Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

SECOND PARTY OPINIONOSAKA GAS CO., LTD.
Daigas Group
GREEN/TRANSITION FINANCE FRAMEWORK
Prepared by: DNV Business Assurance Japan K.K.
Location: Kobe, Japan
Date: March 10, 2022
Ref. Nr.: PRJN-333926-2022-AST-JPN-1

This report was prepared in the “Climate Transition Finance Model Project in FY2021 (Investigation of ideal
way of Transition Finance)” which is a commissioned project by the Ministry of Economy, Trade and Industry.

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Executive Summary
Osaka Gas Co., Ltd. (hereinafter, "Osaka Gas", including the Daigas Group) was establishedin 1897. Currently, the Daigas Group consists of three major business segments: Domestic
Energy business, Overseas Energy business, and Life & Business Solutions business (LBS),
mainly in the Kinki region.
The Daigas Group has formulated the “Daigas Group Carbon Neutral Vision” in 2021 todemonstrate its efforts to achieve carbon neutrality by 2050. Under the “Daigas Group
Carbon Neutral Vision”, the Daigas Group, as an innovative energy services company, will
provide solutions for the realization of a sustainable society by decarbonizing the raw
materials for city gas and introducing renewable energy. In addition, one of the key
initiatives in the Daigas Group Medium-Term Management Plan 2023, which was formulated
in 2021, is the realization of a low and decarbonized society. In this plan, the Daigas Group's
strengths are used to specify targets for 2030 and initiatives for 2050.
In promoting these efforts, Osaka Gas has formulated a "Roadmap to Carbon Neutrality". In
order to achieve carbon neutrality, Osaka Gas will promote various research anddevelopment activities, demonstrations, and the introduction of technologies and facilities,
and will also promote the reduction of CO2 emissions through the use of low-carbon
technologies in the medium term until practical application, and these efforts are in line withthe concept of Climate Transition. The "Roadmap to Carbon Neutrality" is consistent with theJapan Gas Association's Carbon Neutral Challenge 2050 Action Plan and with the roadmaps
for the gas and electricity sectors developed by Ministry of Economy, Trade and Industry inJanuary 2022 to promote transition finance. In addition, it includes representative green
projects as presented in the widely recognised international green finance framework.
Osaka Gas has established Daigas Group Green/Transition Finance Framework (hereinafter,"Framework") to procure investment funds that contribute to the realization of the “Daigas
Group Carbon Neutral Vision” is carried out in a manner that conforms to the internationallyrecognized framework.
DNV Business Assurance Japan K.K. (hereinafter, "DNV"), as an external reviewer,
evaluated the eligibility of the framework and the Osaka Gas Transition Bond (to be issued
after May 2022).
Specifically, DNV provided the eligibility evaluation for frameworks against the following
handbook, principle and guidelines which are widely recognized:- Climate Transition Finance Handbook (International Capital Market Association, 2020,
hereinafter CTFH)- Basic Guidelines on Climate Transition Finance (Financial Services Agency, Ministry of
Economy, Trade and Industry, Ministry of the Environment, 2021 hereinafter, CTFBG)- Green Bond Principles (International Capital Market Association, 2021 hereinafter GBP)
- Green Bond Guidelines (Ministry of the Environment, 2020, hereinafter GBGLs)- Green Loan Principles (Loan Market Association (LMA) and others, 2021 hereinafter GLP)
- Green Loan Guidelines (Ministry of the Environment, 2020, hereinafter GLGLs)

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

The following is a summary of the assessment results for each common element indicated in
the above framework. Followings (CTF-1 ~ CTF-4) are findings and opinions of DNV against
the four common elements of the CTFH and CTFBG (disclosure elements); Followings(GBP/GLP-1 ~ GBP/GLP-4) are findings and opinions of DNV against the elements of
GBP/GBGLs and GLP/GLGLs as a transition finance with Use of Proceeds.

<CTF Eligibility assessment results>
CTF-1. Issuer’s Climate Transition Strategy and Governance:
The transition strategy of the issuer Osaka Gas sets carbon neutrality in 2050 as along-term goal consistent with the goals of the Paris Agreement set forth in the“Daigas Group Carbon Neutral Vision”. This is in line with the pathway of the Japan
Gas Association's Carbon Neutral Challenge 2050 Action Plan and the Ministry of
Economy, Trade and Industry's roadmap for the gas and electricity sectors. In
addition, Osaka Gas's Transition Strategy will contribute to the realization of supplyside and demand-side carbon neutrality as a key initiative presented in various plans
and strategies for decarbonization in Japan. In terms of governance and disclosure
related to implementation of the finance, an internal structure and information
disclosure process based on TCFD*1 have been established. These are disclosed in theframework and other documents, and meet the disclosure elements of CTF-1. *1: Task

Force on Climate-related Financial Disclosures

CTF-2. Business model environmental materiality︓
The environmental materiality of Osaka Gas's business model is closely related to three
initiatives related to the materiality identified as "climate change" under the Osaka Gas
Charter of Business Conduct, "Contributing to the Sustainability of the Environment andSociety": 1) achieving carbon neutrality, 2) the provision of clean energy and the
expansion of the renewable energy value chain, and 3) the advanced use of natural gas
and the promotion of environmental products. Materiality is identified by using the GRI
Standards*1, ISO 26000, TCFD, etc., and scoring the materiality of the two aspects ofsocial and environmental impact and the future financial impact of the Group, of which"climate change" is shown to be if high materiality. In addition, efforts to addressenvironmental materiality include not only the reduction of CO2 emissions from thecompany's own business activities, but also activities that contribute to Scope 3 and theCO2 emission reduction of other companies. In addition, the contribution to the SDGs
(see below) is also taken into account. These are disclosed in the framework and otherdocuments, and meet the disclosure elements of CTF-2.
*1: Global Reporting Initiative (an international standard providing ESG-related reporting, management and analysis
tools)

CTF-3. Climate transition strategy to be ‘ science-based ’ including targets andpathways︓
Osaka Gas' Transition Strategy is defined by science-based targets and pathways.
Specifically, it is consistent with the roadmaps for the gas industry and the electricity
sector of the Japan Gas Association and the Ministry of Economy, Trade and Industry(METI) as described in CTF-1, and in addition to reducing CO2 emissions from thecompany'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 ofachieving these targets is clarified. These are disclosed within the framework, otherdocuments and second party opinion, and meet the disclosure elements of CTF-3.
CTF-4. Implementation transparency:
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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Osaka Gas plans to invest a cumulative total of 2 trillion yen from fiscal 2017 to 2030 inquality improvement, growth and M&A, including the implementation of its transition
strategy. In the fiscal years 2021-2023, Osaka Gas plans to invest 737 billion yen (237billion yen for quality improvement and 500 billion yen for growth (including 120 billion
yen for renewable energy)), which includes projects implemented with green/transition
finance. DNV has confirmed that the overall and individual investment plans to achieve
the carbon neutral vision in the future will be implemented in accordance with theappropriate timeline, based on the internal management system and processes, taking
into account CTF-1 to CTF-3, for the investments required to implement the transition
strategy. These are disclosed in the framework and other documents and this second
party opinion and meet the disclosure elements of CTF-4.
<GBP/GLP Eligibility assessment results>
GBP/GLP-1. Use of Proceeds:
Osaka Gas defines the eligible criteria for the use of proceeds as projects(green/transition projects) that contribute directly or indirectly to the realization oftransition strategies and goals. Specifically, the eligible criteria are indicated by theeligible project categories classified into the initiatives 1) to 3) shown in Table-1, andthe proceeds will be allocated to finance or refinance existing expenditures for one ormore research and development, business development, construction, operation,
refurbishment and other related expenditures. DNV has confirmed that thesegreen/transition projects are consistent with the elements of CTF-1 to 4. Transition
projects have been evaluated by Osaka Gas as having a clear environmental benefit on
the transition strategy and are expected to contribute directly and indirectly to the
SDGs. These processes are in line with GBP-1. Table-2 provides an overview of the fiveprojects for which the proceeds by the transition bond are planned to be allocated.
Table-1 Osaka Gas Green/Transition Finance Eligibility Criteria and Project Overview(Please see text for details)
Eligible Criteria
1)

Decarbonizationof gas energy

2)

Decarbonizationof power
generation

3)

Lowcarbonization

Eligible Criteria & Project Overview

Hydrogen utilization- Methanation, direct use (chemical looping combustion
technology), etc.

Biogas- On-site utilization in domestic/global scale

Renewable power
generation- Solar power plants, onshore wind farm, offshore wind
farm, biomass power plants, etc.

Thermal power
generation- Use of carbon neutral fuels such as synthetic methane,hydrogen and ammonia, CCUS (Carbon Capture,
Utilization and Storage), etc.

Fuel Cell- Enhancing efficiency and downsizing, etc.

Advanced utilizationof natural gas and
CHP- Support for converting fuel from oil and coal to naturalgas- Demonstration of building micro grid
- Use of carbon neutral LNG

Advanced energyuse- VPP, smart energy systems, etc.

Other
(Reduction of CO2
emission associatedwith own activities)- Cryogenic power generation in the city gas production
process, Cryogenic power generation facilities, energy
efficiency renovation work of buildings, etc.

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

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Osaka Gas will confirm that the transition project meets the GBP-1 eligibility project
categories, and that potentially negative environmental and social considerations aretaken into account, and the procedures such as facility certification, permits, andenvironmental assessments are appropriate in the region where the project is to be
implemented. Specifically, eligible projects are made list by the Finance Department andfinalized by the Finance Director after consultation with the Business Unit and Planning
Department. These processes are in line with GBP-2.
GBP/GLP-3. Management of Proceeds:
The proceeds are managed by the Finance Department on an annual, project-by-projectbasis, using an internal system and dedicated ledgers. The proceeds are managed in
cash or cash equivalents in an amount equal to the unallocated proceeds until the fullamount of the proceeds has been allocated.
GBP/GLP-4. Reporting:
Until the full amount of the proceeds is allocated to eligible projects, Osaka Gas will
disclose the status of the allocation (allocated/unallocated amount, new/refinanced) on
the Osaka Gas website. In addition, the overview of the projects that have been
allocated and the environmental benefits will be disclosed on the Osaka Gas website to
the extent practicable (for projects under construction, the progress and expectedenvironmental benefits will be included). Furthermore, any changes to the transition
strategy or pathway, or significant changes to the allocation plan or actual results will bereported in a timely manner or in reporting.
Based on an assessment of the framework and other relevant documents and information
provided by Osaka Gas, DNV has confirmed that the framework meets the criteria required by
the relevant framework and eligibility as transition finance. It was also confirmed that thetransition bond to be implemented this time would be appropriately planned and implemented
in accordance with the framework.

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Table-2 Transition bonds (to be issued after May 2022) Overview of transition projects
No.

Classification

01

2)*

02

03

2) *

2) *

Transition project overview
 Project Name: Inami Wind Power
Plant (Onshore Wind Farm) Project Overview: Inami-cho,
Hidaka-gun, Wakayama Prefecture,
Output is 26,000kW (2,000kw/unit x
13 units)
 Start of operation: 2018 (inoperation)
 Amount to be allocated: 4.5 billion
yen (refinancing) Environmental benefits (CO2emission reduction): approx. 23,000
t-CO2/year (result of FY2020)
 Project Name: Daigas Oita Mirai
Solar Power Plant (Nissan Green
Energy Farm in Oita) (Solar power
generation plant) Project Overview: Oita City, Oita
Prefecture, Output is 26,540kW
 Start of operation: 2013 (inoperation) * Acquisition of all sharesby Gas & Power Co., Ltd. (nowDaigas G&P Solutions) in 2019
 Amount to be allocated: 1.5 billion
yen (refinancing) Environmental benefits (CO2emission reduction): approx. 21,000
t-CO2/year (result of FY2020)

 Project Name: Noheji Mutsu Bay
Wind Farm (Onshore Wind Farm) Project Overview: Noheji-machi,
Kamikita-gun, Aomori Prefecture,
Output is 39,600 kW (3,600 kW
class/unit x 11 units) Planned start of operation: in
2022 (under construction)
 Amount to be allocated: 1.5 billionyen Environmental benefits (CO2emission reduction): approx. 22,000
t-CO2/year (estimated value)

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Inami Wind Power Plant(Onshore wind power)

Daigas Oita Mirai Solar Power
Plant(Nissan Green Energy Farm In
Oita)(Solar power)

Noheji Mutsu Bay Wind Farm
(Onshore wind power)

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

04

2) *

 Project Name: Yokohama Town
Wind Farm (onshore wind power
generation)
 Project Overview: Yokohamamachi, Kamikita-gun, Aomori
Prefecture, Output is 43,200 kW(3,600 kW class/unit x 12 unit) Planned start of operation: in
2023 (under construction)
 Amount to be allocated: 1.5 billion
Yokohama Machi Wind Farm
(Onshore wind power)yen Environmental benefits (CO2emission reduction): approx. 31,000
t-CO2/year (estimated value)05
3) Project Name: Shikoku Central
Energy Natural Gas Supply Project Project Overview: Construction of
an LNG satellite terminal at the East
Wharf of Mishima-Kawanoe Port in
Shikokuchuo City, Ehime Prefecture,
Natural gas supply business forvarious industries (contribution to
No Imagefuel conversion) Planned start of operation: Supply
start will be scheduled in 2022
 Amount to be allocated: 1.0 billionyen Environmental benefits (CO2emission reduction): approx. 23,000
t-CO2/year (estimated value)*Green projects are marked with an asterisk (*) in the table : Projects that qualify as green projects can be
included in green bonds in the future, and in addition, projects that qualify as green projects are allowed in
the CTFBG to be included as part of transition bonds.
(The images and diagrams shown are representative of the project.)

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Contents
Executive Summary

2

I. Introduction

9

II.

21

Scope and objectives

Ⅲ. Responsibilities of Osaka Gas and DNV

22Ⅳ. Basis of DNV’s opinion

22

V. Work Undertaken

24

Ⅵ. Findings and DNV's opinion

25

Ⅶ. Assessment Conclusion

38

Schedule-1 Osaka Gas Transition Finance Eligible Project Candidates

40

Schedule-2 Climate Transition Finance Eligibility Assessment Protocol

42

Schedule-3 Green Bond (Transition Finance with specific use of proceeds) Eligibility Assessment
Protocol50

Schedule-4: Basic Guidelines on Climate Transition Finance Eligibility Checklist

57

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

88

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

103

Schedule-7 Climate Bonds Standard & Certification Scheme Sector Criteria for Solar (version 2.1)

119

Schedule-8 Climate Bonds Standard & Certification Scheme Sector Criteria for Onshore Wind Sector
Wind Sector Eligibility Criteria of the Climate Bonds Standard Version 1.2
List of reference materials

122
124

Revision history
Revision
number0

Date of issue
28/2/2022

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 thaterrors or irregularities, possibly significant, may not have been detected. Limited depth of evidence gathering including inquiry and analytical procedures and limited
sampling at lower levels in the organization were applied as per Scope of work. DNV expressly disclaims any liability or co-responsibility for any decision a person or anentity may make based on this Statement.

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

1

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

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

I. Introductioni.

About the Issuer
Osaka Gas Co., Ltd. (hereinafter, "Osaka Gas", including the Daigas Group) wasestablished in 1897. Currently, the Daigas Group consists of three major businesssegments: Domestic Energy business, International Energy business, and Life &Business Solutions business (LBS), mainly in the Kinki region (west Japan, around
Osaka area).
Domestic Energy Business: Gas

Production, supply and sales of city gas,sales of gas appliances, gas piping work,
LNG sales, LPG sales, industrial gas sales: Electricity Power generation and sales of electricity
International Energy Business: Development and investment related tonatural gas and oil, energy supply, LNG
transportation

Life & Business Solutions Business : Development and leasing of real estate,
information processing services, sales offine materials and carbon products

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

ii.

