・オピニオン 改訂-1

Ⅶ. Assessment Conclusion
On the basis of the information provided by Tokyo Gas and the work undertaken, it is
DNV’s opinion that the Tokyo Gas Transition Finance Framework and Transition Bondissued by Tokyo Gas meets the criteria established in the Protocol, and that it is alignedwith the following stated definition or purpose of climate transition finance for bonds
and loans that specify the use of proceeds within the CTFH/CTFBG, GBP/GBGLs,
GLP/GLGLs.
“provide an investment opportunity with transparent sustainability credentials”“enable capital-raising and investment for new and existing projects with environmental
benefits"

DNV Business Assurance Japan K.K.
24 Nov. 2022

Mark Robinson

Naoki Maeda

Manager, Sustainability Services

Managing Director

DNV Business Assurance, Australia

DNV Business Assurance Japan K.K.

Masato Kanedome

Masahito Seiwa

Project Leader

Assessor

DNV Business Assurance Japan K.K.

DNV Business Assurance Japan K.K.

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東京ガス株式会社 トランジション・ファイナンス・フレームワーク セカンド・パーティ・オピニオン 改訂-1
About DNV
Driven by our purpose of safeguarding life, property and the environment, DNV enables organizations to advance thesafety and sustainability of their business. Combining leading technical and operational expertise, risk methodology andin-depth industry knowledge, we empower our customers’ decisions and actions with trust and confidence. We
continuously invest in research and collaborative innovation to provide customers and society with operational andtechnological foresight.
With our origins stretching back to 1864, our reach today is global. Operating in more than 100 countries, our 16,000
professionals are dedicated to helping customers make the world safer, smarter and greener.
Disclaimer
Responsibilities of the Management of the Fundraiser and the Second-Party Opinion Providers, DNV : The management ofFundraiser has provided the information and data used by DNV during the delivery of this review. Our statement
represents an independent opinion and is intended to inform the Fundraiser management and other interested
stakeholders in the Bond as to whether the established criteria have been met, based on the information provided to us.
In our work we have relied on the information and the facts presented to us by the Fundraiser. DNV is not responsible forany aspect of the nominated assets referred to in this opinion and cannot be held liable if estimates, findings, opinions, orconclusions are incorrect. Thus, DNV shall not be held liable if any of the information or data provided by the Fundraiser’s
management and used as a basis for this assessment were not correct or complete

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Tokyo Gas Co., Ltd. Transition Finance Framework Eligibility Second Party Opinion Rev-1

Schedule-1 Tokyo Gas Transition Finance Nominated Project
The projects listed in the table are transition finance candidates that have been evaluated for eligibility at the time of pre-issue eligibility assessment (as ofFebruary 2022). In the future, bonds or loans issued under the Tokyo Gas Transition Finance Framework will be selected from one or more of the eligible
project candidates and reported in the pre-financing or post-financing reports. If additional transition projects are included, eligibility will be evaluated inadvance by Tokyo Gas in accordance with the Tokyo Gas Transition Finance Framework and, if necessary, DNV will evaluate them in a timely manner.
Eligible Project Candidates
Initiatives

Eligible Criteria(Transition Project Overview)

Category

Advanced use ofnatural gas

Fuel conversion to gas
Installation of high-efficiency
gas appliances①
1)Power generation and cogeneration(Combined heat and power)

Use natural gas
as Low-carbon
solution

Area energy use
Carbon-neutral LNG
②

2)

③

 New LNG terminal
 Gas production facilities at satellites
 Pipeline extension/maintenance Support for the installation of gas appliances forindustrial, commercial and domestic useConventional fuel cell (ENE-FARM)
Gas cogeneration (including non-in-buildinguse), district heating and coolingConstruction, maintenance and renewal ofhigh-efficiency LNG-fired power stations

VPP in the household and commercial sectors
Development and introduction of ultra highefficiency fuel cellsSmart Energy Networks, etc.

Procurement and supply of carbon-neutral
LNG
CCU systems at the customer's site
CCS (development of large-scale CO2 storage
technology using micro-bubble)
New hydrogen stations
Hydrogen pipeline installation

Use of CCUS technology
Use of hydrogen and biogasPage 33 of 105

CO2 emission reduction
targets
Scope 1 to

Reduction3

contribution

✔

✔

✔

✔

✔

✔

✔

✔

✔

✔

✔
✔
✔

✔

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1


Decarbonizationof gaseous
energyDecarbonize
gas andelectricity④

Development of technology
for decarbonization of
gaseous energy

Expansion of renewable energy sources
Zero emission of own gas-fired power








Maintenance and renewal of hydrogenproduction and CCUS
Procurement of biogas
Development of low-cost green hydrogenproduction technology by water electrolysis
Development of innovative methanation
technologies
Expansion of renewable energy sources
Renewable electricity procurement
Co-firing and exclusive use of hydrogen andammonia in gas-fired power plants

Page 34 of 105

✔

✔
✔

✔

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Schedule-2 Climate Transition Finance Eligibility Assessment Protocol
The checklists (1-4) below are DNV evaluation procedures created for Tokyo Gas Transition Finance Framework and Transition Bond Eligibility Evaluation based on
the disclosure requirements of CTFH and CTFBG.
The "confirmed documents" in the Work Undertaken include public or private documents (internal documents of the issuer or borrower), etc., and are provided by
Tokyo Gas as evidence of eligibility judgment for DNV.
*Please replace “Issuer”, “Investor” to “Borrower/Fundraiser”, “Lender” in the context in the following requirements.
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

1

Issuer’s
ClimateTransition
Strategy andGovernance

The financing purpose should be forenabling an issuer’s climate change
strategy. A ‘transition’ label applied to a
debt financing instrument should serve
to communicate the implementation of
an issuer’s corporate strategy totransform the business model in a way
which effectively addresses climaterelated risks and contributes toalignment with the goals of the Paris
Agreement.

Confirmed documents- Framework- Compass 2030
- Compass Action- Carbon neutral by 2050of the Japan Gas
Association- Gas roadmap of Ministryof Economy, Trade andIndustry.
- Tokyo Gas Integrated
report 2021

Tokyo Gas has established a framework and has introduceda range of plans and initiatives to manage and enhance theenvironmental sustainability and related performance of theorganization against its wider environmental strategy.

Suggested information and indicators

Interviews with stakeholders••

A long-term target to align with thegoals of the Paris Agreement (e.g.
the objective of limiting global
warming ideally to 1.5℃ and, at thevery least, to well below 2℃);
Relevant interim targets on the
trajectory towards the long-term
goal;

Page 35 of 105

Based on the science-based long-term targets quantified by
Tokyo Gas, DNV has reviewed and confirmed that Tokyo
Gas's targets correspond to achieving the goals of the Paris
Agreement. Tokyo Gas sets environmental corporate
strategies that are important to its business model, based on
the identification of risks and opportunities and scenario
analysis using TCFD guidance.
Tokyo Gas formulated its management vision, "Compass
2030," in November 2019 and "Compass Action" in
November 2021 as specific actions to implement Compass
2030. In the Compass Action, Tokyo Gas has set a longterm goal of Net-Zero CO2 by 2050, which is the goal of theParis Agreement, and has set short-term and medium-termgoals to achieve that long-term goal. Tokyo Gas disclosed its
strategic plan to achieve the above goal as a roadmap fortransitioning to carbon neutrality in Compass Action.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

Criteria

Requirements•••

Work Undertaken

Disclosure on the issuer’s levers
towards decarbonization, andstrategic planning towards a longterm target to align with the goalsof the Paris Agreement;
Clear oversight and governance oftransition strategy and,Evidence of a broader sustainability
strategy to mitigate relevant
environmental and social
externalities and contribute to the
UN Sustainable Development Goals.

DNV Findings
Specifically, Tokyo Gas's Transition Strategy incorporates theenvironmental targets of the Japan Gas Association and theMinistry of Economy, Trade and Industry (METI), as well as
its action plan to achieve a target of limiting the increase inaverage temperature below 2°C using the TCFD. In addition,
if it becomes necessary to review Tokyo Gas’s efforts inorder to achieve continuous emission reductions in the
future, Tokyo Gas plans to implement them as appropriate
according to the timeline.
Tokyo Gas recognizes that the implementation of theTransition Strategy is one of the ways to promotesustainability, and has established a system and framework
to promote the initiatives specified in “Compass 2030” and“Compass Action” at the management level.
The Tokyo Gas’s approach to promoting sustainability is “tocontributes to the achievement of a sustainable society bycreating social and financial value from the solution of social
issues through its business activities, and by engaging inenduring corporate management”. Based on this concept,
Tokyo Gas aims to contribute to the achievement of the
Sustainable Development Goals (SDGs) set by the United
Nations by addressing materiality (key sustainability issues)
through its business activities. Of these, the sustainability
issue (materiality) primarily relevant to Transition Finance is"Leading net-zero CO2 emissions as leading company dealing
with natural gas".
Based on an assessment of the Framework, “Compass2030”, “Compass Action” and the Implementation Plan, DNV
has confirmed that they are well aligned with Tokyo Gas's
Transition Strategy. Through the assessment, DNV has

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Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
confirmed that the implementation plan based on theTransition Strategy is reliable, ambitious and achievable.

2

Business model
environmental
materiality

The planned climate transition trajectoryshould be relevant to theenvironmentally-material parts of theissuer’s business model, taking into
account potential future scenarios which
may impact on current determinations
concerning materiality.

Confirmed documents- Framework- Compass 2030
- Compass Action- Carbon neutral by 2050of the Japan Gas
Association- Gas roadmap of Ministryof Economy, Trade andIndustry.
- Tokyo Gas Integrated
report 2021
- Tokyo Gas Group
Sustainability report
2021

DNV evaluated whether the key activities associated with
Tokyo Gas's business activities corresponded to the Tokyo
Gas’s Transition Strategy, which was evaluated ascontributing to the environment.
Tokyo Gas's greenhouse gas emissions (FY2020) are shown
below.
SCOPE 1,2: 3.9 million t-CO2(City gas production, power generation, heat supply, etc.)
SCOPE 3:34.53 million t-CO2(Raw material procurement: 6.22 million tonnes,
At customers: 28.31 million tonnes)

Interviews with stakeholders

Tokyo Gas's Transition efforts include not only emission
reductions from its own business activities (SCOPE 1 and 2),
but also SCOPE 3 and activities that contribute to the
reduction at customers. This will contribute to theimplementation of supply-side and demand-side carbon
neutrality as an important initiative indicated in the various
plans and strategies for decarbonization in Japan. In otherwords, as a natural gas company, Tokyo Gas's transition

Page 37 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
efforts directly support the transition of society as a whole,including its own.
The Tokyo Gas’s Transition Roadmap is well aligned with theGas Roadmaps of the Japan Gas Association and the Ministryof Economy, Trade and Industry, and their specificimplementation plans and targets have been set andquantified in the absolute sense that they must be theoptimization to achieve them and the possibility of further
improvement.
DNV confirmed that Tokyo Gas's plan to implement its
Transition Strategy is closely linked to the activities of Tokyo
Gas's core business and to activities that contribute to theCO₂ reduction of in society as a whole, thus contributing to
the environmental aspects of society as a whole andsupporting commercial drive. Tokyo Gas's planned Transition
Strategy and Transition Pathway will be associated with themateriality that Tokyo Gas has achieved through GRI*1, ISO
26001, TCFD, etc., and will contribute to significant
environmental benefits in both qualitative and quantitative
terms.
*2: Global Reporting Initiative (an international standard
providing ESG-related reporting, management and analysis
methods)

3

Climatetransition
strategy to bescience-based
includingIssuer’s climate strategy shouldreference science-based targets andtransition pathways. The plannedtransition trajectory should:

Confirmed documents- Framework- Compass 2030
- Compass Action

Page 38 of 105

Tokyo Gas has set a transition plan that is consistent with
the Paris Agreement based on science-based evidence, anda transition trajectory that is consistent with the goals of theJapan Gas Association and the Ministry of Economy, Tradeand Industry.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

Criteria

Requirements

targets andpathways

•

•

•

•

be quantitatively measurable (basedon a measurement methodology
which is consistent over time);be aligned with, benchmarked orotherwise referenced to recognized,
science-based trajectories wheresuch trajectories exist;
be publicly disclosed (ideally inmainstream financing filings),
include interim milestones, and;be supported by independent
assurance or verification

Work Undertaken
-

-

-

-

Carbon neutral by 2050of the Japan Gas
Association
Gas roadmap of Ministryof Economy, Trade andIndustry.
Tokyo Gas Integrated
report 2021
Tokyo Gas Group
Sustainability report2021
Tokyo Gas Project List &CO2 Reduction Results

Suggested information and indicators
•

•
•
•

•

Short, medium, and long-term
greenhouse gas reduction targets
aligned with Paris Agreement;
Baseline
Scenario utilised, and methodology
applied (e.g. ACT, SBTi, etc.);
Greenhouse gas objectives covering
all scopes (Scope 1, 2 and 311);
and,Targets formulated both in intensity
and absolute terms

Interviews with stakeholders

DNV Findings
The plan sets out realistic targets and pathways for reducing
CO2 emissions in absolute terms, and for reducing absolute(total) CO2 emissions to maintain defined levels in the
future.
DNV has confirmed that Tokyo Gas's Transition Strategy isquantified in terms of emission intensity and absolute values
based on a consistent measurement methodology withprescribed assumptions.
Transition targets are set voluntarily based on initiatives
using TCFD and other methods to achieve sustainable CO2
emission reductions, and they are consistent with thepolicies of the benchmarking of the Japan Gas Associationand the Ministry of Economy, Trade and Industry.
Specifically, Tokyo Gas has set the following targets for its
transitions
TABLE: TOKYO GAS TRANSITION TARGETS
MEDIUM-TERM
Contribution to CO2 reduction
TARGETSby 2030: ▲17 million tonnes＊
LONG-TERM
Challenge to achieve Net-Zero
TARGETS
CO2 towards 2050
Reference: Short term target: Achieve net-zero CO2 andcontribute to CO2reduction of ▲650 million tonnes in 20202022 (for domestic emissions)＊
Compared to 2013. This includes our own emissions (Scope
1 and 2), Scope 3 emissions and reductions at ourcustomers. Of the 17 million tonnes reduction, the reductionin Scope 3 emissions is (-) 750,000 tonnes

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Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
Tokyo Gas' CO2 reduction focuses not only on reducing
emissions from its own business activities (SCOPE 1 and 2),
but also on activities that contribute to the reduction of
SCOPE 3and other companies. This will contribute to theimplementation of supply and demand side carbon neutrality
as an important initiative that will be presented in various
plans and strategies for decarbonization in Japan. In otherwords, as a natural gas company, Tokyo Gas' transition
initiatives directly support the transition of society as awhole, including its own.
Transition initiatives and respective scope emissions aredisclosed in the Compass2030, Compass Action, Tokyo Gas
Sustainability Report, etc.

4

Implementation transparency

Market communication in connection
with the offer of a financing instrument
which has the aim of funding the issuer’s
climate transition strategy should also
provide transparency to the extent
practicable, of the underlying investment
program including capital andoperational expenditure. This may
include R&D-related expenditure where
relevant, and details of where any suchoperating expenditure is deemed ‘nonBusiness as Usual’, as well as otherrelevant information indicating how thisprogram supports implementation of thetransition strategy, including details ofany divestments, governance andprocess changes.

