SECOND PARTY OPINION
MITSUBISHI HEAVY INDUSTRIES, LTD.
TRANSITION BOND POST-ISSUANCEPERIODIC REVIEW (#1)
Prepared by: DNV Business Assurance Japan K.K.
Location: Kobe, Japan
Date: 8 September 2023
Ref. Nr.: PRJN-339571-2022-AST-JPN-01

Publication history
Date of Issue
18 March 2022

Remarks
Green/Transition Finance Framework
Second Party Opinion
Transition Bond Post-Issuance Periodic Review (#1)

8 September 2023

(Mitsubishi Heavy Industries, Ltd. 40th Series Unsecured Bond (1st
Mitsubishi Heavy Industries Transition Bond))

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Scope and Objectives
Mitsubishi Heavy Industries, Ltd. (hereinafter, “MHI” *including MHI Group) has engaged
DNV Business Assurance Japan K.K. (hereinafter, “DNV”) to provide a periodic review on
Mitsubishi Heavy Industries, Ltd. Transition Bond (Mitsubishi Heavy Industries, Ltd. 40th
Series Unsecured Bond (1st Mitsubishi Heavy Industries Transition Bond) hereinafter, the“BOND”). The purpose of the periodic review of DNV is to conduct an assessment onwhether the BOND meets the Climate Transition Finance Handbook 2020 (hereinafter,“CTFH”), the Basic Guidelines on Climate Transition Finance (Financial Services Agency,
Ministry of Economy, Trade and Industry, Ministry of the Environment, 2021 hereinafter,“CTFBG”), and the four core elements of transition, and is consistent with the Green Bond
Principles 2021 (hereinafter, “GBP”) and the Green Bond Guidelines (Ministry of theEnvironment, 2020 hereinafter, “GBGLs”) as a bond with specific use of proceeds, andprovide a second party opinion on the eligibility of the BOND.
MHI issued the BOND on 8 September 2022. The issue amount was 10 billion yen. DNV'sreview team conducted the first periodic review for the period from September 2022 toJune 2023 based on the CTFH/CTFBG and the GBP/GBGLs.
This report provides a post-issuance periodic review of the requirements of the Transition
Bond with specific use of proceeds (Principles 1 to 4 below).
DNV, as an independent external reviewer, has identified no real or perceived conflictof interest associated with the delivery of this second-party opinion for MHI.
In this paper, no assurance is provided regarding the financial performance of the BOND,
the value of any investments in the BOND, or the long-term environmental impacts of thetransaction.

Standards/Guidelines to be Applied
No.
1.
2.

Standards/guidelines

Scheme owner

Climate Transition Finance Handbook(CTFH)*1
Basic Guidelines on Climate Transition
Finance (CTFBG)*1International Capital Market Association (ICMA), 2020
Financial Services Agency, Ministry of Economy, Tradeand Industry, Ministry of the Environment, 2021

*2*3

3.

Green Bond Principles (GBP)

4.

Green Bond Guidelines (GBGLs)*2*3

International Capital Market Association (ICMA), 2021
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).

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Responsibilities of MHI and DNV
MHI’s management has provided the information and data used by DNV during thedelivery of this review.
DNV’s statement represents an independent opinion and is intended to inform MHI andother interested stakeholders in the BOND as to whether the established criteria havebeen met, based on the information provided to us.
In our work we have relied on the information and the facts presented to us by MHI. DNV
is not responsible for any aspect of the nominated projects and assets referred to in thisopinion.
Thus, DNV shall not be held liable if any of the information or data provided by MHI’s
management and used as a basis for this review were not correct or complete.

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Basis of DNV’s Opinion
To provide issuer-specific Transition Bond Eligibility Assessment Protocol (hereinafter,“Protocol”), we have adapted our Transition Bond assessment methodologies, which
incorporates the requirements of the CTFH/CTFBG and the GBP/GBGLs that are required forthe management of transition bonds with specific use of proceeds. The Protocol isapplicable to transition bonds with specific use of proceeds under the CTFH/CTFBG and the
GBP/GBGLs. Our Protocol includes a set of suitable criteria that can be used to underpin
DNV’s opinion. The overarching principle behind the criteria is that a transition bond should“provide an investment opportunity with transparent sustainability credentials”. DNV
conducted the periodic review by applying the following four core elements related to theoperation and management of the transition finance (with specific use of proceeds).