Issuers' initiatives for ESG/SDGs
The Daigas Group has revised the “Daigas Group Charter of Business Conduct” andformulated the “Daigas Group Human Rights Policy” as part of its Medium-Term
Management Plan 2023, and is conducting ESG-conscious management. In addition,
the Daigas Group is working to create "Creating Value for a Sustainable Future"
based on the three pillars of "Achieving a Low Carbon/Carbon Neutral Society”,"Establishing Lifestyles and Businesses Adjusted to the New Normal" and "Enhancing
Resilience of Customers and Society”. These initiatives are linked to the materiality
issues shown in Table-1, and the Daigas Group also aims to make a broad
contribution to the achievement of the Sustainable Development Goals (SDGs) set by
the United Nations.
Of these, the important issue (materiality) primarily relevant to Transition Finance isclimate change (Value for a Sustainable Future: Achieving a Low Carbon/Carbon
Neutral Society), as set out in the Daigas Group Charter of Business Conduct: "Contributing to the Sustainability of the Environment and Society".
Table-1: Relationship between the Daigas Group Charter of Business Conduct,
Materiality and Creating Value for a Sustainable Future and the SDGs
Charter of Business
Important issues
Value for aContribution to SDGs
Conduct(Materiality)
Sustainable Future

I

Creating value forcustomers

Maintain and expand
customer base
Improvement ofcustomer satisfaction
and quality of services
Customer health andsafetyStable supply ofservices

II

III
IV
V

VI

Contributing to
the sustainabilityof theenvironment andsociety
Engaging withand contributing
to society
Respecting
human rights
Complying withlaws andregulations
Providing work
environment that
supports
employees’
personal growth

Climate change

Establishing
lifestyles andbusinesses adjusted
to the new normal
Enhancingresilience ofcustomers andsociety
Achieving a low
carbon/carbon
neutral society

Coexistence with local
community
Supply chain
management
Compliance
Employee
Engagement
Development of
employee skills
Diversity and inclusion

Building
foundations that
support therealization of value
for a sustainable
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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinioniii. Issuer's Environmental Initiatives

The Daigas Group has formulated the “Daigas Group Carbon Neutral Vision” in 2021
to demonstrate its efforts to achieve carbon neutrality by 2050. Under the “Daigas
Group Carbon Neutral Vision”, the Daigas Group, as an innovative energy services
company, will provide solutions for the realization of a sustainable society bydecarbonizing the raw materials for city gas and introducing renewable energy.
In addition, one of the key initiatives in the Daigas Group Medium-Term
Management Plan 2023, which was formulated in 2021, is the realization of a low
and decarbonized society. In this plan, the Daigas Group's strengths are used to
specify targets for 2030 and initiatives for 2050. (Table/Figure-2).
These visions and plans approach not only the CO2 emission reduction of Scope 1 to
3 (Figure-2) towards carbon neutrality in the Daigas Group's businesses, but also
the contribution to the CO2 emission reduction for society as a whole.
Table/Figure-2 The challenge of carbon neutrality in 2050

1

Initiatives
 Development of methanationand other technologies forthe decarbonization of city
Striving to becomegas feedstock
carbon neutral in Practical application of
Daigas groupmethanation in 2030 (citybusiness throughgas pipeline injection)
innovation
 Decarbonization of thepower sources with a focus
on the introduction ofrenewable energies2

 Promoting maximum
contribution to CO2 emission
reduction before theestablishment ofdecarbonization technologies
 Promotion of advanced useof natural gas, expansion of
LNG use overseas andspread of renewable energy

Contributing to
the reduction of
CO2 emissions
throughout
society

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Target2050
Carbon neutral





2030
Renewable development
contribution on a global basis :5GWPower portfolio in Japanconsisting of renewable2 :Nearly 50%
CO2 emission reduction
contribution : 10 million
tons/year (compared to 2016)

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

In order to achieve carbon neutrality, Osaka Gas will promote various research anddevelopment, demonstrations, and the introduction of technology and facilities, aswell as promote the reduction of CO2 emissions through the use of low-carbon
technologies in the medium term until practical application.
In promoting these efforts, Osaka Gas has developed a "Roadmap to Carbon
Neutrality" (hereinafter, "Roadmap") (Figure-1).

Figure 1: Daigas Group roadmap to carbon neutrality

Scope15,215,428

Scope2
297,386

Scope3

Scope1

22,270,832

Scope2
Scope3

Target Scope

Results for FY2020

Scope15,215, 428 t-CO2e

19%

Scope2

297,386 t-CO2e

1%

Scope3

22,270,832 t-CO2e

80%

Total

27,783,646 t-CO2e(100%)

Figure-2: Daigas Group greenhouse gas emissions (Scope 1 to 3)
Source: Daigas Group website Environmental performance data (emissions to the atmosphere)<Osaka Gas's approach to Scope 1 to 3 emissions>
Scope1: Direct emissions from own operations (gas production, power generation, etc.) (combustion ofgas for power generation, etc.)

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Scope2: Indirect emissions from own operations (gas production, power generation, etc.) (use ofelectricity supplied by other companies, etc.)
Scope3: Indirect emissions from value chains other than Scope 1 and Scope 2 (e.g., fuel procurement,
combustion of gas at destination)
Table-2 Osaka Gas’s Participation in External Initiatives and Efforts
External initiatives

Osaka Gas’ Efforts

UN Global Compact

In 2007, Osaka Gas became the first Japanese public interest
company to join the UN Global Compact. Supporting theprinciples that we should work towards as a good member ofthe international community

Sustainable
Development Goals(See Table-1) Declaration of proactive efforts to contribute to
the achievement of the SDGs by promoting business activities
aimed at realizing "Value for a Sustainable Future".

(SDGs)
Task Force on Climaterelated Financial
Disclosures (TCFD)

Osaka Gas endorses the TCFD recommendations and will use
them as a benchmark for verifying its response to climatechange. Osaka Gas is also a member of the TCFD Consortium,
which is discussing efforts to disclose information on climatechange response in line with the TCFD recommendations.

Challenge Zero

Osaka Gas has decided to support “Challenge Zero (Challenge
Net Zero Carbon Innovation)” which is a new initiative of Nippon
Keidanren (Japan Business Federation) that strongly promotes
and encourages the innovation actions that companies andorganizations are taking on, both domestically andinternationally, with the aim of realizing a "decarbonizedsociety," which is the long-term goal of the Paris Agreement,
the international framework for combating climate change.
Osaka gas also participated in the "Companies Taking on the
Zero-Emission Challenge” in 2021.

iv. About the Green/Transition Finance Framework
In order to promote the environmental initiatives, set out in the “Daigas Group Carbon
Neutral Vision”, Osaka Gas has issued transition finance for transition activities torealize the Carbon Neutral Challenge 2050*1 set out by the Japan Gas Association(JGA) and the sector-specific technology roadmap*2*3 set out by the Ministry of
Economy, Trade and Industry (METI). Also, Osaka Gas engaged in dialogue withinvestors and a wide range of marked participants and has established the Osaka Gas
Green/Transition Finance Framework (hereinafter, "Framework") in order to carry out
funds for in a manner that conform to the internationally recognized frameworks.
The framework which this framework specifically refers to is described in (3) of Section
II below.
*1: Japan Gas Association: Carbon Neutral Challenge 2050 on 24th November 2020
*2: Ministry of Economy, Trade and Industry (METI): Technology roadmap for the gas sector on"Transition Finance" on February 2022.
*3: Agency for Natural Resources and Energy, Electric Infrastructure Division: Transition Roadmap
for the Electricity Sector on February 2022.

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinionv.

Issuer’s transition strategy for decarbonization(1)

Strategies by sector (industry) at the international/national/regional level

Figure-3 shows the scenarios for gas
carbon neutrality set out in the"Carbon Neutral Challenge 2050"
developed by the Japan Gas
Association in November 2020.
Figure-4 shows the technology
roadmap by sector (gas) of the
Ministry of Economy, Trade andIndustry (METI).
The Japan Gas Association's scenario(Figure-3)/the METI's technology
roadmap by sector (gas) (Figure-4.12/3) and Osaka Gas's roadmap (Figure-1)
are well aligned, and it is designed to reduce
CO2 emissions throughout the entire gas
supply chain, including demand-side, supplyside, CCUS and overseas contribution
initiatives.

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

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
recognised as a typical transition project. According to METI's technology roadmap for thegas sector (Figure-4.1 1/3), the progress of fuel conversion in society as a whole will leadto an increase in gas demand (consumption and sales) for gas utilities, which in turn willlead to an increase in supply-side (gas utility) CO2 emissions (increase in Scope 3) in the
short to medium term.

In other words, while Osaka Gas is working to reduce CO2 emissions in its gas businessthrough the introduction of high-efficiency gas appliances and other measures (Figure-4.13/3), its Scope 3 CO2 emissions are expected to increase due to the relatively large amountof natural gas supplied for fuel conversion. Osaka 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 the introduction of high-efficiency gas appliances, etc. (the introductionof technologies and equipment that will contribute to the reduction of the supply of lowcarbon gas in the future) will also contribute to the reduction of Scope 3.

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Furthermore, in addition to the gas business, Osaka Gas is actively involved in the electric
power business as an innovative energy and service company. Osaka Gas recognizes theimportance of building a system for supplying electricity from renewable energy sources
until the technology necessary to achieve a decarbonized society 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 body energy throughmethanation, etc. (For details, see Table-3 below and Figure-4.2).
Osaka Gas's policy on renewable energy in its roadmap, as well as its contribution to thedissemination of renewable energy (5 million kW) and the renewable energy ratio (50%*of the domestic electricity business provided by Osaka Gas) as set out in its FY2030
target, are considered to be closely related to the renewable energy of Ministry of
Economy, Trade and Industry's transition roadmap for the electricity sector (Figure-4.2).

Image of Fuel conversion to natural gas

CO2 emission
from the whole society

CO2 emission reduction(Demand side)

CO2 emission increment(Supply side)

Figure-4.1(1/3) Ministry of Economy, Trade and Industry Technology roadmap for the gas sector(contribution to CO2 emission reduction of demand-side)

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Figure-4.1(2/3) Ministry of Economy, Trade and Industry Technology roadmap for the gas sector(city gas, LP gas, common technologies)
Provisional translation by DNV based on the Japanese version

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Figure-4.1 (3/3) Ministry of Economy, Trade and Industry Technology roadmap for the gas sector (development
and diffusion of highly-efficiency gas cogeneration)
Technology roadmap for gas sector related to transition finance on February 2022, Ministry of
Economy, Trade and Industry

RenewableenergyContinuous
introduction isrequired for theentire period up
to 2050 (solid
red line: practicalapplication andintroduction
phase)

Figure-4.2 Ministry of Economy, Trade and Industry Technology roadmap for the electricity sector
Agency for Natural Resources and Energy, Electric Infrastructure Division Transition Roadmap for
the Electricity Sector on February 2022
Provisional translation by DNV based on the Japanese version

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion(2) Issuer's transition strategy
Osaka Gas has positioned its transition strategy as a way to achieve its mid-termand long-term goals by embodying the transition initiatives outlined above by theJapan Gas Association and the Ministry of Economy, Trade and Industry, in line withthe goals of the Paris Agreement, as well as the efforts to achieve carbon neutrality
in 2050 as outlined in the “Daigas Group Carbon Neutral Vision” and Roadmap.
These targets will contribute to (and support) the achievement of supply-side anddemand-side carbon neutrality as a key initiative outlined in Japan's various
decarbonization plans and strategies.
Table-3 shows the Osaka Gas transition targets, and Figure-5 shows the concept ofeach Scope and contribution of CO2 emission reduction for the mid-term targets. In
addition, Figure-6 shows the roadmap for the transition to carbon neutrality,
including the outline of the transition strategy, specific initiatives and timeline, andTable-4 shows the main initiatives for achieving carbon neutrality.
Although the transition strategies of the Japan Gas Association and the Ministry of
Economy, Trade and Industry (METI) do not set clear interim targets (base year,
specific quantified reduction targets, etc.), Osaka Gas has set the short-, mid- andlong-term targets required by the transition strategies from the perspective of its
own activities and contribution to society, together with specific management
strategies and business plans.
Table-3 Osaka Gas Transition Targets
Medium-termtargets

FY2030Long-term
targets

2050

Renewable development contribution on a global basis : 5GW
Power portfolio in Japan consisting of renewable*1 : Nearly 50%
CO2 emission reduction contribution : 10 million tons/year*2*3(compared to 2016)

Carbon-neutral

1: Including solar, wind, biomass power sources which are eligible for the feed-in tariff (FIT) scheme
2: Equivalent to one third of the CO2 emission currently produced in our business and by our customers (33 million
ton/year)
3: Includes 700,000 tonnes of a partial reduction of Scope 3 emissions equivalent through introduction of highefficiency gas appliances, etc.
Contribution social CO2 emission reduction
by replacing low carbon energy system

10,000kt
Avoided emission

Avoided emission as of 2030 in mideum-term targets
31,760kt

Increase Scope3 due to cogeneration installation

4,360kt
FY2016

Osaka Gas Group(Scope1+2)

FY2030

Osaka Gas Group(Scope3)

Increase Scope1,2 due to gas manufacturing, electricity, etc

Value chain emission from others(Power Plant, fussil fuel needs)

Figure-5 Daigas Group Transition Targets (details of medium-term targets)
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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Figure-6 Daigas Group Road Map to Carbon Neutrality
Table-4 Daigas Group's key initiatives to achieve carbon neutrality(Green/transition finance candidate projects)
Eligible Criteria
1)

2)

3)

Decarbonization ofgas energy
Decarbonizationof power
generation

Lowcarbonization

Eligible Criteria & Project Overview

Hydrogen utilization

Methanation, direct use (chemical looping
combustion technology), etc.

BiogasOn-site utilization in domestic/global scale

Renewable power
generation

Solar power plants, onshore wind farm, offshore
wind farm, biomass power plants, etc.

Thermal power generation

Use of carbon neutral fuels such as synthetic
methane, hydrogen and ammonia, CCUS
(Carbon Capture, Utilization and Storage), etc.

Fuel Cell

Enhancing efficiency and downsizing, etc.

Advanced utilization ofnatural gas and CHP

Support for converting fuel from oil and coal tonatural gas
Demonstration of building micro gridUse of carbon neutral LNG

Advanced energy use

VPP, smart energy systems, etc.

Other
(Reduction of CO2
emission associated with
own activities)

Cryogenic power generation in the city gas
production process, Cryogenic power generation
facilities, energy efficiency renovation work ofbuildings, etc.

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion(3) Governance of the issuer (sustainability promotion system)
Figure-7 and Figure-8 show Osaka Gas'
sustainability promotion system and its
approach to sustainability promotion.
Osaka Gas considers the response to climatechange, including the implementation of theTransition Strategy, as one of the mostimportant management issues, and manages
various aspects of the response to climatechange as the Daigas Group through the
ESG Promotion Committee (Management
Committee) and ESG Promotion Committee
as shown in Figure-7. As part of thisprocess, the Daigas Group monitors theroadmap initiatives and important matters
are discussed and reported to the Board of
Directors, so that the transition strategy ismanaged as a Daigas Group.
In addition, the Daigas Group's response to
climate change is incorporated in its
corporate philosophy as a key issue in its
Charter of Business Conduct. In this context,
activities are being carried out in line with aroadmap based on the Daigas Group Carbon
Neutral Vision and the Medium-Term
Management Plan 2023 "Creating Value for a
Sustainable Future.”