Confirmed documents- Framework- Compass 2030
- Compass Action- Carbon neutral by 2050of the Japan Gas
Association- Gas roadmap of Ministryof Economy, Trade andIndustry.
- Tokyo Gas Integrated
report 2021
- Tokyo Gas Group
Sustainability report2021
Tokyo Gas Project List &CO2 Reduction Results

Page 40 of 105

DNV has confirmed that the investment and deployment
plans associated with Tokyo Gas's Transition Strategy
include agreement on future investment and expenditure.
Specifically, under Compass Action, Tokyo Gas plans toinvest approximately 2 trillion yen by 2030 in growth areas
including decarbonization, projects to be implemented
through transition finance.
DNV confirmed that the overall investment plan (investment
amount) for the future considers CTF-1 to CTF-3 for theinvestment required to implement the transition strategy
and also confirmed plans to be implemented according to
the appropriate timelines, based on internal management
system and process.
Tokyo Gas plans to allocate to capital investment, operating
expenses, running cost, and R & D-related expenditures fortransition eligible project candidates shown in Schedule-1.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

Criteria

Requirements

Work Undertaken

Suggested information and indicators••

Disclosure on the percentage ofassets/revenues/
expenditures/divestments aligned to
the various levers outlined in
Element 1 above;
Capex roll-out plans consistent withthe overall strategy and climate
science

Interviews with stakeholders

Page 41 of 105

DNV Findings
Through the assessment, DNV concluded that Tokyo Gas's
transition strategy can be seen as a non-Business as Usual
concept in terms of directly and indirectly supporting thedecarbonization of society as a whole.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Schedule-3 Green Bond (Transition Finance with specific use of proceeds) Eligibility Assessment
ProtocolThe checklist below (GBP/GLP-1 to GBP/GLP-4) is a DNV evaluation procedure created for Tokyo Gas Transition Finance (Bond & Loan) Eligibility Assessment (Bond& Loan with specific use of proceeds) based on the requirements of GBP/GBGLs and GLP/GLGLs. "Confirmed documents" in the “Work Undertaken” includes
documents inside the issuer and is provided by Tokyo Gas as evidence of eligibility judgment for DNV.
In Schedule-3, it is referred to as GBP or GLP according to the practice, but this is the standard to be referred to in the case of financing that specifies the use ofproceeds such as transition projects in transition finance (bonds and loan) that specifies the use of proceeds based on CTFH and CTFBG, so please read as themeaning of the transition as appropriate.

GBP/GLP-1 Use of proceeds
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

1aTypes of funds

The types of green bonds are classified into
one of the following types defined by GBP.
· (Standard) Green/transition Bond・ Green/transition Revenue Finance・ Green/transition Project Finance・ Other

Confirmed documents- Framework

Through the evaluation work, DNV confirmed that Tokyo Gas
Transition Finance (bond/loan) fall into the following categories.

The key to a green/transition bond is thatthe proceeds will be used for a green
project, which should be properly stated in
the legal documents relating to the security.

Confirmed documents- Framework- Tokyo Gas Project
List & CO2
Reduction Results- Amendment Shelf
Registration
StatementInterviews withstakeholders

1bGreen/transition
Project
Classification

Interviews with

· (Standard) Green/transition Bond

stakeholders

Page 42 of 105

DNV confirmed that Tokyo Gas Transition Finance aims to funda wide range of transition projects focused on Tokyo Gas's
environmental goals and transition strategy, as described in the
Framework and Schedule-1.
Specifically, all Transition Finance Eligible Project Candidates
listed in Schedule-1 are evaluated as conforming to theTransition Strategy, and the proceeds through Transition
Finance are planned to be financed one or more of theTransition Finance Eligible Project Candidates. If a transition

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
project is pre-selected before the financing is implemented, thiswill be disclosed in legal documents.
Through the assessment, DNV concludes that the Transition
eligible projects candidates will bring concrete and actual
environmental benefits.

Table: Tokyo Gas Transition Finance Eligible Project Candidates
Low anddecarbonization
initiatives*

Eligible project categories①Advanced use of natural gas(Fuel conversion to natural gas, highLow
efficiency gas appliances, area
1) carbonizationenergy use, strengthening resilience)② Introduction of carbon-neutral LNG
with natural gas
and useof CCUS technology③Decarbonizationof gaseous energy
Decarbonization④ Expansion of renewable energy2) of gas andsources and achieving zero emission
electricity
of gas-fired power*In addition to 1) and 2), Tokyo Gas is committed to “reducing
its own CO2 emissions”, and is introducing ultra high-efficiency
fuel cells, solar power generation, CCUs and carbon-neutral LNG
into its facilities, as well as converting its company-owned
vehicles to HEVs, FCVs and EVs.
1c

Environmental
benefits

All green projects to which the funds areused should have clear environmental
benefits, the effects of which should be

Confirmed documents- Framework

Page 43 of 105

Transition projects will contribute to goals based on Tokyo Gas’s
Transition Strategy, and to low and decarbonized emissions
through the two initiatives and four project categories indicatedTokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

Criteria

Requirements
assessed by the issuer and, where possible,
quantitatively demonstrated.

Work Undertaken-

Tokyo Gas Project
List & CO2
Reduction Results

Interviews withstakeholders

1dRefinancing rate

If all or part of the proceeds are used or
may be used for refinancing, the issuer will
indicate the estimated ratio of the initialinvestment to the refinancing and, if
necessary. Therefore, it is recommended toclarify which investment or project portfolio
is subject to refinancing.

Confirmed documents- Framework- Tokyo Gas Project
List & CO2
Reduction Results
Interviews withstakeholders

Page 44 of 105

DNV Findings
in 1b. The environmental benefit is the reduction of CO2
emissions, which has been quantitatively evaluated by theissuer.
It was confirmed that, prior to the implementation of thetransition finance, only the evaluation method (calculation
method) of the environmental improvement effect of the
project to be allocated by the subject finance will be disclosed,
and that it will be evaluated and reported quantitatively as CO2
emission reductions in the annual report.
The Issuer plans to use all proceeds for new investments,
refinancing, or both for eligible project candidates included in
Schedule-1. If it is clear in advance whether to make newinvestment or refinance before implementing financing, it will
be disclosed in legal documents. DNV confirmed that if it is not
yet clear, the Issuer plans to disclose the estimated amount (orratio) of the proceeds which was allocated to refinancing
through reporting (annual report).

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

GBP/GLP-2 Process for Project Evaluation and Selection
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

2aProject
selection
process

Green bond issuers should provide an overview
of the process of qualifying projects for whichgreen bond funding will be used. This includes(but is not limited to):・The process by which the issuer determinesthat the project in question is included in thebusiness category of a qualified green project.
・ Creation of criteria for eligibility of projects forwhich green bond funding will be used
・ Environmental sustainability goals
In addition to criteria and certifications, theinformation published by issuers regarding thegreen bond process also considers the quality of
performance of the issuer's framework andenvironmental sustainability.

Confirmed documents- Framework- Tokyo Gas project selection
document

DNV confirmed that the issuer has a process ofdetermining the eligibility of projects for which thetransition finance, and that the outline is specified in
the framework.

2b

Issuer's
Environment
al and Social
Governance
Framework

Interviews with stakeholders

Confirmed documents- Framework- Tokyo Gas project selection
document
Interviews with stakeholders

The issuer complies with environment-related laws,
ordinances and regulations, and considers that theeffects of environmental improvement such as CO2
reduction are clear in the entire life cycle or eachprocess when selecting transition projects to be
implemented.
In the operation and implementation of the project,
each of the departments involved is committed tothe preservation of the surrounding environment.
DNV has confirmed that the transition projects
implemented by the issuer are consistent withissuer's management and environmental policies, aswell as with the transition strategy, goals andpathways.

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Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

GBP/GLP -3 Management of Proceeds
Ref.

Criteria

3a

Tracking
procedure-1

Requirements

Work Undertaken

DNV Findings

The net proceeds from of Green bonds should bemanaged in sub-accounts, included in subportfolio, or otherwise tracked. It should also be
certified by the issuer in a formal internal process
related to the issuer's investment and financing
operations for the Green Project.

Confirmed documents- Framework- Accounting management
rules- Document handlingregulations

DNV has confirmed that the proceeds by the transition
financing can be tracked in line with the issuer's
accounting integration system and other systems, andconfirmed the systems and related document actuallyused through the assessment, and confirmed that the
management status of the proceeds was proved.

Interviews with stakeholders

3b

Tracking
procedure-2

During the green bond redemption period, thebalance of funds raised that is being tracked
should be adjusted at regular intervals to matchthe amount allocated to eligible projects
undertaken during that period.

Confirmed documents- Framework- Accounting management
rules- Document handlingregulations

DNV confirmed that the issuer plans to periodically(quarterly) review the balance of the transition financeby the accounting integration system and other systems
described in 3a during the period from theimplementation of the transition finance to its
redemption or repayment.

Interviews with stakeholders
3cTemporaryholding

If no investment or payment has been made in aqualified green project, the issuer should also
inform the investor of the possible temporary
investment method for the balance of unallocatedproceeds.

Confirmed documents- Framework- Accounting management
rules- Document handlingregulations
Interviews with stakeholders

Page 46 of 105

DNV has confirmed that the confirmation process
through the issuer's accounting integration system andother systems is structured to ensure that the balanceof unallocated proceeds are recognized sequentially.
DNV confirmed through the framework and assessmentthat the balance of unallocated proceeds will be
managed in cash or cash equivalents. DNV has also
confirmed that the balance of unallocated proceeds will
be disclosed through reporting on the allocation statusof funds.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

GBP/GLP-4 Reporting
Ref.

Criteria

4aPeriodical
Reporting

Requirements

Work Undertaken

DNV Findings

In addition to reporting on the useof proceeds and the temporary
investment of unallocated proceeds,
the issuer will consider each projectat least once a year for projects towhich the Green bond proceeds
have been allocated, taking into
account the following: A list of eachproject should be provided.
-Confidentiality and competitive
considerations-Outline of each project, expectedsustainable environmental andsocial effects

Confirmed documents- Framework- Tokyo Gas Project
List & CO2
Reduction Results- Information on
projects to beallocated

DNV confirmed that the issuer will carry out annual reporting of the transition
finance until the proceeds are allocated and disclose information on the statusof the allocation of proceeds, the projects to which the proceeds have been
allocated and the environmental benefits. DNV also confirmed that the issuer
will report on the environmental benefits until the redemption or repayment of
the transition finance is completed.

Interviews withstakeholders

DNV also confirmed that, even after the allocation plan or allocation has been
completed, the issuer plans to report in a timely manner or in its reporting on
any changes in transition strategy or pathways, or any major changes in the
allocation plan or project implementation status (e.g. interruption of a project
for which allocation has been started, significant postponement on an annual
basis, sale or retirement, etc.). This was confirmed.
The report will be disclosed on the website.
<Allocation Status>
 Allocated amount Unallocated amounts (including when they will be allocated and its
management) Amount of proceeds to be used for refinancing<Environmental benefit>Environmental benefits are disclosed within the scope ofconfidentiality, to the extent practicable, and in consideration of thecharacteristics of the project, including an overview of the project(including progress, completion, operation, etc.) and the expectedenvironmental benefits (e.g., t-CO2/year).
The currently planned reporting for the transition project is described in thesection of GBP/GLP-4. Reporting in this document.

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Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Schedule-4 Basic Guidelines on Climate Transition Finance Eligibility Checklist
The following checklist (from CTF-1 to CTF-4) are based on four “disclosure elements “which indicated in the “Basic Guidelines on Climate Transition Finance (CTF)”
established by the Financial Services Agency, Ministry of Economy, Trade and Industry, and Ministry of the Environment in May 2021.
According to the CTF, “disclosure elements” are classified into the following three categories. Should:◎ recommend:〇 be considered/possible: △These expressions are used in the following context.
-

Items described with the word “should” are basic elements that financial instruments labeled as transition finance are expected to have.

-

Items described with the word “recommended” are elements that financial instruments labeled as transition finance are optimally recommended to have under-these Guidelines although instruments which do not have these items can also be labeled as “transition”.
Items described with the word “be considered” or “possible” are elements that these Guidelines provides as examples and interpretations although it is notconsidered problematic even if financial instruments labeled as transition finance do not have them.

There is a supplementary explanation in the margin of each checklist for the annotations in the disclosure elements.
The number /01/、/02/～/19/ listed in the “Work Undertaken” are documents confirmed through the eligibility evaluation work. Details (document name) are
shown in Appendix. In addition to the confirmed documents, the “Work Undertaken” includes the case where the information obtained through discussions andinterviews with the issuer is used as evidence.

CTF-1 Fundraiser’s Climate Transition Strategy and Governance
Ref.

No.

Disclosure elements

◎

1-a)

Financing through transition finance should aim
to implement or incentivize the achievement oftransition strategies9. Such strategies shouldincorporate a long-term target to align with thegoals of the Paris Agreement, relevant interim
targets on the trajectory towards the long-term
goal, disclosure on the levers towards
decarbonization, and fundraiser’s strategicplanning.

Requirement
check
Yes
No
Not Applicable

Work
Undertaken

DNV Findings

Confirmed
documents:/01//02//03//04//05/

The financing that Tokyo Gas implements by utilizing
transition finance is aimed at achieving the Tokyo Gas
transition strategy which is in line with the low-carbon
decarbonization strategy set by the Japan Gas
Association and the Ministry of Economy, Trade andIndustry's technology roadmap, which aims to align withthe goals of the Paris Agreement.
Tokyo Gas has developed its Transition Strategy as atransition roadmap, which incorporates short-term goals,
medium-term goals, and a strategic plan for
decarbonization (a plan to introduce technologies that

Interviews withstakeholders

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Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

No.

Disclosure elements

Requirement
check

Work
Undertaken

DNV Findings
contribute to transition). Each goal based on Tokyo Gas's
Transition Strategy is disclosed as follows.
TABLE: TOKYO GAS TRANSITION TARGETS
MEDIUMContribution to CO2 reduction
TERM
by 2030: ▲17 million tonnes＊
TARGETS
LONG-TERM
Challenge to achieve Net-Zero
TARGETS
CO2 towards 2050
Reference: Short-term target: Achieve Net-Zero CO2 andcontribute to CO2 reduction of ▲6.5 million tonnes in
2020-2022 (for domestic emissions)＊＊Compared to 2013. Includes in-house emissions (Scope
1 and 2), Scope 3 and reductions at customers.
Of the▲ 17 million tonnes (target for the global
business as a whole), Net-Zero CO2 emissions from city
gas production, company-owned buildings, andcompany vehicles in Scope 1 and 2 (approx. 300,000
tons in FY2020); the decrease in Scope 3 emissions is▲750,000 tonnes.

◎
(△)

1-b)

A transition strategy should serve to explicitly
communicate the implementation of an issuer’s
strategy to transform the business model in a
way which effectively addresses climate-relatedrisks and contributes to achieving the goals of
the Paris Agreement10. Transformation of abusiness model is not limited to initiatives as anextension of existing businesses but can also betransformation based on various otherYes

Confirmed

No

documents:/01//02//03//04//05//06//07//08//09/

Not Applicable

Interviews withstakeholders

Page 49 of 105

The Tokyo Gas’s Transition Strategy takes into accountscenarios that make use of the TCFD guidance. The
Tokyo Gas’s Transition Strategy includes efforts toachieve significant reductions in the gas business, which
is its core business, regarding its role as a supplier whichis the policy of the national government and its
contribution to the demand side.
The following (table below) are listed as specificinitiatives.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

No.