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

• Principle Two: Process for Project Evaluation and Selection
The Process for Project Evaluation and Selection criteria are guided by the requirementsthat a fundraiser of a transition finance (with specific use of proceeds) should outline theprocess it follows when determining eligibility of an investment using the proceeds fromtransition 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
finance should be tracked within the fundraiser 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 should be made of the use of bond proceeds and thatquantitative and/or qualitative performance indicators should be used, where feasible.

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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:Pre-issuance assessment of transition bond *not included in this reportCreation of MHI-specific Protocol to be adapted to the finance;Assessment of documentary evidence provided by MHI on the BOND andsupplemented assessment by a comprehensive desktop research. These checks
refer to current assessment best practice and standards methodologies;Discussions with MHI, and review of relevant documentation;

Documentation of findings against each element of the criteria.

Periodic (annual) review *This reportAssessment of documentary evidence provided by MHI related to the implementationof the transition bond, a high-level desktop research, documentation review, andsupplemented documentary evidence by interviews with MHI’s major persons incharge. These checks refer to current assessment best practice and standards
methodologies;Discussions with MHI, and review of relevant documentation;



Field research and inspection (if necessary);



Review of nominated projects and assets at the time of the periodic assessment;Document creation of observation results through the periodic review described inthis report.

DNV's opinion (described below) summarizes the above.

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Findings and DNV's Opinion
Principle One: Use of Proceeds
DNV has confirmed that 6.5 billion yen of the proceeds (10 billion yen) raised by MHI has
been fully allocated to the following projects as of 31 March 2023.
In MHI's "Green/Transition Finance Framework (hereinafter, the “Framework”)," sixprojects were identified as candidates for use of the proceeds. DNV has confirmed that thefollowing two projects, which are subject to allocation, have been selected by MHI as its
priority projects at this time from the perspective of systematically promoting its energy
transition, while also taking into consideration the allocation plan and progress of the
projects. Other nominated projects are also being promoted in a planned manner.
The following two projects selected will directly or indirectly support projects that will resultin significant GHG reductions as exemplified by the CTFH/CTFBG and the GBP/GBGLs, aswell as projects that will help issuers achieve carbon neutrality contributing to theirbusiness transformation. These projects are also consistent with the Ministry of Economy,
Trade and Industry's Transition Roadmap for power and chemical sectors and contribute to
the achievement of their goals. These projects have been evaluated by MHI as meeting thecriteria required for transition projects and as having clear environmental benefits ontransition strategies, and are expected to contribute to the SDGs.

1. Project: Hydrogen gas turbine (co-firing) ・・・4.4 billion yen allocated (refinancing
1.7 billion yen)This project is categorized as decarbonize existing infrastructure, which aims to reduce
emissions from other companies in the Framework, and is consistent with the Agency for
Natural Resources and Energy's Transition Roadmap for Power Sector and will contributeto achieving its goals.
The overview of the project is the development of hydrogen co-firing, single-fuel hydrogenfiring gas turbines (GT: Gas Turbine) that complies with the EU Taxonomy, the world's
most stringent CO₂ emission regulations (including operation of an actual pressure
combustion testing facility and a power generation demonstration facility).

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The project is developing large,
medium, and small gas turbines.
The large gas turbines are
expected to be commerciallyavailable with 100% hydrogenfiring by 2030, while the medium
and small gas turbines are
expected to be commerciallyavailable with 100% hydrogenfiring by 2025 or later. The
project has completed thedevelopment of a gas turbine
combustor capable of mixing
natural gas with hydrogen at aratio of 30% by volume(hereinafter, "30% co-firing") inlarge gas turbines, and plans to
conduct a co-firing testing at a power generation demonstration facility in FY2023.
Currently, MHI is developing a combustor that is capable of mixing 50% by volume(hereinafter, "50% co-firing") in large gas turbines. Furthermore, DNV has confirmed that
MHI has conducted combustion testing of 100% hydrogen dry firing in a combustor forsmall- and medium-sized gas turbines and is developing a combustor for large gas turbines
based on the knowledge obtained, and that the development has been progressing asplanned.

