Toho Gas Co., Ltd. Transition Bond (#1) ANNEX - Second Party Opinion

ANNEX - SECOND PARTY OPINIONTOHO GAS CO., LTD.
TRANSITION BOND (#1)

Prepared by: DNV Business Assurance Japan K.K.
Location: Kobe, Japan
Date: 21st October 2022
Ref. Nr.: PRJN-432401-2022-ANX-JPN-1

This opinion is prepared based on the Toho Gas Green/Transition Finance Framework Second Party Opinion(hereinafter, "Master SPO") (Ref. Nr.: PRJN-432401-2022-AST-JPN-1 *21st October 2022), which wasassessed against to the Toho Gas Green/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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Toho Gas Co., Ltd. Transition Bond (#1) ANNEX - Second Party Opinion

Executive Summary
DNV Business Assurance Japan K.K. (hereinafter, "DNV") confirmed that the Toho Gas
Transition Bond (#1) issued by Toho Gas Co., Ltd. (hereinafter, "Toho 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: Toho Gas Green/Transition Finance Framework*2: Toho Gas Green/Transition Finance Framework Second Party Opinion

Table-1 shows an outline of the Toho Gas Transition Bond (#1) 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 bond withspecific use of proceeds (response to the four elements). The conformances against to thecriteria for the other elements has already been assessed its eligibility in accordance with
Framework.
Table - 1 Toho Gas Transition Bond (#1) ANNEX - Second Party Opinion
Target financeTargetorganization
Targetframework
Targeted

Toho Gas Transition Bond (#1)
Toho Gas Co., Ltd.
Toho Gas Green/Transition Finance Framework
Toho Gas Green/Transition Finance Framework Second Party Opinion
Ref. Nr.: PRJN-432401-2022-AST-JPN-1 Issued on 21st October 2022

external review

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, 2022)
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 (Implementationtransparency)-

Bonds with specificuse of proceeds

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

elements)-

Confirmed reliance on Framework-

Confirmed reliance on Framework-

Confirmed reliance on Framework-

Confirmed reliance on Framework

Confirmed reliance on Framework. Additional
assessment was implemented as follows:・ Building a clean energy production base (Chita,
Aichi)・ Installation of NAS batteries (Tsu, Mie)

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Toho Gas Co., Ltd. Transition Bond (#1) ANNEX - Second Party Opinion

・ Offshore wind power business in Taiwan (in thewaters off Miaoli, Taiwan)
Element-2(Process for project
evaluation and-Confirmed reliance on Framework-

Confirmed reliance on Framework-

Confirmed reliance on Framework. Additional review

selection)
Element-3(Management ofproceeds)

Element-4(Reporting)

was carried out as follows:・ Allocation of proceeds: Items and categories
・ Environmental benefits: Annual CO2 reduction (tCO2/year), etc.

DNV, as an external reviewer, evaluated the eligibility of the use of proceeds and reportingfor the Toho Gas Transition Bond (#1), based on an assessment of the Framework and otherrelevant documents and information provided by Toho Gas. DNV also confirmed that there
were no changes to the other items (in accordance with the Framework).

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Toho Gas Co., Ltd. Transition Bond (#1) ANNEX - Second Party Opinion

Contents
Executive Summary

2

I.

Scope and Objectives

5

Ⅱ.

Responsibilities of Toho Gas and DNV

7

Ⅲ.

Basis of DNV’s Opinion

7

Ⅳ.

Work Undertaken

9V.

Findings and DNV's Opinion

10

Ⅵ.

Assessment Conclusion

19

Schedule-1 Toho Gas Transition Bond (#1) Eligible Projects

21

Revision history
Date of issue
21st October 2022

Remarks
Prepared and issued as Toho Gas Transition Bond (#1) 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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Toho Gas Co., Ltd. Transition Bond (#1) ANNEX - Second Party Opinion

I. Scope and Objectives
DNV has been commissioned by Toho Gas to provide a pre-issuance assessment on theTransition Bond. Our objective has been to implement an assessment on whether Toho
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 Toho 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 Toho Gas that there were no changes in the Transition Bond to be
implemented this time or additional assessments required.
"Toho Gas Green/Transition Finance Framework Second Party Opinion"
Ref. Nr.: PRJN-432401-2022-AST-JPN Issued on 21st October 2022

(2) Role(s) of review provider☒

Second party opinion☐

Certification☐

Verification☐

Ratings☐

Other (please specify):

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Toho Gas Co., Ltd. Transition Bond (#1) ANNEX - Second Party Opinion(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, 2022

*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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Toho Gas Co., Ltd. Transition Bond (#1) ANNEX - Second Party Opinion

Ⅱ. Responsibilities of Toho Gas and DNV
Toho 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 interested stakeholders in the Toho Gas Transition Bond (#1) as towhether 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 Toho Gas. DNV
is not responsible for any aspect of the nominated projects and assets referred to in thisopinion 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
Toho Gas’s management and used as a basis for this assessment were not correct orcomplete.

Ⅲ. Basis of DNV’s Opinion
To provide a more flexible ANNEX - Second Party Opinion for the issuer, Toho 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 a use of proceeds bondas 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 Toho Gas Transition Bond (#1) 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) GBP/GBGLs.
Part 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 "Toho Gas
Green/Transition Finance Framework Second Party Opinion" (Ref. Nr.: PRJN-4324012022-AST-JPN-1, issued on 21st October 2022).

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Toho Gas Co., Ltd. Transition Bond (#1) ANNEX - Second Party Opinion(1) Four common elements of CTFH and 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:
Climate transition strategy to be science-based including
targets and pathways
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 aninvestment using the proceeds from transition finance and outline any impact objectives it willconsider.

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 Reportingto 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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Toho Gas Co., Ltd. Transition Bond (#1) ANNEX - Second Party Opinion

Ⅳ. 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 includes:i. Pre-funding assessment (ANNEX - Second Party Opinion)•

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

Discussions with Toho 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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Toho Gas Co., Ltd. Transition Bond (#1) ANNEX - Second Party Opinion

V. Findings and DNV's Opinion
DNV’s findings and opinion are as described below.

GBP/GBGLs-1. Use of Proceeds
Toho Gas has defined the criteria applied to eligible projects as transition projects
which meet Transition Strategy and related handbook, principle, and guidelines (CTFH
and CTFBG).
The proceeds of the Toho Gas Transition Bond (#1) will be used for the following threeprojects. Please see Schedule-1 for details.
All three projects are eligible projects that are aligned with either or all of theTechnology Roadmap for “Transition Finance” in Gas Sector (METI, February 2022),
the “Transition Roadmap for Power Sector” (Agency for Natural Resources and Energy,
February 2022) and the Action Plan of the Carbon Neutral Challenge 2050 by theJapan Gas Association (The Japan Gas Association, November 2020), in addition to the
Toho Gas Green/Transition Finance Framework.
The amount of proceeds of the Toho Gas Transition Bond (#1) will be JPY 10 billion.
DNV confirmed at the time of this assessment that the proceeds will be allocated for
new investments and refinancing. The actual allocation results will be reported on anannual basis in accordance with GBP/GBGLs-4.Reporting.

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Toho Gas Co., Ltd. Transition Bond (#1) ANNEX - Second Party Opinion

Project 1: Building a clean energy production base-

Building a clean energy production base is a project aims to achieve Toho Gas'
Transition Strategy by conducting verification testing of methanation and constructing
a hydrogen production plant in Chita, Aichi.

-

The methanation verification testing will produce synthetic methane from biogasderived CO2 generated from the treatment of sewage sludge at the Chita City Nanbu
Purification Center and hydrogen produced using electricity from LNG cryogenic
power generation, etc., which will be used as a raw material for city gas. This is
expected to be the first time in Japan that synthetic methane from methanation will
be used as a raw material for city gas. Toho Gas plans a large-scale social
implementation of methanation facilities in the future, with the aim of decarbonizing
the gas itself.

-

The hydrogen production plant using natural gas as a raw material will be built on thepremises of Toho Gas' Chita-Midorihama Factory, with the aim of creating a hydrogen
supply chain that contributes to carbon neutrality. The construction will be completed
and hydrogen supply will start by 2024, after which the scale of the plant will be
expanded in line with the growing demand for hydrogen in the region. The CO2
generated during hydrogen production will be offset for the time being through theuse of credits, with a view to capture and utilization in the future. The ChitaMidorihama Factory is also aiming to build a foundation for the spread and expansionof hydrogen by forming alliances with other companies that have expertise and knowhow in the fields of hydrogen transport and consumption, and in the future, to use
the Chita-Midorihama Factory as a receiving terminal for imported hydrogen fromoverseas.

-

In view of the above, building a clean energy production base is a transition projectthat is aligned with the "Toho Gas Group 2050 Carbon Neutrality Initiative", theTechnology Roadmap for “Transition Finance” in Gas Sector (METI) and the Carbon
Neutral Challenge 2050 (The Japan Gas Association).

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Toho Gas Co., Ltd. Transition Bond (#1) ANNEX - Second Party Opinion

Figure-1 Image of methanation verification
Table-1 Outlines of Project – Building a clean energy production base
Project name:
Estimated allocation:

Building a clean energy production base
Approx. JPY 2.5 billion

Content:

Methanation verification testing

Hydrogen production plant

Location:

Chita City, Aichi Prefecture (Chita
LNG Terminal)

Chita City, Aichi Prefecture (ChitaMidorihama Factory)

FY2023 - FY2026 (planned)2024 (planned)

Quantitative reduction effects areunder consideration as it is still inthe verification phase.

Hydrogen production capacity
1.7 t/dayStart of operation:
Estimatedenvironmental
benefits:

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Toho Gas Co., Ltd. Transition Bond (#1) ANNEX - Second Party Opinion

Project 2: Installation of NAS batteries-

Installation of NAS batteries is a project that is the first case in the three prefecturesin Tokai area where storage batteries are being installed on the former site of the Tsu
LNG Station owned by Toho Gas, with the aim of contributing to the promotion ofrenewable energy. The storage batteries to be installed are NAS batteries
manufactured by NGK Insulators, Ltd. with a capacity of 69,600 kWh and an output
of 11,400 kW.

-

By introducing storage batteries using subsidies under the “Supporting Project for the
Installation of NAS Batteries, etc. to Accelerate the Introduction of Renewable
Energy” by the Agency for Natural Resources and Energy, the project aims topromote the spread of renewable energy and contribute to achieving carbon
neutrality.

-

In order to expand the introduction of renewable energy in the future, it will be an
urgent task to ensure the effective use of surplus renewable energies and to secure
the power to adjust to fluctuations. The project aims to indirectly contribute to the
reduction of CO2 of the entire society by utilizing NAS batteries, absorbing surplus
renewable energy and providing adjusting power through trading on various
electricity markets.

-

In view of the above, installation of NAS batteries is a transition project that isaligned with the "Toho Gas Group 2050 Carbon Neutrality Initiative" and the“Transition Roadmap for Power Sector” (Agency for Natural Resources and Energy).

Figure-2 Appearance of a NAS battery

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Toho Gas Co., Ltd. Transition Bond (#1) ANNEX - Second Party Opinion

Table-2 Outlines of Project – Installation of NAS batteries
Project name:
Estimated allocation:
Location:

Installation of NAS batteries
Approx. JPY 2.5 billion
Tsu City, Mie Prefecture (former site of Tsu
LNG Station)

Output:11,400 kW

Capacity:

69,600 kWhStart of operation:
Estimated environmental

FY2025 (planned)
Output: 11,400 kW, Capacity: 69,600 kWh

benefits:

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Toho Gas Co., Ltd. Transition Bond (#1) ANNEX - Second Party Opinion

Project 3: Offshore wind power business in Taiwan (Formosa 1)-

Formosa 1 is a project classified as offshore wind power and is a green project thatmeets the technical criteria of the referenced Climate Bond Standard.