Disclosure elements

Requirement
check

Work
Undertaken

perspectives. It includes fuel conversion that
achieves significant carbon and GHG reduction
benefits, introduction of innovativetechnologies, improvement of / changes inmanufacturing processes and products, anddevelopment and provision of products andservices in new fields.

〇

1-c)

The implementation of a transition strategy
assumes cases where it affects society andenvironment other than climate change, suchas employment or stable provision of products
and services, through transformation of a

DNV Findings
Table: Tokyo Gas Transition Finance Eligible Project
Category
Low anddecarbonization
Eligible project categories
initiatives*①Advanced use of natural
gas(Fuel conversion tonatural gas, highLow
efficiency gas appliances,
1) carbonization
area energy use,with natural gas
strengthening resilience)② Introduction of carbonneutral LNG and use of
CCUS technology③Decarbonization of
gaseous energy
Decarbonizatio④ Expansion ofrenewable energy sources2) n of gas andand achieving zero
electricity
emission of gas-fired
power*In addition to 1) and 2), Tokyo Gas is committed to“reducing its own CO2 emissions”, and is introducing
ultra high-efficiency fuel cells, solar power generation,
CCUs and carbon-neutral LNG into its facilities, as wellas converting its company-owned vehicles to HEVs,
FCVs and EVs.

Yes
No
Not Applicable

Confirmed
documents:/01//11//16//17//18//19/

Page 50 of 105

DNV confirmed that there are no additional significant
social or environmental benefits on the implementation ofTokyo Gas's Transition Strategy at this time. DNV also
confirmed that the procedures to ensure that the project
evaluation and selection process does not conflict with

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

No.

Disclosure elements

Requirementcheckbusiness model. In such cases, it isrecommended that the fundraiser also takes
into consideration the impact of business
innovations to society and environment otherthan climate change.

◎
(△)

〇

1-d)

1-e)

Work
Undertaken

DNV FindingsInterviews withthe exclusion criteria (e.g. human rights, environmental
and other social issues) will be implemented. However, in
the implementation of the project, consideration andcountermeasures for social and environmental benefits
based on laws, regulations, ordinances and thecompany's own standards will be implemented underTokyo Gas's standard business and operational
management processes.

stakeholders

Climate change-related scenarios11 should bereferenced in developing transition strategies.
The pathway to transition should be planned forrespective sector and regions of individual
fundraiser, who may generally be placed in adifferent starting point and pathway totransition.

Yes

Transition strategies and plans must be highly
credible in terms of their effectiveness.
Therefore, it is recommended that a transition
strategy and plan are linked to management
strategy and business plan, including mediumterm management plans.

Yes

No
Not Applicable

Confirmed
documents:/01//02//03//04//05//08//09/
Interviews withstakeholders

No
Not Applicable

Confirmed
documents:/01//02//03//04//05//08//09//10/
Interviews withstakeholders

Page 51 of 105

Tokyo Gas's transition strategy is built on the Japan Gas
Association, the Ministry of Economy, Trade andIndustry, and the use of TCFD guidance.
Tokyo Gas has developed a transition strategy that
embodies the roadmaps of the Japan Gas Association and
the Ministry of Economy, Trade and Industry, to which
we refer as the gas industry, and which identifies thecriteria, pathways and targets for reducing CO2
emissions.
Tokyo Gas has formulated "Compass 2030" as the Tokyo
Gas Group's management vision, and one of the main
points of the vision is to lead the transition to "CO2 Net
Zero". In addition, the Tokyo Gas Group has establishedCompass Action as a concrete roadmap for realizing
Compass 2030, and has drawn up a transition strategy
and plan as a roadmap for the transition to CO2 net zero.
In other words, the transition strategy and plan of Tokyo
Gas is closely related to the management plan, and its
effectiveness can be judged to be highly reliable.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

No.

Disclosure elements

△

1-f)

However, because such strategies and plansrun for a long period of time, it is possible thatthe content may be modified or adjusted in theevent of a major change in the assumed
external environment and so on.

△

◎

1-g)

1-h)

Requirement
check
Yes
No
Not Applicable

Work
Undertaken

DNV Findings

Confirmed
documents:/01//02//03//04//05//06//07/

stakeholders

Tokyo Gas has included a range of technology options in
the implementation of its Transition Strategy. DNV also
confirmed through the assessment that Tokyo Gas plans
to implement changes and modifications to the Transition
Strategy and Plan in a flexible manner in response torevisions to the Japan Gas Association and nationalguidelines.

Confirmed
documents:/01/

DNV confirmed that Tokyo Gas's transition strategy is
generally implemented for the “recommend” and “beconsidered/possible” items in this basic guideline.

Interviews withIn the initial phase of developing a transition
strategy by the fundraiser, it is considered as
an option for the fundraiser to indicate a planfor future implementation of items describedwith the words “recommended” and “beconsidered/ possible” in these Guidelines.

Yes

In order to secure the effectiveness of thetransition strategy, the fundraiser should
establish an organizational structure12 for theboard of directors and/or other such committee
to oversee the activities addressing climatechange and for management to play a role inassessing and managing such climate-related
activities.

Yes

No
Not Applicable＊Confirmation
through thisassessment

No
Not Applicable

Confirmed
documents:/01//02//08//09/
Interviews withstakeholders

Page 52 of 105

Tokyo Gas has established the following organizational
structure.
 The Board of Directors has established asustainability promotion system to promotesustainability throughout the Group, including its
subsidiaries.
 The establishment of an organizational structure todeal with the environmental and social issues
associated with the implementation of thetransition strategy, and to monitor, evaluate andmanage the transition initiatives.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

No.

Disclosure elements

Requirement
check

Work
Undertaken

DNV Findings
 The Sustainability Committee, chaired by the
President, has been set up to address sustainability
issues (materiality), including climate change.

Tokyo Gas Sustainability Promotion Structure
△

◎

1-i)

1-j)

While a transition strategy shall be basicallydeveloped by a company in need of finance, it ispossible for entities to utilize the strategy ofcompanies that are wholly or partially
responsible for the initiatives to establish or
explain their own strategy, given that thefinance supports GHG emissions reduction
initiatives of not just a single company but its
supply chain.

Yes

Transition strategies should be disclosed inadvance in a company’s integrated report,sustainability report, statutory documents andother materials for investors (including such

Yes

No
Not Applicable

Confirmed
documents:/01//02//06//07/
Interviews withstakeholders

No
Not Applicable

Confirmed
documents:/01//02//03//08//09//10/

Page 53 of 105

Tokyo Gas is building a transition strategy as the Tokyo
Gas Group with Tokyo Gas at its core. In building thetransition strategy, in addition to the strategy for the gas
supply side, in accordance with the policies set by thegovernment and other organizations, Tokyo gas has
included activities to contribute to the reduction of CO22
emissions in Japan and abroad, as well as in society as awhole, by providing technologies, products and services
that contribute to low-carbon and decarbonization on the
demand side.
Tokyo Gas's transition strategy (and environmental
initiatives in general) is explained to stakeholders anddisclosed to the public in advance through the Tokyo Gas
Group Medium-Term Management Plan, Integrated

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

No.

Disclosure elements

Requirement
check

disclosures on the website). This also applies tothe other three elements.

Work
Undertaken

Interviews withstakeholders

△

〇

1-k)

1-l)

It is possible to disclose transition strategies
and elements concerning the governanceguaranteeing that the execution of transition
strategies is in alignment with the reporting
frameworks such as the Recommendations of
the Task Force on Climate-Related Financial
Disclosures (TCFD; Final Report)13.

Yes

If the implementation of a transition strategy
assumes impacts on society and environment
other than climate change, it is recommended
that the fundraiser explain the view underlying
its approach14, etc. to address such impacts anddisclose how the strategy on the wholecontributes to achieving the Sustainable
Development Goals (SDGs) so that the effects
can be appropriately evaluated by the financier.

Yes

No
Not Applicable

Confirmed
documents:/01//02//03//08//09/
Interviews withstakeholders

No
Not Applicable

Confirmed
documents:/01//02//03//08//09//11/
Interviews withstakeholders

Page 54 of 105

DNV Findings
Report, Compass Action, etc, based on its management
vision "Compass 2030" which was formulated anddisclosed in 2019.
Tokyo Gas's Transition Strategy takes into account the
TCFD recommendations and the governance of theTransition Strategy and TCFD recommendations arealigned. Tokyo Gas discloses governance-related items in
its Integrated Report and Framework. Relevant
information is provided in 1-d), 1-h) and 1-j).

DNV confirmed that there are no additional significant
social or environmental benefits on the implementation ofTokyo Gas's Transition Strategy at this time.
DNV also confirmed that the procedures to ensure thatthe project evaluation and selection process does notconflict with the exclusion criteria (e.g. human rights,
environmental and other social issues) will be
implemented. However, in the implementation of the
project, consideration and countermeasures for socialand environmental benefits based on laws, regulations,ordinances and the company's own standards will be
implemented under Tokyo Gas's standard business andoperational management processes.
In addition, the contribution to the achievement of theSDGs in the implementation of the Transition Strategy
has been incorporated into the relationship between
Tokyo Gas's materiality (key sustainability issues) and theTokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

No.

Disclosure elements

Requirement
check

Work
Undertaken

DNV Findings
SDGs as “leading net-zero CO2 emissions as leading
company dealing with natural gas”.
Reference (in Table-1 of the main text): Climate change
Goal 7: Affordable and clean energy
Goal 9: Industry, innovation and infrastructure
Goal 11: Sustainable cities and communities
Goal 13: Climate action
Goal 17: Partnerships for the goals

◎

〇

1-m)

1-n)

Considering the length of application and otherfactors, there may be instances when atransition strategy and plan will need to bemodified due to major changes in the external
environment and relevant conditions that wereassumed at a planning phase. In this case, thecontents of the modification should be disclosed
together with the underlying reason in a timely
manner.

Yes

In terms of governance, it is recommended that
disclosures include an organizational structure
for overseeing the implementation of atransition strategy and for assessing andmanaging related initiatives. It is also
recommended that disclosures include thespecific roles of the constituent organizations

Yes

No
Not Applicable

Confirmed
documents:/01//02//03//04//05/
Interviews withstakeholders

No
Not Applicable

Confirmed
documents:/01//02//03//08//09//10/
Interviews withstakeholders

Page 55 of 105

Tokyo Gas has included a range of technology options in
the implementation of its Transition Strategy. DNV also
confirmed through the assessment that Tokyo Gas plans
to implement changes and modifications to the Transition
Strategy and Plan in a flexible manner in response torevisions to the Japan Gas Association and nationalguidelines.
Tokyo Gas plans to disclose any material changes to its
transition strategy and plans in a timely manner,
together with the reasons for such changes.
Tokyo Gas has established the following organizational
structure.
 The Board of Directors has established asustainability promotion system to promotesustainability throughout the Group, including its
subsidiaries.
 The establishment of an organizational structure todeal with the environmental and social issues

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

No.

Disclosure elements

Requirement
check

Work
Undertaken

and the management and the process by which
the content of deliberations is reflected inmanagement.

DNV Findings
associated with the implementation of thetransition strategy, and to monitor, evaluate andmanage the transition initiatives.
 The Sustainability Committee, chaired by the
President, has been set up to address sustainability
issues (materiality), including climate change.
Tokyo Gas links the governance of the Transition
Strategy to the governance of the TCFD
recommendations as a sustainability promotion
framework, and discloses the process as follows (Tokyo
Gas Group Integrated Report 2021).
“Tokyo Gas Group considers the promotion ofsustainability to be an important business
implementation matter, and works to achieve
accurate and prompt decision-making and efficientbusiness implementation by deliberating the matter atmeetings that support rational decision-making byexecutive officers. In addition, the directors arerequested to report on the status of business
implementation based on the decisions of the Board of
Directors as appropriate, and to hold discussions asnecessary. Furthermore, the Sustainability Committee,
chaired by the President, has been established topromote sustainability, and important matters arereported to the Board of Directors.”

〇

1-o)

In cases where the fundraiser determines theneed for an objective assessment regarding thetransition strategy, it is recommended that a

YesNo
Not Applicable

Confirmed
documents:/01/~/11/

Page 56 of 105

Tokyo Gas uses a review by DNV, an external body, foran objective assessment of the eligibility of its transition
finance, including its transition strategy.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

No.

Disclosure elements

Requirement
check

review, assurance and verification by an
external organization for its transition strategy.

△

1-p)

It is recognized useful to obtain a review
particularly concerning the following inconnection with the transition strategy:- Alignment of short-term, mid-term and longterm targets (for targets, refer to Element 3)
with the overall scenario- Credibility of the fundraiser’s strategy toreach the targets- Appropriateness of the management process
and governance for the transition strategy

Work
Undertaken

DNV FindingsInterviews withstakeholders

Yes
No
Not Applicable

Confirmed
documents:/01/~/11/
Interviews withstakeholders＊Confirmation
through thisassessment

DNV has confirmed the following about the review ofTokyo Gas's transition strategy- Tokyo Gas's Transition Strategy is consistent withthe scenarios (specific action plans) and targets
shown in the table below.
- The transition strategy of Tokyo Gas is positioned as
one of the core elements of its management planand vision, and its credibility is considered to besupported by concrete plans and targets.
- The Transition Strategy is a plan in which the
management processes and governance of theTransition Strategy are properly implemented under
the Sustainability Promotion Structure.
TABLE: TOKYO GAS TRANSITION TARGETS
MEDIUMContribution to CO2 reduction by
TERM
2030: ▲17 million tonnes＊
TARGETSLONGChallenge to achieve Net-Zero CO2
TERM
towards 2050
TARGETS
Reference: Short-term target: Achieve Net-Zero CO2 andcontribute to CO2 reduction of ▲6.5 million tonnes in
2020-2022 (for domestic emissions)＊＊Compared to 2013. Includes in-house emissions (Scope
1 and 2), Scope 3 and reductions at customers.

Page 57 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

No.

Disclosure elements

Requirement
check

Work
Undertaken

DNV Findings
Of the▲ 17 million tonnes (target for the global businessas a whole), Net-Zero CO2 emissions from city gas
production, company-owned buildings, and company
vehicles in Scope 1 and 2 (approx. 300,000 tons in
FY2020); the decrease in Scope 3 emissions is ▲750,000
tonnes.

9 Transition finance is available for not only entities with strategies and plans for reducing emissions associated with their corporate economic activities, but also
entities that plan to take initiatives that enable others to implement transition strategies through their own products and services. In such cases of financial
institutions, a financier should articulate how the underlying projects or activities themselves fit into the fundraiser’s strategy while, similarly, a subsidiary or an
SPC to make use of its group’s or its sponsors’ strategy. However, doing so they should explain how their strategy will contribute to the strategy as a whole. In
addition, it can be considered that parent company or the group who established the strategy would explain the transition elements as the main fundraiser.
10 The Paris Agreement sets out a goal to Holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts
to limit the temperature increase to 1.5°C above pre-industrial levels.
11 Climate-related scenarios are listed in the “Task Force on Climate-related Financial Disclosures (TCFD) Technical Supplement” and the document issued by the
Ministry of the Environment: “Practical Guide for Scenario Analysis in line with TCFD Recommendations”. In addition, Principles for Responsible Investment (PRI)
disclose a set of climate scenario tools.
12 Assumes matters provided for under “governance” in the TCFD Recommendations.
13 As for the approach to disclosure aligned with TCFD Recommendations, refer to “Guidance on Climate-related Financial Disclosures (TCFD Guidance) 2.0”,“Guidance for Utilizing Climate-related Information to Promote Green Investment (Green Investment Guidance)” (both published by the TCFD Consortium), andthe document published by the Ministry of the Environment: “Practical Guide for Scenario Analysis in line with TCFD Recommendations”.
14 An example of the approach may be to identify, eliminate, reduce, and manage potential negative effects.