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2. Project: Hydrogen production (blue or turquoise, etc.) ・・・2.2 billion yen allocated(refinancing 0.9 billion yen)This project is categorized as build a hydrogen solutions ecosystem in the Framework,
which aims to establish a hydrogen value chain, etc. This project is consistent with the
Ministry of Economy, Trade and Industry's Technology Roadmap for chemical field and willcontribute to achieving its goals.
Specifically, the projects are as follows:① Hydrogen Power Generation Demonstration Facility "Takasago Hydrogen
Park"
The project overview is a development, design, manufacturing, and establishment of ademonstration base for the early commercialization of 100% hydrogen firing inhydrogen gas turbines.
The "Takasago Hydrogen Park," which is the world's first integrated verification facility
for technologies ranging from hydrogen production to power generation, has been
established at the Takasago Machinery Works, where hydrogen gas turbines aredeveloped and manufactured. As of June 2023, the Takasago Hydrogen Park has
started partial operation and is expected to complete a co-firing testing using thehydrogen produced at the Takasago Hydrogen Park in FY2023 as planned.

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② Investment in Monolith Materials, Inc.
The project overview is an investment in Monolith Materials, Inc. through Mitsubishi
Heavy Industries America, Inc. (hereinafter, “MHIA”). Monolith Materials, Inc. has aninnovative technology to produce solid carbon with high value that is used for carbon
black in addition to so-called "turquoise hydrogen." "Turquoise hydrogen" is produced
without emitting CO2 in the hydrogen production process by extracting hydrogen (H2)and solid carbon (C) from methane (CH4), which is abundant in natural gas, throughplasma pyrolysis using renewable energy-derived electricity as a heat source.
By investing in Monolith Materials, Inc., MHI looks to strengthen and diversify innovative
alternative technologies in the energy transition (transition to energy with lower
environmental impact) business and the hydrogen value chain. MHI is working toadvance innovative technologies to decarbonize entire industries, such as power
generation systems, fertilizer production facilities, and steel mills that utilize thehydrogen produced.

Monolith Process

Commercial-scale facility in Nebraska, U.S.

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③ Investment in C-Zero Inc.
The project overview is an investment in C-Zero Inc. through MHIA. C-Zero Inc. has anadvanced technology to produce so-called "turquoise hydrogen,” which is produced
without emitting CO2 in the hydrogen production process by extracting hydrogen (H2)and solid carbon (C) from methane (CH4), which is abundant in natural gas, using
innovative thermal catalyst.
By investing in C-Zero Inc., MHI looks to strengthen and diversify innovative alternativetechnologies in the energy transition (transition to energy with lower environmental
impact) business and the hydrogen value chain. MHI is working to advance innovativetechnologies to decarbonize power generation systems that utilize the hydrogenproduced and entire industries utilizing hydrogen, to contribute to the realization of adecarbonized society.

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Principle Two: Process for Project Evaluation and Selection
In evaluating and selecting the transition project, DNV has confirmed that MHI meets theeligibility criteria and that MHI has confirmed that the transition project does not conflictwith any of the following internal policies, etc.

・CSR Action Guidelines
・MHI Group Human Rights Policy・Basic Policy on Environmental Matters and Action Guidelines
・Privacy Policy
・MHI Group Policy of Safety and Health・Procurement Policy
・MHI Group Supply Chain CSR Promotion Guidelines Basic Policy Concerning Conflict
Minerals
As a specific evaluation and selection process, DNV has confirmed that the Finance
Department confirmed that the projects selected by the business divisions met the eligibility
criteria, and the Chief Financial Officer made the final decision.