Figure-7 Osaka Gas Climate Change Governance
Organization Chart

Board of Directors- 10 directors(6 Internal Directors and 4 Outside
directors)



Executive Board (ESG Council)- 1 President and Executive Officer- 3 Vice Presidents (Executive Officers)- 6 Managing Officers*In principle, it is held three times per
year as “ESG Council”



ESG Committee- Vice President (Head of ESG Promotion)- Heads of related business units, etc.

Figure-8 The Daigas Group's Values*Climate change action is part of the Daigas
Group Charter of Business Conduct.

Issuer Name: Osaka Gas Co., Ltd.
Framework Name: Osaka Gas Co. Ltd. Daigas Group Green/Transition Finance Framework
Review provider’s Name: DNV Business Assurance Japan K.K.
Date of report: March 10, 2022

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

II. Scope and objectives
DNV has been commissioned by Osaka Gas to provide a pre-issuance assessment on Osaka
Gas’s Green/Transition Finance Framework and the Transition Bonds. Our objective has
been to implement an assessment on whether the Osaka Gas’s Transition Bonds meet thecriteria established on CTFH・CTFBG, GBP・GBGLs and GLP・GLGLs to provide a second party
opinion on the eligibility of the Osaka Gas’s Green/Transition Finance Framework and theTransition Bond to be implemented.
DNV, as an independent external reviewer, has identified no real or perceived conflict ofinterest associated with the delivery of this second-party opinion for Osaka 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 of thetransaction.
(1) Scope of review*
The review assessed the following elements and confirmed their alignment with the gist of GBP/GLP:☒.

Use of Proceeds☒.

Process for Project Evaluation and Selection☒.

Management of Proceeds☒.

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

Consultancy (incl. 2nd opinion)☐

Certification☐

Verification☐

Ratings☐

Other (please specify):(3) Standards/guidelines to be applied
No.
1.

Standards/guidelines
Climate Transition Finance Handbook(CTFH)*1

Scheme owner
International Capital Market Association (ICMA), 2020

2.

Basic Guidelines on Climate Transition Financial Services Agency, Ministry of Economy, Trade
Finance (CTFBG) *1
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*3

Ministry of the Environment, 2020

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, 2020

*1
*2
*3

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)
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).
Green projects were assessed for eligibility using the referable technical criteria of the Climate Bond
Initiative's Climate Bond Standard.

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

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

Ⅳ. Basis of DNV’s opinion
To provide as much flexibility for the issuer, Osaka Gas as possible, we have adapted our Osaka
Gas Green/Transition Finance assessment methodologies, which incorporates the requirementsof the CTFH, CTFBG, GBP, GBGLs, GLP and GLGLs, to create an Osaka Gas Green/Transition
Finance Eligibility Assessment Protocol (hereinafter, “Protocol”). Please refer to Schedule-2. The
Protocol is applicable to Osaka 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 useof 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 Osaka Gas Transition Finance has beenreviewed are grouped into common elements bellow, represented by CTFH, CTFBG, GBP,
GBGLs, GLP and GLGLs.

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion(1) Four elements of CTFH/CTFBG (disclosure elements)
Principle One: Issuer’s climate transition strategy and governance
The financing purpose should be for enabling an issuer’s climate change strategy.
Principle Two: Business model environmental materiality
The planned climate transition trajectory should be relevant to the environmentallymaterial parts of the issuer’s business model.
Principle Three: Transition is science-based including targets and pathway
Issuer’s climate strategy should reference science-based targets and transition
pathways.
Principle Four: Implementation transparency
Market communication in connection with the offer of a financing instrument
which has the aim of funding the issuer’s climate transition strategy should also
provide transparency of the underlying investment program.
(2) Four elements of GBP/GBGLs and GLP/GLGLs
Principle One: Use of Proceeds.
The Use of Proceeds criteria are guided by the requirement that an issuer of atransition finance with specific use of proceeds must use the funds raised tobond 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 requirementsthat an issuer of a transition finance should outline the process it follows when
determining eligibility of an investment using the proceeds from transition
finance, and outline any impact objectives it will consider.
Principle Three: Management of Proceeds.
The Management of Proceeds criteria are guided by the requirements that atransition finance should be tracked within the issuing organization, that
separate portfolios should be created when necessary and that a declaration of
how unallocated funds will be handled should be made.
Principle Four: Reporting
The Reporting criteria are guided by the recommendation that at least
Sustainability Reporting to the bond investors should be made of the use ofbond proceeds and that quantitative and/or qualitative performance indicators
should be used, where feasible.
*The GLGLs set out requirements for loan-specific elements (internal reviews). This is
identified in the green loan requirements check in Schedule-6.

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Osaka Gas Co., Ltd. Daigas Group 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 issuer in good faith. We havenot performed an audit or other tests to check the veracity of the information provided to us.
The work undertaken to form our opinion included:
The assessment work that forms DNV's opinion includes
i. Pre-funding assessment (Transition Finance Framework and Transition Bonds)•

Creation of a Daigas Group-specific Protocol, adapted to the purpose of the Daigas Group
Green/Transition Finance, as described above and in Schedule-2 to this assessment.

•

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

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

Documentation of findings against each element of the criteria.

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

Interviews with fundraisers' managers, and review of the relevant documentation;•

Field research and inspection (if necessary)•

Document creation of post-issuance assessment results

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ⅵ. Findings and DNV's opinion

DNV’s findings and opinion are as described in (1) and (2) below.
From the CTF-1 to 4 in (1) below are the findings and opinions of DNV against the disclosure
elements of the CTFH and CTFBG.
Please see Schedule-2 for details.
From the GBP 1 to 4 in (2) below are the findings and opinions of DNV against therequirement of the four common 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. Issuer’s Climate Transition Strategy and Governance
In January 2021, Osaka Gas formulated the “Daigas Group Carbon Neutral
Vision”, which sets out a roadmap for achieving carbon neutrality. In thevision, Osaka Gas sets the long-term goal of achieving carbon neutrality in
2050, which is consistent with the goals of the Paris Agreement, and the
medium-term goals for achieving the long-term goal. The roadmap discloses
the strategic plan to achieve the transition to carbon neutrality.
-

DNV has reviewed and confirmed that Osaka Gas's targets are equivalent tomeeting the targets of the Paris Agreement, based on a plan of action toachieve carbon neutrality in 2050, a science-based long-term target quantified
by Osaka Gas. Osaka Gas sets environmental corporate strategies that areimportant to its business model, based on the identification of risks andopportunities and scenario analysis using TCFD guidance.

-

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

-

Osaka Gas considers the response to climate change, including theimplementation of the Transition Strategy, to be one of the most importantmanagement issues, and has established a system and framework to promote
the initiatives specified in the Daigas Group Carbon Neutral Vision andRoadmap at the management level.

-

Osaka Gas's approach to promoting sustainability, both for the Daigas Groupand for society as a whole, is to provide solutions for the realization of asustainable society as an innovative energy service company by decarbonizing
city gas feedstock and introducing renewable energy. Based on this approach,
Osaka Gas is promoting various initiatives (the declaration of Creating Valuefor a Sustainable Future in the medium-term management plan and the
Daigas Group Carbon Neutral Vision), and through these activities Osaka Gas
aims to make a broad contribution to the achievement of the SDGs, thesustainable development goals set by the United Nations. Of these, the key
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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

climate change (achieving a low- and decarbonized society) as set out in the
Daigas Group's Charter of Business Conduct "Contributing to the Sustainabilityof the Environment and Society".
-

CTF-2.

Based on an assessment of the implementation plan provided by Osaka Gas
under the Framework, the "Daigas Group Carbon Neutral Vision" and the
Osaka Gas Roadmap, DNV confirmed that it is well aligned with Osaka Gas's
Transition Strategy. Through the assessment, DNV confirmed that theimplementation plan based on the Transition Strategy is reliable, ambitious
and achievable.
Business model environmental materiality-

Osaka Gas's Transition efforts include not only CO2 emission reductions fromits own business activities (SCOPE 1 and 2), but also SCOPE 3 and activities
that contribute to the CO2 emission reduction at customers. This willcontribute to the implementation of supply-side and demand-side carbon
neutrality as an important initiative indicated in the various plans andstrategies for decarbonisation in Japan. In other words, Osaka Gas's transition
initiatives directly support the transition of society as a whole, including its
own company, as an energy service company taking on the challenge ofachieving carbon neutrality in 2050.

-

The Osaka Gas’s roadmap is well aligned with the gas and electricity sector
roadmaps of the Japan Gas Association and the Ministry of Economy, Tradeand Industry, and its specific implementation plans and targets are set andquantified in the absolute sense that they must be the optimization to achieve
them and the possibility of further improvement.

-

DNV confirmed that Osaka Gas's plan to implement its Transition Strategy isclosely linked to the activities of its core business and to activities that
contribute to the CO2 emissions reduction of in society as a whole, thus
contributing to the environmental aspects of society as a whole and supporting
the promotion of Osaka Gas's business. Osaka Gas's planned transition
strategy and transition pathway are associated with the materiality that Osaka
Gas has achieved through GRI standards*1, ISO 26000, TCFD, etc., and willcontribute to significant environmental improvements (impact) in both
qualitative and quantitative terms.
*1: Global Reporting Initiative (an international standard providing ESG-related reporting,management and analysis methods)

CTF-3.
-

Transition is science-based including targets and pathways
Osaka 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 goals of the Japan Gas Association and the Ministry of Economy,
Trade and Industry.
DNV has confirmed that Osaka Gas's Transition Strategy is quantified in termsof emissions intensity and absolute values or ratios based on a consistentmeasurement methodology with prescribed assumptions. Transition targets
are set voluntarily based on the use of TCFD and other initiatives to achievesustainable CO2 emission reductions, and they are consistent with the policiesof the benchmarking Japan Gas Association and the Ministry of Economy,
Trade and Industry.

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Table-3 Osaka Gas Transition Targets

Medium-termtargets

Long-term
targets

FY2030
Renewable development contribution on a global basis : 5GW
Power portfolio in Japan consisting of renewable*1 : Nearly50%
CO2 emission reduction contribution : 10 million tons/year*2*3(compared to 2016)
2050
Carbon-neutral

1: Including solar, wind, biomass power sources which are eligible for the feed-in tariff (FIT) scheme
2: Equivalent to one third of the CO2 emission currently produced in our business and by our customers (33 million
ton/year)
3: Includes 700,000 tonnes of a partial reduction of Scope 3 emissions equivalent through introduction of highefficiency gas appliances, etc.
Contribution social CO2 emission reduction
by replacing low carbon energy system

10,000kt
Avoided emission

Avoided emission as of 2030 in mideum-term targets

31,760kt

Increase Scope3 due to cogeneration installation

4,360kt
FY2030FY2016

Osaka Gas Group(Scope1+2)

Osaka Gas Group(Scope3)

Increase Scope1,2 due to gas manufacturing, electricity, etc

Value chain emission from others(Power Plant, fussil fuel needs)

Figure-5 (re-posted) Daigas Group transition targets (details of medium-term targets)-

Osaka 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 animportant initiative indicated in the various plans and strategies for
decarbonisation in Japan. In other words, Osaka Gas's transition initiatives
directly support the transition of society as a whole, including its own company,as an energy service company taking on the challenge of achieving carbon
neutrality in 2050.

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CTF-4.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Implementation Transparency-

DNV has confirmed that the investment and development plans related to
Osaka Gas's Transition Strategy include agreement on future investment andexpenditure. Specifically, Osaka Gas plans to invest a cumulative total of 2
trillion yen by FY2030 from FY2017 in quality improvement, growth and M&A,
including the activities outlined in the Daigas Group Carbon Neutral Vision andRoadmap. In the fiscal years 2021 to 2023, Osaka Gas plans to invest 737
billion yen (237 billion yen for quality improvement and 500 billion yen forgrowth (including 120 billion yen for renewable energy)), which includes
projects to be implemented with green/transition finance.

-

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

(2) Findings and opinions of DNV against the four common elements of GBP/GBGLs
and GLP/GLGLs*The four elements are used as criteria for transition finance to specify the use of proceeds, and somegreen bonds/loans below can be read as transition finance (bond/loan).

GBP/GLP-1. Use of Proceeds
Osaka Gas has defined the criteria applied to eligible projects as transition projects whichmeet Transition Strategy and related handbook, principle and guidelines (CTF-H and CTFBG).
Table-4 shows the eligible project categories for transition finance.
Table-4(re-posted): Daigas Group's key initiatives to achieve carbon neutrality(Green/transition finance candidate projects)
Eligible Criteria
1)

Decarbonization ofgas energy

2)

Decarbonizationof power
generation

3)

Lowcarbonization

Eligible Criteria & Project Overview

Hydrogen utilization

Methanation, direct use (chemical looping
combustion technology), etc.

BiogasOn-site utilization in domestic/global scale

Renewable power
generation

Solar power plants, onshore wind farm, offshore
wind farm, biomass power plants, etc.

Thermal power generation

Use of carbon neutral fuels such as synthetic
methane, hydrogen and ammonia, CCUS (Carbon
Capture, Utilization and Storage), etc.

Fuel Cell

Enhancing efficiency and downsizing, etc.

Advanced utilization ofnatural gas and CHP

Support for converting fuel from oil and coal tonatural gas
Demonstration of building micro gridUse of carbon neutral LNG

Advanced energy use

VPP, smart energy systems, etc.

Other
(Reduction of CO2
emission associated with
own activities)

Cryogenic power generation in the city gas
production process, Cryogenic power generation
facilities, energy efficiency renovation work ofbuildings, etc.

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

DNV has confirmed that Osaka Gas plans to allocate the net proceeds fromgreen/transition finance, excluding expenses, as new investment and refinancing for
capital investment, operating expenses, equity investment and R&D-related expenses
for green/transition-eligible projects that meet Osaka Gas's investment plan for
implementing its transition strategy.
These are projects that contribute to business transformation projects as exemplified by
CTFH/CTFBG, GBP/GBGLs and GLP/GLGLs, that directly or indirectly support fuelconversion, and that contribute to achieving the goals of the Japan Gas Association and
METI. These projects have been evaluated as having a clear environmental benefit on
the Transition Strategy, and are expected to contribute to the SDGs. These processes
are in line with the GBP-1.
Table-6 shows the eligible project candidates and the project overview. Table-7 shows
the details of the five projects that meet the two eligibility criteria for which theproceeds of the Transition Bond (to be issued after May 2022) are intended to be used.

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Table-6 Green/Transitional Finance Eligibility Criteria and Project Overview(Bold underlined projects in light blue are the green/transition projects to be covered by this allocation, as
detailed in Table-7)
Eligible Criteria

1)2)Decarbonization ofgas energy

Decarbonizationof power
generation

Methanation

Direct use

Expenditure on research and development
investment in a process for simultaneous
production of hydrogen, electricity and CO2
using chemical looping combustion
technology

Hydrogenutilization

BiogasExpenditure on capital expenditure to
expand the use of biogas for domestic andinternational on-site utilization.

Renewable power generation

Expenditure on the development,
construction, operation andrefurbishment of renewable energy,
such as biomass, solar, onshore windand offshore wind.

Carbon-neutral
Fuel utilisation

Expenditure on investment, research anddevelopment in the procurement, supply
and use of synthetic methane, hydrogenand ammonia

CO2 capture andstorage(CCUS)

Expenditure on participation in CCUS
demonstrations (e.g. consortia)

The fuel cellHigh efficiency andminiaturisation

Expenditure on research, development andcapital investment in small SOFCs withhigh power generation efficiency

converting fuelfrom oil and coal
to natural gas

Expenditure on capital expenditure(e.g. on the construction of LNG
satellite terminals and the provision ofrelated equipment) to support
customers' fuel conversion.