-

Formosa 1 is the first commercial-scale offshore wind farm in Taiwan, which has
started selling electricity to Taiwan Power Company for 20 years under the feed-in
tariff (FIT) system. Toho Gas, together with Mitsui O.S.K. Lines, Ltd. and Hokuriku
Electric Power Company will participate in the offshore wind power project byacquiring shares in the holding company of the project through a special purpose
company.

-

Through due diligence when participating in the project, Toho Gas has assessed the
major risks arising from climate change, impacts on stakeholders, the design andimplementation of the adaptation plan, the maintenance system and impacts on
ecosystem services to confirm that there are no issues.

-

In its Green/Transition Finance Framework, Toho Gas has identified offshore wind
power and other renewable energies as key initiatives (Green/Transition Eligible
Criteria) towards the "Toho Gas Group 2050 Carbon Neutrality Initiative".

-

Toho Gas has a target of the volume of renewable energy sources handled in 2030 of
500,000 kW, and Formosa 1 will directly contribute to achieving this target. In
addition, it is expected that Toho Gas will contribute to the future development of theoffshore wind power project in Japan by accumulating knowledge on offshore wind
power generation through its participation in Formosa 1.

-

The expected annual CO2 reduction is estimated to be approximately 27,000 tCO2/year. (The reduction amount is proportionally distributed according to theirshare, as it is a joint project of several companies.)

Figure-3 Offshore wind power business in Taiwan (Formosa 1)

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Toho Gas Co., Ltd. Transition Bond (#1) ANNEX - Second Party Opinion

Table-3 Outlines of Project - Offshore wind power business in Taiwan (Formosa 1)
Project name:Offshore wind power business in
Taiwan (Formosa 1)

Estimated allocation:
Location:

Approx. JPY 5 billion
In the waters of Miaoli, Taiwan

Installed capacity:

Approx. 128,000 kW

Number of turbines:

22 (bottom-mounted)

Start of operation:

April 2017: Phase 1 (8,000 kW)
December 2019: Phase 2 (120,000 kW)

Estimated environmental

Approx. 27,000 t-CO2/year

benefits:

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Toho Gas Co., Ltd. Transition Bond (#1) ANNEX - Second Party Opinion

GBP/GBGLs-4. Reporting<Allocation status>
DNV confirmed that the following items relating to the allocation status of theproceeds will be disclosed on the issuer’s website until the proceeds of the Toho Gas
Transition Bond (#1) have been fully allocated. DNV also confirmed that, even after
allocation have been completed, Toho Gas plans to promptly disclose on its website
any material changes in the project for which the proceeds are to be used, andinformation of unallocated proceeds.

Allocated amount

Estimated amount of unallocated proceeds, estimated time of allocation

Estimated amount or percentage of the portion of the proceeds allocated asrefinancing<Environmental benefits>
DNV confirmed that during the period between the implementation and redemptionof the Toho Gas Transition Bond (#1), Toho Gas plans to disclose on its website, aslong as reasonably practicable, any or all of the following items relating toenvironmental benefits.

Outlines of each projectProgress in R&D, capital investment, etc.

Installed capacity

Annual power generationAnnual CO2 emission reductions from each project (t-CO2/year)

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Toho Gas Co., Ltd. Transition Bond (#1) ANNEX - Second Party Opinion

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:☒

Annual☐Other (please specify):☐

Semi-annual

Information reported (estimated or ex-post):☒

GHG emissions/savings☒

Other ESG indicators (please specify):☐

Energy savings

Outlines of project, installed capacity, annual
power generation, etc.

Means of disclosure☐

Information published in financial☐

report (Integrated Report)☐

Information published in ad hoc

report☒Other (please specify): on Toho Gas
websitedocuments☐

Information published in sustainability

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

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Toho Gas Co., Ltd. Transition Bond (#1) ANNEX - Second Party Opinion

Ⅵ. Assessment Conclusion
On the basis of the information provided by Toho Gas and the work undertaken, it is
DNV’s opinion that the Toho Gas Transition Bond (#1) 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.
21st October 2022

Mark Robinson

Naoki Maeda

Manager, Sustainability Services

Managing Director

DNV Business Assurance, Australia

DNV Business Assurance Japan K.K.

Masato Kanedome

Jun Chokai

Project Leader

Assessor

DNV Business Assurance Japan K.K.

DNV Business Assurance Japan K.K.

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Toho Gas Co., Ltd. Transition Bond (#1) ANNEX - Second Party Opinion
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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Toho Gas Co., Ltd. Transition Bond (#1) ANNEX - Second Party Opinion

Schedule-1 Toho Gas Transition Bond (#1) Eligible Projects

Electricity

HydrogenGas

Eligible Criteria (partly extracted from the framework)

Decarbonizationof gas itself

Supply chain
creation

Reductions ofcarbon anddecarbonization
at customer
locations

Methanation

Hydrogen production,
CCUS

Distributed energy
system, renewableenergy, cleantransportation

Project Overview

R&D or capital
investment in
the practicalimplementationof methanation
technology

Methanation verification
testing and hydrogenproduction plant

R&D or capital
investment inhydrogenproduction byreforming
natural gas, etc.
and carbon
recycling

Methanation verification
testing:

R&D or capital
investment inencouraging the
popularization ofdiversedistributed
energy sources,
including solar
power
generation,
storagebatteries,
electric
automobiles,
etc. and*New allocations planned

Project name: Building a clean energy production
base<Estimated environmental
benefits>

Estimated allocation: Approx. JPY 2.5 billion

Quantitative reduction effects
are under consideration as it isstill in the verification phase.

Location: Chita, Aichi (Chita LNG Terminal and ChitaMidorihama Factory)
Period for methanation verification testing: FY2023 FY2026 (planned)
Start of operation of the hydrogen production plant:
FY2024 (planned)

Hydrogen production plant:
Hydrogen production capacity
1.7 t/day

Installation of NAS batteries

Project name: Installation of NAS batteries*New allocations planned

Estimated allocation: Approx. JPY 2.5 billion
Location: Tsu, Mie<Estimated environmental
benefits>

Battery type: NAS battery

Output 11,400 kW

Capacity: 69,600 kWh

Capacity 69,600 kWhStart of operation: FY2025 (planned)

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Output: 11,400 kW

Toho Gas Co., Ltd. Transition Bond (#1) ANNEX - Second Party Opinion

integrating in
the controllingthese utilizing
digitaltechnology

Decarbonizationof electrical
power sources

Renewable energy

Capitalinvestment /investment andlending for thedevelopment of
renewableenergy sources
such as solar,
biomass, wind(including
offshore wind)and smallhydropower

Offshore wind power businessin Taiwan*Refinancing planned<Estimated environmental
benefits>
Approx. 27,000 t-CO2/year

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Project name: Offshore wind power business in
Taiwan (Formosa 1)
Estimated allocation: Approx. JPY 5 billion
Location: In the waters of Miaoli, Taiwan
Installed capacity: 128,000 kW
Number of turbines: 22 (bottom-mounted)
Start of operation: April 2017 (Phase 1)
December 2019 (Phase 2)

Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

SECOND PARTY OPINIONTOHO GAS CO., LTD.
GREEN/TRANSITION FINANCE FRAMEWORK

Prepared by: DNV Business Assurance Japan K.K.
Location: Kobe, Japan
Date: 21st October 2022
Ref. Nr.: PRJN-432401-2022-AST-JPN-01

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Contents
Executive Summary

3

I.

Introduction

9

Ⅱ.

Scope and Objectives

28

Ⅲ.

Responsibilities of Toho Gas and DNV

29Ⅳ.

Basis of DNV’s Opinion

30

V.

Work Undertaken

32

Ⅵ.

Findings and DNV's Opinion

33

Schedule-1 Green/Transition Finance Nominated Projects

48

Schedule-2 Transition Finance Framework Eligibility Assessment Protocol

50

Schedule-3 Green Finance (Transition Finance with specific use of proceeds) Eligibility Assessment
Protocol58

Revision history
Revision

Date of issue

number0

21st October 2022

Remarks
InitialDisclaimer
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 that errors 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 an entity may makebased 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 forbodies providing audit and certification of management systems, and accordingly maintains a comprehensive system of quality control, including documented policies andprocedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. We have complied with the DNV Codeof 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 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)

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Executive Summary
Over almost 100 years since its establishment in 1922, Toho Gas Group has been an energy
company with strong roots in the local communities. In response to changes in the businessenvironment, Toho Gas Group has converted the energy resources used for city gas, expanded
usage applications, and achieved growth and development together with the local communities.
Toho Gas Group has achieved the growth of the city gas business as well as LPG business
operations developed since 1959. In addition, the Group is working to expand the scope ofbusiness by taking initiatives such as entering into the retail electricity business in 2016.
Amid the recently heightening sense of crisis with respect to global warning, in July 2021, Toho
Gas Co., Ltd. (hereafter, “Toho Gas”) has formulated the “Toho Gas Group 2050 Carbon
Neutrality Initiative.” Toho Gas Group will continue to contribute to realizing a sustainable
society and to the further development of the region through clean energy systems.
Toho Gas has decided to utilize green finance and transition finance in order to achieve carbon
neutrality in 2050 in its entire value chain, including customer locations, and has formulated the“Toho Gas Green/Transition Finance Framework” (hereinafter, the “Framework”).
The Framework is structured as a comprehensive framework that includes the following
elements necessary for the implementation of finance:- Green Finance (green bond and loan)- Transition Finance (transition bond and loan with specific use of proceeds)
DNV Business Assurance Japan K.K. (hereinafter, "DNV"), as an external reviewer, evaluated theeligibility of the framework.
Specifically, DNV provided the eligibility evaluation for frameworks (principles, guidelines, etc.)
against the following handbook, principle and guidelines which are widely recognized:- Climate Transition Finance Handbook (CTFH), International Capital Markets Association(ICMA), 2020
- Basic Guidelines on Climate Transition Finance (CTFBG), Financial Services Agency, Ministryof Economy, Trade and Industry, Ministry of the Environment, 2021
- Green Bond Principles (GBP), International Capital Markets Association (ICMA), 2021
- Green Bond Guidelines (GBGLs), Ministry of the Environment, 2022
- Green Loan Principles (GLP), Loan Market Association (LMA) and others, 2021
- Green Loan Guidelines (GLGLs), Ministry of the Environment, 2022
The following is a summary of the assessment results for each common element indicated in theabove frameworks.

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion<CTF eligibility assessment results>
DNV has confirmed the following from the documentation and information provided by Toho Gas.
CTF-1 to CTF-4 below are findings and opinions of DNV against the four common elements(disclosure elements) of the CTFH and CTFBG as criteria for the Climate Transition Finance.

CTF-1. Fundraiser’s climate transition strategy and governance:
The transition strategy of the fundraiser Toho Gas is set forth in the “Toho Gas Group 2050
Carbon Neutrality Initiative,” which sets out a realization image and scenario for achieving thetargets. This is in line with the targets and pathways set out in the “Technology Roadmap for“Transition Finance” in Gas Sector” (The Ministry of Economy, Trade and Industry), the“Transition Roadmap for Power Sector” (Agency for Natural Resources and Energy), and theCarbon Neutral Challenge 2050 (The Japan Gas Association). In addition, Toho 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 and strategies for decarbonization in
Japan.
In terms of governance related to implementation of the Transition Strategy, an internal
structure in the entire Toho Gas Group, including the Group Environmental Preservation
Board, and information disclosure process based on TCFD*1 have been established. These aredisclosed in the frameworks 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:
The environmental materiality of Toho Gas's business model is identified by extracting
individual issues with reference to the GRI Standards*2, evaluating from the viewpoints ofeconomic and social value, and going through the Management Committee and the Board of
Directors. Each materiality is disclosed in the “Integrated Report 2022” with the relevant SDGs
tied to it, and one of the materialities is the promotion of carbon neutrality. In addition, theToho Gas Group Medium-Term Management Plan 2022-2025 includes the promotion ofcarbon neutrality as one of the four themes to be addressed during the period of the mediumterm plan (FY2022 - FY2025). The response to climate change is closely linked to the
management strategy and business activities of Toho Gas Group. In addition, efforts toaddress environmental materiality include not only emissions reductions from their own
business activities, but also activities that contribute to Scope 3 emissions reductions andthose of other companies.
In accordance with the TCFD Guidance, Toho Gas has selected less than 2℃ scenario and lessthan 4℃ scenario as external scenarios to identify risks and opportunities, taking into accounttime horizons such as short-to-medium-term and medium-to-long-term, and grasp the impactof these scenarios. These are disclosed in the frameworks and other documents and meet thedisclosure elements of CTF-2.