Principle Three: Management of Proceeds
DNV has reviewed the evidence presented on how MHI has managed the proceeds from thebond issuance through March 2023. The allocation status of the proceeds is shown in Table1.
DNV has confirmed that 9.9 billion yen as net proceeds out of the 10 billion yen raised were
deposited into MHI's common account, and that the allocation was subsequently managed
by the finance department on a project-by-project basis using an internal management
system, etc.
In addition, DNV has confirmed that the unallocated proceeds of 3.4 billion yen shown in
Table-1 were managed in cash or cash equivalents and will continue to be allocated in
FY2023 for the two projects shown in Table-1.
As described above, no assurance is provided regarding the financial performance of the
BOND, the value of any investments in the BOND, or the long-term environmental impactsof the transaction.

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Table-1: Allocation status of proceeds (as of March 2023)
Item

AmountAmount of proceeds (bond issuance amountexcluding issuance costs)
Allocated amount (transition projects)

9.9 billion yen
6.5 billion yen

New investment

2.7 billion yen

Refinancing

1.7 billion yen

Hydrogen production (blue or

New investment

1.3 billion yen

turquoise, etc.)

Refinancing

0.9 billion yen

Hydrogen gas turbine (co-firing)

Unallocated balance

3.4 billion yen

Principle Four: Reporting
DNV has confirmed that MHI will disclose the allocation status of proceeds and theenvironmental benefits on its website. DNV has also confirmed that the Framework statesthat reporting will continue until the full amount of proceeds (net proceeds) has been
allocated, and that MHI will continue to disclose information from next year since there isan unallocated balance of 3.4 billion yen as of March 2023.
Similarly, as for the environmental benefits, DNV has confirmed that MHI will reportannually on an outline and the environmental benefits of the projects until the proceeds are
fully allocated.
The allocation and management of the proceeds and the environmental benefits are as
follows:(1) Allocation and management of the proceeds
As shown in Table-1 of the Principle Three: Management of Proceeds, DNV has confirmedthat 6.5 billion yen out of 9.9 billion yen as net proceeds were managed by the financedepartment on a project-by-project basis using an internal management system, etc. DNV
has also confirmed that the unallocated proceeds of 3.4 billion yen were managed in cash or
cash equivalents and will continue to be allocated in FY2023 for the two projects shown in
Table-1.

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(2) Environmental benefits
Environmental benefits (project overview and progress)
Project Name

Project Overview and Progress

Expenditures related to Decarbonize existing infrastructure / Build a hydrogen solutions
ecosystem
Development of hydrogen co-firing, single-fuel hydrogen firing
Project

gas turbines, consideration of operation in actual pressure

overview

combustion test facility and power generation demonstration
facility (planned by FY2030)
The large gas turbines are expected to be commercially available
with 100% hydrogen firing by 2030, while the medium and small
gas turbines are expected to be commercially available with
100% hydrogen firing by 2025 or later. The project has

Hydrogen gas

completed the development of a gas turbine combustor capableturbine (co-firing)of 30% co-firing in large gas turbines and plans to conduct a coProgress

firing testing at a power generation demonstration facility in
FY2023. Currently, MHI is developing a combustor that is capableof 50% co-firing in large gas turbines. Furthermore, DNV has
confirmed that MHI has conducted combustion testing of 100%hydrogen dry firing in a combustor for small- and medium-sizedgas turbines and is developing a combustor for large gas turbines
based on the knowledge obtained, and that the development has
been progressing as planned.
①

Project
overview

Hydrogen Power Generation Demonstration Facility"Takasago Hydrogen Park":

Development, verification, and manufacturing of 100% hydrogenfiring hydrogen gas turbine for early commercialization
The "Takasago Hydrogen Park," which is the world's first
integrated verification facility for technologies ranging fromhydrogen production to power generation, has been establishedHydrogenproduction (blue or
turquoise, etc.)