Page 58 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

CTF-2 Business Model Environmental Materiality
Ref.

No.

Disclosure elements

◎

2-a)

Initiatives for achieving the transition
strategy should be such that contributeto transforming core business activities
that are environmentally material parts
today and in the future.15

Requirement
checkWork Undertaken

DNV Findings

Yes

Confirmed
documents:/01//02//03//08//09//10/The Tokyo Gas’s Transition Strategy includes efforts toachieve significant reductions in the gas business, which isits core business, regarding its role as a supplier which isthe policy of the national government and its contribution to
the demand side.
The following (table below) are listed as specificinitiatives.
Table: Tokyo Gas Transition Finance Eligible Project
Category
Low anddecarbonization
Eligible project categories
initiatives*①Advanced use of natural
gas(Fuel conversion to naturalgas, high-efficiency gas
Low carbonization
appliances, area energy use,1)with natural gas
strengthening resilience)② Introduction of carbonneutral LNG and use of CCUS
technology③Decarbonization of
gaseous energy
Decarbonization④ Expansion of renewable2) of gas andenergy sources andelectricity
achieving zero emission ofgas-fired power*In addition to 1) and 2), Tokyo Gas is committed to“reducing its own CO2 emissions”, and is introducing
ultra high-efficiency fuel cells, solar power generation,
CCUs and carbon-neutral LNG into its facilities, as well as

No
Not Applicable

Interviews withstakeholders

Page 59 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

No.

Disclosure elements

Requirement
checkWork Undertaken

DNV Findings
converting its company-owned vehicles to HEVs, FCVs
and EVs.

〇

△

◎

2-b)

2-c)

2-d)

When identifying business activities thatare environmentally material parts, it isrecommended that the fundraiser
consider multiple climate change-related
scenarios that may possibly impact its
judgment on the identification16.

Yes

In terms of considering materiality, it ispossible to apply existing guidance
provided by an organization that creates
standard criteria concerning sustainability
reporting17.

Yes

The fundraiser should indicate thatclimate change is an environmentallymaterial part of business activities18.

Yes

No
Not Applicable

Confirmed
documents:/01//02//03//08//
09//10/Interviews withstakeholders

No
Not Applicable

Confirmed
documents:/01//02//03//08//
09//10/Interviews withstakeholders

No
Not Applicable

Confirmed
documents:/01//02//03//08//
09//10/Page 60 of 105

Tokyo Gas discloses climate change-related information inline with the recommendations of the TCFD. Specifically,
Tokyo Gas discloses information on governance, strategy(transitions, natural gas demand projections), risk
management (limiting the increase in average temperature
below 2°C, risks and opportunities for 4°C scenarios, andactions towards 2030), indicators and targets. Tokyo Gas'
Transition Strategy is linked to this TCFD initiative.
In identifying materiality, Tokyo Gas has used analysis andevaluation methods that take into account the positive andnegative aspects of its business, using GRI*1, ISO 26000,
TCFD, etc. In addition, efforts to address environmental
materiality include not only the reduction of emissions fromthe company's own business activities, but also activities
that contribute to the reduction of the scope3 and othercompanies. Furthermore, the contribution to the SDGs (seebelow) is also taken into account. These are disclosed in theframework and other documents. *1: Global Reporting
Initiative
One of the materialities defined for the Tokyo Gas Group,“leading net-zero CO2 emissions as leading company dealing
with natural gas”, includes "climate change" as a key
environmental issue. These are disclosed in the integrated
report, on the website and through the framework.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

No.

Disclosure elements

Requirement
checkWork Undertaken

DNV FindingsInterviews withstakeholders〇

2-e)

It is recommended that disclosures
include the contents of climate changerelated scenarios used in identifying
business activities that areenvironmentally material parts along withthe underlying reasons (e.g., regional
and industrial characteristics) for
selecting such scenarios.

Yes
No
Not Applicable

Confirmed
documents:/01//02//03//08//
09//10/Interviews withstakeholders

Tokyo Gas, through its work on the TCFD, has explained theimportance of transitions using the IEA's multiple forecast
scenarios. In this context, the company's efforts tocontribute to the transition by using its natural gas businessare explained.

15 They include activities that are environmentally material parts are considered to be business activities of the fundraiser that identifies climate change as part ofits materiality.
16 Scenario analysis using multiple climate-related scenarios is similar to that required by the TCFD Recommendations, and it is considered useful to refer torelevant guidelines and such like for implementation methods. An example is the document issued by the Ministry of the Environment: “Practical Guide for
Scenario Analysis in line with TCFD Recommendations”.
17 “The SASB Materiality Map” issued by the Sustainability Accounting Standards Board serves as a guidance concerning materiality.
18 As for the approach to identifying environmentally material business activities, it is possible to use the materiality map and such like and outline the level ofmateriality of climate change for one’s entity.

Page 61 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

CTF-3 Climate Transition Strategy to be Science-based Including Targets and Pathways
Ref.

No.

Disclosure elements

◎

3-a)

The fundraiser should reference
science-based targets in developing its
transition strategies.

Requirement
check
Yes
No
Not
Applicable

◎

3-b)

This should include mid-term targets(short- to mid-term targets) inaddition to long-term targets for 2050
and be quantitatively measurable
based on a measurement
methodology which is consistent overa long period of time.

Yes
No
Not
Applicable

Work Undertaken

DNV Findings

Confirmed documents:/01//02//03//04//05/

Tokyo Gas' transition strategy and targets are in line with theinitiatives and Technology Roadmap of the Japan Gas
Association and the Ministry of Economy, Trade and Industry(METI), which aims to align with the goals of the Paris
Agreement.
The Technology Roadmap of the Ministry of Economy, Tradeand Industry is based on the scientific-based required to achieve
the goals of the Paris Agreement, and therefore Tokyo Gas's
Transition Strategy is considered to be a science-based goal.

Interviews withstakeholders

Confirmed documents:/01//02//03//04//05/
Interviews withstakeholders

Tokyo Gas has developed its Transition Strategy as a transition
roadmap, which incorporates short-term goals, medium-termgoals, and a strategic plan for decarbonization (a plan to
introduce technologies that contribute to transition). Each goalbased on Tokyo Gas's Transition Strategy is disclosed asfollows.
TABLE: TOKYO GAS TRANSITION TARGETS
MEDIUM-TERM
TARGETS

Contribution to CO2
reduction by 2030: ▲17million tonnes＊
LONG-TERM
Challenge to achieve NetTARGETS
Zero CO2 towards 2050
Reference: Short-term target: Achieve Net-Zero CO2 andcontribute to CO2 reduction of ▲6.5 million tonnes in 20202022 (for domestic emissions)＊＊Compared to 2013. Includes in-house emissions (Scope 1
and 2), Scope 3 and reductions at customers.

Page 62 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

No.

Disclosure elements

Requirement
checkWork Undertaken

DNV Findings
Of the▲ 17 million tonnes (target for the global business as awhole), Net-Zero CO2 emissions from city gas production,company-owned buildings, and company vehicles in Scope 1
and 2 (approx. 300,000 tons in FY2020); the decrease in Scope
3 emissions is ▲750,000 tonnes.

◎

3-c)

(△)

◎
(△)

3-d)

In addition, it is recommended thatGHG reduction targets, which could beformulated either in intensity andabsolute terms, should consider
environmental materiality and cover
Scopes 1 through 3 of GHG Protocol,
the international standard on supplychain emissions. It is recommended
that targets covering Scope 3 be set
using a practical calculation method
when it could be subject to significant
reduction in the fundraiser’s businessmodel19. It is also possible to disclose
the avoided emissions as necessary.

Science-based targets are GHG
reduction targets required forachieving the goals of the Paris
Agreement and should be set while
taking into account differences inregional characteristics and industries.
In so doing, it is possible to refer tothe following trajectories.

Yes
No
Not
Applicable

Yes
No
Not
Applicable

Confirmed documents:/01//02//03//08//09/
Interviews withstakeholders

Confirmed documents:/01//02//03//08//09/
Interviews withstakeholders

Page 63 of 105

Tokyo Gas’s CO2 emissions are assessed in absolute terms,
covering Scope 1, Scope 2 and Scope3 (main items), andtaking into account reductions in emissions from society as awhole.
Scope 3 is an important target for reduction in Tokyo Gas's
supply chain and business model, and targets have been set
as far as practicable. In addition, the Compass Action indicatesa reduction of 17 million tonnes by 2030 (compared to 2013)as a contribution to reduction.
*See 3-b) for details.

Tokyo Gas's transition strategy targets refer to the following-

A widely recognied international scenario⇒Refer to IEA's analysis to TCFD with reference tomultiple scenarios-

Tokyo Gas's transition roadmap and targets, such as the
Science Based Targets Initiative (SBTi), have not been

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

No.

Disclosure elements

Requirement
checkWork Undertaken- Scenarios widely recognized in
the international community(Examples include the Sustainable
Development Scenario (SDS)
outlined by the International
Energy Agency (IEA)20)- Objectives verified under the
Science Based Targets Initiative(SBTi) and such like- Nationally Determined
Contributions (NDC) of countriesaligned with the goals of the Paris
Agreement, roadmaps by industry
sector21, industries set out plansthat are science-based achieving
the Paris Agreement22 and so on.
◎

△

3-e)

3-f)

Short- to mid-term targets (with aterm of three to fifteen years) should
be set by referencing the aforesaid
trajectories or on the pathway toward
the long-term targets planned as
benchmarks23.

In doing so, since short- to mid-termtargets will likely be set inconsideration of various factors(including the starting point and trackrecords of the issuer, timing of capital

DNV Findings
verified, but the dealing validity of the plan has been
confirmed through assessment.
-

Yes
No
Not
Applicable

Yes
No
Not
Applicable

Confirmed documents:/01//02//03//04//05/
Interviews withstakeholders

Confirmed documents:/01//02//03//04//05/
Interviews withstakeholders
Page 64 of 105

Targets consistent with the Paris Agreement targets (e.g.
NDC, roadmaps by sector, scientific evidence set byindustry etc.)⇒See the gas industry roadmap developed by the
Ministry of Economy, Trade and Industry and the Japan
Gas Association's Carbon Neutral Challenge 2050.

Tokyo Gas's short-term targets (2022 year) and medium-termtargets (2030 year) are based on the asset deployment andtechnology development plans set out in the pathway(transition roadmap) towards the long-term target of 2050.
*See 3-b) for details.

In developing the transition roadmap set out in the Compass
Action, Tokyo Gas has taken into account a range of issues(short term initiatives, medium- and long-term technology
development and implementation) and plans to achieve its
targets through multiple technology options. Tokyo Gas isplanning a non-linear pathway towards CO2 net zero in 2050,

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

No.

Disclosure elements

Requirement
checkWork Undertaken

investments, economic rationality,
cost-benefit analysis, and availabilityof technology necessary to achieve thetargets), it is possible that thepathway may not necessarily be linearwith the same slope at all times but
may be nonlinear.

◎

◎

3-g)

3-h)

The fundraiser should disclose theshort- to mid-term and long-termtargets they have set, including thebase years etc.

In order to show that long-termtargets are science-based, disclosures
should explain the methodology or
trajectory used to define target,
including the underlying reasons (e.g.,characteristics specific to a region orindustry). In particular, whenreference is made to plans andindustry roadmaps established by anindustry, etc., the explanation should
include that they are grounded inscientific basis.

DNV Findings
implementing the conversion of fuels used in society until 2030
and the decarbonization of gaseous after 2030.

Yes
No
Not
Applicable

Yes
No
Not
Applicable

Confirmed documents:/01//02//03/
Interviews withstakeholders
Confirmed documents:/01//02//03//04//05/
Interviews withstakeholders

Page 65 of 105

Tokyo Gas's Transition Strategy sets 2013 as the base year,with 2020-2022 as the short-term target, 2030 as themedium-term target, and 2050 as the long-term target, andthese are disclosed through Compass Action and the
Framework.
The long-term targets in Tokyo Gas' Transition Strategy are
consistent with those of the Japan Gas Association and theMinistry of Economy, Trade and Industry.
The Ministry of Economy, Trade and Industry (METI) targets(technology roadmap of gas sector) refer to various Japanesepolicies and international scenarios aimed at achieving carbon
neutrality in 2050, and are clearly consistent with the Paris
Agreement.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

No.

Disclosure elements

△

3-i)

It is possible that disclosures explain
the pathway toward a long-termtarget and the alignment between the
short- to mid-term targets on thepathway and the transition strategy,
based on the investment plan (refer toElement 4) and other plans.

Requirement
check
Yes
No
Not
Applicable

Work Undertaken

DNV Findings

Confirmed documents:/01//02//03/

Tokyo Gas has set forth the following specific initiatives as
examples of typical projects (eligible project categories) that
may be eligible for investment among the initiatives toward
the long-term goal.

Interviews withstakeholders

Low anddecarbonization
initiatives*

Eligible project categories①Advanced use of natural gas(Fuel conversion to natural gas,
high-efficiency gas appliances,
Low carbonization area energy use, strengthening
1)with natural gas
resilience)② Introduction of carbon-neutral
LNG
and use of CCUS technology③Decarbonization of gaseous
energyDecarbonization④ Expansion of renewable2) of gas andenergy sources and achieving
electricity
zero emission of gas-fired
power*In addition to 1) and 2), Tokyo Gas is committed to “reducing
its own CO2 emissions”, and is introducing ultra high-efficiency
fuel cells, solar power generation, CCUs and carbon-neutral
LNG into its facilities, as well as converting its company-owned
vehicles to HEVs, FCVs and EVs.
DNV confirmed that Tokyo Gas has an overall investment plan
(investment amount) in line with the timeline, with a planned
investment of around 2 trillion yen in growth areas including
decarbonization by 2030.

Page 66 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

No.