Micro grid

Expenditure on the construction anddemonstration of microgrids

Carbon-neutral LNG

Expenditure on the procurement andsupply of carbon neutral LNG*.
*LNG with GHG emissions offset by credits

Advancedenergyutilization

VPP and smart
energy systems

Expenditure on research and development
and capital investment in projects todemonstrate the establishment of VPPs
and smart energy systems using
consumer-side energy resources.

Other(Reductionof CO2emissionassociatedwith own
activities)

Reduce CO2
emissions from
activities other than
the above, such as
manufacturing,
power generation,and office
operations.

Expenditure on cold power generationequipment and cold heat utilisationequipment in the city gas production
process, and on energy-saving renovation
work in buildings.

Thermalpower
generation

Fuel Cells

Advancedutilizationof natural
gas and
CHP
3)

Project overview (main expenditure)
Expenditure on research and development
and capital expenditure to establish
methanation technology (e.g. SOEC coelectrolysis).

Lowcarbonization

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Table-7 Transition bonds (to be issued after May 2022) Overview of transition projects
No.

Classification

01

2)*

02

03

2) *

2) *

Transition project overview
 Project Name: Inami Wind Power
Plant (Onshore Wind Farm) Project Overview: Inami-cho,
Hidaka-gun, Wakayama Prefecture,
Output is 26,000kW (2,000kw/unit x
13 units)
 Start of operation: 2018 (inoperation)
 Amount to be allocated: 4.5 billion
yen (refinancing) Environmental benefits (CO2emission reduction): approx. 23,000
t-CO2/year (result of FY2020)
 Project Name: Daigas Oita Mirai
Solar Power Plant (Nissan Green
Energy Farm in Oita) (Solar power
generation plant) Project Overview: Oita City, Oita
Prefecture, Output is 26,540kW
 Start of operation: 2013 (inoperation) * Acquisition of all sharesby Gas & Power Co., Ltd. (nowDaigas G&P Solutions) in 2019
 Amount to be allocated: 1.5 billion
yen (refinancing) Environmental benefits (CO2emission reduction): approx. 21,000
t-CO2/year (result of FY2020)
 Project Name: Noheji Mutsu Bay
Wind Farm (Onshore Wind Farm) Project Overview: Noheji-machi,
Kamikita-gun, Aomori Prefecture,
Output is 39,600 kW (3,600 kW
class/unit x 11 units) Planned start of operation: in
2022 (under construction)
 Amount to be allocated: 1.5 billionyen Environmental benefits (CO2emission reduction): approx. 22,000
t-CO2/year (estimated value)

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Inami Wind Power Plant(Onshore wind power)

Daigas Oita Mirai Solar Power
Plant(Nissan Green Energy Farm In
Oita)(Solar power)

Noheji Mutsu Bay Wind Farm
(Onshore wind power)

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

04

05

2) *

3)

 Project Name: Yokohama Town
Wind Farm (onshore wind power
generation)
 Project Overview: Yokohamamachi, Kamikita-gun, Aomori
Prefecture, Output is 43,200 kW(3,600 kW class/unit x 12 unit) Planned start of operation: in
2023 (under construction)
 Amount to be allocated: 1.5 billionyen Environmental benefits (CO2emission reduction): approx. 31,000
t-CO2/year (estimated value) Project Name: Shikoku Central
Energy Natural Gas Supply Project Project Overview: Construction of
an LNG satellite terminal at the East
Wharf of Mishima-Kawanoe Port in
Shikokuchuo City, Ehime Prefecture,
Natural gas supply business forvarious industries (contribution tofuel conversion) Planned start of operation: Supply
start will be scheduled in 2022
 Amount to be allocated: 1.0 billionyen Environmental benefits (CO2emission reduction): approx. 23,000
t-CO2/year (estimated value)

Yokohama Machi Wind Farm
(Onshore wind power)

No Image*Green projects are marked with an asterisk (*) in the table. Projects that qualify as green projects can be
included in green bonds in the future, and in addition, projects that qualify as green projects are allowed in
the CTFBG to be included as part of transition bonds.
(The images and diagrams shown are representative of the project.)

GBP/GLP-2. Process for Project Evaluation and Selection
Osaka Gas confirms that green/transition projects contribute to the achievement of
the transition strategy and confirms the following (<confirmations>), which are set
out in the framework in advance. Specifically, the Finance Team of the Finance
Department consolidates and selects the project candidates based on the eligibility
criteria, and then the ESG Promotion Office of the Planning Department evaluates andconfirms their compliance with the various frameworks. In addition, the Finance Teamof the Finance Department confirms, when necessary, with the business unit in chargeof the project in question, and after drafting the required approval, the President
makes the final decision in accordance with internal regulations.
DNV confirmed that these processes had been established as internal documents ofOsaka Gas and the plan will be implemented in accordance with the appropriate
processes.

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

DNV also confirmed that the green/transition project implemented by Osaka Gas isconsistent with the issuer's management and environmental policies, as well as its
transition strategy, goals and pathways.
<Confirmation>

In assessing the eligibility of each project, it is confirmed that the project takes into
account the potential negative environmental and social impacts and that thefacility certification, licensing, and environmental assessment procedures requiredby the country, region, or municipality where the facility or project is to be installed
are appropriate.

Evaluation and selection☒

Conforms to the issuer’s achievement of☒environmental contribution goals☒

Documented process to determine that projects
fit within defined categories

The project is eligible for use of proceeds☒

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

ensured.
☐The project is evaluated and selected☐

Other (please specify):

based on the published standard summary

Information on Responsibilities and Accountability☒

Evaluation / Selection criteria subject to☒In-house assessment

external advice or verification☐

Other (please specify):

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

GBP/GLP-3. Management of Proceeds

The proceeds will be deposited into Osaka Gas’s common account, and the Finance
Department will then manage the allocation of proceeds for each project by allocatingthem to affiliated companies, subsidiaries, and investments, using the accounting
management rules, the integrated accounting system, and specially prepared ledgers.
The accounting management rules and the integrated accounting system allow for
tracking over the period of redemption or repayment, and a review of the allocation
will be carried out at least once a year on the basis of books prepared exclusively by
the Finance Department. 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 two years of the issue. If the proceeds are to
be used to refinance existing expenditure, it is planned to be allocated withinapproximately three years from the time of the financing, and the projects that are
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 appropriation andrefinancing 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,
the method of managing the proceeds will be explained prior to implementation of theloan through disclosure in legal documents and loan agreement documentation.

Tracking of Proceeds:☒

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

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

systematically distinguished or tracked by the issuer.

Additional disclosure:☐

Allocations to future investments only☒

Allocation to individual☐

Allocations to both existing and future
investments☐

Allocation to a portfolio of disbursements☒

Other (please specify): includes allocations

disbursements☐

Disclosure of portfolio balance of
unallocated proceeds

and investments made through affiliates
and subsidiaries.

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

GBP/GLP-4. Reporting

DNV confirms that the issuer will report on the transition finance until the proceeds areallocated, and disclose information on the status of the allocation, the projects to which
the proceeds have been allocated or the environmental benefits. DNV also confirmed thatenvironmental benefits will be reported until the completion of the redemption or
repayment of the transition financing.
DNV confirmed that, even after the allocation plan or allocation have been completed,
Osaka Gas plans to report any changes in transition strategy or pathways, or any majorchanges in the allocation plan or project implementation status, in a timely manner or in
Osaka Gas’s reporting.
The report will be disclosed on the issuer’s website.
<Allocation Status>
Allocated Amount to be allocated per eligible criteriaBalance of unallocated amount

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

<Others>

Efforts to achieve carbon neutrality in 2050 will be reviewed as necessary in lightof policy and technological trends, and will be disclosed where necessary.

Table-8 shows the reporting plan (calculation method) for the environmental benefits ofthe five projects to be allocated by the green/transition bonds to be issued this time.

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Table-8 Calculating Method of the environmental benefits (e.g. eligible projects ofgreen/transition bonds to be issued this time)
No.
01

02

03

04

05

Classification
2)

2)

2)

2)

3)

Transition project overview
Project name

Environmental benefits

Inami Wind
Power Plant(Onshore Wind
Farm)
Daigas Oita Mirai
Solar Power
Plant (Nissan
Green Energy
Farm in Oita)(Solar power
generation plant)
Noheji Mutsu Bay
Wind Farm(Onshore Wind
Farm)
Yokohama Town
Wind Farm(onshore wind
power
generation)
Shikoku Central
Energy Natural
Gas Supply
Project

Environmental benefits (indicator): CO2 emission
reduction (t-CO2/year) In the case of replacing thermal
power generation
Calculation method: electric power generation (MWh,actual) x CO2 emission factor for thermal power (tCO2/MWh)Other: project overview, equipment capacity (MW),electric power generation (kWh or MWh)

Environmental benefits (indicator): CO2 emission
reduction (t-CO2/year) In the case of replacing thermal
power generation
Calculation method: electric power generation (MWh,planned＊) x CO2 emission factor for thermal power (tCO2/MWh)In the case of reporting after the start of operation, theactual power generation is used.
Other: project overview, equipment capacity (MW),electric power generation (kWh or MWh)
Environmental benefits (indicator): CO2 emission
reduction (t-CO2/year) by fuel conversion from coaland oil to gas
Calculation method: (CO2 emissions from coal, oil,etc. - CO2 emissions from LNG) (theoretical value) x
investment share
Other: project overview

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework 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:☒

Every year☐

Other (please specify):☐

Every six months☐

Energy savings

Information reported (expected or ex-post):☒

GHG Emissions / Savings☒

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

Means of Disclosure☐

Information published in financial report☐

Information published in sustainability report☒

Other (please specify): on Osaka Gas web site

(Integrated Report)☐

Information published in ad hoc documents☐

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

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ⅶ. Assessment Conclusion
On the basis of the information provided by Osaka Gas and the work undertaken, it is
DNV’s opinion that the Osaka Gas Green/Transition Finance Framework and Transition
Bond issued by Osaka Gas meets the criteria established in the Protocol, and that it isaligned with the following stated definition or purpose of climate transition finance forbonds 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.
10th Mar. 2022

Mark Robinson

Naoki Maeda

Manager, Sustainability Services

Managing Director

DNV Business Assurance, Australia

DNV Business Assurance Japan K.K.

Masato Kanedome

Tsuyoshi Katori

Project Leader

Assessor

DNV Business Assurance Japan K.K.

DNV Business Assurance Japan K.K.

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Osaka Gas Co., Ltd. Daigas Group 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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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Schedule-1 Daigas Group Green/Transition Finance Nominated Projects
The projects listed in the table are transition finance candidates that have been evaluated for eligibility at the time of pre-issue eligibility assessment (as ofFebruary 2022). In the future, green/transition bonds or loans issued under the Daigas Group Green/Transition Finance Framework will be selected from one ormore of the green/transition eligible project (Eligible Criteria) as per its labelling and reported in the pre-financing or post-financing reports. If additional
green/transition projects are included, eligibility will be evaluated in advance by Osaka Gas in accordance with the Daigas Group Green/Transition Finance
Framework and, if necessary, DNV will evaluate them in a timely manner.
Eligible Criteria

1)2)Decarbonization ofgas energy

Decarbonizationof power
generation

Hydrogenutilization

Project overview (main expenditure)
Methanation

Expenditure on research and development and capital expenditure to establish
methanation technology (e.g. SOEC co-electrolysis).

Direct use

Expenditure on research and development investment in a process for simultaneous
production of hydrogen, electricity and CO2 using chemical looping combustion
technology

BiogasExpenditure on capital expenditure to expand the use of biogas for domestic andinternational on-site utilization.

Renewable power generation

Expenditure on the development, construction, operation and refurbishment of
renewable energy, such as biomass, solar, onshore wind and offshore wind.

Carbon-neutral
Thermal power
generation

Fuel utilisation
CO2 capture and storage(CCUS)

Fuel Cells
3)

Lowcarbonization

Advancedutilization ofnatural gas and
CHP

The fuel cells
High efficiency andminiaturisation

Expenditure on investment, research and development in the procurement, supply anduse of synthetic methane, hydrogen and ammonia
Expenditure on participation in CCUS demonstrations (e.g. consortia)
Expenditure on research, development and capital investment in small SOFCs withhigh power generation efficiency

converting fuel from oiland coal to natural gas

Expenditure on capital expenditure (e.g. on the construction of LNG satellite terminals
and the provision of related equipment) to support customers' fuel conversion.

Micro grid

Expenditure on the construction and demonstration of microgrids

Carbon-neutral LNG

Expenditure on the procurement and supply of carbon neutral LNG*.

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion*LNG with GHG emissions offset by credits
Advanced energy
utilization

VPP and smart energy
systems

Expenditure on research and development and capital investment in projects todemonstrate the establishment of VPPs and smart energy systems using consumerside energy resources.

Other (Reductionof CO2 emission
associated with
own activities)

Reduce CO2 emissions
from activities other than
the above, such as
manufacturing, power
generation, and office
operations.

Expenditure on cold power generation equipment and cold heat utilisation equipmentin the city gas production process, and on energy-saving renovation work in buildings.

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

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

Criteria

Requirements

Work Undertaken

DNV Findings

1

Issuer’s Climate
Transition
Strategy andGovernance

The financing purpose should be forenabling an issuer’s climate change
strategy. A ‘transition’ label applied to a
debt financing instrument should serve tocommunicate the implementation of anissuer’s corporate strategy to transform thebusiness model in a way which effectively
addresses climate-related risks andcontributes to alignment with the goals of
the Paris Agreement.

Confirmed documents- Framework- Daigas Group MediumTerm Management Plan
2030
- Daigas Group Carbon
Neutral Vision- Carbon Neutral Challenge
2050 Action Plan of theJapan Gas Association- Gas and Electricity Sector
Roadmap of Ministry of
Economy, Trade andIndustry- Daigas Group Integrated
Report 2021
- Daigas Group ESG data
- Project list & estimatedCO2 emission reduction

Osaka Gas has established a framework and has
introduced a range of plans and initiatives to manage andenhance the environmental sustainability and related
performance of the organisation against Daigas Group’s
wider environmental strategy.

Suggested information and indicators••

A long-term target to align withthe goals of 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;

Interviews with stakeholders

Page of 42 of 124

DNV has reviewed and confirmed that Osaka Gas's targets
are equivalent to achieving the goals of Paris Agreement,
based on action plan to achieve carbon neutrality in 2050,
a science-based long-term target quantified by Osaka Gas.
Osaka Gas sets environmental corporate strategies that areimportant to its business model, based on the identificationof risks and opportunities and scenario analysis using TCFD
guidance.
In January 2021, Osaka Gas formulated the "Daigas Group
Carbon Neutral Vision," in which it outlines a roadmap forachieving carbon neutrality. The roadmap sets a long-termtargets of carbon neutrality by 2050, consistent with thegoals of Paris Agreement, and medium-term targets forachieving that goal. The roadmap discloses a strategic planto achieve the transition to carbon neutrality.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements•••

Work Undertaken

Disclosure on the issuer’s
levers towards decarbonisation,and strategic planning towards
a long-term target to align withthe goals of the Paris
Agreement;
Clear oversight and governanceof transition strategy and,Evidence of a broader
sustainability strategy to
mitigate relevant
environmental and social
externalities and contribute to
the UN Sustainable
Development Goals.