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion*2: 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 and pathways:
Toho Gas's Transition Strategy is defined by science-based targets and pathways. Specifically,
it is consistent with the targets and pathways set out in the “Transition Roadmap in the Gas
Sector” (The Ministry of Economy, Trade and Industry), the “Transition Roadmap in the Power
Sector” (Agency for Natural Resources and Energy), and the Carbon Neutral Challenge 2050
(The Japan Gas Association). In addition to reducing CO2 emissions from the company's own
activities, long-term and medium-term targets that take into account Scope 3 and reduction
contributions are indexed and quantified, and the process of achieving these targets isclarified. As the targets of the Ministry of Economy, Trade and Industry and the Agency for
Natural Resources and Energy were formulated to be consistent with the Paris Agreement,
Toho Gas's Transition Strategy can also be judged as science-based.
Toho Gas has set a long-term target for 2050 of carbon neutrality in its entire value chain,including customer locations, and a medium-term target for 2030 of 3 million tonnes of CO2
reduction contribution (compared to FY2020), a gas carbon neutrality rate of at least 5%, and500,000 kW of renewable energy sources handled.
As a pathway to achieving the target, Toho Gas aims to build an energy system that
contributes to carbon neutrality, based on gas (city gas and LPG), hydrogen, and electricity.
These are disclosed in the frameworks and other documents and meet the disclosure
elements of CTF-3.
CTF-4. Implementation transparency:
To address climate change-related risks and opportunities, including the implementation of
the Transition Strategy, Toho Gas aims for a 1:1 ratio of core projects to strategic projects outof the JPY 230 billion of investments in the medium-term management plan period covering
FY2022 - FY2025, which includes projects implemented with green/transition finance.
DNV has confirmed that the investments required to implement the Transition Strategy will be
carried out in accordance with the appropriate timeline, based on the internal management
system and processes, taking into account CTF-1 to CTF-3. These are disclosed in theframeworks and other documents and meet the disclosure elements of CTF-4.

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion<GBP/GLP eligibility assessment results>
DNV has confirmed the following from the documentation and information provided by Toho Gas.
GBP/GLP-1 to GBP/GLP-4 below are findings and opinions of DNV against the four elements
common to GBP and GLP (including GBGLs and GLGLs) required for green finance and transition
finance with specific use of proceeds.

GBP/GLP-1. Use of Proceeds:
The proceeds raised by Toho Gas through green/transition finance will be allocated to newinvestment and refinancing for existing investments as R&D, capital investments,
investments and loans, and other related expenditure regarding green/transition eligible
projects, focusing on the initiatives of gas (city gas and LPG), hydrogen, and electricity as
described in the realization image of carbon neutrality in 2050. DNV has confirmed thatthese projects are consistent with the elements of CTF-1 to CTF-4. Each project has been
evaluated by Toho Gas as having clear environmental benefits on the transition strategy
and is expected to contribute directly and indirectly to the SDGs.
Table-1 Toho Gas Green/Transition Finance Project Overview
Eligible Project
Business
Category

Project Overview

Type of Initiative

Reductions of carbon and decarbonization at customer locations
Fuel conversion to gas
Creation of gas supply
chain
Gas-related energy
savings

Expenditure and investment in supporting fuel conversion
from coal and petroleum to city gas
Capital investment in extending or maintaining gas
pipelines
Capital investment in cogeneration, installation of highefficiency gas appliances, and regional heating and cooling

Carbon recycling＊
Gas

CCUS

R&D or capital investment in separation, recovery,
utilization, and storage of CO2

Decarbonization of gas itself＊
Methanation
Carbon neutral LNG
Biogas(Renewable energy)
Hydrogen

R&D or capital investment in the practical implementationof methanation technology
Expenditure and investment in the procurement andsupply of carbon neutral LNG
R&D or capital investment in biogas introduction

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Capital investment in the development of hydrogen

Hydrogen station

stations

Further application expansion＊
Hydrogen combustion
equipment, etc.

with city gas, etc.

Distributed energy
systems
Supply chain creation

R&D related to hydrogen combustion, mixed-combustion
Capital investment in the construction of smart towns
combining various technologies, such as hydrogen andrenewable energy＊

Hydrogen production,

R&D or capital investment in hydrogen production andCCUS

carbon recycling through natural gas reforming, etc.

Local hydrogen network

R&D or capital investment in hydrogen pipeline supply
through local networks

Reductions of carbon and decarbonization at customer locations ＊Electricity

Distributed energy

R&D or capital investment in the promotion of various

systems, renewabledistributed energy resources, including solar power

energy, clean

generation, storage batteries, and electric vehicles, andtransportation

their integration and control using digital technology

Decarbonization of power sources＊
Capital investment / investment and loan for thedevelopment of renewable energy sources such as solar
Renewable energy

power, biomass, wind (including offshore wind), and smallhydropower
Investment and loan for new regional power companies*: Projects that could be used for green finance as well as transition financeAlignment of the above eligible projects with the SDGs:*The relevance to the SDGs is based on Green, Social and Sustainability Bonds: A High-Level Mapping to
the Sustainable Development Goals published by ICMA, which sets out the Green Bond Principles. It iscomplementary upon the issuance of green bonds etc. and is not directly associated as a financing
objective.

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

GBP/GLP-2. Process for Project Evaluation and Selection:
Toho Gas confirms that the green/transition projects meet the GBP/GLP-1 eligible project
categories, and that they do not conflict with the exclusion criteria set out in the Frameworkin advance. Specifically, the Finance Department takes the lead in selecting eligible projects
after consulting with the Corporate Planning Department and the CSR/Environment
Department to assess the environmental benefits of each project, with the Finance Officer
making the final decision. It is also confirmed that all nominated eligible projects have beenaddressed to reduce environmental and social risks.
GBP/GLP-3. Management of Proceeds:
Toho Gas's Finance Department will track the proceeds raised as green/transition finance onan annual basis using an internal management system and proceeds allocation control chart
to ensure that an amount equal to the amount raised is allocated to one of the eligible
projects, and to report the allocation status to the Finance Officer. Unallocated proceeds will
be managed in cash or cash equivalents and will be allocated within approximately three
years of financing.
GBP/GLP-4. Reporting:Toho Gas plans to disclose the allocation status of the proceeds raised on its website until
the full amount has been allocated. The disclosure will include the amount of allocatedproceeds, the estimated unallocated amount, the estimated time of allocation, and theestimated amount or percentage of proceeds allocated to refinancing. In addition, theenvironmental benefits of the project subject for allocation will be disclosed on the website
as long as reasonably practicable for the period from the implementation of financing to thecompletion of redemption or repayment. In the event of material changes to the projects
subject for the use of proceeds, even after the allocation of the proceeds is completed, suchchanges and the status of unallocated proceeds will be promptly disclosed on the website.

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

I. Introductioni.

About the Fundraiser
Over almost 100 years since its establishment in 1922, Toho Gas Group has been an
energy company with strong roots in the local communities. In response to changes inthe business environment, Toho Gas Group has converted the energy resources used
for city gas, expanded usage applications, and achieved growth and development
together with the local communities. Toho Gas Group has achieved the growth of thecity gas business as well as LPG business operations developed since 1959. In
addition, the Group is working to expand the scope of business by taking initiatives
such as entering into the retail electricity business in 2016.

ii.

Fundraiser’s initiatives for ESG/SDGs
With regard to highly-important social issues, Toho Gas Group identifies individual
issues with reference to the GRI Standards, an international standard for sustainability
information disclosure, and in conjunction with the examination of the Toho Gas
Group Vision and Medium-Term Management Plan, based on the expectations ofstakeholders, etc. Subsequently, the extracted individual issues are evaluated fromthe two viewpoints of economic and social value, and after exchanging opinions withthe relevant agencies, the new materialities were identified in August 2022 throughthe Management Committee and the Board of Directors, and the relevant SDGs aretied to them.

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Figure-1 Materiality and relevant SDGs

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinioniii. Fundraiser's environmental initiatives
Toho Gas formulated the “Toho Gas Group 2050 Carbon Neutrality Initiative” in July
2021, aiming to accelerate efforts to reduce carbon and even achieve decarbonization
at customer locations, and achieve technical innovation for utilizing hydrogen and in
carbon recycling, and to connect to future decarbonization of gas itself. Throughcombinations of diverse means, including decarbonization in electrical power sources
and the like, Toho Gas is tackling the challenge of achieving carbon neutrality in theentire value chain, including customer locations, in 2050.

Figure-2 Realization image of carbon neutrality
To achieve carbon neutrality, innovative technical development is a requirement, andtremendous time and costs become necessary to overcome this. Consequently, Toho
Gas aims to make a smooth transition to carbon neutrality by first steadily pressing
ahead with reducing carbon and decarbonization using established technology andachieving decarbonization of gas itself in the future.

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Figure-3 Scenario for achieving carbon neutrality
Toho Gas participates in the external initiatives listed in Table-2 to strengthen its ESG
efforts.
Table-2 Toho Gas’s participation in external initiatives and efforts
External Initiatives

Toho Gas’s Efforts
In May 2020, Toho Gas Group signed and joined the“UN Global Compact” proposed by the United Nations.

UN Global
Compact

Task Force on
Climate-related
Financial
Disclosures(TCFD)The UN Global Compact is a voluntary initiative inwhich individual companies and organizations
participate in the creation of a global framework to act
as good members of society and achieve sustainablegrowth by exercising responsible and creative
leadership.
In April 2020, Toho Gas Group expressed its support
for the TCFD (Task Force on Climate-related Financial
Disclosures), which recommends analyzing the risks
and opportunities posed by climate change to businessand disclosing information about them. At the sametime, the Group joined the TCFD Consortium, which
was established as a forum for discussion among
companies and financial institutions that support the
TCFD.

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

The Japan
Business
Federation(Keidanren)
Challenge Zero

Toho Gas Group participates in the Japan Business
Federation’s “Challenge Zero” initiative to develop
technologies for a future decarbonized society.
Challenge Zero communicates the challenge of thebusiness community to innovate net zero carbon
technologies (including transition technologies),
actively implement and disseminate them, and actively
invest in or offer loans to companies working on thesetechnologies, in order to encourage innovation towards
the realization of a decarbonized society.

Keidanren Carbon
Neutral Action
Plan

As a member company of the Japan Gas Association,
Toho Gas is promoting various initiatives to address
reduction of greenhouse gas emissions in order toachieve the targets of the city gas industry.

Keidanren
Declaration of
Biodiversity andAction Policy

In July 2020, Toho Gas endorsed the Keidanren
Declaration of Biodiversity and Action Policy. Toho
Gas's endeavors are congruent with this declaration
and action policy, and Toho Gas will continue to devote
effort accordingly.

Keidanren
Committee on
NatureConservation

Toho Gas Group has been a member of the Keidanren
Committee on Nature Conservation since FY2014.
Through the committee, The Group is providing aid fornature conservation activities by environmental NGOs
in Indonesia and elsewhere around the world.