Disclosure elements

△

3-j)

Concerning targets and trajectories,
obtaining expert reviews on thefollowing is considered to beparticularly useful:- Whether the long-term target isaligned with science-based targets➡Whether the disclosed information
explains the alignment with the Paris
Agreement- Whether the short- to mid-termtargets are determined using a GHG
emissions forecast calculated basedon a climate change scenario
analysis➡Whether scenarios, etc. widely
recognized in the international
community are used or referenced- Whether the actual values of theindicators used for the targets arequantitatively measured using
consistent measurement methods➡Whether a specific GHG emissions
reduction measure has beendeveloped to achieve short- to midterm targets aligned with long-term
goals

Requirement
check
Yes
No
Not
Applicable

Work Undertaken

DNV Findings

Confirmed documents:/01//02//03//04//05/

Based on the documentation and information provided by
Tokyo Gas, DNV has reviewed the following and confirmedthat Tokyo Gas’s targets and trajectories are science-based.
- Whether the long-term target is aligned with science-basedtargets➢ Targets and trajectories based on the Transition
Strategy of Tokyo Gas are based on METI's targets (Gas
Sector Technology Roadmap), which refer to various
Japanese policies, international scenarios, etc. aimed atachieving carbon neutrality in 2050, and METI's targets
are clearly consistent with the Paris Agreement.
- Whether the short- to mid-term targets are determinedusing a GHG emissions forecast calculated based on a
climate change scenario analysis➢ Tokyo Gas is conducting an analysis using TCFD basedon IEA's sub-2°C and 4°C scenarios. Tokyo Gas also
provides a global natural gas demand forecast (forecast
year: ~2030 year). This is closely related to Tokyo Gas's
greenhouse gas

Interviews withstakeholders*Confirmation throughthis assessment- Whether the actual values of the indicators used for thetargets are quantitatively measured using consistentmeasurement methods➢ The indicator used for the target is CO2 emissions(absolute value), and Tokyo Gas has established amethod for calculating the reduction effect based on theamount of LNG supplied and the number of products
supplied. Through the review, DNV confirmed that theCO2 reduction effect is estimated based on the actual
amount of LNG supplied and the number of products
supplied. For some projects, it is difficult to calculate thePage 67 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

No.

Disclosure elements

Requirement
checkWork Undertaken

DNV Findings
direct CO2 reduction benefits, therefore it will be disclosed
as the project progresses.

19 Since an appropriate method for calculating Scope 3 emissions for specific industrial sectors is under development, it is possible to estimate Scope 3 emissions
on a provisional “best effort” basis. When disclosing, it is recommended that boundaries, calculation methods and other relevant factors be also reported. “Basic
Guidelines on Accounting for Greenhouse Gas Emissions Throughout the Supply Chain” (METI, MoE; 2017 Japanese only. Related information in English) can beused for calculation references.
20 In addition to benchmarks indicated by the IEA, there are those referenced by the IPCC, such as RCP 2.6 (keep global warming to below 2°C), RCP 1.9 (keepglobal warming to below 1.5°C) and other related Transition Pathway Initiative (TPI) benchmarks. Meanwhile, scenario listings are available in the TCFD
Technical Supplement and in the document published by the Ministry of the Environment: “Practical Guide for Scenario Analysis in line with TCFD
Recommendations”.
21 An example of a sector-specific roadmap formulated by a public organization is the “Roadmap to Zero Emission from International Shipping” (Ministry of Land,
Infrastructure, Transport and Tourism; 2020). The Ministry of International Trade and Industry also plans to formulate a roadmap for high emission industries.
22 In utilizing a plan formulated at a sector level, it is necessary to have a credible proposition that the alignment with the Paris Agreement can be explained with
scientific grounds.
23 While it is possible to set short- to mid-term targets by determining the standard based on an assumed use of best available technologies (BAT), consideration
should be made as to whether the use of such technologies might make it difficult to achieve long-term targets.

Page 68 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

CTF-4 Implementation Transparency
Ref.

No.

Disclosure elements

◎

4-a)

In implementing transition strategies,
the fundraiser should provide
transparency of the basic investment
plan to the extent practicable.

Yes

The investment plan includes not only
capital expenditure (Capex) but also
capital and operational expenditure(Opex). Therefore, costs related toresearch and development, M&A, anddismantling and removal of facilities arealso subject to the investment plan. In
other words, it is recommended that theinvestment plan incorporate, to theextent possible, expenditure andinvestment necessary for implementing
the transition strategy.

Yes

◯

4-b)

Requirement
check

No
Not Applicable

Work Undertaken

DNV Findings

Confirmed
documents:/01//02//03/

DNV confirmed that Tokyo Gas plans to invest around 2
trillion yen in growth areas, including decarbonization, by2030, and that it has investment plans in line with thetimeline.

Interviews withstakeholders

No
Not Applicable

Confirmed
documents:/01//02//03//11//16//17//18//19/
Interviews withstakeholders

Page 69 of 105

The investment plan includes one or more of thefollowing capitals, operational and running costs
necessary to implement the following strategies that
contribute to the necessary efforts to implement theTransition Strategy.
Table: Tokyo Gas Transition Finance Eligible Project
Candidates
Low and
Eligible project categories
decarbonization
initiatives*①Advanced use of natural gas(Fuel conversion to naturalLowgas, high-efficiency gas
carbonization
appliances, area energy use,1)with natural
strengthening resilience)② Introduction ofgas
carbon-neutral LNG anduse of CCUS technology③Decarbonization of gaseous
Decarbonizat
2)
energyion of gas

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

No.

Disclosure elements

Requirement
checkWork Undertaken

DNV Findings④ Expansion of renewableenergy sources andachieving zero emission ofgas-fired power*In addition to 1) and 2), Tokyo Gas is committed to“reducing its own CO2 emissions”, and is introducing ultra
high-efficiency fuel cells, solar power generation, CCUs
and carbon-neutral LNG into its facilities, as well as
converting its company-owned vehicles to HEVs, FCVs
and EVs.
andelectricity

△

◯

4-c)

4-d)

It is recommended that the investment
plan outline the assumed climate-related
outcomes and impacts24 in a quantitative
fashion where possible, along with thecalculation methods and prerequisites25.
If quantification is difficult, the use of
external certification systems can beconsidered as a substitute for qualitative
assessment.

Yes

In particular, when outlining theassumed climate-related outcomes andimpacts, it is recommended that thedisclosure include not only GHG emission

Yes

No
Not Applicable

Confirmed
documents:/01//02//03//11//16//17//18//19/
Interviews withstakeholders

No
Not Applicable

Confirmed
documents:/01//02//03//11//16//17//18//19/

Page 70 of 105

The climate-related outcomes and impacts assumed by
the investment plan are reductions in CO2 emissions forsociety as a whole (both domestically and internationally)
through "reduction of CO2 emissions by the company"and "low-carbonization by natural gas" and"decarbonization of gas and electricity" (including
contributions to reductions by suppliers). All of them use
CO2 reduction as an indicator, with the goal of CO2
reducing 17 million tons by 2030 (compared to the baseyear of 2013).
Through the assessment, DNV confirmed that Tokyo Gas
has established calculation methods and prerequisites foreach project category as appropriate. However, TokyoGas has not planned to disclose such informatio to the
public, and DNV confirmed the appropriatenes of that.
Any critical factors that would impede a "just transition"
through the implementation of Tokyo Gas's Transition
Strategy have not identified. As for the procurement andintroduction of carbon-neutral methane, for example, it isTokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

No.

Disclosure elements

Requirement
check

reduction and other initiatives to easeclimate change but also report how
consideration of a “just transition”26 isincorporated into the transition strategy.

Work Undertaken

Interviews withstakeholders

DNV Findings
possible to utilize assets related to the existing LNG
supply chain when it is transported from overseas, and it
is considered possible to make the transition while
limiting the impact* on employment in the existing value
chain and the increase in social costs.
* Upstream projects such as natural gas mining willremain affected by the procurement and introduction ofcarbon-neutral methane, which will have an impact on
business and employment.
In addition, through the assessment, it was confirmedthat Tokyo Gas will take appropriate measures anddisclose information when necessary, if any negative
impacts on "just transition" or SDGs are considered infuture projects to be implemented by Tokyo Gas.

〇

◎

4-e)

4-f)

If implementing the transition strategy
has the potential of having a negative
impact on employment or theenvironment and communities otherthan climate change, it is recommended
that any expenditures to mitigate suchnegative impacts be added to the plan.

Yes

Moreover, the outcomes arising frominvestments included in the investment
plan should align with the targets.

Yes

No
Not Applicable

Confirmed
documents:/01//02//03//11//16//17//18//19/
Interviews withstakeholders

No
Not Applicable

Confirmed
documents:/01//02//03//11//16//17//18//19/

Page 71 of 105

DNV confirmed that there are no additional significant
social or environmental benefits on the implementation ofTokyo Gas's Transition Strategy at this time. However,consideration and countermeasures for social andenvironmental benefits based on laws, regulations,ordinances and the company's own standards will be
implemented under Tokyo Gas's standard business andoperational management processes.

Tokyo Gas quantitatively evaluates the results (CO2
reduction effects) of each eligible project candidate (see(3-b)) included in the investment plan are consistent withthe targets (see (3-c)).

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

No.

Disclosure elements

Requirement
checkWork Undertaken

DNV FindingsInterviews withstakeholders
〇

4-g)

(△)

◯

4-h)

Transition finance is a means tofinancially support the implementation ofa transition strategy, and it isrecommended that financing be provided
for new initiatives. However, in the caseof transition finance in the format of Useof Proceeds instruments, refinancing fora reasonably set lookback period (theperiod during which refinancing is to be
applied for projects that have alreadystarted) is considered to be eligible.

Yes

It is recommended that investment plans
be disclosed by linking the outcomes andimpacts with the expenditures to theextent practicable27.

Yes

No
Not Applicable

Confirmed
documents:/01//02//03//11//16//17//18//19/
Interviews withstakeholders

No
Not Applicable

Confirmed
documents:/01//02//03//11//16//17//18//19/
Interviews withstakeholders

◯

4-i)

It is recommended that the fundraiser,
after securing financing, reports any
deviations between the initial plan andYesNo

Confirmed
documents:/01//02//03//11//16/

Page 72 of 105

Tokyo Gas plans to allocate its transition finance to fundboth new initiatives and refinancing of existing ones
(amounts and ratio are expected to vary for each project
and bond).
Where refinancing is targeted, DNV confirmed that areasonable look-back period should be set (e.g. thetransitional nature of the target asset should bemaintained at the time of refinancing and theenvironmental improvement benefits should be realized
during the redemption or repayment period).

DNV confirmed that Tokyo Gas plans to invest around 2
trillion yen in growth areas, including decarbonization, by2030, and that it has investment plans in line with thetimeline.
For each financing, the amount of the project to beinvested, the amount to be allocated (new or refinanced),
and the environmental improvement benefits (calculation
method or results) will be disclosed to the extent
practicable in the evaluation of the specific use ofproceeds.
Tokyo Gas will include in its post-funding reporting any
significant variances in expenditure, outcomes or impact

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

◎

◯

(△)

No.

4-j)

4-k)

Disclosure elements

Requirement
check

the actual expenditure, outcomes andimpacts. For any deviations, it isrecommended that the underlying
reasons be explained.

Not Applicable

In cases where the Use of Proceeds
bonds include refinancing, the fundraiser
should provide an explanation on the
lookback period set under the frameworkor other relevant methods along with theunderlying reasons and factors.

Yes

While there are differences in businesspractices, such as the fact that loans are
traditionally made based on the bilateralrelationship between a borrower and alender, it is recommended that disclosureon the above be made to the extent
possible in order to ensure transparency
and credibility of transition finance.
However, if it is difficult to disclose suchinformation to the public from thestandpoint of confidentiality andcompetition, it is possible to report suchinformation only to lenders or external
evaluation organizations without
disclosing it to the public.

Yes

Work Undertaken

DNV Findings/17//18//19/

from the original plan, as well as the reasons for suchvariances.

Interviews withstakeholders

No
Not Applicable

Confirmed
documents:/01/
Interviews withstakeholders

No
Not Applicable

Confirmed
documents:/01/
Interviews withstakeholders*This report

Page 73 of 105

Tokyo Gas has set a look-back period of approximately
three years. This is a standardised period of time during
which Tokyo Gas's environmental business is likely toremain transitional in the short term. In the event thatthe look-back period exceeds three years in the future,
DNV has confirmed that Tokyo Gas will explain the period
and the reasons for it at an appropriate time (e.g. in legal
documents or reports prior to the bond issue).
When Tokyo Gas implements transition financing using
loans, it will explain that the loans are based on thisFramework and the results of this external assessment,
and will disclose the requirements set out in the Green
Loan related standards to the extent practicable.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

No.

Disclosure elements

△

4-l)

Similarly, in cases where the fundraiser
is a small-to-medium-sized enterpriseand it is difficult to disclose to the public
the same content as that reported to thefinancier or an external evaluation
institution, it is possible for thefundraiser to simplify the content of
disclosure, for example, by limiting
disclosure to a summary of h) to j) of
this section.

Requirement
checkWork Undertaken

DNV Findings

Yes

Interviews with thepeople involved

Tokyo Gas is not a small business.

No
Not Applicable

24 The Ministry of the Environment, in its “Concept Paper on Impact Finance”, refers to impact as “a positive or negative change to the environment, society or
economy caused by an organization and is not a direct deliverable or output but an outcome as a change brought about in terms of the environment, society or
economy.”25 In disclosing impacts, outlining the amount of contribution to reducing CO2 emissions in the global value chain on the whole and the entire lifecycle, including theconsumption phase, can be considered. For the amount of contribution to the reduction, it is possible to reference the “Guideline for Quantifying GHG Emission
Reduction Contribution” (METI, 2018). Furthermore, as for outcomes on research and development, it is possible to reference the IEA Measuring Innovation by
Technology Readiness Level (TRL) or Importance for Net-Zero Emission, among others, and outline the progress in the R&D phase or the potential of reducing
CO2 emissions with the relevant technology by highlighting the importance of net-zero emissions.
26 A just transition is an attempt to ensure the wide sharing of virtual profits created through a transition to a green economy, as well as to support any party who
will experience an adverse economic impact (be it a country, a region, an industry, a community, a worker, or a consumer). The concept of a just transition
corresponds to several SDGs.
27 In particular, disclosure of investment plans is expected to be required for projects applicable to Use of Proceeds.

Page 74 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Schedule-5 Green Bond Guidelines (Transition Finance with specific use of proceeds) Eligibility
Assessment

Following check list (GBGLs-1 ~ GBGLs-4) is prepared based on the Green Bond Guidelines (GBGLs, MOE, 2020).
According to the GBGLs, Requirements/Work Undertaken are divided into following two terms, Should:◎ Recommend:〇
The numbers /01/, /02/ ~ /19/ listed in the Work Undertaken column are the confirmed documents, and the details (document name) are shown in Appendix.
In addition to the confirmed documents, the Work Undertaken includes the case where the information obtained through discussions and interviews with the
publishers is used as evidence.
This assessment applies as a requirement for Use of Proceeds based on CTFH and CTFBG, so any term "green" and “bond” in Schedule-5 should beread as "transition” or “finance (bond)".

GBGLs-1 Use of proceeds
Ref.

SectionRequirements◎

1-①

Green Bond proceeds should beallocated to Green Projects thatstate the clear environmental
benefits, which should beassessed by the issuer

Yes

Environmental benefit of Green
Bond proceeds, where feasible,
quantification is recommended.

Yes

〇

1-①

Requirement checkNo
Not Applicable

Work Undertaken

DNV Findings

Confirmed
documents:/01//02//03//11//1
6//17//18//19/

The proceeds from transition finance will be allocated toTokyo Gas Group’s projects that contribute to low anddecarbonization through the business related to climatechange, which is a materiality issue for Tokyo Gas. Specificenvironmental improvements have been evaluated by theissuer as leading to a CO2 reduction.

Interviews withstakeholders

No
Not Applicable

Confirmed
documents:/01//11//16//17//18//19/
Interviews withstakeholders

Page 75 of 105

Tokyo Gas has quantified the environmental improvement
effects of the Transition Project. Specifically, Tokyo Gas
has established a calculation formula in advance for theCO2 reduction effect, and quantified the effects.
(Some projects involve research and development or
installation of equipment for future environmental
improvements, which may make it difficult to disclose orquantify results.)