DNV Findings
Specifically, Osaka Gas's Transition Strategy incorporates
the environmental targets of the Japan Gas Associationand the Ministry of Economy, Trade and Industry (METI),
as well as action plan to achieve a target of limiting theincrease in average temperature below 2°C using the
TCFD. In addition, if it becomes necessary to review Osaka
Gas’s efforts in order to achieve continuous emission
reductions in the future, Osaka Gas plans to implement
them as appropriate according to the timeline.
Osaka Gas considers the response to climate change,
including the implementation of the Transition Strategy, tobe one of the most important management issues, and has
established a system and framework to promote theinitiatives specified in the Daigas Group Carbon Neutral
Vision and Roadmap at the management level.
Osaka Gas's approach to promoting sustainability, both for
the Daigas Group and for society as a whole, is to provide
solutions for the realization of a sustainable society as aninnovative energy service company by decarbonizing city
gas feedstock and introducing renewable energy
Based on this approach, Osaka Gas is promoting various
initiatives (the declaration of Creating Value for a
Sustainable Future in the medium-term management planand the Daigas Group Carbon Neutral Vision), and throughthese activities Osaka Gas aims to make a broad
contribution to the achievement of the SDGs, thesustainable development goals set by the United Nations.
Of these, the key materiality issue to which
Green/Transition Finance is primarily concerned is climatechange (achieving a low- and decarbonized society) as set

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken

DNV Findingsout in the Daigas Group's Charter of Business Conduct"Contributing to the Sustainability of the Environment andSociety".
Based on an assessment of the implementation plan
provided by Osaka Gas under the Framework, the "Daigas
Group Carbon Neutral Vision" and the Osaka Gas
Roadmap, DNV confirmed that it is well aligned with Osaka
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 trajectoryshould be relevant to the environmentallymaterial parts of the issuer’s businessmodel, taking into account potential futurescenarios which may impact on current
determinations concerning materiality.

Confirmed documents
Framework
Daigas Group MediumTerm Management Plan
2030
- Daigas Group MediumTerm Management Plan
2030
- Daigas Group Carbon
Neutral Vision- Carbon Neutral Challenge
2050 Action Plan of theJapan Gas Association- Gas and Electricity Sector
Roadmap of Ministry of
Economy, Trade andIndustry- Daigas Group Integrated
Report 2021
- Daigas Group ESG data

Page of 44 of 124

DNV evaluated whether the key activities associated with
Osaka Gas's business activities correspond to the Osaka
Gas’s Transition Strategy, which was evaluated ascontributing to the environment.
The Daigas Group's greenhouse gas emissions (FY 2020)are as follows
Scope 1: 5,215,428 t-CO2e
Scope 2: 297,386 t-CO2e
Scope3: 22,270,832 t-CO2e
Total: 27,783,646 t-CO2e
Scope15,215,428

Scope2
297,386

対象 Scope

2020 年度実績

Scope15,215,428 t-CO2e

19％

Scope3

Scope1

22,270,832

Scope2

297,386 t-CO2e

1%

Scope2

Scope3

22,270,832 t-CO2e

80%

Scope3

合計

27,783,646 t-CO2e(100%)<Osaka Gas's approach to Scope 1 to 3 emissions>
Scope1: Direct emissions from own operations (gas production, power
generation, etc.) (combustion of gas for power generation, etc.)

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken-

Project list & estimatedCO2 emission reduction

Interviews with stakeholders

DNV Findings
Scope2: Indirect emissions from own operations (gas production, power
generation, etc.) (use of electricity supplied by other companies,
etc.)
Scope3: Indirect emissions from value chains other than Scope 1 andScope2 (e.g., fuel procurement, combustion of gas at destination)

Osaka Gas's Transition efforts include not only CO2emission 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 the implementation of supply-side
and demand-side carbon neutrality as an important
initiative indicated in the various plans and strategies for
decarbonisation in Japan. In other words, Osaka Gas's
transition initiatives directly support the transition ofsociety as a whole, including its own company, as anenergy service company taking on the challenge ofachieving carbon neutrality in 2050.
The Osaka Gas’s roadmap is well aligned with the gas
and electricity roadmaps of the Japan Gas Associationand the Ministry of Economy, Trade and Industry, andits specific implementation plans and targets are set andquantified in the absolute sense that they must be theoptimization to achieve them and the possibility offurther improvement.
DNV confirmed that Osaka Gas's plan to implement its
Transition Strategy is closely linked to the activities of its
core business and to activities that contribute to the CO2
emissions reduction of in society as a whole, thus
contributing to the environmental aspects of society as aPage of 45 of 124

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
whole and supporting the promotion of Osaka Gas's
business.
Osaka Gas's planned transition strategy and transition
pathway are associated with the materiality that Osaka
Gas has achieved through GRI standards*1, ISO 26000,
TCFD, etc., and will contribute to significant
environmental improvements (impact) in both
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

Issuer’s climate strategy should reference
science-based targets and transition
pathways. The planned transition trajectoryshould:•••be quantitatively measurable(based on a measurement
methodology which isconsistent over time);be aligned with, benchmarked
or otherwise referenced torecognized, science-based
trajectories where suchtrajectories exist;
be publicly disclosed (ideally inmainstream financing filings),
include interim milestones,
and;Confirmed documents- Frameworks- Daigas Group MediumTerm Management Plan
2030
- Daigas Group Carbon
Neutral Vision- Carbon Neutral Challenge
2050 Action Plan of theJapan Gas Association- Gas and Electricity Sector
Roadmap of Ministry of
Economy, Trade andIndustry- Daigas Group Integrated
Report 2021
- Daigas Group ESG data
- Project list & estimatedCO2 emission reduction

Page of 46 of 124

Osaka Gas has set a transition plan that is consistent with
the Paris Agreement based on science-based evidence, anda transition trajectory that is consistent with the goals of
the Japan Gas Association and the Ministry of Economy,
Trade and Industry.
The plan sets out realistic targets and pathways for
reducing CO2 emissions in absolute terms, and plans to
reduce absolute (total) CO2 emissions to maintain definedlevels in the future.
DNV has confirmed that Osaka Gas's Transition Strategy isquantified in terms of emissions intensity and absolutevalues or ratios based on a consistent measurement
methodology with prescribed assumptions.
Transition targets are set voluntarily based on the use of
TCFD and other initiatives to achieve sustainable CO2
emission reductions, and they are consistent with theOsaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements•

be supported by independent
assurance or verification

Work Undertaken

DNV FindingsInterviews with stakeholders

policies of the benchmarking Japan Gas Association and
the Ministry of Economy, Trade and Industry.
Specifically, Osaka Gas has set the following targets forTransition

Suggested information and indicators
•

•
•

•

•

Table-3 Osaka Gas Transition Targets

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

Medium-termtargets

FY2030- Renewable development contribution
on a global basis : 5GW- Power portfolio in Japan consisting of
renewable*1 : Nearly 50%- CO2 emission reduction
contribution : 10 million
tons/year*2*3 (compared to 2016)
Long-term
2050
targets
Carbon-neutral
1: Including solar, wind, biomass power sources which are eligible
for the feed-in tariff (FIT) scheme
2: Equivalent to one third of the CO2 emission currently producedin our business and by our customers (33 million ton/year)
3: Includes 700,000 tonnes of a partial reduction of Scope 3
emissions equivalent through introduction of high-efficiency gas
appliances, etc.

Osaka Gas's Transition efforts include not only CO2emission 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 the implementation of supply-side
and demand-side carbon neutrality as an important
initiative indicated in the various plans and strategies for
decarbonisation in Japan. In other words, Osaka Gas's
transition initiatives directly support the transition ofsociety as a whole, including its own company, as anPage of 47 of 124

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
energy service company taking on the challenge ofachieving carbon neutrality in 2050.
Transition initiatives and the respective scope emissions
are disclosed in the “Daigas Group Carbon Neutral Vision”,“Daigas Group Environmental Performance Data” and otherdocuments.

4

Implementationtransparency

Market communication in connection withthe offer of a financing instrument which
has the aim of funding the issuer’s climatetransition strategy should also provide
transparency to the extent practicable, ofthe underlying investment program
including capital and operational
expenditure. This may include R&D-related
expenditure where relevant, and details of
where any such operating expenditure isdeemed ‘non-Business as Usual’, as well asother relevant information indicating how
this program supports implementation of
the transition strategy, including details ofany divestments, governance and processchanges.
Suggested information and indicators•

Disclosure on the percentage ofassets/revenues/
expenditures/divestmentsaligned to the various levers
outlined in Element 1 above;

Confirmed documents- Framework- Daigas Group MediumTerm Management Plan
2030
- Daigas Group Carbon
Neutral Vision- Carbon Neutral Challenge
2050 Action Plan of theJapan Gas Association- Gas and Electricity Sector
Roadmap of Ministry of
Economy, Trade andIndustry- Daigas Group Integrated
Report 2021
- Daigas Group ESG data
- Project list & estimatedCO2 emission reduction
Interview with stakeholders

Page of 48 of 124

DNV has confirmed that the investment and development
plans related to Osaka Gas's Transition Strategy include
agreement on future investment and expenditure.
Specifically, Osaka Gas plans to invest a cumulative total of
2 trillion yen by FY2030 from FY2017 in quality
improvement, growth and M&A, including the activities
outlined in the Daigas Group Carbon Neutral Vision andRoadmap. In the fiscal years 2021 to 2023, Osaka Gas
plans to invest 737 billion yen (237 billion yen for quality
improvement and 500 billion yen for growth (including 120
billion yen for renewable energy)), which includes projects
to be implemented with green/transition finance.
DNV confirmed that the overall investment plan
(investment amount) for the future considers CTF-1 to
CTF-3 for the investment required to implement thetransition strategy and also confirmed plans to be
implemented according to the appropriate timelines, basedon internal management system and process.
Osaka Gas plans to allocate the proceeds to capital
investment, operating expenses, equity investment and
R&D-related expenditures for the transition eligible project
candidates shown in Schedule-1. Through the assessment,
DNV concluded that Osaka Gas's transition strategy, inOsaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements•

Work Undertaken

Capex roll-out plans consistent
with the overall strategy andclimate science

DNV Findings
terms of directly and indirectly supporting thedecarbonization of society as a whole, can be seen as a
non-Business as Usual concept in that it aims to both
expand its electricity business, including its gas business,
as an innovative energy and service company.

Page of 49 of 124

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

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

GBP/GLP-1 Use of proceeds
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

1aTypes of funds

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

Confirmed documents

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

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

Confirmed documents- Frameworks- Project list &estimated CO2
emission
reduction- Amendment
Shelf Registration
Statement

1b

Green/transition
Project
Classification-

Frameworks

Interview withstakeholders

Page of 50 of 124· (Standard) Green/transition BondDNV confirms that Daigas Group Green/Transition Finance isintended to finance a wide range of green/transition projects
focused on Osaka Gas's environmental targets and transition
strategy, as described in the Framework and Schedule-1. The
Group confirmed that the purpose of the financing is to allocate
funds to a wide range of green/transition projects focusing on
Osaka Gas' environmental objectives 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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken
Interview withstakeholders

DNV Findings
the Transition Strategy, and the proceeds throughGreen/Transition Finance are planned to be financed one or moreof the Green/Transition Finance Eligible Project Candidates.
If a transition project is pre-selected before the financing is
implemented, this will be disclosed in legal documents.
Through the assessment, DNV concludes that theGreen/Transition eligible projects candidates will bring concrete
and actual environmental benefits.

Table Daigas Group Key initiatives to achieve carbon neutrality(Green/transition finance candidate projects)
Eligible Criteria
Hydrogen
Decarboniz
utilization
1) ation of gas
energyBiogasRenewable
power
Decarboniz
generation
ation of2)
power
Thermalgeneration power
generation
Fuel Cells
Advancedutilization ofLow3) carbonizatio natural gas
and CHPnAdvancedenergyutilization

Page of 51 of 124

Eligible Criteria & Project Overview
Methanation, direct use (chemicallooping combustion technology), etc.
On-site utilization in domestic/global
scale
Solar power plants, onshore wind farm,offshore wind farm, biomass power
plants, etc.
Use of carbon neutral fuels such assynthetic methane, hydrogen andammonia, CCUS (Carbon Capture,
Utilization and Storage), etc.
Enhancing efficiency and downsizing,etc.
Support for converting fuel from oil andcoal to natural gas
Demonstration of building micro gridUse of carbon neutral LNG
VPP, smart energy systems, etc.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
Other(Reductionof CO2emissionassociatedwith own
activities)

1c

Environmental
benefits

All green projects to which the funds areused should have clear environmental
benefits, the effects of which should beassessed by the issuer and, where
possible, quantitatively demonstrated.

Confirmed documents-

Frameworks
Project list &estimated CO2
emission
reduction

Interviews withstakeholders

1dRefinancing rate

If all or part of the proceeds are used or
may be used for refinancing, the issuer
will indicate the estimated ratio of theinitial investment to the refinancing and,if necessary. Therefore, it isrecommended to clarify whichinvestment or project portfolio is subject
to refinancing.

Confirmed documents- Frameworks- Project list &estimated CO2
emission
reduction

Page of 52 of 124

Cryogenic power generation in the city
gas production process, Cryogenic
power generation facilities, energy
efficiency renovation work of buildings,
etc.

Green/Transition projects will contribute to goals based on Osaka
Gas’s Transition Strategy, and contribute to low-carbon or
decarbonization that classified into the three eligibility criteria
listed in 1b. The environmental benefit is the reduction of CO2
emissions, which has been quantitatively or qualitatively
evaluated by the issuer.
It was confirmed that, prior to the implementation ofgreen/transition finance, the project's environmental
improvement effect evaluation method (calculation method) andthe items to be disclosed are planned to be evaluated andreported quantitatively as indicators and CO2 emission reductions
according to the project's characteristics in the annual report. (Ifit is difficult to evaluate the quantitative CO2 emission reductions
due to the characteristics of the project, Osaka Gas will report the
project outline and the status of R&D and demonstration to theextent practicable).
Osaka 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 or refinancing, thiswill be disclosed in legal documents. If it is not yet clear, theissuer plans to disclose the estimated amount (or percentage) ofOsaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken
Interviews withstakeholders

Page of 53 of 124

DNV Findings
the proceeds used for refinancing through reporting (annual
report).

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

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

Criteria

Requirements

Work Undertaken

DNV Findings

2aProject
selection
process

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

Confirmed documents- Frameworks- Osaka Gas Project Selection
Document

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

2b

Issuer's
Environment
al and Social
Governance
Framework

Interviews with stakeholders

Confirmed documents- Frameworks- Osaka Gas Project Selection
Document
Interviews with stakeholders

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

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

GBP/GLP -3 Management of Proceeds
Ref.

Criteria

3a

Tracking
procedure-1

Requirements

Work Undertaken

DNV Findings

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

Confirmed documents- Framework- Accounting management
rules- Document handlingregulations

DNV has confirmed that the proceeds by thegreen/transition financing can be tracked in line with
the issuer's accounting integration system and othersystems, and confirmed the systems actually in use or
to be used, and documents to be created specifically for
use through the assessment, and confirmed that the
management status of the proceeds was proved.

Interviews with stakeholders
3b

Tracking
procedure-2

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

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

3cTemporaryholding

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

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

Page of 55 of 124

DNV confirmed that the issuer plans to regularly (atleast once a year) review the outstanding balance ofthe transition financing by using the integrated
accounting system and other documents preparedspecifically for this purpose described in 3a during theperiod from the implementation of the transition financeto its redemption or repayment.
DNV has confirmed that the confirmation process
through the issuer's integrated accounting system anddocuments produced specifically for this purpose isstructured to ensure that the balance of unallocatedproceeds is recognised sequentially.
DNV confirmed through the framework and assessmentthat the balance of unallocated proceeds will be
managed in cash or cash equivalents. DNV has also
confirmed that the balance of unallocated proceeds will
be disclosed through reporting on the allocation statusof funds.