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

iv. About the Green/Transition Finance Framework
In order to promote the environmental initiatives, set out in the “Toho Gas Group
2050 Carbon Neutrality Initiative,” Toho Gas has issued transition finance fortransition activities to realize the Carbon Neutral Challenge 2050*1 set out by theJapan Gas Association (JGA) and the sector-specific technology roadmap*2*3 set out by
the Ministry of Economy, Trade and Industry (METI). Also, Toho Gas engaged indialogue with investors and a wide range of marked participants and has establishedthe Toho Gas Green/Transition Finance Framework in order to carry out funds for in amanner that conform to the internationally recognized frameworks.
The frameworks which this Framework specifically refers to are described in (3) ofSection II below.
*1: Japan Gas Association: Carbon Neutral Challenge 2050 on 24th November 2020
*2: Ministry of Economy, Trade and Industry (METI): Technology roadmap in the gas sector on"Transition Finance" on February 2022
*3: Agency for Natural Resources and Energy: Technology roadmap in the power sector on"Transition Finance" on February 2022

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinionv.
(1)

Fundraiser’s transition strategy for decarbonization
Strategies by sector (industry) at the international/national/regional level
Figure-4 shows the scenarios forgas carbon neutrality set out inthe "Carbon Neutral Challenge
2050" developed by the Japan Gas
Association in November 2020.
Figure-5 shows the technology
roadmap by sector (gas) of the
Ministry of Economy, Trade andIndustry (METI).
The Japan Gas Association's
scenario (Figure-4)/the METI's
technology roadmap by sector (gas)(Figure-5) and Toho Gas's realization
image of carbon neutrality (Figure-2)
are well aligned, and it is designed to reduce
CO2 emissions throughout the entire gas supply
chain, including demand-side, supply-side, CO2
capture and decarbonization of the gas itself
through methanation.

Figure-4 Scenarios for achieving gas
carbon neutral(Japan Gas Association)

Toho Gas has set a gas carbon neutralization
rate of at least 5% as one of its medium-termtargets for 2030, which is consistent with thetargets of the Carbon Neutral Challenge 2050
Action Plan of the Japan Gas Association.
Fuel conversion from coal and oil to natural gas is one of the main ways contributing to
the reduction of CO2 emissions in society as a whole in the gas sector and is widely
recognized as a typical transition project. According to METI's technology roadmap in thegas sector, the progress of fuel conversion in society as a whole will lead to an increase ingas demand (consumption and sales) for gas utilities, which in turn will lead to an increasein supply-side (gas utility) CO2 emissions (increase in Scope 3) in the short to medium
term (Figure-6).
In other words, while Toho Gas is working to reduce CO2 emissions in its gas businessthrough the introduction of high-efficiency gas appliances and other measures (Figure-7),
its Scope 3 CO2 emissions are expected to increase due to the relatively large amount of
natural gas supplied for fuel conversion. Toho Gas is committed to reduce CO2 emissions
for society as a whole through the supply of gas for fuel conversion, etc. (contributing to
the reduction of CO2 emissions), and the voluntary reduction of CO2 emissions through theintroduction of high-efficiency gas appliances, etc. (the introduction of technologies andPage 15 of 65

Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

equipment that will contribute to the reduction of the supply of low-carbon gas in the
future) will also contribute to the reduction of Scope 3.
Furthermore, Toho Gas has set out to evolve as an energy provider and is actively working
on expanding its electricity services in addition to its gas business as a diverse energy
supply. Toho Gas recognizes the importance of building a system for supplying electricity
from renewable energy sources until the technology necessary to achieve a decarbonizedsociety is established, and is promoting the introduction of renewable energy sources,
which is the green power infrastructure necessary for the future supply of green gas bodyenergy through methanation, etc.
The acceleration of the development and procurement of renewable energy sources shownby Toho Gas in its image of achieving carbon neutrality, and the amount of renewableenergy sources handled (500,000 kW) as a 2030 target are considered to be closely
related to the renewable energies in the Agency for Natural Resources and Energy’s
Transition Roadmap in the power sector (Figure-8).

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Figure-5 Ministry of Economy, Trade and Industry Technology roadmap in the gas sector(city gas, LP gas, common technologies)
Technology roadmap in the gas sector on "Transition Finance" (METI, February 2022)
Provisional translation by DNV based on the Japanese version

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Figure-6 Ministry of Economy, Trade and Industry Technology roadmap in the gas sector(avoided CO2 emissions on demand side)
Technology roadmap in the gas sector on "Transition Finance" (METI, February 2022)

Figure-7 Ministry of Economy, Trade and Industry Technology roadmap in the gas sector(development and expansion of high-efficiency gas cogeneration)
Technology roadmap in the gas sector on "Transition Finance" (METI, February 2022)

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Figure-8 Transition roadmap for decarbonizing the electricity sector(Agency for Natural Resources and Energy, Electric Infrastructure Division, February 2022)

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion(2)

Fundraiser’s transition strategy
Toho Gas has formulated the "Toho Gas Group 2050 Carbon Neutrality Initiative" and the"Toho Gas Group Medium-Term Management Plan 2022-2025" as a medium- to long-term
strategy for transitions and has disclosed the following medium-term targets for FY2025
and up to 2030 and long-term targets for 2050.

Table-3 Toho Gas transition targets
Targets up to FY2025
CO2 emission reduction contribution: ▲1 million
tonnes (compared to FY2020)
Mediumterm
targets

Renewable energy sources handled: 250,000 kW
Targets up to 2030
CO2 emission reduction contribution: ▲3 million
tonnes*1 (compared to FY2020)
Gas carbon neutralization rate: At least 5%*2
Renewable energy sources handled: 500,000 kW

Long-

Targets for 2050

term

Carbon neutrality of the entire supply chain,targets

including customer locations*1: Contribution to CO2 reduction through business activities (from FY2021)*2: Percentage of gas sold that is carbon neutral (assuming various means such as methanation,etc., hydrogen use, biogas, carbon neutral LNG, carbon recycling, overseas contributions,afforestation and forest protection, etc.)

In order to achieve the above targets, Toho Gas aims to build an energy system that
contributes to carbon neutrality, based on gas (city gas and LPG), hydrogen, andelectricity. The future energy system that Toho Gas envisions based on these three typesof energy is shown in Figure-9.

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Figure-9 The future energy system Toho Gas envisions
Toho Gas' specific efforts to build an energy system that contributes to carbon neutrality
are as follows.
(i) Gas● Reductions of carbon and decarbonization at customer locations
The Chubu area is a prominent industrial region, and because coal and petroleum are bothstill heavily used in high-temperature thermal applications, switching the fuel type fromthese to environmentally friendly city gas accelerated reductions in carbon. Further, inconjunction with such conventional efforts as energy conservation and advanced utilizationof energy, Toho Gas is also promoting such new initiatives as carbon recycling andhydrogen, supporting carbon reduction and decarbonization at customers in athoroughgoing way.

● Carbon recycling
Toho Gas was quick to turn attention to technical development for CO2 separation andcapture and will continue to enhance its technical capabilities from the perspective of CO2
utilization (conversion to fuel and solidification) and storage. As a means of carbon
reduction that can be carried out right now, Toho Gas is socially implementing carbon
recycling to separate, capture, and utilize CO2 at customer locations, and in the future,

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Toho Gas will also take up such challenges as direct capture from the atmosphere andexpanding usage applications.

● Decarbonization of gas itself
Aiming for the practical implementation of methanation technology and the like and thelarge-quantity introduction of clean synthetic methane and similar substances, throughbroad-based alliances Toho Gas is devoting effort to such matters as verification geared
toward resolving such issues as greater high efficiency and lower costs. For carbon neutral
LNG and biogas for which the start of introduction has already been completed, Toho Gas
will work to further expand the amounts handles and achieve decarbonization of gas itself
through diverse means.

Figure-10 Decarbonization of gas itself

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion(ii) Hydrogen● Demand creation: Mobility applications
In the Chubu area, the utilization of hydrogen as a mobility application is progressing, andto help drive the spread of fuel cell automobiles, Toho Gas has been proactively
endeavoring to prepare hydrogen stations. Along with continuing to work expand hydrogenstation facilities and reduce costs, Toho Gas will press on with expanding infrastructure byalso making full use of cross-sectional frameworks in the industry to move toward
expanding vehicle types and application to include industrial vehicles, transport vehicles,
and others.

● Demand creation: Further expansion of applications
Toho Gas has even heretofore been devoting effort to the development of technology
relating to hydrogen combustion and of mixed-combustion technology for city gas andhydrogen. Through further technical development, Toho Gas will turn its efforts towardapplication expansion and practical implementation for the areas of heating and the like.
Also, in the phase II development for “Minato AQULS” that is now under discussion, Toho
Gas is delineating a plan for the practical implementation of hydrogen technology.
The "Decarbonized Compact City Model for Redevelopment Areas (proposal name)" in
Minato AQULS has been selected as the Ministry of the Environment's 1st Decarbonization
Leading Region. Nagoya City and Minato AQULS will work together to decarbonize the area
by maximizing the use of renewable energy and introducing advanced technologies, and todevelop a regional decarbonization model that will contribute to solving regional problems
and improving the attractiveness of the area and the quality of life of its inhabitants.

● Supply chain creation
To accommodate the vigorous hydrogen utilization needs of the Chubu region, Toho Gas isdriving the spread and expansion of hydrogen in the Chubu region through the early
actualization of a planned change to a hydrogen supply terminal at the Chita-Midorihama
Factory and the creation of a hydrogen supply chain.

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Figure-11 Creation of hydrogen supply chain

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion(iii) Electricity● Reductions of carbon and decarbonization at customer locations
Together with encouraging the popularization of diverse distributed energy sources,
including solar power generation, storage batteries, electric automobiles, and more, byintegrating in the controlling these utilizing digital technology and achieving mutualflexibility for electricity and environmental values, Toho Gas aims to offer services that
achieve both creating of advantages for customers and efficient energy usage.

● Decarbonization of electrical power sources
With an eye to decarbonizing its own power sources, Toho Gas is devoting effort to thedevelopment and procurement of renewable energy power sourced and to theirdiversification. Through cooperation with local governments and other entities and suchmeans as regional electricity business, Toho Gas is endeavoring to utilize latent renewableenergy resources in local regions and contribute to resolving local issues through local
production and local distribution of energy and strengthened resilience.

Figure-12 Decarbonization of electrical power sources

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion(3)

Governance of the fundraiser (sustainability promotion system)
Figure-13 show Toho Gas's sustainability promotion
system and its approach to sustainability promotion.
Toho Gas Group recognizes that addressing
environmental issues, including climate change, is an
important management issue and has establishedenvironmental action policies and guidelines, which
are positioned in the management policy. Importantmatters such as risks and opportunities relating toclimate change, strategies, risk management, andindicator reporting are reported to the Board of
Directors via the Management Committee, which
supervises the implementation status.
Toho Gas Group has set up the Group Environmental
Preservation Board, consisting of Toho Gas and its
major subsidiaries. The committee aims to reduce
impacts of Group activities on the environment andpromote the Group's compliance with laws andregulations related to environmental preservation.
Specifically, the committee is designed to formulate
Figure-13 Organizational structure
the Group's basic policy on environmental
for management of environmental
preservation activities while setting goals regarding
preservationsuch activities. It is also intended to discuss and study
measures aimed at achieving these goals, and to
manage implementation of the measures. Regarding
environmental action goals in particular, Toho Gas has
established an Environmental Promotion Meeting ineach department to verify progress and realization
planning in conjunction with the Group Environmental
Preservation Board.
Toho Gas deploys staff to handle environmental affairs at each department of Toho Gas
and its subsidiaries. "Environmental promoters" are tasked with undertaking specificenvironmental activities. "Environmental auditors" are in charge of reviewing what has
been achieved through environmental preservation activities and checking if these activities
are consistent with relevant regulations. "Environmental controllers" are assigned to control
the activities of the "environmental promoters" and "environmental auditors." The
deployment of these environmental experts is meant to promote environmental activities.
The environmental management system is shown in Figure-13.