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

SectionRequirements◎

1-④

In advance, issuers should provide
investors with information
regarding the use of Green Bond
proceeds through legal
documentation (such as aprospectus) or other documents.

Yes

The provision of the information
regarding the use of proceeds
should specify the Green Project
categories.

Yes

◎

1-⑤

Requirement checkNo
Not Applicable

Work Undertaken

DNV Findings

Confirmed
documents:/01//11//16//17//18//19//20/

Tokyo Gas plans to explain the use of proceeds to investors
in advance through the Framework and the Amended Shelf
Registration Statement, etc.

Interviews withstakeholders

No
Not Applicable

Confirmed
documents:/01//11//16//17//18//19//20/
This report
Interviews withstakeholders

The proceeds will be allocated to one or more of thefollowing projects, which will be explained to investors
through the framework, the Amended Shelf Registration
Statement and other documents and the results of external
reviews.
Table: Tokyo Gas Transition Finance Eligible Project
Candidates
Low anddecarbonization
Eligible project categories
initiatives*①Advanced use of natural gas(Fuel conversion to natural gas,Lowhigh-efficiency gas appliances, areacarbonizatio
energy use, strengthening
1)
n withresilience)natural gas② Introduction of carbon-neutral
LNG and use of CCUS technology③Decarbonization of gaseous
Decarbonienergyation of④ Expansion of renewable2)
gas andenergy sources and achieving
electricity
zero emission of gas-fired power*In addition to 1) and 2), Tokyo Gas is committed to“reducing its own CO2 emissions”, and is introducing ultra
high-efficiency fuel cells, solar power generation, CCUs andPage 76 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

SectionRequirements

Requirement check

Work Undertaken

DNV Findings
carbon-neutral LNG into its facilities, as well as convertingits company-owned vehicles to HEVs, FCVs and EVs.

〇

1-⑤

In the cases where individual
Green Projects have been
specified, it is recommended thatissuers clearly present the
projects to investors.

Yes
No
Not Applicable

Confirmed
documents:/01//11//16//17//18//19//20/
This report
Interviews withstakeholders

◎

〇

1-⑥

1-⑦

In cases where Green Projects
have incidental negativeenvironmental impacts along withthe alleged environmental
benefits, the issuers should
include information regardingthese negative impacts (e.g., how
they are assessed, what theissuers do to curb them) toinvestors so that the investors andmarket participants canappropriately evaluate these
impacts.

Yes(In case of where a part of Green
Bond proceeds is used torefinance existing Green Projects,)
it is recommended that the issuers
provide information to theinvestors regarding (1) theamount (or the share) of the bondYes

No
Not Applicable

Confirmed
documents:/01//11//16//17//1
8//19//20/
Interviews withstakeholders

No
Not Applicable

Confirmed
documents:/01//11//16//17//18//19//20/

Page 77 of 105

The explanations given to investors, taking into accountconfidentiality and other considerations, clearly outline thetransition projects through the disclosure of the frameworkand the results of the external review. Details of thespecific eligible project candidates and projects to be
funded are provided to the external review body to confirm
eligibility.
Negative impacts of the project implementation are taken
into account, such as compliance with environmental laws,
ordinances and various regulations, and clear
environmental improvement effects such as CO2 reductionin the entire life cycle or in each process. In the operationand implementation of the project, the relevant
departments are committed to the preservation of thesurrounding environment.

DNV confirmed that Tokyo Gas plans to disclose theestimated amount (or ratio) of the portion of the proceeds
allocated to refinancing in the integrated report publishedon an annual basis or website. If the inclusion ofrefinancing and the nature of the refinancing is determinedprior to the issue of the bond, Tokyo Gas plans to disclose

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

SectionRequirements

Requirement checkproceeds being allocated forrefinancing, and (2) which Green
Projects (or Green Project
categories) may be refinanced.
◎

1-⑦

When Green Bonds are issued
multiple times to refinance anasset that requires long-term
maintenance, the issuer should
clearly disclose the asset’s age
and remaining useful life and theamount to be refinanced as at thetime of the bond issuance,
evaluate the long-termsustainability of environmental
benefits and obtain an assessment
from an external reviewers forverification.

Yes
No
Not Applicable

Work Undertaken

DNV FindingsInterviews withstakeholders

the necessary information in legal documents inaccordance with CTF 4-g).

Confirmed
documents:/01//11//16//17//18//19/

At present, there are no plans to allocate to refinancing toprojects that are long overdue.

Interviews withstakeholders

GBGLs-2 Process for Project Evaluation and Selection
Ref.

SectionRequirements◎

2-①

In advance, issuers should provide
investors with information
regarding the following:
The environmental sustainability
objectives that the issuers intend toachieve through Green Bonds.

Requirement
check

Work
Undertaken

DNV Findings

Yes

Confirmed
documents:/01//02//03/

The financing that Tokyo Gas implements by utilizing transition
finance is aimed at achieving the Tokyo Gas transition strategy
which is in line with the low-carbon decarbonization strategy set
by the Japan Gas Association and the Ministry of Economy, Tradeand Industry's technology roadmap, which aims to align with thegoals of the Paris Agreement.

No
Not Applicable

Interviews withstakeholders

Page 78 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

SectionRequirements

Requirement
check

Work
Undertaken

DNV Findings
Tokyo Gas has developed its Transition Strategy as a transition
roadmap, which incorporates short-term goals, medium-termgoals, and a strategic plan for decarbonization (a plan to
introduce technologies that contribute to transition). Each goalbased on Tokyo Gas's Transition Strategy is disclosed as follows.
These are planned to be explained to investors in advancethrough the Framework, the external review and the Amendment
Shelf Registration Statement.
TABLE TOKYO GAS TRANSITION TARGETS
MEDIUM-TERM
Contribution to CO2 reduction by
TARGETS
2030: ▲17 million tonnes＊
LONG-TERM
Challenge to achieve Net-Zero CO2
TARGETS
towards 2050
Reference: Short-term target: Achieve Net-Zero CO2 andcontribute to CO2 reduction of ▲6.5 million tonnes in 20202022 (for domestic emissions)＊＊Compared to 2013. Includes in-house emissions (Scope 1 and
2), Scope 3 and reductions at customers.Of the▲ 17 million
tonnes (target for the global business as a whole), Net-Zero CO2emissions from city gas production, company-owned buildings,
and company vehicles in Scope 1 and 2 (approx. 300,000 tons in
FY2020); the decrease in Scope 3 emissions is ▲750,000
tonnes.

◎2-①

In advance, issuers should provide
investors with information
regarding the following:
The criteria for determining theappropriateness of Green Projects

Yes
No
Not Applicable

Confirmed
documents:/01//02//03//14//20/

Page 79 of 105

It was confirmed through the Framework and Assessment thatthe eligibility of the Tokyo Gas Transition Project is described on
the basis of which evaluation criteria (standards). Specifically,
the criteria are as follows

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

SectionRequirements

Requirement
check

Work
Undertaken

based on the environmental
sustainability objectives described
aboveInterviews withstakeholders

DNV Findings---

Climate Transition Finance Handbook
International Capital Market Association (ICMA), 2020
Basic Guidelines on Climate Transition Finance
Financial Services Agency, Ministry of Economy, Tradeand Industry, Ministry of the Environment, 2021
Green Bond Principles
International Capital Market Association (ICMA), 2021
Green Bond Guidelines
Ministry of the Environment, 2020
Green loan principles
Loan Market Association and others (LMA and others),
2021
Green Loan Guidelines
Ministry of the Environment, 2020

These will be specified in the Framework and will be explained toinvestors in advance, through the Amended Shelf Registration
Statement.
◎

2-①

In advance, issuers should provide
investors with information regarding
the following:
The process for determining how
Green Projects fit the criteria for theachievement of the environmental
sustainability objectives (Theprocess for the determination refers
to the reason why issuers determinethat Green Projects can provide
environmental benefits
appropriately in light of theobjectives and criteria for the use of

Yes
No
Not Applicable

Confirmed
documents:/01//02//03//14//20/
Interviews withstakeholders

Page 80 of 105

DNV confirmed that there is a description of the process by which
decisions on the selection of transition projects were made in theframework. Specifically, the accounting department and thebusiness unit responsible for the project will comprehensively
evaluate and select the project, and the final decision will bemade by the accounting officer. These processes have been
established as an internal document of Tokyo Gas and DNV has
confirmed that the plan will be implemented in accordance withthe appropriate processes.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

〇

◎

〇

SectionRequirements

2-⑥Green Bond proceeds, how and bywhom are the criteria applied andused to determine whether Green
Projects are appropriate in light ofthe objectives, and the like)
It is recommended that the issuers
explain to investors in advance any
environmental standards orcertifications that the issuers willrefer to in evaluating and selecting a
Green Project to be financed.

2-⑦

2-⑨

Requirement
check

Yes
No
Not Applicable

Work
Undertaken

DNV Findings

Confirmed
documents:/01//02//03//14//20/

The transition strategy, which forms the basis for the evaluationand selection of transition finance, is Tokyo Gas's transition
roadmap based on the technology roadmap of the Japan Gas
Association and the Ministry of Economy, Trade and Industry,
with specific targets (short, medium and long term) and plans.
These will be explained to investors through the framework andsecond party opinions.
There are no project-specific environmental standards orcertifications. Some activities are carried out through subsidised
projects or alliances.
Tokyo Gas has set out the following common exclusion criteria fortransition finance.
・ Inappropriate relationships such as unfair trade, bribery,corruption, extortion, embezzlement, etc. that do notcomply with the laws of the country of residence・ Transactions that can cause social problems such as humanrights and the environment

Interviews withstakeholders

If an issuer intends to establish an
exclusion standard to identify andcontrol such potentially material
environmental and social risks ofGreen Projects, the issuer should
explain it to investors in advance as
one of the criteria it applies.

Yes

It is recommended that internalgroups who have expertise, such as
the environment related group, or
external institutions check whether
the determination process issuitable from an environmental
point of view.

Yes

No
Not ApplicableNo

Not Applicable

Confirmed
documents:/01//02//03//11//14//16//17//18//
19//20/Interviews withstakeholders
Confirmed
documents:/01//02//03//14/
Interviews withstakeholders

Page 81 of 105

DNV confirmed that there is a description of the process by which
decisions on the selection of transition projects were made in theframework. Specifically, the accounting department and thebusiness unit responsible for the project will comprehensively
evaluate and select the project, and the final decision will be madeby the accounting officer. These processes have been established
as an internal document of Tokyo Gas and DNV has confirmed thatthe plan will be implemented in accordance with the appropriate
processes.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

SectionRequirements〇

2-⑪

It is recommended that issuers
position their environmental
objectives, criteria and informationon their processes in the context of
their comprehensive environmental
sustainability objectives, strategy,
policies and so on (e.g., mediumterm management plan,sustainability strategy, CSR
strategy) when explaining them toinvestors.

Requirement
check
Yes

No

Not Applicable

Work
Undertaken

DNV Findings

Confirmed
documents:/01//02//03//08//
09//10//14/

The transition strategy, which forms the basis for the evaluationand selection of transition finance, is Tokyo Gas's transition
roadmap based on the technology roadmap of the Japan Gas
Association and the Ministry of Economy, Trade and Industry,
with specific targets (short, medium and long term) and plans.
These will be explained to investors through the framework andsecond party opinions.
Tokyo Gas's transition strategy is closely linked to its management
vision "Compass 2030", its medium-term management plan (20202022) and its initiatives under the TCFD.

Interviews withstakeholders

Page 82 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

GBGLs-3 Management of proceeds
Ref.

SectionRequirements◎

3-①

Issuers should track and manage thenet Green Bond proceeds in an
appropriate manner. These tracking
and managing activities should becontrolled by the issuer’s internal
process.

Yes

As long as the Green Bonds areoutstanding, issuers manage theamount of the allocation to the Green
project is equal to or more thanproceed, or issuers should periodicallyadjust to match the amount of thetotal Green Bond proceeds to the sumof the amount of the proceeds
allocated to Green Projects and theamount of the unallocated proceeds.

Yes

If any of the proceeds remains
temporarily unallocated, the issuer
should explain to investors how it
intends to manage the balance of such
unallocated funds and endeavour topromptly allocate such funds to Green
Projects.

Yes

◎

◎

3-②

3-②

Requirement
checkWork UndertakenNo

Not Applicable

Confirmed
documents:/01//12//15/
Interviews withstakeholders

No

Not Applicable

Confirmed
documents:/01//12//13//15/
Interviews withstakeholders

No

Not Applicable

Confirmed
documents:/01//12//13//15/
Interviews withstakeholders

Page 83 of 105

DNV Findings
DNV confirmed that Tokyo Gas plans to manage theproceeds in its accounting system or in individual internal
documents to ensure that the total amount of transitioneligible projects is not less than the amount of transition
finance issued.
DNV also confirmed through the interviews that there is anoperation (system) that can track the proceeds in theabove management.
DNV confirmed that Tokyo Gas plans to monitor the
allocation status of proceeds on a regular (quarterly) basis,
based on data extracted from its accounting system, toensure that the requirements are met.

DNV confirmed that Tokyo Gas will identify the balance of
unallocated proceeds by means of a transition financeprocurement fund management chart, etc., and explain to
investors how the funds will be managed (by cash andcash equivalents). In addition, DNV confirmed that Tokyo
Gas plans to allocate the funds (including refinancing) toeligible projects in a timely manner. DNV also confirmedthat the unallocated funds are scheduled to be allocatedTokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

SectionRequirements

Requirement
checkWork Undertaken

DNV Findings
within two years, and if there is a large excess, Tokyo Gas
plans to report it along with the reason.

◎

〇

◎

3-⑤

3-⑥

3-⑧

In advance, issuers should provide
investors with information on how
Green Bond proceeds will be tracked
and managed.

Yes

It is recommended that issuers keep
evidenced documents appropriatelythat demonstrate how they tracked
and managed Green Bond proceeds.

Yes

In advance, issuers should provide
investors with information on how
unallocated Green Bond proceeds will
be managed when the Green Projects
that will receive the Green Bond
proceeds have not been determined,
or when such Green Projects havebeen determined but the proceeds
have not been allocated because theallocation timing has not yet arrived.

Yes

No

Not Applicable

Confirmed
documents:/01//12//15//20/
Interviews withstakeholders

No

Not Applicable

Confirmed
documents:/01//12//13//15/
Interviews withstakeholders

No

Not Applicable

Confirmed
documents:/01//12//15//20/
Interviews withstakeholders

Page 84 of 105

DNV confirmed that the issuer has internal processes inplace to enable it to track and control the proceeds. DNV
confirmed that these are planned to be explained toinvestors in a framework, etc.

DNV has confirmed that there are internal processes inplace to ensure that documents relating to the
management of proceeds are properly retained throughout
the reimbursement period in accordance with Tokyo Gas's
accounting and document management regulations.
DNV confirmed through the framework that Tokyo Gas
describes how the pre-allocation equivalent of funds is to
be managed (in cash or cash equivalents).