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

Confirmed documents- Frameworks- Project list &estimated CO2
emission reduction- Information on
projects to beallocated

DNV confirmed that the issuer will carry out annual reporting of thegreen/transition finance until the proceeds are allocated and disclose informationon the status of the allocation of proceeds, the projects to which the proceeds
have been allocated and the environmental benefits. DNV also confirmed that theissuer will report on the environmental benefits until the redemption or repaymentof the green/transition finance is completed.
DNV also confirmed that, even after the allocation plan or allocation has been
completed, the issuer plans to report in a timely manner or in its reporting on any
changes in transition strategy or pathways, or any major changes in the allocation
plan or project implementation status (e.g. interruption of a project for which
allocation has been started, significant postponement on an annual basis, sale orretirement, etc.). This was confirmed.
The report will be disclosed on the website.
<Allocation Status>
Allocated Amount to be allocated per eligible criteria
Balance of unallocated amount
Estimated amount of the portion of the proceeds allocated to refinancing<Environmental benefits>Environmental impacts are disclosed within the scope of confidentiality, tothe extent practicable, and in consideration of the characteristics of the
project, including an overview of the project (including progress,
completion, operation, etc.) and the expected environmental benefits(e.g., t-CO2/year).

Page of 56 of 124

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings<Others>

Efforts to achieve carbon neutrality in 2050 will be reviewed as necessary inlight of policy and technological trends, and will be disclosed where
necessary.

The currently planned reporting for the transition project is described in thesection of GBP/GLP-4. Reporting in this document.

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

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

-

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

There is a supplementary explanation in the margin of each checklist for the annotations in the disclosure elements.
The number /01/、/02/〜/20/ listed in the “Work Undertaken” are documents confirmed through the eligibility evaluation work. Details (document name) are
shown in Appendix. In addition to the confirmed documents, the “Work Undertaken” includes the case where the information obtained through discussions andinterviews with the issuer is used as evidence.

CTF-1 Fundraiser’s Climate Transition Strategy and Governance

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

Requirement check

Work Undertaken

DNV Findings

◎

1-a)

Financing through transition financeshould aim to implement or incentivize
the achievement of transition strategies9.
Such strategies should incorporate along-term target to align with the goals of
the Paris Agreement, relevant interim
targets on the trajectory towards thelong-term goal, disclosure on the levers
towards decarbonization, and fundraiser’s
strategic planning.

kWh Yes

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

Osaka Gas's transition financing is aimed at achieving its
transition strategy, which is consistent with the lowcarbon/decarbonization strategy set out by the Gas andElectricity Technology Roadmap of the Japan Gas
Association and the Ministry of Economy, Trade andIndustry, which aims to align with the goals of the Paris
Agreement.
Osaka Gas has formulated its Transition Strategy as a"Roadmap for achieving carbon neutrality", which
incorporates, in addition to the long-term goal of carbon
neutrality in 2050, a medium-term goal and a strategic planfor decarbonization (a plan to introduce technologies that
contribute to the Transition). Each target based on Osaka
Gas's Transition Strategy is disclosed below.

No
Not Applicable

Medium-termtargets

Table Osaka Gas Transition Targets

FY2030- Renewable development contribution
on a global basis : 5GW- Power portfolio in Japan consisting of
renewable*1 : Nearly 50%- CO2 emission reduction
contribution : 10 million
tons/year*2*3 (compared to 2016)
Long-term
2050
targets
Carbon-neutral
1: Including solar, wind, biomass power sources which are eligible
for the feed-in tariff (FIT) scheme
2: Equivalent to one third of the CO2 emission currently producedin our business and by our customers (33 million ton/year)
3: Includes 700,000 tonnes of a partial reduction of Scope 3
emissions equivalent through introduction of high-efficiency gas
appliances, etc.

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

◎

1-b)

A transition strategy should serve to
explicitly communicate theimplementation of an issuer’s strategy totransform the business model in a way
which effectively addresses climaterelated risks and contributes to achieving
the goals of the Paris Agreement10.
Transformation of a business model is not
limited to initiatives as an extension ofexisting businesses but can also betransformation based on various otherperspectives. It includes fuel conversion
that achieves significant carbon and GHG
reduction benefits, introduction of
innovative technologies, improvement of/ changes in manufacturing processes
and products, and development andprovision of products and services in new
fields.

(△)

Requirement checkYes
No
Not Applicable

Work Undertaken

DNV Findings

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

The Osaka Gas’s Transition Strategy takes into accountscenarios that make use of the TCFD guidance. The Osaka
Gas’s Transition Strategy includes efforts to achievesignificant reductions in the gas business, which is its corebusiness, regarding its role as a supplier which is the policyof the national government and its contribution to thedemand side. In addition to the gas business, Osaka Gas,
as an "innovative energy and service company," is also
actively promoting the business of supplying low-carbon
and decarbonized electricity through the introduction ofrenewable energy. The following are the specific initiatives
for the Green/Transition Strategy, mainly in the energy
business, including gas and electricity.
Table Daigas Group Key initiatives to achieve carbon
neutrality(Green/transition finance candidate projects)
Eligible Criteria & Project
Overview

Eligible Criteria

1)

Decarbonizationof gas energy

Hydrogenutilization
Biogas2)

Page of 59 of 124

Decarbonizationof power
generation

Renewable power
generationThermalpower
generationMethanation, direct use(chemical
loopingcombustion
technology), etc.
On-site utilization indomestic/global scale
Solar power plants,
onshore wind farm,offshore wind farm,biomass power plants,
etc.
Use of carbon neutral
fuels such as synthetic
methane, hydrogenand ammonia, CCUS
(Carbon Capture,Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

Requirement check

Work Undertaken

DNV Findings

Fuel Cells
Advancedutilizationof natural
gas and
CHP
3)

Advance
Low-carbonization d energy

utilization
Other(Reduction of CO2
emissionassociated withown
activities)

〇

1-c)

The implementation of a transition
strategy assumes cases where it affects
society and environment other thanclimate change, such as employment or
stable provision of products and services,
through transformation of a businessmodel. In such cases, it is recommended
that the fundraiser also takes into
consideration the impact of business
innovations to society and environment
other than climate change.

Yes
No
Not Applicable

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

Page of 60 of 124

Utilization andStorage), etc.
Enhancing efficiency
and downsizing, etc.
Support for converting
fuel from oil and coal tonatural gas
Demonstration ofbuilding micro gridUse of carbon neutral
LNG
VPP, smart energy
systems, etc.
Cryogenic power
generation in the city
gas production process,
Cryogenic power
generation facilities,
energy efficiency
renovation work ofbuildings, etc.

At present, DNV confirms that there are no additionalsignificant social or environmental impacts with respect tothe implementation of Osaka Gas's Transition Strategy.
DNV also confirmed that Osaka Gas has a process in place
to ensure that the project evaluation and selection process
takes into account the potentially negative environmental
and social impacts associated with the implementation of
the project, and that the various measures required by thecountry, region or municipality in which the target facility or
project is located are appropriate.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

◎
(△)

1-d)

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

Yes

Transition strategies and plans must be
highly credible in terms of theireffectiveness. Therefore, it isrecommended that a transition strategy
and plan are linked to management
strategy and business plan, including
medium-term management plans.

Yes

However, because such strategies andplans run for a long period of time, it ispossible that the content may be
modified or adjusted in the event of a

Yes

〇

△

1-e)

1-f)

Requirement checkNo
Not ApplicableNo
Not ApplicableNo
Not Applicable

Work Undertaken

DNV Findings

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

Osaka Gas's transition strategy is built on the Japan Gas
Association, the Ministry of Economy, Trade and Industry,
and the use of TCFD guidance.
Osaka Gas has developed a transition strategy that is
consistent with the Japan Gas Association (JGA), which thegas industry should refer to, and with METI's roadmap forgas and electricity as the relevant roadmap forgreen/transition, which identifies criteria, pathways andtargets for CO2 emission reductions.

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

Osaka Gas has formulated the "Daigas Group Carbon
Neutral Vision" and one of the main points of the vision isto provide solutions for the realization of a sustainable
society as an innovative energy and service company bydecarbonizing the raw materials for city gas and introducing
renewable energy. In addition, as a concrete approach torealising the Daigas Group Carbon Neutral Vision, a"Roadmap towards Carbon Neutral" has been establishedand specific transition strategies and plans have beendrawn up. These have been incorporated into the "Creating Value for a Sustainable Future ", one of the key
initiatives of the Daigas Group's Medium-Term Management
Plan 2023. In other words, Osaka Gas's transition strategies
and plans are closely linked to its management plan, andare considered to be highly effective and reliable initiatives.

Confirmed documents:/01//02//03//04//05//
06//07/ Interviews
with stakeholders

Osaka Gas has included a range of technology options in
the implementation of its Transition Strategy. DNV also
confirmed through the assessment that Osaka Gas plans to
flexibly implement changes and amendments to theTransition Strategy and Plan in response to revisions to theJapan Gas Association and national guidelines.

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

Requirement check

Work Undertaken

DNV Findings

Confirmed documents:/01/
Interviews withstakeholders＊Confirmation throughthis assessment

DNV confirmed that Osaka Gas's transition strategy haslargely been implemented in terms of the“recommend” and“be considered/possible” items in this basic guideline.

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

Osaka Gas has established and is implementing thefollowing organizational structure.
 Decision-making and oversight of the Board of
Directors on matters including climate change issues.
 The ESG Promotion Committee (Management
Committee) is held three times a year, and under thesupervision of the President, executives and others
deliberate on activity plans and activity reports related
to ESG issues, including climate change.
 The ESG Promotion Committee is chaired by the
Executive Vice President, who oversees sustainability
activities, and includes the heads of relatedorganizations. (The ESG Promotion Committee meetsfour times a year for cross-organizational deliberation,
coordination, and supervision of the formulation andpromotion of plans for business activities related toclimate change, the status of goal achievement, andrisk management and response.)major change in the assumed external
environment and so on.

△

◎

1-g)

1-h)

In the initial phase of developing atransition strategy by the fundraiser, it isconsidered as an option for the fundraiser
to indicate a plan for future
implementation of items described withthe words “recommended” and “beconsidered/ possible” in these Guidelines.

Yes

In order to secure the effectiveness of thetransition strategy, the fundraiser should
establish an organizational structure12 forthe board of directors and/or other suchcommittee to oversee the activities
addressing climate change and for
management to play a role in assessing
and managing such climate-related
activities.

Yes

No
Not ApplicableNo
Not Applicable

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

Requirement check

Work Undertaken

DNV Findings
 Report to the Board of Directors on key issues, such as
performance against ESG management targets forsustainability and business plans that are expected tohave a significant financial impact due to climatechange.

Figure Osaka Gas Climate Change Governance Structure△

1-i)

While a transition strategy shall bebasically developed by a company in needof finance, it is possible for entities toutilize the strategy of companies that are
wholly or partially responsible for the
initiatives to establish or explain theirown strategy, given that the financesupports GHG emissions reduction
initiatives of not just a single company
but its supply chain.

Yes
No
Not Applicable

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

Page of 63 of 124

Osaka Gas is building a transition strategy for the Daigas
Group, with Osaka Gas at the core. In building thetransition strategy, in addition to the strategy for the gas
supply side, in accordance with the policies set by thegovernment and other organizations, Osaka Gas has
included activities to contribute to the CO2 emission
reduction in Japan and abroad, and in society as a whole,by providing technologies, products, and services that
contribute to the reduction and decarbonization of thedemand side. Furthermore, as an "innovative energy
service company", in addition to its gas business, Osaka
Gas is also actively promoting the supply of low-carbon

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

Requirement check

Work Undertaken

DNV Findings
electricity through its efforts to introduce renewableenergy.

◎

△

〇

1-j)

1-k)

1-l)

Transition strategies should be disclosed
in advance in a company’s integrated
report, sustainability report, statutory
documents and other materials forinvestors (including such disclosures on
the website). This also applies to theother three elements.

Yes

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

Yes

If the implementation of a transition
strategy assumes impacts on society andenvironment other than climate change,
it is recommended that the fundraiser
explain the view underlying its
approach14, etc. to address such impacts
and disclose how the strategy on thewhole contributes to achieving the
Sustainable Development Goals (SDGs)

Yes

No
Not ApplicableNo
Not ApplicableNo
Not Applicable

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

Osaka Gas's transition strategy (and environmental
initiatives in general) is explained and disclosed to
stakeholders in advance through the Daigas Group Carbon
Neutral Vision and Roadmap, which are formulated anddisclosed in 2021 annually, and related information is
explained and disclosed to stakeholders through theMedium-Term Management Plan, Integrated Report andwebsite.

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

Osaka Gas's Transition Strategy takes into account the
TCFD recommendations, and the governance of theTransition Strategy and TCFD recommendations arealigned. Osaka Gas discloses governance-related items in
its integrated report, website and framework. Relevant
information can be found in 1-d), 1-h) and 1-j).

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

At present, DNV confirms that there are no additionalsignificant social or environmental impacts with respect tothe implementation of Osaka Gas's Transition Strategy.
DNV also confirmed that Osaka Gas has a process in place
to ensure that the project evaluation and selection process
takes into account the potentially negative environmental
and social impacts associated with the implementation of
the project, and that the various measures required by the

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Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

Requirement check

Work Undertaken

so that the effects can be appropriately
evaluated by the financier.

DNV Findings
country, region or municipality in which the target facility or
project is located are appropriate.
The key materiality issue to which transition finance ismainly related is climate change, as stated in the Daigas
Group's Charter of Business Conduct: "Contributing to the
Sustainability of the Environment and Society", and its
relationship with the SDGs is summarized below.
Reference (in Table-1 of the main text)
Charter of Business Conduct: II Contributing to thesustainability of the environment and society
Materiality: climate change(Value for a Sustainable Future: Realising a low anddecarbonised society)
Goal 7: Affordable and Clean Energy
Goal 9: Industry, Innovation and Infrastructure
Goal12: Responsible Consumption and Production
Goal 13: Climate Action
Goal 17: Partnerships for the Goals

◎

1-m)

Considering the length of application andother factors, there may be instances
when a transition strategy and plan willneed to be modified due to majorchanges in the external environment andrelevant conditions that were assumed at
a planning phase. In this case, thecontents of the modification should be

YesNo
Not Applicable

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

Page of 65 of 124

Osaka Gas has included a range of technology options in
the implementation of its Transition Strategy. DNV also
confirmed through the assessment that Osaka Gas plans to
implement changes and modifications to the Transition
Strategy and Plan in response to the guidelines of the Japan
Gas Association and the national government, as well as
reviews of technological trends.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

Requirement check

Work Undertaken

disclosed together with the underlying
reason in a timely manner.

〇

〇

1-n)

1-o)

DNV Findings
Osaka Gas also plans to disclose any significant changes to
its transition strategy and plans in a timely manner,
together with the reasons for such changes.

In terms of governance, it isrecommended that disclosures include anorganizational structure for overseeing
the implementation of a transition
strategy and for assessing and managing
related initiatives. It is also recommended
that disclosures include the specific rolesof the constituent organizations and the
management and the process by which
the content of deliberations is reflected inmanagement.