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Fundraiser Name: Toho Gas Co., Ltd.
Framework Name: Toho Gas Green/Transition Finance Framework
Review Provider’s Name: DNV Business Assurance Japan K.K.
Date of Report: 21st October 2022

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Ⅱ. Scope and Objectives
DNV has been commissioned by Toho Gas to provide an assessment on the Framework. Our
objective has been to implement an assessment on whether Toho Gas meets the criteria
established on CTFH・CTFBG, GBP・GBGLs, GLP・GLGLs, applicable CBS, and EU Taxonomy toprovide a second party opinion on the eligibility of the framework.
DNV, as an independent external reviewer, has identified no real or perceived conflict ofinterest associated with the delivery of this second-party opinion for Toho Gas.
In this report, no assurance is provided regarding the financial performance of theGreen/Transition Finance, the value of any investments in the finance, or the long-term
environmental benefits of the transaction.
*Stated with GBP as an axis but to be replaced with loan-specific items where appropriate(1) Scope of review*
The review assessed the following elements and confirmed their alignment with the gist of GBP:☒

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 sustainable finance (green ortransition) 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☒

Second Party Opinion☐

Certification☐

Verification☐

Ratings☐

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*3

4.

Green Bond Guidelines (GBGLs)*2*3

Ministry of the Environment, 2022

5.

Green Loan Principles (GLP)*2*3

Loan Market Association (LMA) and others,
2021

6.

Green Loan Guidelines (GLGLs)*2*3

Ministry of the Environment, 2022

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

*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).

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion*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).
*3

Green projects were assessed for eligibility using the referable technical criteria of the Climate Bond

Initiative's Climate Bond Standard and EU Taxonomy.

Ⅲ. Responsibilities of Toho Gas and DNV
Toho 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 Toho Gas and other interested stakeholders in the bonds and loans as to whether theestablished criteria have been met, based on the information provided to us. In our work wehave relied on the information and the facts presented to us by Toho Gas. DNV is not
responsible for any aspect of the nominated assets referred to in this opinion and cannot beheld 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 Toho Gas’s management andused as a basis for this assessment were not correct or complete.

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Ⅳ. Basis of DNV’s Opinion
To provide as much flexibility for the fundraiser, as possible, we have adapted our Toho Gas
Green*/Transition Finance assessment methodologies, which incorporates the requirementsof the CTFH, CTFBG, GBP, GBGLs, GLP and GLGLs, to create a Toho Gas Green/Transition
Finance Eligibility Assessment Protocol (hereinafter, “Protocol”). Please refer to Schedule-2
and Schedule-3. The Protocol is applicable to Toho Gas Transition Finance under the CTFH,
CTFBG, GBP, GBGLs, GLP and GLGLs.
*Green projects have been evaluated using the technical criteria referred to in the Climate Bond Initiative's
Climate Bond Standard.

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
specific use 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 Toho Gas Green/Transition Finance has
been reviewed are grouped into common elements bellow, represented by CTFH, CTFBG,
GBP, GBGLs, GLP and GLGLs.

(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 the environmentallymaterial parts of the fundraiser’s business model.
Principle Three: Climate transition strategy to be science-based including targets
and pathways
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.

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion(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 agreen finance or a transition finance with 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 afundraiser of a green finance or a transition finance with specific use of proceeds
should outline the process it follows when determining eligibility of an investmentusing the green finance or transition finance with specific use of proceeds 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 green
finance or a transition finance with specific use of proceeds should be tracked within
the fundraising 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
The Reporting criteria are guided by the recommendation that at least Sustainability
Reporting to the bond investors or loan lenders should be made of the use ofproceeds and that quantitative and/or qualitative performance indicators should be
used, where feasible.

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

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 assessment work that forms DNV's opinion includes:

Pre-funding assessment (Green/Transition Finance Framework Assessment)•

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

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

Discussions with Toho Gas, and review of relevant documentation management;•

Documentation of findings against each element of the criteria.

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Ⅵ. Findings and DNV's Opinion
DNV’s findings and opinion are as follows:
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/GLP 1 to 4 in (2) below are the findings and opinions of DNV against therequirement of the four common 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-

In July 2021, Toho Gas formulated the “Toho Gas Group 2050 Carbon Neutrality
Initiative,” which sets out a realization image of carbon neutrality. In the vision,
Toho Gas sets the long-term goal of achieving carbon neutrality in 2050, which isconsistent with the goals of the Paris Agreement, and the medium-term goals forachieving the long-term goal. The realization image discloses the technology
introduction plan to achieve the transition to carbon neutrality.

-

DNV has reviewed and confirmed that Toho Gas's targets are consistent with thetargets of the Paris Agreement, based on the action to achieve carbon neutrality in
2050, a science-based long-term target quantified by Toho Gas. Toho Gas sets
environmental corporate strategies that are important to its business model, byidentifying risks and opportunities based on the scenario analysis using TCFD
guidance and grasping their impact.

-

In the event of technological developments or changes in trends related to thetransition strategy, or changes in the external scenarios on which the transition
strategy is based, Toho Gas plans to revise the materiality and review its climatechange initiatives, including the transition strategy, as necessary, and to disclosethe details in a timely manner on its website, etc.

-

Toho Gas identified individual issues with reference to the GRI Standard*1,
evaluated them from the aspects of economic and social values to identify newmaterialities through the Management Committee and the Board of Directors. The“Integrated Report 2022” discloses the promotion of carbon neutrality as one of thematerialities, while the “Toho Gas Group Medium-Term Management Plan 20222025” describes the promotion of carbon neutrality as one of the four themes to beaddressed during the medium-term period (FY2022 to FY2025). The Group
Environmental Committee and other structures and mechanisms have been
established to promote this at the management level, including the implementationof the transition strategy.
*1: Global Reporting Initiative (an international standard providing ESG-related reporting,management and analysis tools)

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion-

Toho Gas has expressed its aim to build an energy system that contributes tocarbon neutrality based on gas (city gas and LPG), hydrogen, and electricity inorder to become carbon neutral throughout its supply chain, including its customer
locations, in the “Toho Gas Group 2050 Carbon Neutrality Initiative”, etc. Based on
this approach, Toho Gas aims to promote the various initiatives listed in the imageof carbon neutrality and, through these activities, to make a broad contribution to
the achievement of the SDGs set by the United Nations.

-

Based on an assessment of the implementation plan provided by Toho Gas under
the Framework, the “Toho Gas Group 2050 Carbon Neutrality Initiative” and Toho
Gas’s realization image and scenario of carbon neutrality, DNV confirmed that it iswell aligned with Toho Gas's Transition Strategy. Through the assessment, DNV
confirmed that the implementation plan based on the Transition Strategy is reliable,
ambitious, and achievable.

CTF-2: Business model environmental materiality-

Toho Gas's transition efforts include not only CO2 emission reductions from its own
business activities, but also activities that contribute to the CO2 emission reduction
at customers. This will contribute to the implementation of supply-side anddemand-side carbon neutrality as an important initiative indicated in the various
plans and strategies for decarbonization in Japan. In other words, Toho Gas's
transition initiatives directly support the transition of society as a whole, including
its own company.

-

Toho Gas's realization image and scenario of carbon neutrality are well aligned withthe “Transition Roadmap in the Gas Sector” (The Ministry of Economy, Trade andIndustry), the “Transition Roadmap in the Power Sector” (Agency for Natural
Resources and Energy), and the Carbon Neutral Challenge 2050 (The Japan Gas
Association), and its specific implementation plans and targets are set andquantified in the absolute sense that they must be the optimization to achieve themand the possibility of further improvement.

-

DNV confirmed that Toho Gas's plan to implement its Transition Strategy is closely
linked to the activities of its core business and to activities that contribute to theCO2 emissions reduction of in society as a whole, thus contributing to theenvironmental aspects of society as a whole and supporting the promotion of Toho
Gas's business. Toho Gas's planned transition strategy and transition pathway areassociated with the materiality that Toho Gas has achieved through GRI standards,
TCFD, etc., and will contribute to significant environmental benefits (impact) inboth qualitative and quantitative terms.

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

CTF-3: Climate transition strategy to be science-based including targets and pathways-

Toho 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 withthe goals of the Ministry of Economy, Trade and Industry, Agency for Natural
Resources and Energy, and the Japan Gas Association.

-

DNV has confirmed that Toho Gas's Transition Strategy is quantified based on aconsistent measurement methodology with prescribed assumptions.

-

DNV has confirmed that Toho Gas set out Transition Strategy targets forsustainable CO2 emission reductions using the TCFD, etc., which are consistent withthe “Transition Roadmap in the Gas Sector” (The Ministry of Economy, Trade andIndustry), the “Transition Roadmap in the Power Sector” (Agency for Natural
Resources and Energy), and the Carbon Neutral Challenge 2050 (The Japan Gas
Association).
Table-3 (re-posted) Toho Gas transition targets
Targets up to FY2025
CO2 emission reduction contribution: ▲1 million
tonnes (compared to FY2020)
Mediumterm
targets

Renewable energy sources handled: 250,000 kW
Targets up to 2030
CO2 emission reduction contribution: ▲3 million
tonnes*1 (compared to FY2020)
Gas carbon neutralization rate: At least 5%*2
Renewable energy sources handled: 500,000 kW

Long-

Targets for 2050

term

Carbon neutrality of the entire supply chain,targets

including customer locations*1: Contribution to CO2 reduction through business activities (from FY2021)*2: Percentage of gas sold that is carbon neutral (assuming various means such as
methanation, etc., hydrogen use, biogas, carbon neutral LNG, carbon recycling, overseas
contributions, afforestation and forest protection, etc.)-

Toho Gas is promoting the advanced use of energy, including the introduction ofhigh-efficiency gas facilities, and the carbon neutralization of gas while encouraging
customers fuel conversion to city gas, with the aim of reducing CO2 emissions by
500,000 tonnes for a part of Scope 3 emission equivalents (compared to FY2020)
in 2030, and of contributing to society's overall CO2 reduction contribution of 3
million tonnes (compared to FY2020).

-

Toho Gas's CO2 reduction include not only CO2 emission reductions from its own
business activities (Scope 1 and 2), but also Scope 3 and activities that contributeto the reduction at customers. This will contribute to the implementation of supply-

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinionside and demand-side carbon neutrality as an important initiative indicated in thevarious plans and strategies for decarbonization in Japan. In other words, Toho
Gas's transition initiatives directly support the transition of society as a whole,including its own company, as a company handling natural gas.
-

DNV has confirmed that a third-party assurance was obtained for the quantitative
information such as CO2 emissions from Toho Gas, and that the subject data will be
disclosed in the Integrated Report and on Toho Gas's website.

CTF-4: Implementation transparency-

DNV has confirmed that the investment plan related to Toho Gas's Transition
Strategy includes agreement on future investment and expenditure. Specifically, inorder to address climate change-related risks and opportunities, including theimplementation of the Transition Strategy, Toho Gas aims for a 1:1 ratio of core
projects to strategic projects out of the JPY 230 billion of investments in themedium-term management plan period covering FY2022 - FY2025, which includes
projects implemented with green/transition finance.

-

DNV has confirmed that the overall investment plan (investment amount) for the
future will be carried out in accordance with the appropriate timeline, based on theinternal management system and processes, taking into account CTF-1 to CTF-3.

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion(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 green finance or transition finance to specify the use ofproceeds, and some green bonds/loans below can be read as transition finance (bond/loan).

GBP/GLP-1: Use of Proceeds
Toho Gas has defined the criteria applied to eligible projects as green/transition
projects which meet Transition Strategy and related handbook, principle, andguidelines (CTFH and CTFBG). Table-1 shows the overview of green/transition financeprojects.
DNV has confirmed that Toho Gas plans to allocate the full amount of the proceeds
raised through green/transition finance for new investment and refinancing forexisting investments as R&D, capital investments, investments and loans, and otherrelated expenditure regarding eligible projects in order to implement the Transition
Strategy.
These are projects that contribute to typical greenhouse gas reductions and to achievecarbon neutrality towards business transformation, as exemplified by CTFH/CTFBG,
GBP/GBGLs, and GLP/GLGLs. These projects are also consistent with the “Transition
Roadmap in the Gas Sector” (The Ministry of Economy, Trade and Industry), the“Transition Roadmap in the Power Sector” (Agency for Natural Resources and Energy),
and the Carbon Neutral Challenge 2050 (The Japan Gas Association) and contribute toachieving their targets. These projects have been evaluated as meeting the criteria
required for green/transition projects and having clear environmental benefits on theTransition Strategy and are expected to contribute to the SDGs.