Progressat the Takasago Machinery Works, where hydrogen gas turbines
are developed and manufactured. As of June 2023, the Takasago
Hydrogen Park has started partial operation and is expected tocomplete a co-firing testing using the hydrogen produced at the
Takasago Hydrogen Park in FY2023 as planned.

Project
overview②

Investment in Monolith Materials, Inc.:MHI invested in Monolith Materials, Inc. that has an innovativetechnology to extract hydrogen (H2) and solid carbon (C) fromPage 13 of 22

methane (CH4), which is abundant in natural gas, throughplasma pyrolysis.
MHI is entering the field of hydrogen production and supply
through plasma pyrolysis technology that uses Monolith
Materials, Inc.'s renewable energy-derived electricity as a heat
Progress

source and is also working to advance innovative technologies todecarbonize entire industries, such as power generation systems,
fertilizer production facilities, and steel mills that utilize thehydrogen produced.
③

Project
overview

Investment in C-Zero Inc.:MHI invested in C-Zero Inc. that has an advanced technology to
extract hydrogen (H2) and solid carbon (C) from methane (CH4),
which is abundant in natural gas, using innovative thermal
catalyst.
MHI is considering the possibilities of using C-Zero Inc.'s
technology in the field of hydrogen production and supply and is

Progressworking to advance innovative technologies to decarbonize power
generation systems that utilize the hydrogen produced and entire
industries utilizing hydrogen, to contribute to the realization of adecarbonized society.

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Assessment Conclusion
On the basis of the information provided by MHI and the work undertaken, it is DNV’sopinion that the Transition Bond issued by MHI meets the criteria established in the
Protocol, and that it is aligned with the definition or purpose of transition bond that is to“enable capital-raising and investment for new and existing projects with environmental
benefits" and “provide an investment opportunity with transparent sustainability
credentials” within the CTFH/CTFBG and the GBP/GBGLs.

DNV Business Assurance Japan K.K.
8 September, 2023

Thomas Leonard

Naoki Maeda

Manager, Sustainability Services

Managing Director

DNV GL Business Assurance, Thailand

DNV Business Assurance Japan K.K.

Masato Kanedome

Hiroyuki Mizoguchi

Project Leader

Assessor

DNV Business Assurance Japan K.K.

DNV Business Assurance Japan K.K.

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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Schedule-1 Green Bond Eligibility Assessment Protocol
The following GBP-1 ~ GBP-4 are DNV's Framework Eligibility Assessment Protocol created for MHI based on the requirements of GBP (2021).

GBP-1 Use of Proceeds
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

1aTypes of funds

The types of transition bonds areclassified into one of the following
types defined by GBP.
・ (Standard) Transition Bond・ Transition Revenue Bond・ Transition Project Bond・ Other

Confirmed documents- Framework<Pre-issuance evaluation result>

The key to a transition bond is thatthe proceeds will be used for agreen/transition project, whichshould be properly stated in thelegal documents relating to thesecurity.

Confirmed documents- Framework- Supplement Shelf
Registration
Statement- Information related
to each project- Transition Bondissuance plan
Reporting (draft)

1b

Green/transition
Project
Classification

Interviews withstakeholders

Through the evaluation work, DNV has confirmed that the Transition
Finance (bond) falls into the following categories.

・(Standard) Transition Bond

Interviews withstakeholders<Pre-issuance evaluation result >DNV has confirmed that the MHI Transition Bond is intended to fund awide range of transition projects focused on MHI's environmental goals
as described in the Framework.
<Post-issuance evaluation result (this time)>
DNV has confirmed that transition project candidates have been
evaluated to meet the Transition Strategy, and the proceeds from thetransition bond were allocated to one or more of the candidate
transition eligible projects. Specific allocated projects are as follows:- Hydrogen gas turbine (co-firing)- Hydrogen production (blue or turquoise, etc.)
・Hydrogen Power Generation Demonstration Facility "Takasago
Hydrogen Park"・Investment in Monolith Materials, Inc.
・Investment in C-Zero Inc.