Yes

In cases where the fundraiser determines
the need for an objective assessment
regarding the transition strategy, it is

YesNo
Not ApplicableNo

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

Osaka Gas has established the following organizational
structure.
In addition, the following information has been disclosed in
the Daigas Group Integrated Report 2021
 Decision-making and oversight of the Board of
Directors on matters including climate change issues.
 The ESG Promotion Meeting (Management Meeting) isheld three times a year, and under the supervision of
the President, executives and others deliberate on
activity plans and activity reports related to ESG
issues, including climate change.
 The ESG Promotion Committee is chaired by the
Executive Vice President, who oversees sustainability
activities, and includes the heads of relatedorganizations. The ESG Promotion Committee meetsannually to deliberate, coordinate and supervise theformulation and promotion of plans for businessactivities related to climate change, the achievementof targets, and risk management and response.) Report to the Board of Directors on key issues, such as
performance against ESG management targets forsustainability and business plans that are expected tohave a significant financial impact due to climatechange.

Confirmed documents:/01/~/11/

Osaka Gas uses a review by an external body, DNV, for an
objective assessment of the eligibility of its green/transition
finance, including its transition strategy.

Page of 66 of 124

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

△

No.

1-p)

Disclosure elements

Requirement check

Work Undertaken

recommended that a review, assurance
and verification by an externalorganization for its transition strategy.

Not Applicable

Interviews withstakeholders＊Confirmation throughthis assessment

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

Yes

Confirmed documents:/01/~/11/
Interviews withstakeholders＊Confirmation throughthis assessment

No
Not Applicable

DNV Findings

DNV has confirmed the following about its review of Osaka
Gas's transition strategy- Osaka Gas's Transition Strategy is consistent with thescenarios (specific action plans) and targets shown in
the table below.
- Osaka Gas's transition strategy is positioned as one of
the core elements of its medium-term management
plan, "Realization of a low-carbon/decarbonizedsociety", and its credibility is supported by concreteplans and targets as a roadmap.
- The Transition Strategy is a plan in which the
management process and governance of the Transition
Strategy will be properly implemented under the“Governance Framework for Climate Change”.
Medium-termtargets

Long-term
targets

Page of 67 of 124

Table Osaka Gas Transition Targets

FY2030- Renewable development contribution
on a global basis : 5GW- Power portfolio in Japan consisting of
renewable*1 : Nearly 50%- CO2 emission reduction
contribution : 10 million
tons/year*2*3 (compared to 2016)
2050
Carbon-neutral

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

Requirement check

Work Undertaken

DNV Findings
1: Including solar, wind, biomass power sources which are eligible
for the feed-in tariff (FIT) scheme
2: Equivalent to one third of the CO2 emission currently producedin our business and by our customers (33 million ton/year)
3: Includes 700,000 tonnes of a partial reduction of Scope 3
emissions equivalent through introduction of high-efficiency gas
appliances, etc.

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

CTF-2 Business Model Environmental Materiality

Page of 68 of 124

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

◎

2-a)

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

Requirement
checkWork Undertaken

DNV Findings

Yes

Documents checked :/01//02//03//08//09//10/
Interviews with thepeople involved

Osaka Gas's Transition Strategy includes initiatives
designed to achieve significant reductions in the role of
the gas business, the company's core business, as the
supply side and its contribution to the demand side, inline with national and other policies.
Furthermore, as an "innovative energy service company",in addition to its gas business, Osaka Gas is also actively
promoting a business that supplies low-carbon electricity
through the introduction of renewable energy. In addition
to the introduction of renewable energies, the company isalso active in the supply of low-carbon electricity.

No
Not Applicable

Table Daigas Group Key initiatives to achieve carbon
neutrality(Green/transition finance candidate projects)
Eligibility Criteria

Eligibility Criteria & Project Summary

Decarbon Hydrogenisation of use
1)
gaseous
BiogasenergyMethanation, direct use (chemicallooping fuel technology), etc.
Expanding the use of biogas onsite athome and abroad

Renewable power
generationPowersupply2)decarboni
Thermalsationpower
supplyFuel Cells
3)

Page of 69 of 124

Low
carbonAdvancedutilizationof natural
gas and
CHP

Solar, onshore wind, offshore wind,biomass, etc.
Use of carbon-neutral fuels such assynthetic methane, hydrogen andammonia, CCUS (Carbon Capture,
Utilization and Storage), etc.
High efficiency and miniaturisation offuel cells, etc.
Support for conversion from oil andcoal to natural gas
Demonstration of the construction ofa microgrid
Use of carbon-neutral LNG

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

Requirement
checkWork Undertaken

DNV Findings
Advancedenergyuse
Other(Reduction of CO2
associate
d
with
own
activities)

〇

△

2-b)

2-c)

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

Yes

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

Yes

No
Not ApplicableNo
Not Applicable

VPP, smart energy systems, etc.

Chillers in the city gas production
process,
chillers,
energy-saving
renovation of buildings, etc.

Documents checked :/01//02//03//08//09//10/
Interviews with thepeople involved

Osaka Gas discloses climate change-related informationin line with the recommendations of the TCFD. This
includes governance, strategy (transitions, natural gas
demand projections), risk management (risks andopportunities of the 2°C scenario, 2°C original scenario
and 4°C scenario, and initiatives for 2030 and 2050), anddisclosure of indicators and targets. Osaka Gas' Transition
Strategy is linked to this TCFD initiative.

Documents checked :/01//02//03//08//09//10/
Interviews with thepeople involved

In identifying materiality, Osaka Gas uses analysis andevaluation methods based on GRI Standards*1, ISO
26000, TCFD, etc. In addition, efforts to addressenvironmental materiality include not only the reductionof emissions from the company's own business activities,
but also activities that contribute to the reduction of thescope3 and other companies. Furthermore, thecontribution to the SDGs (see below) is also taken into
account. These are disclosed in the framework and otherdocuments.
*1: Global Reporting Initiative

Page of 70 of 124

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

◎

2-d)

〇

2-e)

Requirement
checkWork Undertaken

DNV Findings

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

Yes

Documents checked :/01//02//03//08//09//10/
Interviews with thepeople involved

Climate change, one of the materialities defined for the
Osaka Gas Group, is closely linked to the Daigas Group's
Charter of Corporate Behavior, which sets out thephilosophy of the Daigas Group's business activities:"Harmony with the environment and contribution to asustainable society".
These are disclosed in the integrated report and throughthe website.

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

Yes

Documents checked :/01//02//03//08//09//10/
Interviews with thepeople involved

Osaka Gas recognizes that the TCFD recommendations
and its efforts to participate in the TCFD consortium areappropriate scenario analyses to ensure effective
corporate disclosure of information on climate change
responses and to help financial institutions and others
make appropriate investment decisions. These aredisclosed in the integrated report and through thewebsite.

No
Not ApplicableNo
Not Applicable

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

Page of 71 of 124

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

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

No.

Disclosure elements

◎

3-a)

The fundraiser should reference sciencebased targets in developing its transition
strategies.

Requirement
checkWork Undertaken

DNV Findings

Yes

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

Osaka Gas's transition strategy and targets are consistent
with the initiatives of the Japan Gas Association (JGA) and theMinistry of Economy, Trade and Industry (METI)'s technology
roadmap (gas and electricity), which are designed to alignwith the Paris Agreement targets. The METI Technology
Roadmap is based on the scientific-based evidence required
to achieve the goals of the Paris Agreement, and therefore
Osaka Gas's Transition Strategy is considered to be a sciencebased goal.

No
Not Applicable

Interviews withstakeholders

◎

3-b)

This should include mid-term targets(short- to mid-term targets) in addition
to long-term targets for 2050 and bequantitatively measurable based on ameasurement methodology which isconsistent over a long period of time.

Yes
No
Not Applicable

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

Page of 72 of 124

Osaka Gas has formulated its Transition Strategy as a"Roadmap for achieving carbon neutrality", which
incorporates, in addition to the long-term goal of carbon
neutrality in 2050, a medium-term goal and a strategic planfor decarbonization (a plan to introduce technologies that
contribute to the Transition). Each target based on Osaka
Gas's Transition Strategy is disclosed below.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

Requirement
checkWork Undertaken

DNV Findings

Medium-termtargets

Table Osaka Gas Transition Targets

FY2030- Renewable development contribution
on a global basis : 5GW- Power portfolio in Japan consisting of
renewable*1 : Nearly 50%- CO2 emission reduction
contribution : 10 million
tons/year*2*3 (compared to 2016)
Long-term
2050
targets
Carbon-neutral
1: Including solar, wind, biomass power sources which are eligible
for the feed-in tariff (FIT) scheme
2: Equivalent to one third of the CO2 emission currently produced inour business and by our customers (33 million ton/year)
3: Includes 700,000 tonnes of a partial reduction of Scope 3
emissions equivalent through introduction of high-efficiency gas
appliances, etc.

◎

(△)

3-c)

In addition, it is recommended that GHG
reduction targets, which could beformulated either in intensity andabsolute terms, should consider
environmental materiality and cover
Scopes 1 through 3 of GHG Protocol, theinternational standard on supply-chain
emissions. It is recommended thattargets covering Scope 3 be set using apractical calculation method when it
could be subject to significant reductionin the fundraiser’s business model19. It is

YesNo
Not Applicable

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

Page of 73 of 124

The Daigas Group's CO2 emissions are assessed in absoluteterms. It covers Scope 1, Scope 2, and Scope 3 (major
items), and also takes into account the reduction of CO2
emissions from society as a whole.
Scope 3 is an important reduction target in the supply chain
and business model of Osaka Gas, and targets have been set
to the extent practicable. Osaka Gas has also set a CO2
emission reduction contribution of 10 million tonnes of CO2
emissions in FY2030 (compared to 2016).
*See 3-b) for details.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

Requirement
checkWork Undertaken

DNV Findings

Science-based targets are GHG reduction
targets required for achieving the goalsof the Paris Agreement and should be set
while taking into account differences inregional characteristics and industries. In
so doing, it is possible to refer to thefollowing trajectories.
- Scenarios widely recognized in theinternational community (Examples
include the Sustainable Development
Scenario (SDS) outlined by theInternational Energy Agency (IEA)20)- Objectives verified under the
Science Based Targets Initiative(SBTi) and such like- Nationally Determined
Contributions (NDC) of countriesaligned with the goals of the Paris
Agreement, roadmaps by industry
sector21, industries set out plans thatare science-based achieving theParis Agreement22 and so on.

Yes

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

Osaka Gas' transition targets refer to these following

Short- to mid-term targets (with a termof three to fifteen years) should be set byreferencing the aforesaid trajectories orYesalso possible to disclose the avoided
emissions as necessary.

◎

3-d)

(△)

◎

3-e)

No
Not Applicable

Interviews withstakeholders

-

-

-

No
Not Applicable

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

Page of 74 of 124

Scenarios widely recognized in the international
community⇒Refer to the analysis results to TCFD
Osaka Gas' roadmaps and targets have not been tested
in such as the Science Based Targets Initiative (SBTi),but the assessment has confirmed the validity of theplans.
Targets consistent with the goals of the Paris
Agreement (NDC, roadmaps by industry sector,
industries set out plans that are science-based evidence
established by industry, etc.)⇒See the Technology Roadmap for Gas and Electricity
developed by the Ministry of Economy, Trade andIndustry and the Japan Gas Association's Carbon
Neutral Challenge 2050.

Osaka Gas's medium-term target (FY2030) is based on theasset deployment and technology development plans set out
in the pathway (transition roadmap) towards the long-termtarget of 2050.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

Requirement
checkWork Undertakenon the pathway toward the long-termtargets planned as benchmarks23.

△

3-f)

In doing so, since short- to mid-termtargets will likely be set in considerationof various factors (including the starting
point and track records of the issuer,
timing of capital investments, economic
rationality, cost-benefit analysis, andavailability of technology necessary toachieve the targets), it is possible thatthe pathway may not necessarily belinear with the same slope at all times
but may be nonlinear.

Interviews withstakeholders
Yes
No
Not Applicable

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

DNV Findings*See 3-b) for details.

Osaka Gas plans to achieve its targets through multiple
technological options, taking into account a variety ofmatters (short-term initiatives, medium- to long-term
technological development and their implementation) when
formulating its roadmap. Osaka Gas recognizes that energy
conservation, advanced use of natural gas, and theintroduction of renewable energies are key to reducing CO2
emissions until the technology to achieve a decarbonizedsociety is established, and the target for 2030 takes thesefactors into account. A non-linear pathway towards carbon
neutrality in 2050 is planned.

Daigas Group Carbon Neutral Vision

Page of 75 of 124

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

◎

3-g)

The fundraiser should disclose the shortto mid-term and long-term targets they
have set, including the base years etc.

Requirement
check
Yes
No
Not Applicable

Work Undertaken

DNV Findings

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

Osaka Gas's Transition Strategy sets the 2016 as the baseyear, 10 million tons of CO2 emission reduction contribution
as the mid-term target for 2030. Osaka Gas has also set a
Scope 3 target, which is not disclosed for confidentiality
reasons. Long-term goal is to become carbon neutral by
2050. These are disclosed in the Daigas Group Carbon
Neutral Vision.

Interviews withstakeholders
◎

△

3-h)

3-i)

In order to show that long-term targets
are science-based, disclosures should
explain the methodology or trajectory
used to define target, including theunderlying reasons (e.g., characteristics
specific to a region or industry). In
particular, when reference is made toplans and industry roadmaps establishedby an industry, etc., the explanation
should include that they are grounded inscientific basis.

Yes

It is possible that disclosures explain thepathway toward a long-term target andthe alignment between the short- to midterm targets on the pathway and thetransition strategy, based on theinvestment plan (refer to Element 4) andother plans.

Yes

No
Not Applicable

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

No
Not Applicable

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

The long-term goals in Osaka Gas's Transition Strategy are
consistent with the goals and initiatives of the Japan Gas
Association and the Ministry of Economy, Trade and Industry(roadmap for the gas and electricity sectors).
The Ministry of Economy, Trade and Industry's targets referto various Japanese policies and international scenarios
aimed at achieving carbon neutrality in 2050, and are clearlyconsistent with the Paris Agreement.

Osaka Gas has identified the following specific initiatives (seetable below) as examples of typical projects that may be
eligible for investment (eligible project categories) in its
efforts to achieve its long-term goals.
Table Daigas Group Key initiatives to achieve carbon
neutrality(Green/transition finance candidate projects)
Eligible Criteria

Page of 76 of 124

Eligible Criteria & Project Overview

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

Requirement
checkWork Undertaken

DNV Findings

Decarbon Hydrogenization of utilization1)
gas
energyBiogasRenewable power
Decarbon generatio
ization of n2) power
generatio Thermal
powerngenerationFuel Cells
Advancedutilizationof natural
gas and
CHP
Advanced
Lowenergy3) carboniza
utilization
tion
Other
(Reduction of CO2
emissionassociated withown
activities)

Methanation, direct use (chemicallooping combustion technology),etc.
On-site utilization in domestic/global
scale
Solar power plants, onshore wind
farm, offshore wind farm, biomass
power plants, etc.
Use of carbon neutral fuels such assynthetic methane, hydrogen andammonia, CCUS (Carbon Capture,
Utilization and Storage), etc.
Enhancing efficiency anddownsizing, etc.
Support for converting fuel from oiland coal to natural gas
Demonstration of building micro
grid
Use of carbon neutral LNG
VPP, smart energy systems, etc.

Cryogenic power generation in thecity gas production process,
Cryogenic power generation
facilities, energy efficiency
renovation work of buildings, etc.

Osaka Gas plans to invest a cumulative total of 2 trillion yen
from fiscal 2017 to 2030 in quality improvement, growthand M&A, including the implementation of its transition
strategy. In the fiscal years 2021-2023, Osaka Gas plans toinvest 737 billion yen (237 billion yen for quality
improvement and 500 billion yen for growth (including 120
billion yen for renewable energy)), which includes projects

Page of 77 of 124

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

Requirement
checkWork Undertaken

DNV Findings
implemented with green/transition finance. These are
outlined in the framework.