Table-1 (re-posted) Toho Gas Green/Transition Finance Project Overview
Eligible Project
Business
Category

Project Overview

Type of Initiative

Reductions of carbon and decarbonization at customer locations
Fuel conversion to gas
Gas

Creation of gas supply
chain
Gas-related energy
savings

Expenditure and investment in supporting fuel conversion
from coal and petroleum to city gas
Capital investment in extending or maintaining gas
pipelines
Capital investment in cogeneration, installation of highefficiency gas appliances, and regional heating and cooling

Carbon recycling＊

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

CCUS

R&D or capital investment in separation, recovery,
utilization, and storage of CO2

Decarbonization of gas itself＊
Methanation
Carbon neutral LNG
Biogas(Renewable energy)

R&D or capital investment in the practical implementationof methanation technology
Expenditure and investment in the procurement andsupply of carbon neutral LNG
R&D or capital investment in biogas introduction

Mobility applications＊Hydrogen station

Capital investment in the development of hydrogenstations

Further application expansion＊
Hydrogen combustion
equipment, etc.
HydrogenDistributed energy
systems

R&D related to hydrogen combustion, mixed-combustion
with city gas, etc.
Capital investment in the construction of smart towns
combining various technologies, such as hydrogen andrenewable energy

Supply chain creation＊
Hydrogen production,

R&D or capital investment in hydrogen production andCCUS

carbon recycling through natural gas reforming, etc.

Local hydrogen network

R&D or capital investment in hydrogen pipeline supply
through local networks

Reductions of carbon and decarbonization at customer locations ＊Electricity

Distributed energy

R&D or capital investment in the promotion of various

systems, renewabledistributed energy resources, including solar power

energy, clean

generation, storage batteries, and electric vehicles, andtransportation

their integration and control using digital technology

Decarbonization of power sources＊
Capital investment / investment and loan for thedevelopment of renewable energy sources such as solar
Renewable energy

power, biomass, wind (including offshore wind), and smallhydropower
Investment and loan for new regional power companies*: Projects that could be used for green finance as well as transition finance

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Use of proceeds classified under GBP/GLP (for green projects)☒

Renewable energy☐

Energy efficiency (energy savings)☐

Pollution prevention and control☐

Environmentally sustainable management ofConservation of terrestrial and aquatic☒

Clean transportation☐

Adaptation to climate change☐

Green buildings with locally, nationally, or

biological natural resources and land use☐

biodiversity☐

Sustainable water resources andwastewater management☒

Highly eco-efficient products,
environment-adapted products,

internationally recognized standards orenvironment-friendly production

certifications

technologies and processes☐

Other (please specify):☐

Undetermined at the time of implementation of the finance but expected to fit into the GBP/GLP
classification or other eligible fields not currently listed in the GBP/GLP.

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

GBP/GLP-2: Process for Project Evaluation and Selection
Toho Gas confirms that the green/transition projects contribute to the achievement of
the transition strategy and that they do not conflict with the following exclusion criteria,
which were set out in the Framework in advance. Toho Gas also confirms that measuresfor environmental and social risk reduction are implemented for all nominated eligible
projects. Specifically, the Finance Department will take the lead in selecting the eligible
projects, in consultation with the Planning Department and the CSR & Environment
Department, and after evaluating the environmental benefits of each project, the Finance
Officer will make the final decision.
DNV confirmed that these processes had been established as internal documents of
Toho Gas and the plan will be implemented in accordance with the appropriate
processes.
DNV also confirmed that the green/transition project implemented by Toho Gas isconsistent with the fundraiser's management and environmental policies, as well as its
transition strategy, goals, and pathways.
<Exclusion criteria>・・Inappropriate relationships such as unfair trade, bribery, corruption, extortion,embezzlement, etc. that do not comply with the laws and regulations of the countryof the location
Transactions that could cause human rights, environmental, or other social issues

Evaluation and selection☒

Conforms to the fundraiser’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 finance and transparency isDocumented process to identify and manage
potential ESG risks associated with the project

ensured.
☐The project is evaluated and selected based☐

Other (please specify):

on the published standard summary

Information on responsibilities and accountability☒

Evaluation / Selection criteria subject to☒In-house assessment

external advice or verification☐

Other (please specify):

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

GBP/GLP-3: Management of Proceeds
The proceeds will be deposited into Toho Gas’s common account, and the Finance
Department will then manage the allocation of proceeds for each project by allocatingthem to Toho Gas, affiliated companies, and subsidiaries, using the internalmanagement systems, the allocation management ledger, etc.
The internal management systems allow for tracking over the period of redemption or
repayment, and the Finance Department will report the allocation status to the Finance
Officer once a year for a review. Vouchers relating to the management of the proceeds
will be kept in accordance with the document management rules.
The net proceeds will be allocated within approximately three 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 eligible inaccordance with the process set out in GBP/GLP-2. However, if the project execution(planning, construction, etc.) takes a long time, the period of allocation and refinancing
may be flexibly adjusted in consideration of the green/transition characteristics of the
project.
The amount of proceeds will be managed in cash or cash equivalents in the sameamount as the unallocated proceeds until the allocation.
If green/transition finance is to be implemented under this framework in the future, themethod of managing the proceeds will be explained prior to implementation of thefinance through disclosure in legal documents and loan agreement documentation.

Tracking of proceeds:☒

Some or all of the proceeds by green finance that are planned to be allocated are systematicallydistinguished or tracked by the fundraiser☐

Disclosure of intended types of temporary investment instruments for unallocated proceeds☒

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

Additional disclosure:
Allocation to future investments only☒☒

Allocation to individual disbursements☐

Allocation to a portfolio of disbursements☐

Disclosure of portfolio balance of☒

Other (please specify): includes allocations☐

Allocation to both existing and future
investments

unallocated proceeds

made through subsidiaries and affiliates

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

GBP/GLP-4: Reporting
DNV confirms that Toho Gas will report (annual reporting) on the green/transition
finance until the proceeds are allocated, and disclose information on the status of theallocation, the projects to which the proceeds have been allocated or the environmental
benefits.
With regard to the allocation status of proceeds, the following items will be disclosed forthe period until the full amount of the proceeds has been allocated to eligible projects.
Environmental benefits will be disclosed for any or all of the items in the table below for
the period from the implementation of the green/transition finance to the completion ofredemption or repayment, as long as is reasonably practicable.
In the event of a material change in the project for which the proceeds are to be used,such change and the status of unallocated proceeds will be promptly disclosed even after
the completion of the allocation.
The report will be disclosed on the Toho Gas website.

<Allocation status>•

Amount of allocated proceeds•

Estimated amount of unallocated proceeds, estimated time of allocation•

Estimated amount or percentage allocated to refinancing<Environmental benefits>
Eligible Project
Business
Category

Type of Initiative

Impact Reporting

Project Overview

Items

Reductions of carbon and decarbonization at customer
locations
Expenditure and investment inFuel conversion to gas
Gas

Creation of gas supply

supporting customers' fuelOverview of eachprojectProgress in R&D,

conversion from coal and oil tocapitalcity gas.

investment, etc.

Capital investment in extendingAnnual CO2

or maintaining gas pipelines

emission

Capital investment in

reductions fromGas-related energy

cogeneration, installation ofeach project (t-savings

high-efficiency gas appliances

CO2/year)chain

and district heating and cooling

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Carbon recycling＊
Research and development or
capital investment in theCCUSseparation, recovery, utilisationand storage of CO 2

Decarbonization of gas itself＊
Research and development or
capital investment in the

Methanation

practical application of
methanation technology
Expenditure and investment in

Carbon neutral LNG

the procurement and supply ofcarbon neutral LNG
Research and development or

Biogas(Renewable energy)
Mobility applications

capital investment in biogas
introduction＊

Capital investment in the
Hydrogen station

development of hydrogenstations

Further application expansion＊
Research and development
Hydrogen combustion
equipment, etc.

related to hydrogen
combustion, co-firing with citygas, etc.



project
Distributed energy
systems

construction of smart towns
combining various technologies,
such as hydrogen andrenewable energy.

Supply chain creation＊
R&D or capital investment inHydrogen production,hydrogen production andCCUS

carbon recycling throughnatural gas reforming, etc.

Local hydrogen network

Research and development or
capital investment in hydrogen

Page 43 of 65

Progress in R&D,
capitalCapital investment in the
Hydrogen

Overview of each

investment, etc.


Annual CO2
emission
reductions fromeach project (tCO2/year)Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

pipeline supply through local
networks
Reductions of carbon and decarbonization at customer
locations＊

project
R&D or capital investment in theDistributed energy

energy resources, including

systems, renewable

photovoltaic power generation,energy, clean

storage batteries and electrictransportation

vehicles, and their integration

investment, etc.
Installed capacity

Annual CO2
emission
reductions fromand control using digitaleach project (t-technology.
Decarbonization of power sources＊

CO2/year)

Renewable energy

Overview of eachproject

Capital investment orinvestment and financing for

Progress in R&D,
capitalpromotion of various distributed

Electricity

Overview of eachProgress in R&D,

the development of renewable

capitalenergy sources such as solar,

investment, etc.

biomass, wind (including

Installed capacity

offshore wind) and smallAnnual power
generationhydropower.

Investing in and financing new
regional power companies

Annual CO2
emission
reductions fromeach project (tCO2/year)

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Use of Proceeds reporting:☒

Project-by-project☒

On a project portfolio basis☐

Linkage to individual finance☐

Other (please specify):

Information reported:☒

Allocated amounts☐

Other (please specify):☐

Green finance share of total investment

Frequency:☒

Annual☐Other (please specify):☐

Semi-annual

Impact reporting (Environmental Impact):☒

Project-by-project☒

On a project portfolio basis☐

Linkage to individual finance☐

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):

Installed capacity, annual power generation, etc.

Means of disclosure:☐

Information published in financial report☐(Integrated Report)

Information published in the sustainability
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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Other (please specify): on Toho Gas website

Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Assessment Conclusion
On the basis of the information provided by Toho Gas and the work undertaken, it is DNV’sopinion that the Toho Gas Green/Transition Finance Framework meets the criteria
established in the Protocol, and that it is aligned with 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.
21st October 2022

Mark Robinson.

Naoki Maeda

Manager, Sustainability Services

Managing Director

DNV Business Assurance, Australia

DNV Business Assurance Japan K.K.

Masato Kanedome

Jun Chokai

Project Leader

Assessor

DNV Business Assurance Japan K.K.

DNV Business Assurance Japan K.K.

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion
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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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Schedule-1 Green/Transition Finance Nominated Projects
The projects listed in the table are green/transition finance candidates before the implementation offinance (as of October 2022). In the future, green/transition finance issued under the Toho Gas
Green/Transition Finance Framework will be selected from one or more of the green/transition eligible
criteria (nominated eligible projects) and the use of proceeds will be reported in the pre-financing or
post-financing reports. If additional green/transition projects are included, eligibility will be evaluated inadvance by Toho Gas in accordance with the Toho Gas Green/Transition Finance Framework and, if
necessary, DNV will evaluate them in a timely manner.

Eligible Project
Business
Category

Project Overview

Type of Initiative

Reductions of carbon and decarbonization at customer locations
Fuel conversion to gas
Creation of gas supply
chain
Gas-related energy
savings

Expenditure and investment in supporting fuel conversion
from coal and petroleum to city gas
Capital investment in extending or maintaining gas
pipelines
Capital investment in cogeneration, installation of highefficiency gas appliances, and regional heating and cooling

Carbon recycling＊
Gas

CCUS

R&D or capital investment in separation, recovery,
utilization, and storage of CO2

Decarbonization of gas itself＊
Methanation
Carbon neutral LNG
Biogas(Renewable energy)

R&D or capital investment in the practical implementationof methanation technology
Expenditure and investment in the procurement andsupply of carbon neutral LNG
R&D or capital investment in biogas introduction

Mobility applications＊Hydrogen station
Hydrogen

Capital investment in the development of hydrogenstations

Further application expansion＊
Hydrogen combustion
equipment, etc.