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

SectionRequirements〇

3-⑨

It is recommended that issuers
manage unallocated Green Bond
proceeds as an asset with highliquidity and safety such as cash, cash
equivalents, or short-term financial
assetsRequirement
check
Yes

Work UndertakenNo

Not Applicable

Confirmed
documents:/01//12//15//20/
Interviews withstakeholders

Page 85 of 105

DNV Findings
Cash or cash equivalents as specified in the Framework arehighly secure assets and comply with the requirements.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

GBGLs-4 Reporting
Ref.

SectionRequirements◎

4-①

Issuers should publicly disclose the latest
information on the use of Green Bond
proceeds after issuance

Requirement
check

Work
Undertaken

DNV Findings

Yes

Confirmed
documents:/01/

From the year following the issuance of the transition finance,
it was confirmed that the status of allocation of the proceedsfrom the issuance of the transition finance to the use ofproceeds and the environmental improvement effect areplanned to be reported annually at least until the year
following the completion of the allocation.
The annual report will be disclosed on the Tokyo Gas’s
website.

No

Not Applicable

Interviews withstakeholders

◎

◎

4-②

4-③

Issuers should disclose the latest
information at least once a year until full
allocation of the proceeds and asnecessary thereafter in the event of new
developments.

Yes

Disclosed information should include thefollowing contents:<Contents>
 A list of the Green Projects to which
Green Bond proceeds have been allocatedYes A brief description of each Green
Project (including up-to-date progress)No

Not Applicable

Confirmed
documents:/01/
Interviews withstakeholders

No

Not Applicable

Same as 4-(1).
In addition, if there is a significant change in the transition
strategy or pathway, allocation plan or project implementation
status (e.g., interruption of the project that started allocation,
significant postponement on a yearly basis, sale or retirement,etc.), Tokyo Gas will report the change in a timely manner orin reporting.

Confirmed
documents:/01//11//16//17//18//19/

The disclosed information will include the following contents inconsideration of confidentiality.
The planned allocation period will be within two years after
fund procurement, and the operation method will be managedin cash or cash equivalents.

Interviews withstakeholders

The report will be disclosed on the website.

 The amount allocated to each Green
Project
 The expected environmental benefits ofeach Green Project

Page 86 of 105<Allocation Status>
 Allocated Amount Unallocated amounts (including when they will beallocated and its management) Amount of proceeds to be used for refinancing<Environmental benefit>Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

〇

〇

◎

Section

4-④

4-⑤

4-⑦

Requirements
 Information regarding unallocatedGreen Bond proceeds (the amount of theunallocated proceeds or the share of theunallocated proceeds to the total amountof the proceeds, when the unallocatedproceeds are expected to be allocates toGreen Projects, and how the unallocatedproceeds are managed until allocation)
If Green Bond proceeds have been
allocated to the refinancing of existing
projects, it is recommended that disclosed
information include: 1) the approximate
amount (or the share) of the allocatedproceeds used for refinancing, and 2) alist of the Green Projects (or the project
categories) refinanced.

Requirement
check

Work
Undertaken

DNV Findings


Yes

No

Not Applicable

Confirmed
documents:/01//11//16//17//
18//19/Environmental proceeds impacts are disclosed within
the scope of confidentiality, to the extent practicable,
and in consideration of the characteristics of the
project, including an overview of the project(including progress, completion, operation, etc.) andthe expected environmental benefits (e.g., tCO2/year).

DNV confirmed that Tokyo Gas plans to disclose the estimatedamount (or ratio) of the portion of the proceeds allocated torefinancing in the integrated report published on an annual
basis or website.

Interviews withstakeholders

While it is recommended to disclose 4-③
and 4-④ on a project-by-project basis, if
there are confidentiality agreements,
competitive considerations, or a large
number of underlying projects that limit
the disclosure of details, it is consideredthat information is presented in genericterms or in an aggregated portfolio.

Yes

When disclosing information regarding the
expected environmental benefits ofprojects, issuers should use appropriate
indicators while ensuring consistency withthe “environmental sustainability
objectives,” the “criteria” for Green
Projects specified in Section 2, “Process
for Project Evaluation and Selection,” and

Yes

No

Not Applicable

Confirmed
documents:/01//11//16//17//18//19/

It was confirmed that the disclosure of information is based on
the disclosure of information for each transition project, but
may take place in an aggregated format depending on thecircumstances, taking into account confidentiality agreements.

Interviews withstakeholders
No

Not Applicable

Confirmed
documents:/01//11//16//17//18//19/
Interviews withstakeholders

Page 87 of 105

The environmental improvement effect will be based on theCO2 reduction effect, but Tokyo Gas will use an appropriately
described indicator depending on the nature of the project tobe allocated for transition finance.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

SectionRequirements

Requirement
check

Work
Undertaken

DNV Findings

Confirmed
documents:

The environmental improvement effect will be disclosed using
quantitative indicators, but it will be implemented for eachtransition project or each transition project classification inconsideration of confidentiality and rationality of the evaluation
process. In addition, the calculation method will be disclosed
to the extent necessary.

the characteristics of Green Projects.
〇

4-⑧

When disclosing the expectedenvironmental benefits of projects, it isrecommended that issuers, where
feasible, use quantitative indicators anddisclose information on methodologies
and/or assumptions as well as these
indicators.

Yes

No

Not Applicable/01//11//16//17//18//19/

Interviews withstakeholders

Page 88 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Schedule-6 Green Loan Guidelines (Transition Finance Loan with specific use of proceeds)
Eligibility Assessment
The following check list (GLGLs-1 to GLGLs-6) is prepared based on the Green Loan Guidelines (GLGLs, MOE, 2020).
According to the GLGLs, Requirements/Evaluation aspects are divided into following two terms, Should:◎ Recommend:〇
The numbers /01/, /02/ ~ /19/ listed in the Work Undertaken column are the confirmed documents, and the details (document name) are shown in Reference
dcoument-1 (See the Attachment).
In addition to the confirmed documents, the Work Undertaken includes the case where the information obtained through discussions and interviews with the
publishers is used as evidence.
This assessment applies as a requirement for Use of Proceeds based on CTFH and CTFBG, so any term "green" and “bond” in Schedule-6 should beread as "transition” or “finance (bond)".

GLGLs-1 Use of proceeds
Ref.

SectionRequirements◎

1-①

Proceeds of Green Loans should be
used for Green Projects that haveclear environmental benefits.
The borrowers should assess suchenvironmental benefits.

Requirement
check
Yes

Work UndertakenNo

Not Applicable

Confirmed
documents:/01//02//03//11//16//17//18//19/

DNV Findings
The proceeds from transition finance will be allocated toTokyo Gas Group’s projects that contribute to low anddecarbonization through the business related to climatechange, which is a materiality issue for Tokyo Gas. Specificenvironmental improvements have been evaluated by theissuer as leading to a CO2 reduction.

Interviews withstakeholders〇

1-①

The borrowers is recommended toquantify them where possible.

Yes

No

Not Applicable

Confirmed
documents:

Page 89 of 105

Tokyo Gas has quantified the environmental improvement
effects of the Transition Project. Specifically, Tokyo Gas has

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

SectionRequirements

Requirement
checkWork Undertaken/01//11//16//17//18//19/Interviews withstakeholders◎

1-④

Borrowers should explain in advancethe use of proceeds in documents
including contracts exchanged
between parties involved.

Yes

No

Not Applicable

Confirmed
documents:

DNV Findings
established a calculation formula in advance for the CO2
reduction effect, and quantified the effects.
(Some projects involve research and development or
installation of equipment for future environmental
improvements, which may make it difficult to disclose orquantify results.)
Tokyo Gas will explain the use of the proceeds to the lenders
in advance through the framework and the loan agreement.

/01//11//16//17//18//19//20/
Interviews withstakeholders◎

1-⑤

The provision of the information
regarding the use of proceeds should
specify the Green Project categories.

Yes

Confirmed
documents:No
Not Applicable/01//11//16//17//18//19//20/-

This report

Interviews withstakeholders

Page 90 of 105

The proceeds will be allocated to one or more of the following
projects, which will be explained to lenders through theframework, the Amended Shelf Registration Statement andother documents and the results of external reviews.
Table: Tokyo Gas Transition Finance Eligible Project
Candidates
Low anddecarbonization
Eligible project categories
initiatives*

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

SectionRequirements

Requirement
checkWork Undertaken

DNV Findings①Advanced use of natural
gas(Fuel conversion to naturalLowgas, high-efficiency gas
carbonization
appliances, area energy use,1)with natural
strengthening resilience)gas② Introduction of carbonneutral LNG and use of
CCUS technology③Decarbonization of
Decarboniza
gaseous energy
tion of gas④ Expansion of renewable2)energy sources andandachieving zero emission ofelectricity
gas-fired power*In addition to 1) and 2), Tokyo Gas is committed to“reducing its own CO2 emissions”, and is introducing ultra
high-efficiency fuel cells, solar power generation, CCUs
and carbon-neutral LNG into its facilities, as well as
converting its company-owned vehicles to HEVs, FCVs
and EVs.

〇

1-⑤

In cases where individual Green
Projects have been specified, it isrecommended that issuers clearlypresent the projects to lenders.

Yes

Confirmed
documents:No
Not Applicable/01//11//16//17//18//19//20/-

This report

Interviews withstakeholders

Page 91 of 105

The explanations given to investors, taking into accountconfidentiality and other considerations, clearly outline thetransition projects through the disclosure of the frameworkand the results of the external review. Details of the specificeligible project candidates and projects to be funded areprovided to the external review body to confirm eligibility.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

SectionRequirements◎

1-⑥

In cases where Green Projects haveincidental negative environmental
impacts along with the alleged
environmental benefits, borrowers
should include information regardingthese negative impacts (e.g., how
they are assessed, how borrowers
intend to address them) so that
lenders and market participants canappropriately evaluate these impacts.

Yes

In cases where Green Loan proceeds
are used to refinance existing Green
Projects, it is recommended thatborrowers provide information to thelenders regarding (1) the amount (orthe share) of the loan proceeds being
allocated for refinancing, and (2)which Green Projects (or Green
Project categories) may be
refinanced. Furthermore, when using
proceeds for refinancing Green
Projects, the borrower isrecommended to indicate theapplicable period of the Green Projectrefinanced (Lookback Period).

Yes

When Green Loans are used multiple
times to refinance an asset that
requires long-term maintenance, theborrower should clearly disclose the

Yes

〇

◎

1-⑦

1-⑦

Requirement
checkWork Undertaken
Confirmed
documents:No
Not Applicable/01//11//16//17//18//19//20/
Interviews withstakeholders

Confirmed
documents:No
Not Applicable/01//11//16//17//18//19//20/
Interviews withstakeholders

Confirmed
documents:No
Not Applicable/01//11//16//17//18//19/

Page 92 of 105

DNV Findings
Negative impacts of the project implementation are taken
into account, such as compliance with environmental laws,
ordinances and various regulations, and clear environmental
improvement effects such as CO2 reduction in the entire life
cycle or in each process. In the operation andimplementation of the project, the relevant departments arecommitted to the preservation of the surrounding
environment.

DNV confirmed that Tokyo Gas plans to disclose the estimatedamount (or ratio) of the portion of the proceeds allocated torefinancing in the integrated report published on an annual
basis or website. If the inclusion of refinancing and the natureof the refinancing is determined prior to the issue of the bond,Tokyo Gas plans to disclose the necessary information in legal
documents in accordance with CTF 4-g).

At present, there are no plans to allocate to refinancing toprojects that are long overdue.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

SectionRequirements
asset’s age, remaining life and theamount to be refinanced as of thetime of procurement, evaluate thelong-term sustainability ofenvironmental benefits and receive anassessment from an outside agency
for verification as necessary.

Requirement
checkWork Undertaken

Interviews withstakeholders

Page 93 of 105

DNV Findings

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

GLGLs-2 Process for Project Evaluation and Selection
Ref.

SectionRequirements◎

2-①

Borrowers should provide lenders
with information in advanceregarding the following: theenvironmental sustainability
objectives that the borrowers intend
to achieve through the Green Loans;

Requirement
checkWork Undertaken

Yes
No
Not Applicable

Confirmed
documents:/01//02//03/
Interviews withstakeholders

DNV Findings
The financing that Tokyo Gas implements by utilizing
transition finance is aimed at achieving the Tokyo Gas
transition strategy which is in line with the low-carbon
decarbonization strategy set by the Japan Gas Associationand the Ministry of Economy, Trade and Industry's
technology roadmap, which aims to align with the goals of
the Paris Agreement.
Tokyo Gas has developed its Transition Strategy as atransition roadmap, which incorporates short-term goals,
medium-term goals, and a strategic plan for
decarbonization (a plan to introduce technologies that
contribute to transition). Each goal based on Tokyo Gas's
Transition Strategy is disclosed as follows.
These are planned to be explained to investors in advancethrough the Framework, the external review and theAmendment Shelf Registration Statement.
TABLE TOKYO GAS TRANSITION TARGETS
MEDIUM-TERM
Contribution to CO2 reduction by
TARGETS
2030: ▲17 million tonnes＊
LONG-TERM
Challenge to achieve Net-Zero CO2
TARGETS
towards 2050
Reference: Short-term target: Achieve Net-Zero CO2 andcontribute to CO2 reduction of ▲6.5 million tonnes in
2020-2022 (for domestic emissions)＊＊Compared to 2013. Includes in-house emissions (Scope 1
and 2), Scope 3 and reductions at customers.
Of the▲ 17 million tonnes (target for the global business asa whole), Net-Zero CO2 emissions from city gas production,

Page 94 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

SectionRequirements

Requirement
checkWork Undertaken

DNV Findings
company-owned buildings, and company vehicles in Scope 1
and 2 (approx. 300,000 tons in FY2020); the decrease in
Scope 3 emissions is ▲750,000 tonnes.

◎

2-①

Borrowers should provide lenders
with information in advanceregarding the following: the criteria
for determining the appropriatenessof Green Projects based on theenvironmental sustainability
objectives described above;

Yes

No

Not Applicable

Confirmed
documents:/01//02//03//14//20/
Interviews withstakeholders

It was confirmed through the Framework and Assessmentthat the eligibility of the Tokyo Gas Transition Project is
described on the basis of which evaluation criteria(standards). Specifically, the criteria are as follows
-

-

-

-

-

Climate Transition Finance Handbook
International Capital Market Association (ICMA),
2020
Basic Guidelines on Climate Transition Finance
Financial Services Agency, Ministry of Economy,
Trade and Industry, Ministry of the Environment,
2021
Green Bond Principles
International Capital Market Association (ICMA),
2021
Green Bond Guidelines
Ministry of the Environment, 2020
Green loan principles
Loan Market Association and others (LMA andothers), 2021
Green Loan Guidelines
Ministry of the Environment, 2020

These will be specified in the Framework and will be
explained to investors in advance, through the Amended
Shelf Registration Statement.

Page 95 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

SectionRequirements◎

2-①

Borrowers should provide lenders
with information in advanceregarding the following: the process
for determining how Green Projects
fit thecriteria for the achievement of theenvironmental sustainability
objectives.

Yes

It is recommended that the borrower
explains to lenders in advance any
environmental standards orcertification that the borrower willrefer to in evaluating and selecting a
Green Project to be financed.