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Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
Through the assessment, DNV concludes that the transition project
candidates will provide tangible and truly environmental benefits.
Table: MHI Transition Finance Eligible Project Category(Allocated projects for this time are highlighted in yellow.)
Project
Decarbonize existing
infrastructure

Eligibility Criteria
 Hydrogen gas turbine (co-firing) Ammonia gas turbine (co-firing) LNG-fuelled high-efficiency gas turbine
 Steam power (conversion to 100% ammonia firing) Gas engine for power generation (hydrogen cofiring) Material handing (high efficiency and fuel cell
powered)

1c

Environmental
Benefits

All transition projects to which thefunds are used should have clear
environmental benefits, the effectsof which should be assessed by theissuer and, where possible,
quantitatively demonstrated.

Confirmed documents- Framework- Supplement Shelf
Registration
Statement- Information related
to each project

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Build a hydrogensolutions ecosystem

 Hydrogen production (blue or turquoise, etc.)
 Ammonia production (blue or turquoise, etc.)
 Hydrogen compressors (for hydrogen production,transport, storage, etc.)
 Metals machinery (hydrogen-reduced ironmaking,etc.)

Build a CO2 solutions
ecosystem CO2 Capture and Storage
 CO2 transport (liquefied CO2carries, etc.)<Post-issuance evaluation result (this time)>
Transition projects will have environmental benefits, including CO2
emission reduction through low carbonization or decarbonization, that
contributes to MHI's Transition Strategy-based goals and is classified
under the project categories and eligibility criteria shown in 1b. DNV has
confirmed as for the environmental benefits that quantified evaluation interms of CO2 emission reductions, the project summary, and progress,

Ref.

Criteria

Requirements

Work Undertaken-

Transition Bondissuance plan
Reporting (draft)

DNV Findings
taking into account the specific characteristics of each project will bereported annually, to the extent practicable.

Interviews withstakeholders
1dRefinancing rate

If all or part of the proceeds areused or may be used forrefinancing, the issuer will indicate
the estimated ratio of the initialinvestment to the refinancing and,if necessary. Therefore, it isrecommended to clarify whichinvestment or project portfolio issubject to refinancing.

Confirmed documents- Framework- Supplement Shelf
Registration
Statement- Information related
to each project- Transition Bondissuance plan
Reporting (draft)
Interviews withstakeholders

Page 18 of 22<Pre-issuance evaluation result >DNV has confirmed that MHI plans to allocate all proceeds to make newinvestments, refinance, or both in one or more of the nominated eligible
projects.
<Post-issuance evaluation result (this time)>
DNV has confirmed that MHI disclosed the estimated amount of theproceeds that was allocated to refinancing through reporting (annual
report).

GBP-2 Process for Project Evaluation and Selection
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

2aProject
selection
process

Transition bond issuers should provide
an overview of the process of qualifying
projects for which transition bondfunding will be used. This includes (but is
not limited to):・The process by which the issuer
determines that the project in questionis included in the business category of aqualified transition project.
・ Creation of criteria for eligibility of
projects for which transition bondfunding will be used
・ Environmental sustainability goals

Confirmed documents- Framework- Supplement Shelf
Registration
Statement- Information related
to each project- Transition Bondissuance plan
Reporting (draft)<Pre-issuance evaluation result >In addition to criteria and certifications,the information published by issuers
regarding the transition bond process
also considers the quality of performanceof the issuer's framework andenvironmental sustainability.

Confirmed documents- Framework- Process for ProjectEvaluation and
Selection<Pre-issuance evaluation result >Interviews withstakeholders

In operating and implementing its projects, MHI is committed topreserving the surrounding environment in all relevant departments.

2b

Issuer's
Environment
al and Social
Governance
Framework

Interviews withstakeholders

DNV has confirmed that MHI has a process and structure that
determine the eligibility of the project for which the transition financing
proceeds are to be allocated and that it is clearly outlined in the
Framework.
<Post-issuance evaluation result (this time)>
DNV has confirmed that the projects were selected by MHI as its
priority projects at this time from the perspective of systematicallypromoting its energy transition, taking into consideration the allocation
plan of proceeds and the progress of the projects. DNV has also
confirmed that the other candidate projects are also being promoted ina planned manner.