R&D related to hydrogen combustion, mixed-combustion
with city gas, etc.

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Distributed energy
systems

Capital investment in the construction of smart towns
combining various technologies, such as hydrogen andrenewable energy

Supply chain creation＊
Hydrogen production,

R&D or capital investment in hydrogen production andCCUS

carbon recycling through natural gas reforming, etc.

Local hydrogen network

R&D or capital investment in hydrogen pipeline supply
through local networks

Reductions of carbon and decarbonization at customer locations ＊Electricity

Distributed energy

R&D or capital investment in the promotion of various

systems, renewabledistributed energy resources, including solar power

energy, clean

generation, storage batteries, and electric vehicles, andtransportation

their integration and control using digital technology

Decarbonization of power sources＊
Capital investment / investment and loan for thedevelopment of renewable energy sources such as solar
Renewable energy

power, biomass, wind (including offshore wind), and smallhydropower
Investment and loan for new regional power companies*: Projects that could be used for green finance as well as transition finance

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Schedule-2 Transition Finance Framework Eligibility Assessment Protocol
The checklists (1-4) below are DNV evaluation procedures created for Toho Gas Green/Transition Finance Framework Eligibility Assessment 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 fundraiser), etc., and are provided by
Toho 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

Fundraiser’s
climatetransition
strategy andgovernance

The financing purpose should be for enabling afundraiser’s climate change strategy. A‘transition’ label applied to a debt financing
instrument should serve to communicate theimplementation of a fundraiser’s corporate
strategy to transform the business model in a
way which effectively addresses climaterelated risks and contributes to alignment withthe goals of the Paris Agreement.

Confirmed documents:- Framework- 6th Basic Energy Plan
- Transition Roadmaps
in the gas and power
sectors- Carbon Neutral
Challenge- Integrated Report2022- Toho Gas Group
Medium-Term
Management Plan
2022-2025- Toho Gas Group 2050
Carbon Neutrality
Initiative- Project list

Toho Gas has established a framework and has introduceda range of plans and initiatives to manage and enhancethe environmental sustainability and related performanceof the organization against Toho Gas Group’s wider
environmental strategy.

Suggested information and indicators•••

A long-term target to align with the goalsof the Paris Agreement (e.g. the objectiveof limiting global warming ideally to 1.5℃
and, at the very least, to well below 2℃);
Relevant interim targets on the trajectory
towards the longterm goal;
Disclosure on the fundraiser’s levers
towards decarbonisation, and strategicplanning towards a long-term target toInterviews with Toho Gas
stakeholders

Page 50 of 65

DNV has reviewed and confirmed that Toho Gas's targets
are consistent with the targets of the Paris Agreement,
based on the action to achieve carbon neutrality in 2050,
a science-based long-term target quantified by Toho Gas.
Toho Gas sets environmental corporate strategies that areimportant to its business model, by identifying risks andopportunities based on the scenario analysis using TCFD
guidance and grasping their impact.
Toho Gas presented a realization image and scenario ofachieving carbon neutrality in the "Toho Gas Group 2050
Carbon Neutrality Initiative" published in July 2021. The
long-term target is to achieve carbon neutrality by 2050,
which is consistent with the targets of the Paris
Agreement, and the medium-term targets for realizing thistarget are to contribute 3 million tonnes of CO2 reduction
in 2030 (compared to FY2020), to achieve a gas carbon

Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements••

Work Undertakenalign with the goals of the Paris
Agreement;
Clear oversight and governance oftransition strategy and,Evidence of a broader sustainability
strategy to mitigate relevant
environmental and social externalities andcontribute to the UN Sustainable
Development Goals.

DNV Findings
neutrality rate of at least 5%, and to handle 500,000 kW
of renewable energy. Toho Gas's realization image ofcarbon neutrality discloses specific technologies to be
introduced to realize the transition to carbon neutrality.
Toho Gas's Transition Strategy is aligned with the“Transition Roadmap in the Gas Sector” (The Ministry of
Economy, Trade and Industry), the “Transition Roadmap
in the Power Sector” (Agency for Natural Resources andEnergy), and the Carbon Neutral Challenge 2050 (TheJapan Gas Association), and incorporates the action planto achieve the targets set by utilizing TCFD guidance.
Furthermore, in the event of technological developmentsor changes in trends related to the transition strategy, orchanges in the external scenarios on which the transition
strategy is based, Toho Gas plans to revise the materiality
and review its climate change initiatives, including thetransition strategy, as necessary, and to disclose thedetails in a timely manner on Toho Gas’s website, etc.
Toho Gas identifies the promotion of carbon neutrality as
one of the materialities in the “Integrated Report 2022”,
while describes the promotion of carbon neutrality as oneof the four themes to be addressed during the mediumterm period (FY2022 to FY2025) in the “Toho Gas Group
Medium-Term Management Plan 2022-2025”. Measuresagainst climate change is recognized as one of the mostimportant issues in Toho Gas’s business, and structuresand mechanisms have been established to promote this at
the management level, including the implementation of
the transition strategy.
Toho Gas has expressed its aim to build an energy systemthat contributes to carbon neutrality based on gas,

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken

DNV Findingshydrogen, and electricity in order to become carbon
neutral throughout its supply chain, including its customer
locations, in the “Toho Gas Group 2050 Carbon Neutrality
Initiative”, etc. Based on this approach, Toho Gas aims topromote the various initiatives listed in the realization
image of carbon neutrality and, through these activities, tomake a broad contribution to the achievement of the SDGs
set by the United Nations.
Based on an assessment of the implementation plan
provided by Toho Gas under the Framework, the “Toho
Gas Group 2050 Carbon Neutrality Initiative” and Toho
Gas’s realization image and scenario of carbon neutrality,
DNV confirmed that it is well aligned with Toho Gas's
Transition Strategy. Through the assessment, DNV
confirmed that the implementation plan based on theTransition Strategy is reliable, ambitious and achievable.

2

Business model
environmental
materiality

The planned climate transition trajectory should
be relevant to the environmentally-material
parts of the fundraiser’s business model, taking
into account potential future scenarios which
may impact on current determinations
concerning materiality.

Confirmed documents:- Framework- 6th Basic Energy Plan
- Transition Roadmaps
in the gas and power
sectors- Carbon Neutral
Challenge- Integrated Report2022- Toho Gas Group
Medium-Term
Management Plan
2022-2025

Page 52 of 65

DNV evaluated whether the key activities associated withToho Gas's business activities correspond to Toho Gas’s
Transition Strategy, which was evaluated as contributing to
the environment.
The greenhouse gas emissions from Toho Gas’s value chain(FY2021) are as follows:
Scope 1, 2: 142 thousand t-CO2
Scope 3 Category 1, 2, 3, 4: 1.67 million t-CO2
Scope 3 Category 5, 6, 7, 9: 18 thousand t-CO2
Scope 3 Category 11: 9.59 million t-CO2

Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken--

DNV Findings

Toho Gas Group 2050
Carbon Neutrality
Initiative
Project list

Interviews with Toho Gas
stakeholders*Includes methane, fluorocarbons and other non CO2greenhouse gas emissions.
[Scope 1] Direct emissions by business operator[Scope 2] Indirect emissions accompanying use ofelectricity and heat supplied by other companies[Scope 3] Indirect emissions other than Scope 1 and 2(Emissions of others related to business activitiesof the operator)
Toho Gas's Transition efforts include not only CO2 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, Toho Gas's transition initiatives directly support thetransition of society as a whole, including its own company.
Toho Gas’s realization image of carbon neutrality is wellaligned with the “Transition Roadmap in the Gas Sector”(The Ministry of Economy, Trade and Industry), the“Transition Roadmap in the Power Sector” (Agency forPage 53 of 65

Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
Natural Resources and Energy), and the Carbon Neutral
Challenge 2050 (The Japan Gas Association), and its
specific implementation plans and targets are set andquantified in the absolute sense that they must be theoptimization to achieve them and the possibility of further
improvement.
DNV confirmed that Toho Gas's plan to implement its
Transition Strategy is closely linked to the activities of its
core business and to the activities that contribute to theCO2 emissions reduction of in society as a whole, thus
contributing to the environmental aspects of society as awhole and supporting the promotion of Toho Gas's
business.
Toho Gas's planned transition strategy and transition
pathway are associated with the materiality that Toho Gas
has achieved through GRI standards*1, TCFD, etc., and willcontribute to significant environmental benefits (impact) inboth qualitative and quantitative terms.
*1: Global Reporting Initiative (an international standard providing
ESG-related reporting, management and analysis methods)

3

Climatetransition
strategy to bescience-based
includingtargets andpathways

Fundraiser’s climate strategy should reference
science-based targets and transition pathways.
The planned transition trajectory should:••

be quantitatively measurable (based on ameasurement methodology which isconsistent over time);be aligned with, benchmarked orotherwise referenced to recognized,

Confirmed documents:- Framework- 6th Basic Energy Plan
- Transition Roadmaps
in the gas and power
sectors- Carbon Neutral
Challenge

Page 54 of 65

Toho 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 with the goalsof the Ministry of Economy, Trade and Industry, Agency
for Natural Resources and Energy, and the Japan Gas
Association.
DNV has confirmed that Toho Gas's Transition Strategy isquantified based on a consistent measurement
methodology with prescribed assumptions. The transition

Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements••science-based trajectories where suchtrajectories exist;
be publicly disclosed (ideally inmainstream financing filings), include
interim milestones, and;be supported by independent assurance orverification.

<Suggested information and indicators>
•

•
•
•
•

Short, medium, and long-term greenhousegas 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 3); and,Targets formulated both in intensity andabsolute terms.

Work Undertaken--

Integrated Report2022
Toho Gas Group
Medium-Term
Management Plan
2022-2025
Toho Gas Group 2050
Carbon Neutrality
Initiative

DNV Findings
targets were set out based on initiatives using TCFD, etc.,
which are consistent with the policies of the Ministry of
Economy, Trade and Industry, Agency for Natural
Resources and Energy, and the Japan Gas Association.
Specifically, Toho Gas set out the following transition
targets:
Targets up to FY2025
CO2 emission reduction contribution: ▲1
million tonnes (compared to FY2020)

Interviews with Toho Gas
stakeholders

Renewable energy sources handled:
Mediumterm
targets

250,000 kW
Targets up to 2030
CO2 emission reduction contribution: ▲3million tonnes*1 (compared to FY2020)
Gas carbon neutralization rate: At least
5%*2
Renewable energy sources handled:
500,000 kW

Long-

Targets for 2050

term

Carbon neutrality of the entire supply

targets

chain, including customer locations*1: Contribution to CO2 reduction through business activities(from FY2021)*2: Percentage of gas sold that is carbon neutral (assuming
various means such as methanation, etc., hydrogen use, biogas,
carbon neutral LNG, carbon recycling, overseas contributions,afforestation and forest protection, etc.)

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
Toho Gas's CO2 reduction include not only CO2 emission
reductions from its own business activities (Scope 1 and2), 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 thevarious plans and strategies for decarbonization in Japan.
In other words, Toho Gas's transition initiatives directly
support the transition of society as a whole, including its
own company as a company handling natural gases.
Toho Gas is promoting the advanced use of energy,
including the introduction of high-efficiency gas facilities,
and the carbon neutralization of gas while encouraging
customers fuel conversion to city gas, with the aim of
reducing CO2 emissions by 500,000 tonnes for a part of
Scope 3 emission equivalents (compared to FY2020) in
2030, and of contributing to society's overall CO2
reduction contribution of 3 million tonnes (compared to
FY2020).
A third-party assurance was obtained for the quantitative
information such as CO2 emissions from Toho Gas, which
is disclosed in the Integrated Report 2022 and on Toho
Gas's website.