Yes

If the borrower intends to establish
exclusion criteria to identify andcontrol such potentially material
environmental and social risks ofGreen Projects, the borrower should
explain them to lenders in advanceas part of thecriteria it applies.
It is recommended that internal
departments who have expertise,such as the environment related
department, or external institutions

Yes

〇

◎

〇

2-⑥

2-⑦

2-⑨

Requirement
checkWork UndertakenNo
Not Applicable

Confirmed documents:/01//02//03//14//20/
Interviews withstakeholders

No
Not Applicable

Confirmed documents:/01//02//03//14//20/
Interviews withstakeholders

No
Not Applicable

Confirmed documents:/01//02//03//11//14//16//17//18//19//
20/
Interviews withstakeholders
Confirmed documents:/01//02//03//14/

Yes
No
Not Applicable

Page 96 of 105

DNV Findings
DNV confirmed that there is a description of the process bywhich decisions on the selection of transition projects weremade in the framework. Specifically, the accounting
department and the business unit responsible for the projectwill comprehensively evaluate and select the project, andthe final decision will be made by the accounting officer.
These processes have been established as an internal
document of Tokyo Gas and DNV has confirmed that theplan will be implemented in accordance with the appropriate
processes.
The transition strategy, which forms the basis for theevaluation and selection of transition finance, is Tokyo Gas's
transition roadmap based on the technology roadmap of theJapan Gas Association and the Ministry of Economy, Tradeand Industry, with specific targets (short, medium and longterm) and plans. These will be explained to investors
through the framework and second party opinions.
There are no project-specific environmental standards orcertifications. Some activities are carried out throughsubsidised projects or alliances.
Tokyo Gas has set out the following common exclusion criteria
for transition finance.
・ Inappropriate relationships such as unfair trade,
bribery, corruption, extortion, embezzlement, etc. that
do not comply with the laws of the country of residence・ Transactions that can cause social problems such as
human rights and the environment
DNV confirmed that there is a description of the process bywhich decisions on the selection of transition projects weremade in the framework. Specifically, the accounting
department and the business unit responsible for the projectTokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

SectionRequirements

Requirement
checkWork Undertaken

are involved in the evaluation andselection process of Green Projects toensure suitability from anenvironmental point of view.

〇

2-⑪

It is recommended that borrowers
position their environmental
objectives and criteria andinformation on their processes in thecontext of their comprehensive
objectives, strategy, policies
concerning environmental
sustainability (e.g. medium-term
management plan, sustainability
strategy, CSR strategy) and provide
an explanation to lenders.

Interviews withstakeholders

Yes
No
Not Applicable

Confirmed documents:/01//02//03//08//09//
10//14/
Interviews withstakeholders

Page 97 of 105

DNV Findings
will comprehensively evaluate and select the project, andthe final decision will be made by the accounting officer.
These processes have been established as an internal
document of Tokyo Gas and DNV has confirmed that theplan will be implemented in accordance with the appropriate
processes.
The transition strategy, which forms the basis for theevaluation and selection of transition finance, is Tokyo Gas's
transition roadmap based on the technology roadmap of theJapan Gas Association and the Ministry of Economy, Tradeand Industry, with specific targets (short, medium and longterm) and plans. These will be explained to investors
through the framework and second party opinions.
Tokyo Gas's transition strategy is closely linked to its
management vision "Compass 2030", its medium-term
management plan (2020-2022) and its initiatives under the
TCFD.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

GLGLs-3 Management of proceeds
Ref.

SectionRequirements◎

3-①

Borrowers should track and manage theentire amount of Green Loan proceeds.
These tracking and managing activities
should be controlled by the borrower’s
internal processes.

Yes

As long as the Green Loans areoutstanding, borrowers should conductperiodic checks (at least yearly) to ensurethat the amount used for Green Projects
is equal to, or greater than, the amountraised by the procurement of Green Loansor the sum of the amount used for Green
Projects and the amount of theunallocated proceeds match the total
amount of Green Loan proceeds.

Yes

If any of the proceeds remain temporarily
unallocated, the borrower should explain
to lenders how it intends to invest thebalance of such unallocated funds andendeavor to promptly use such funds forGreen Projects.

Yes

◎

◎

3-②

3-②

Requirement
check

No
Not Applicable

Work Undertaken
Confirmed
documents:/01//12//15/
Interviews withstakeholders

No
Not ApplicableNo
Not Applicable

DNV Findings
DNV confirmed that Tokyo Gas plans to manage theproceeds in its accounting system or in individual internal
documents to ensure that the total amount of transitioneligible projects is not less than the amount of transition
finance issued.
DNV also confirmed through the interviews that there is anoperation (system) that can track the proceeds in theabove management.

Confirmed
documents:/01//12//13//15/
Interviews withstakeholders

DNV confirmed that Tokyo Gas plans to monitor theappropriation of procurement funds on a regular(quarterly) basis, based on data extracted from its
accounting system, to ensure that the requirements aremet.

Confirmed
documents:/01//12//15/
Interviews withstakeholders

DNV confirmed that Tokyo Gas will identify the balance of
unallocated proceeds by means of a transition financeprocurement fund management chart, etc., and explain to
investors how the funds will be managed (by cash andcash equivalents). In addition, DNV confirmed that Tokyo
Gas plans to allocate the funds (including refinancing) toeligible projects in a timely manner. DNV also confirmedthat the unallocated funds are scheduled to be allocatedPage 98 of 105

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

SectionRequirements

Requirement
checkWork Undertaken

DNV Findings
within two years, and if there is a large excess, Tokyo Gas
plans to report it along with the reason.

◎

〇

3-④

3-⑤

In advance, borrowers should provide
lenders with information on how Green
Loan proceeds will be tracked andmanaged.

Yes

It is recommended that borrowers keep
evidenced documents appropriately that
demonstrate how they tracked andmanaged Green Loans proceeds.

Yes

No
Not Applicable

Confirmed
documents:/01//12//15//20/
Interviews withstakeholders

No
Not Applicable

Confirmed
documents:/01//12//13//15/
Interviews withstakeholders

Page 99 of 105

DNV confirmed that the issuer has internal processes inplace to enable it to track and control the proceeds. DNV
confirmed that these are planned to be explained toinvestors in a framework, etc.

DNV has confirmed that there are internal processes inplace to ensure that documents relating to the
management of proceeds are properly retained throughout
the reimbursement period in accordance with Tokyo Gas's
accounting and document management regulations.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

GLGLs-4 Reporting
Ref.

Secti
on

Requirements◎

4-①

Borrowers should report the latest
information on the use of Green Loan
proceeds to the financial institutions
who are lenders and took part in theGreen Loans after the procurement.

Yes

For a borrower to gain public
acceptance by expressing that the
procured loans are Green Loans, theyneed to ensure transparency. For thisreason, if a borrower expresses that the
procured loans are Green Loans, it
should publicly disclose the latest
information on the use of Green Loan
proceeds after the procurement.

Yes

Borrowers should report or disclose theusage status of funds at least once a
year until all the proceeds are used.
Borrowers should report or disclosesuch information in a timely manner
even after all the proceeds are allocated
if there has been any major change inthe situation.

Yes

Reported or disclosed information should
include the following contents:<Matters pertaining to reporting or

Yes

◎

◎

◎

4-②

4-④

4-⑤

Requirement
checkWork UndertakenNo
Not Applicable

Confirmed
documents:/01/
Interviews withstakeholders

No
Not Applicable

Confirmed
documents:/01/
Interviews withstakeholders

No
Not Applicable

Confirmed
documents:/01//11//16//17//
18//19/Interviews withstakeholders

No

Confirmed
documents:/01//11//16//17/
Page 100 of 105

DNV Findings
From the year following the issuance of the transition finance,
it was confirmed that the status of allocation of the proceedsfrom the issuance of the transition finance to the use ofproceeds and the environmental improvement effect areplanned to be reported annually at least until the year
following the completion of the allocation.
The annual report will be disclosed on the Tokyo Gas’s
website.
In the event that the transition financing is to be funded by aloan, Tokyo Gas will state that it is a transition loan and will
disclose updated information on the use of proceeds to the
public on its website.

Same as 4-①.
In addition, if there is a significant change in the transition
strategy or pathway, allocation plan or project implementation
status (e.g., interruption of the project that started allocation,
significant postponement on a yearly basis, sale or retirement,etc.), Tokyo Gas will report the change in a timely manner orin reporting.
The disclosed information will include the following contents inconsideration of confidentiality.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

〇

Secti
on

4-⑥

Requirements
disclosure>
A list of the Green Projects to which
Green Loan proceeds have been
allocated
A brief description of each Green
Project (including up-to-date
progress)
The amount allocated to eachGreen Project
The expected environmental
benefits of each Green Project
Information regarding unallocatedGreen Loan proceeds (the amountof the unallocated proceeds or theshare of the unallocated proceeds
to the total amount of theproceeds, and when the unallocatedproceeds are expected to beallocated to Green Projects)
A borrower is small-medium, reported
and disclosed information can be
simplified, if it is difficult to disclose thesame contents which a borrower reports
to a lender.
If Green Loan proceeds have been
allocated to the refinancing of existing
projects, it is recommended that
disclosed information include: (1) the
approximate amount (or the share) of
the allocated proceeds used forrefinancing, and (2) a list of the Green
Projects (or the project categories)

Requirement
checkWork Undertaken

Not Applicable/18//19/
Interviews withstakeholders

DNV Findings
The planned allocation period will be within two years after
fund procurement, and the operation method will be managedin cash or cash equivalents.
The report will be disclosed on the website.
<Allocation Status>
 Allocated Amount Unallocated amounts (including when they will beallocated and its management) Amount of proceeds to be used for refinancing<Environmental benefit>
 Environmental proceeds impacts are disclosed within
the scope of confidentiality, to the extent practicable,
and in consideration of the characteristics of the
project, including an overview of the project (including
progress, completion, operation, etc.) and the expectedenvironmental benefits (e.g., t-CO2/year).

Yes
No
Not Applicable

Confirmed
documents:/01//11//16//17//18//19/
Interviews withstakeholders

Page 101 of 105

DNV confirmed that Tokyo Gas plans to disclose the estimatedamount (or ratio) of the portion of the proceeds allocated torefinancing in the integrated report published on an annual basis
or website.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

〇

◎

〇

Secti
on
4-⑦

4-⑩

4-⑪

Requirements
refinanced.
While it is recommended to disclose (v)and (vi) on a project-by-project basis, if
there are confidentiality agreements,
competitive considerations, or a large
number of underlying projects that limit
the disclosure of details, it is consideredthat information is presented in genericterms or in an aggregated portfolio.
When disclosing information regarding
the expected environmental benefits ofprojects, borrowers should use
appropriate indicators, while ensuringconsistency with the characteristics ofGreen Projects.

When disclosing the expectedenvironmental benefits of projects, it isrecommended that borrowers, where
feasible, use quantitative indicators anddisclose information on methodologies
and/or assumptions as well as these
indicators.

Requirement
checkWork Undertaken

Yes
No
Not Applicable

Confirmed
documents:/01//11//16//17//18//19/DNV Findings

It was confirmed that the disclosure of information is based on
the disclosure of information for each transition project, but
may take place in an aggregated format depending on thecircumstances, taking into account confidentiality agreements.

Interviews withstakeholders
Yes
No
Not Applicable

Confirmed
documents:/01//11//16//17//18//19/

The environmental improvement effect will be based on theCO2 reduction effect, but Tokyo Gas will use an appropriately
described indicator depending on the nature of the project tobe allocated for transition finance.

Interviews withstakeholders
Yes
No
Not Applicable

Confirmed
documents:/01//11//16//17//18//19/
Interviews withstakeholders

Page 102 of 105

The environmental improvement effect will be disclosed using
quantitative indicators, but it will be implemented for eachtransition project or each transition project classification inconsideration of confidentiality and rationality of the evaluation
process. In addition, the calculation method will be disclosed tothe extent necessary.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

GLGLs-5：Internal reviews
Ref.

SectionRequirements◎

5-(3)②

If the borrower performs self-certification, it
should inform the lenders in advance and explain
with sufficient transparency its internal expertiseupon formulation of the self-certification process
pertaining to the green loan framework.

Yes

Borrowers are recommended to document theirinternal expertise. This documentation should becommunicated to the lenders on request. The selfcertification results should also be reported to thelenders on request.

Yes

When appropriate, and taking into accountconfidentiality and competitive considerations,borrowers should make publicly available, via theirwebsite or otherwise, their decision to review theGreen Loan based on self-certification as well as
the parameters based on which they assess Green
Projects and the internal expertise they have toassess such parameters.

Yes

◎

◎

5-(3)③5-(3)④

Requirement
checkWork Undertaken

No

Confirmed
documents:

Not Applicable/01//11//14//15/
Interviews withstakeholders

No

Confirmed
documents:

Not Applicable/01//11//14//15/
Interviews withstakeholders

No

Confirmed
documents:

Not Applicable/01//11//14//15/
Interviews withstakeholders

Page 103 of 105

DNV Findings
Tokyo Gas uses reviews by external bodies as
an objective assessment. In the future, when
conducting self-certification, Tokyo Gas plans to
explain to borrowers that it follows the
Framework and internal processes.

Tokyo Gas has established documented internal
processes for the evaluation and selection
process of projects and for the management ofproceeds. Tokyo Gas will report on the resultsof these processes when requested by thelenders.

Tokyo Gas plans to disclose to the public that it
has conducted its self-certification inaccordance with the internal processes set out
in the Framework in advance when using loans
for transition financing and the results of theassessment.

Tokyo Gas Co., Ltd. Transition Finance Framework Second Party Opinion Rev-1

Ref.

SectionRequirements〇

5-(3)④For a borrower to gain public approval by
expressing that the procured loans are Green
Loans, they need to ensure transparency. It istherefore recommended that they make the selfcertification results publicly available via theirwebsite or otherwise.

Requirement
check
Yes

Work Undertaken

No

Confirmed
documents:

Not Applicable/01//11//14//15/
Interviews withstakeholders

Page 104 of 105

DNV Findings
Tokyo Gas plans to disclose the results of its
self-certification to the general public throughits website and other means when using loans
for transition finance based solely on selfcertification.

Tokyo Gas Co., Ltd. Transition Finance Framework Eligibility Second Party Opinion Rev-1

List of reference documents/01/

Tokyo Gas Co., Ltd Transition Finance Framework/02/

Tokyo Gas Group Management Vision Compass 2030

/03/

Tokyo Gas Group Compass Action/04/

Japan Gas Association Carbon Neutral Challenge 2050

/05/

Ministry of Economy, Trade and Industry (METI) Technology roadmap for the gas
sector on "Transition Finance".

/06/

Green growth strategy with carbon neutrality in 2050

/07/

Basic Energy Plan (October 2021)/08/

Tokyo Gas Integrated Report 2021

/09/

Tokyo Gas Group Sustainability Report 2021

/10/

Tokyo Gas Group Medium-Term Management Plan

/11/

Tokyo Gas Project List & CO2 Reduction Results/12/Tokyo Gas Accounting Management Regulations/13/

Tokyo Gas Document Management Regulations/14/

Tokyo Gas Project Evaluation and Selection Process/15/

Tokyo Gas Procurement Fund Management Chart (Management Flow & Management
Sheet)/16/

Project Related Information - Niihama LNG Project (New LNG Terminal)/17/

Project related information - Smart Energy Network/18/

Project Related Information - Harumi Hydrogen Project (New Hydrogen Station,
Hydrogen Pipeline)/19/

Amendment Shelf Registration Statement

Page 105 of 105