When selecting transition projects, MHI considers compliance withenvironmental laws, ordinances, and regulations, as well as clear
environmental benefits such as CO2 reductions throughout the life
cycle or in each process.

DNV has confirmed that the transition projects implemented by MHI
are consistent with its management and environmental policies, aswell as with the transition strategy, goals and pathways.

Page 19 of 22

GBP-3 Management of Proceeds
Ref.

Criteria

3a

Tracking
procedure-1

Requirements

Work Undertaken

DNV Findings

The net proceeds from transition bonds
should be managed in sub-accounts,
included in sub-portfolio, or otherwise
tracked. It should also be certified by
the issuer in a formal internal process
related to the issuer's investment andfinancing operations for the transition
project.

Confirmed documents- Framework- Supplement Shelf
Registration
Statement- Information related
to each project- Transition Bondissuance plan
Reporting (draft)<Post-issuance evaluation result (this time)>
DNV has confirmed that the tracking control of the proceeds wasevidenced by MHI by confirming that the allocated and unallocatedproceeds from the net proceeds were managed in accordance with
MHI's internal management system and documents preparedexclusively for collaboration with the departments.

Interviews withstakeholders
3b

Tracking
procedure-2

During the transition bond redemption
period, the balance of funds raised thatis being tracked should be adjusted atregular intervals to match the amountallocated to eligible projects undertaken
during that period.

Confirmed documents- Framework- Supplement Shelf
Registration
Statement- Information related
to each project- Transition Bondissuance plan
Reporting (draft)
Interviews withstakeholders

Page 20 of 22<Post-issuance evaluation result (this time)>
DNV has confirmed that MHI reviewed the balance of the transition
finance once a year since the implementation of the transition financethrough the internal control system described in 3a.

Ref.

Criteria

3c

Temporaryholding

Requirements

Work Undertaken

DNV Findings

If no investment or payment has been
made in a qualified transition project,
the issuer should also inform theinvestor of the possible temporary
investment method for the balance of
unallocated proceeds.

Confirmed documents- Framework- Supplement Shelf
Registration
Statement- Information related
to each project- Transition Bondissuance plan
Reporting (draft)<Post-issuance evaluation result (this time)>

Interviews withstakeholders

Page 21 of 22

DNV has confirmed that the confirmation process through MHI's internalmanagement system and specific documents created is a mechanismthat allows for the sequential recognition of unallocated balances.
DNV has confirmed that the balance of unallocated proceeds wasmanaged in cash or cash equivalents. DNV has also confirmed that theunallocated proceeds will be continuously allocated to two projects,hydrogen gas turbine (co-firing) and hydrogen production (blue or
turquoise, etc.)

GBP-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 transition 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 and social
effects

Confirmed documents- Framework- Supplement Shelf
Registration
Statement- Information related
to each project- Transition Bondissuance plan
Reporting (draft)<Post-issuance evaluation result (this time)>

Interviews withstakeholders

DNV has confirmed that MHI will conduct transition finance reporting (annual
reporting) until the proceeds are allocated, disclosing information on the allocation
status of proceeds, the projects to which the proceeds have been allocated and theenvironmental benefits.
In addition, DNV has confirmed that even after the allocation is completed, anychanges in the transition strategy or pathway, or any major changes in the
allocation plan or project implementation status (e.g., suspension of a project that
has initiated allocation, significant deferral on an annual basis, sale or retirement,etc.) will be reported in a timely manner or in the reporting, however, there wereno major changes at this time.
Reporting will be published on the website.
<Allocation status>
Amount and status of allocation to eligible projects
Amount of unallocated proceeds and the method to manage unallocatedproceeds
Amount of new financing and refinancing<Environmental benefits>Disclose the overview (including progress of research and development,
operation, etc.) of the project within the scope of confidentiality and to
the extent practicable and taking into account the characteristics of the
project.

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