4

Implementationtransparency

Market communication in connection with theoffer of a financing instrument which has theaim of funding the fundraiser’s climatetransition strategy should also provide
transparency to the extent practicable, of theunderlying investment program including

Confirmed documents:- Framework- Integrated Report2022- Toho Gas Group
Medium-Term

Page 56 of 65

DNV has confirmed that the investment and development
plan related to Toho Gas's Transition Strategy includes
agreement on future investment and expenditure.
Specifically, in order to address climate change-relatedrisks and opportunities, including the implementation of
the Transition Strategy, Toho Gas aims for a 1:1 ratio ofToho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements
capital and operational 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 other relevant
information indicating how this programsupports implementation of the transition
strategy, including details of any divestments,
governance, and process changes.

Work Undertaken--

Management Plan
2022-2025
Toho Gas Group 2050
Carbon Neutrality
Initiative
Project list

Interviews with Toho Gas
stakeholders<Suggested information and indicators>••

DNV Findings
core projects to strategic projects out of the JPY 230
billion of investments in the medium-term management
plan period covering FY2022 - FY2025, which includes
projects implemented with green/transition finance.
DNV has confirmed that the overall investment plan
(investment amount) for the future will be carried out inaccordance with the appropriate timeline, based on theinternal management system and processes, taking into
account CTF-1 to CTF-3.
Toho Gas plans to allocate to the nominatedgreen/transition eligible projects set out in Schedule-1 as
R&D, capital investments, investments and loans, andother related expenditures. Through the assessment, DNV
concluded that Toho Gas's transition strategy, in terms of
directly and indirectly supporting the decarbonization ofsociety as a whole, can be seen as a non-Business as
Usual concept.

Disclosure on the percentage ofassets/revenues/expenditures/divestmentsaligned to the various levers outlined in
Element 1 above
Capex roll-out plans consistent with theoverall strategy and climate science

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Schedule-3 Green Finance (Transition Finance with specific use of proceeds) Eligibility
Assessment Protocol
The checklist below (GBP/GLP-1 to GBP/GLP-4) is a DNV evaluation procedure created for Toho Gas Green/Transition Finance Eligibility Assessment(green/transition finance 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 fundraiser and is provided by Toho 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 that specifies the use of proceeds based on CTFH and CTFBG, so please read as the meaning of thegreen/transition as appropriate.

GBP/GLP-1 Use of Proceeds
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

1aTypes of funds

The types of green/transition finance areclassified into one of the following types
defined by GBP/GLP.
・ (Standard) Green/transition Bond/loan
・ Green/transition Revenue Bond/loan
・ Green/transition Project Bond/loan
・ Other

Confirmed documents:- Framework

Through the evaluation work, DNV confirmed that Toho Gas
Green/Transition Finance falls into the following categories.

Interviews with Toho Gas
stakeholders· (Standard) Green/transition bond/loan

The key to a transition finance is that theproceeds will be used for a transition
project, which should be properly statedin the legal documents relating to thesecurity/loan.

Confirmed documents:- Framework- Toho Gas Group 2050
Carbon Neutrality
Initiative- Project list

1b

Green/transition
Project
Classification

Interviews with Toho Gas
stakeholders

Page 58 of 65

DNV confirms that Toho Gas Green/Transition Finance isintended to finance a wide range of green/transition projects
focused on Toho Gas's environmental targets and transition
strategy, as described in the Framework and Schedule-1.
Specifically, all Green/Transition Finance Eligible Project
Candidates listed in Schedule-1 are evaluated as conforming
to the Transition Strategy, and the proceeds throughGreen/Transition Finance are planned to be financed one ormore of the Green/Transition Finance Eligible Project
Candidates. If a green/transition project is pre-selected beforeToho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
the financing is implemented, this will be disclosed in legal
documents.
Through the assessment, DNV concludes that theGreen/Transition eligible projects candidates will bringconcrete and actual environmental benefits.

1c

Environmental
benefits

All green/transition projects to which thefunds are used should have clear
environmental benefits, the effects ofwhich should be assessed by thefundraiser and, where possible,
quantitatively demonstrated.

Confirmed documents:- Framework- Toho Gas Group 2050
Carbon Neutrality
Initiative- Project list
Interviews with Toho Gas
stakeholders

1dRefinancing rate

If all or part of the proceeds are used or
may be used for refinancing, thefundraiser will indicate the estimatedratio of the initial investment to therefinancing and, if necessary. Therefore,
it is recommended to clarify which

Confirmed documents:- Framework- Project list
Interviews with Toho Gas
stakeholders

Page 59 of 65

Green/Transition projects will contribute to goals based on
Toho Gas’s Transition Strategy and contribute to low-carbon
or decarbonization that classified into the three business fields
listed in Schedule-1. The environmental benefit is the
reduction of CO2 emissions, which has been quantitatively or
qualitatively evaluated by Toho Gas.
DNV confirmed that, prior to the implementation ofgreen/transition finance, the project's environmental benefits
evaluation method (calculation method) and the items to bedisclosed are planned to be evaluated and reported
quantitatively as indicators and CO2 emission reductions
according to the project's characteristics in the annual report.
(If it is difficult to evaluate the quantitative CO2 emission
reductions due to the characteristics of the project, Toho Gas
will report the project outline and the status of R&D anddemonstration to the extent practicable).
Toho Gas plans to allocate all of the proceeds to newinvestment, refinancing, or both, in one or more of the eligible
project candidates included in Schedule-1. If it is clear inadvance, prior to the implementation of the financing,whether the financing will be used for new investments orrefinancing, this will be disclosed in legal documents. If it is
not yet clear, the fundraiser plans to disclose the estimatedToho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken

investment or project portfolio is subject
to refinancing.

DNV Findings
amount (or percentage) of the proceeds used for refinancing
through reporting (annual report).

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

Criteria

Requirements

Work Undertaken

DNV Findings

2aProject
selection
process

Green/transition finance fundraisers should
provide an overview of the process of qualifying
projects for which green/transition financefunding will be used. This includes (but is not
limited to):・ The process by which the fundraiser
determines that the project in question is
included in the business category of aqualified green/transition project.
・ Creation of criteria for eligibility of projects
for which green/transition finance funding will
be used・ Environmental sustainability goals
In addition to criteria and certifications, theinformation published by fundraisers regarding
the green/transition finance process also
considers the quality of performance of thefundraiser's framework and environmental
sustainability.

Confirmed documents:- Framework

DNV confirmed that the fundraiser has a process ofdetermining the eligibility of projects for which thegreen/transition finance, and that the outline is
specified in the framework.

2b

Fundraisers'
Environment
al and Social
Governance
Framework

Interviews with Toho Gas
stakeholders

Confirmed documents:- Framework- Toho Gas Group Medium-Term
Management Plan 2022-2025
Interviews with Toho Gas
stakeholders

Page 60 of 65

Specifically, the Finance Department will take thelead in selecting the eligible projects, in consultation
with the Planning Department and the CSR &Environment Department, and after evaluating theenvironmental benefits of each project, the Finance
Officer will make the final decision.

Toho Gas complies with environment-related laws,
ordinances and regulations, and considers that theeffects of environmental benefits such as CO2
reduction are clear in the entire life cycle or eachprocess when selecting green/transition projects tobe implemented.
In the operation and implementation of the project,
each of the departments involved is committed toToho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
the preservation of the surrounding environment.
The following exclusion criteria have been set.
・ Inappropriate relationships such as unfair trade,
bribery, corruption, extortion, embezzlement, etc.
that do not comply with the laws and regulations of
the country of the location
・ Transactions that could cause human rights,
environmental, or other social issues
DNV has confirmed that the green/transition projects
implemented by Toho Gas are consistent with Toho
Gas's management and environmental policies, aswell as with the transition strategy, goals, andpathways.

GBP/GLP-3 Management of Proceeds
Ref.

Criteria

3a

Tracking
procedure-1

Requirements

Work Undertaken

DNV Findings

The net proceeds from of green/transition financeshould be managed in sub-accounts, included in
sub-portfolio, or otherwise tracked. It should also
be certified by the fundraiser in a formal internal
process related to the fundraiser's investment andfinancing operations for the Transition Project.

Confirmed documents:- Framework- Allocated proceeds
management list

DNV has confirmed that the proceeds by thegreen/transition finance can be tracked in line withToho Gas’s internal system, etc., and proved based on
the review of systems actually in use and documents
through the assessment.

Interviews with Toho Gas
stakeholders

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

3b

Tracking
procedure-2

Requirements

Work Undertaken

DNV Findings

During the green/transition finance redemption
period, the balance of funds raised that is being
tracked should be adjusted at regular intervals tomatch the amount allocated to eligible projects
undertaken during that period.

Confirmed documents:- Framework- Allocated proceeds
management list

DNV confirmed that Toho Gas’s Finance Department
plans to review the outstanding balance of thegreen/transition finance by using the internal systemand the allocated proceeds management list describedin 3a on an annual basis during the period from theimplementation of the green/transition finance to its
redemption or repayment.

Interviews with Toho Gas
stakeholders

3cTemporaryholding

If no investment or payment has been made in aqualified green/transition project, the fundraiser
should also inform the investor of the possible
temporary investment method for the balance of
unallocated proceeds.

Confirmed documents:- Framework- Allocated proceeds
management list
Interviews with Toho Gas
stakeholders

Page 62 of 65

DNV confirmed that the confirmation process throughToho Gas’s internal system and the allocated proceeds
management list are structured to ensure that thebalance of unallocated proceeds is recognizedsequentially.
DNV confirmed through the framework and assessmentthat the balance of unallocated proceeds will be
managed in cash or cash equivalents, and that in theunlikely event of a significant delay in the scheduled
date of allocation, this would be reported in thereporting or otherwise, together with the reasons forthe delay. DNV also confirmed that the balance of
unallocated proceeds will be disclosed through reportingon the allocation status of proceeds.

Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

GBP/GLP-4 Reporting
Ref.

Criteria

4aPeriodical
Reporting

Requirements

Work Undertaken

DNV Findings

In addition to reporting on the use of proceeds andthe temporary investment of unallocated proceeds,
the fundraiser will consider each project at least
once a year for projects to which theGreen/transition Finance proceeds have been
allocated, taking into account the following: A listof each project should be provided.
-Confidentiality and competitive considerations-Outline of each project, expected sustainable
environmental and social effects

Confirmed documents:- Framework

DNV confirmed that Toho Gas will carry out green/transition
finance reporting (annual reporting) and disclose information on
the allocation status of proceeds, projects for which proceeds
have been allocated, and environmental benefits. With regard to
the allocation status of proceeds, the following items are disclosed
until the full amount of proceeds has been allocated to eligible
projects. For environmental benefits, any or all of the items in thetable below will be disclosed for the period from theimplementation of the green/transition finance to the completionof the redemption or repayment, as long as is reasonably
practicable.

Interviews with Toho
Gas stakeholders

DNV also confirmed that, in the event of a material change in the
project for which the proceeds are to be used, disclosure will bemade promptly regarding such change and unallocated proceeds
even after the completion of the allocation of proceeds.
The report will be published on the Toho Gas website.
<Allocation status>
 Amount of allocated proceeds
 Estimated amount of unallocated proceeds, estimatedtime of allocation
 Estimated amount or percentage allocated to refinancing<Environmental benefits>
Business Category
Gas

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Impact Reporting Items
・ Overview of each projectToho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
・ Progress in R&D, capital
investment, etc.
・ Annual CO2 emission
reductions from each project(t-CO2/year)
Hydrogen・ Overview of each project・ Progress in R&D, capital
investment, etc.
・ Annual CO2 emission
reductions from each project(t-CO2/year)

Electricity

・ Overview of each project(Distributed

・ Progress in R&D, capitalenergy systems,

investment, etc.

renewable energy,

・ Installed capacity

clean

・ Annual CO2 emission

transportation)

reductions from each project(t-CO2/year)

Electricity

・ Overview of each project(Renewable

・ Progress in R&D, capitalenergy)investment, etc.
・ Installed capacity
・ Annual power generation

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Toho Gas Co., Ltd. Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
・ Annual CO2 emission
reductions from each project(t-CO2/year)

Page 65 of 65