△

3-j)

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

Yes
No
Not Applicable

Confirmed
documents:/01//02//03//04//05/
Interviews withstakeholders*Confirmation
through thisassessment

Page of 78 of 124

On the basis of the documents and information provided by
Osaka Gas, DNV has reviewed the following and confirmedthat the targets and trajectories are based on science-based-

Whether the long-term target is aligned with sciencebased targets➢ Targets and trajectories based on Osaka Gas's
Transition Strategy refer to METI's targets (Gas andElectricity Sector Technology Roadmap) and various
Japanese policies and international scenarios aimed atachieving carbon neutrality in 2050, and METI's targets
are clearly aligned with the Paris Agreement.

-

Whether the short- to mid-term targets are determinedusing a GHG emissions forecast calculated based on a
climate change scenario analysis➢ Based on the IEA scenarios, Osaka Gas is analysing
scenarios for 2030, 2040, and 2050 for 2°C, 2°C
original, and 4°C respectively. This is closely related to
Osaka Gas's greenhouse gas emissions and climatechange initiatives.

-

Whether the actual values of the indicators used for thetargets are quantitatively measured using consistentmeasurement methods➢ The indicator used for the target is CO2 emissions(absolute value), and Osaka Gas has established amethod for calculating and evaluating the reduction

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

Requirement
checkWork Undertaken

DNV Findings
effect based on the amount of LNG supplied (including
the amount of fuel switched from coal and oil), thenumber of high-efficiency gas-related products
supplied, and the amount and ratio of renewable energy
installed (kW and the ratio of renewable energy todomestic electricity business). DNV has confirmed
through the review that the CO2 savings are estimatedon the basis of the above performance values. For someprojects, it is difficult to calculate the direct CO2
emission reduction effect, so the disclosure of projectprogress, plans, etc. is considered as a reduction
benefit.

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

Page of 79 of 124

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

CTF-4 Implementation Transparency
Ref.

No.

Disclosure elements

◎

4-a)

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

Yes

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

Yes

◯

4-b)

Requirement
check

No
Not Applicable

Work Undertaken

DNV Findings

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

DNV confirmed that Osaka Gas plans to invest acumulative total of 2 trillion yen from fiscal 2017 to2030 in quality improvement, growth and M&A,
including activities outlined in the Daigas Group
Carbon Neutral Vision and Roadmap. DNV also
confirmed that in the fiscal years 2021-2023, Osaka
Gas plans to invest 737 billion yen (237 billion yen
for quality improvement and 500 billion yen forgrowth (including 120 billion yen for renewableenergy)), which includes projects implemented withgreen/transition finance.

Interviews withstakeholders

No
Not Applicable

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

Page of 80 of 124

The investment plan includes one or more of thefollowing capitals, operational and running costs
necessary to implement the following strategies that
contribute to the necessary efforts to implement theTransition Strategy. Specific initiatives (project
outlines and main expenditure) include the following(table below).

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

Requirement
checkWork Undertaken

Eligible Criteria

Project overview (main expenditure)
Methanation1)

Decarbonizationof gas energy

Hydrogen utilization

Direct use

BiogasRenewable energy generation2)

Decarbonizati
on of power
generation

Thermal power
generation

Fuel Cells

3)

Lowcarbonization

Advancedutilization ofnatural gas andCHP

DNV Findings

Carbon-neutral
Fuel utilisation

Expenditure on research and development and capital expenditure toestablish methanation technology (e.g. SOEC co-electrolysis).
Expenditure on research and development investment in a process for
simultaneous production of hydrogen, electricity and CO2 using chemicallooping combustion technology
Expenditure on capital expenditure to expand the use of biogas for domestic
and international on-site utilization.
Expenditure on the development, construction, operation and refurbishmentof renewable energy, such as biomass, solar, onshore wind and offshorewind.
Expenditure on investment, research and development in the procurement,
supply and use of synthetic methane, hydrogen and ammonia

CO2 capture and storage(CCUS)

Expenditure on participation in CCUS demonstrations (e.g. consortia)

The fuel cells
High efficiency andminiaturisation

Expenditure on research, development and capital investment in small SOFCs
with high power generation efficiency

converting fuel from oil andcoal to natural gas

Expenditure on capital expenditure (e.g. on the construction of LNG satellite
terminals and the provision of related equipment) to support customers' fuelconversion.

Micro grid

Expenditure on the construction and demonstration of microgrids

Carbon-neutral LNG

Advanced energy
utilization

VPP and smart energy
systems

Other (Reductionof CO2 emission
associated with
own activities)

Reduce CO2 emissions from
activities other than theabove, such as manufacturing,
power generation, and office
operations.

Page of 81 of 124

Expenditure on the procurement and supply of carbon neutral LNG*.
*LNG with GHG emissions offset by credits
Expenditure on research and development and capital investment in projects
to demonstrate the establishment of VPPs and smart energy systems using
consumer-side energy resources.
Expenditure on cold power generation equipment and cold heat utilisationequipment in the city gas production process, and on energy-saving
renovation work in buildings.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

△

4-c)

◯

4-d)

Requirement
checkWork Undertaken

DNV Findings

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

Yes

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

The climate-related results and impacts envisionedby the investment plan are the reduction in theoverall society (including domestic andinternational), as indicated by the eligibility criteria"Decarbonization of gas energy", "Decarbonization of
power generation" and "lLow-carbonization", as wellas the reduction contribution, as indicated in 4-b).
All of them use CO2 reduction as an indicator, with areduction of 10 million tons in 2030 (compared tothe base year of 2016). DNV has confirmed throughthe assessment that Osaka Gas has establishedappropriate eligible criteria or calculation methods
and assumptions for each project. However, Osaka
Gas has not planned to disclose such information to
the public when the calculation method andassumptions include business strategies andcustomer information, and DNV confirmed theappropriatenes of that.

In particular, when outlining the assumed
climate-related outcomes and impacts, it isrecommended that the disclosure include
not only GHG emission reduction and otherinitiatives to ease climate change but also
report how consideration of a “justtransition”26 is incorporated into thetransition strategy.

Yes

No
Not Applicable

Interviews withstakeholders

No
Not Applicable

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

Page of 82 of 124

Any critical factors that would impede a "justtransition" through the implementation of Osaka
Gas's Transition Strategy have not identified.
DNV believes that the use of carbon-neutral LNG will
have a medium to long-term impact on businesses
and employment related to natural gas extraction.
However, it is not considered to be a factor that willhinder an extreme "fair transition" through the useof existing supply chains and the systematic review
of existing businesses in the process of transitioning
to a low-carbon society globally.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

Requirement
checkWork Undertaken

DNV Findings
In addition, it was confirmed that Osaka Gas willtake appropriate measures and disclose information
when necessary, if it is necessary for future projects
implemented by Osaka Gas to be equivalent to a"fair transition" through the assessment or if
negative impacts on the SDGs are considered.

〇

◎

4-e)

4-f)

If implementing the transition strategy has
the potential of having a negative impact
on employment or the environment andcommunities other than climate change, it
is recommended that any expenditures tomitigate such negative impacts be added
to the plan.

Yes

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

Yes

No
Not Applicable

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

No
Not Applicable

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

Page of 83 of 124

At this time, DNV has confirmed that there are no
additional significant social or environmental impacts
associated with the implementation of Osaka Gas's
Transition Strategy. However, in assessing theeligibility of each project, consideration is given topotential negative environmental and social impacts,
and it is confirmed that the facilities and projects
concerned have been properly certified and licensed,
and that the environmental assessment procedures
required by the country, region or municipality inwhich they are to be installed are appropriate.
Osaka Gas quantitatively evaluates the results (CO2emission reduction effects) of each eligible project
candidate (see (3-b)) included in the investment
plan to ensure that they are consistent with thetargets (see (3-c)).

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

〇

4-g)

(△)

◯

4-h)

Requirement
checkWork Undertaken

DNV Findings

Transition finance is a means to financially
support the implementation of a transition
strategy, and it is recommended that
financing be provided for new initiatives.
However, in the case of transition financein the format of Use of Proceeds
instruments, refinancing for a reasonably
set lookback period (the period during
which refinancing is to be applied for
projects that have already started) is
considered to be eligible.

Yes

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

Osaka Gas plans to allocate its transition finance tofund both new initiatives and refinancing of existingones (amounts and ratio are expected to vary foreach project and bond).
Where refinancing is targeted, DNV confirmed that areasonable look-back period should be set (e.g. thegreen/transitional nature of the target asset should
be maintained at the time of refinancing and theenvironmental improvement benefits should be
realised during the redemption or repayment
period).

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

Yes

No
Not Applicable

Interviews withstakeholders

No
Not Applicable

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

Page of 84 of 124

DNV has confirmed that Osaka Gas plans to invest acumulative total of 2 trillion yen from fiscal 2017 to2030 in quality improvement, growth and M&A,
including the implementation of its transition
strategy, and that these investments are being
implemented in a planned manner. DNV also
confirmed that there is an investment plan in the
future according to the timeline.
(See Schedule-2 Ref.4 for details)
For each financing, the amount of the project to beinvested, the amount to be allocated (new orrefinanced), and the environmental improvement
benefits (calculation method or results) will be
disclosed to the extent practicable in the evaluationof the specific use of proceeds.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

◯

4-i)

◎

◯

(△)

4-j)

4-k)

Requirement
checkWork Undertaken

DNV Findings

It is recommended that the fundraiser,
after securing financing, reports any
deviations between the initial plan and theactual expenditure, outcomes and impacts.
For any deviations, it is recommended thatthe underlying reasons be explained.

Yes

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

Osaka Gas will include in its post-funding reporting
any significant variances in expenditure, outcomesor impact from the original plan, as well as thereasons for such variances.

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

Yes

While there are differences in businesspractices, such as the fact that loans are
traditionally made based on the bilateralrelationship between a borrower and alender, it is recommended that disclosureon the above be made to the extent

Yes

No
Not Applicable

Interviews withstakeholders

No
Not ApplicableNo
Not Applicable

Confirmed
documents:/01/
Interviews withstakeholders

Osaka Gas has set a look-back period of
approximately three years. This is the standard timeframe that the Osaka Gas Green/Transition Project
has set as the time frame in which green/transition
ability will not be compromised in the short term. In
the case of refinancing in the future, it was
confirmed that the green/transition nature of thetarget assets will be maintained and thatenvironmental improvement effects will be realized
during the redemption or repayment period. In
addition, the it was confirmed that the look-backperiod and the reason for the look-back period, if
necessary, should be explained at an appropriate
timing (e.g., in legal documents or reports before
the bond issuance).

Confirmed
documents:/01/

When Osaka Gas executes a transition financing
using a loan, it will explain that the loan is based on
the Framework and the results of this external
evaluation, and will disclose the requirements set
out in the green loan related standards to the extent
practicable.

Interviews withstakeholders

Page of 85 of 124

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

No.

Disclosure elements

Requirementcheck

possible in order to ensure transparency
and credibility of transition finance.
However, if it is difficult to disclose suchinformation to the public from thestandpoint of confidentiality andcompetition, it is possible to report suchinformation only to lenders or external
evaluation organizations without disclosing
it to the public.
△

4-l)

Similarly, in cases where the fundraiser isa small-to-medium-sized enterprise and it
is difficult to disclose to the public thesame content as that reported to thefinancier or an external evaluation
institution, it is possible for the fundraiser
to simplify the content of disclosure, forexample, by limiting disclosure to asummary of h) to j) of this section.

Work Undertaken

DNV Findings*This report

Yes
No

Interviews withstakeholders

Osaka Gas is not a small business.

Not Applicable

24 The Ministry of the Environment, in its “Concept Paper on Impact Finance”, refers to impact as “a positive or negative change to the environment, society or
economy caused by an organization and is not a direct deliverable or output but an outcome as a change brought about in terms of the environment, society or
economy.”25 In disclosing impacts, outlining the amount of contribution to reducing CO2 emissions in the global value chain on the whole and the entire lifecycle, including theconsumption phase, can be considered. For the amount of contribution to the reduction, it is possible to reference the “Guideline for Quantifying GHG Emission
Reduction Contribution” (METI, 2018). Furthermore, as for outcomes on research and development, it is possible to reference the IEA Measuring Innovation by
Technology Readiness Level (TRL) or Importance for Net-Zero Emission, among others, and outline the progress in the R&D phase or the potential of reducing
CO2 emissions with the relevant technology by highlighting the importance of net-zero emissions.

Page of 86 of 124

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

26 A just transition is an attempt to ensure the wide sharing of virtual profits created through a transition to a green economy, as well as to support any party who
will experience an adverse economic impact (be it a country, a region, an industry, a community, a worker, or a consumer). The concept of a just transition
corresponds to several SDGs.
27 In particular, disclosure of investment plans is expected to be required for projects applicable to Use of Proceeds.

Page of 87 of 124

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

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

Following check list (GBGLs-1 ~ GBGLs-4) is prepared based on the Green Bond Guidelines (GBGLs, MOE, 2020).
According to the GBGLs, Requirements/Work Undertaken are divided into following two terms, Should:◎ Recommend:〇
The numbers /01/, /02/ ~ /21/ listed in the Work Undertaken column are the confirmed documents, and the details (document name) are shown in Appendix.
In addition to the confirmed documents, the Work Undertaken includes the case where the information obtained through discussions and interviews with the
publishers is used as evidence.
This assessment applies as a requirement for Use of Proceeds based on CTFH and CTFBG, so any term "green" and “bond” in Schedule-5 should beread as "transition” or “finance (bond)".

GBGLs-1 Use of proceeds
Ref.

SectionRequirements◎

1-①

Green Bond proceeds should beallocated to Green Projects that state
the clear environmental benefits,
which should be assessed by theissuerYes

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

Yes

〇

1-①

Requirement
checkWork UndertakenNo
Not Applicable

Confirmed documents:/01//02//03//11//16//1
7//18//19//20/
Interviews withstakeholders

No
Not Applicable

Confirmed documents:/01//11//16//17//18//1
9//20/
Interviews withstakeholders

Page of 88 of 124

DNV Findings
The proceeds from green/transition finance will beallocated to Osaka Gas’s projects that contribute to low
and decarbonization through the business related toclimate change, which is a materiality issue for OsakaGas. Specific environmental benefits have been evaluatedby the issuer as leading to CO2 emission reduction.
Osaka Gas has quantified the environmental
improvement effects of the Green/Transition Project.
Specifically, Osaka Gas has established a calculation
formula in advance for the CO2 reduction effect, andquantified the effects. (Some projects involve researchand development or installation of equipment for futureenvironmental improvements, which may make it difficult
to disclose or quantify results.)

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

SectionRequirements◎

1-④

In advance, issuers should provide
investors with information regarding
the use of Green Bond proceeds
through legal documentation (suchas a prospectus) or otherdocuments.

Yes

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

Yes

◎

1-⑤

Requirement
checkWork UndertakenNo
Not Applicable

Confirmed documents:/01//11//16//17//18//1
9//20//21/

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

Interviews withstakeholders

No
Not Applicable

Confirmed documents:/01//11//16//17//18//1
9//20//21/*This report

The proceeds will be allocated to fund one or more of the
projects listed in the table below and will be explained toinvestors through the Framework, the Amended Shelf
Registration Statement and other documents and theresults of external reviews.

Interviews withstakeholders

Table Daigas Group Key initiatives to achieve carbon neutrality(Green/transition finance candidate projects)
Eligible Criteria

Eligible Criteria & Project Overview

Decarbon Hydrogenization of utilization1)
gas
energyBiogasMethanation, direct use (chemicallooping combustion technology),etc.
On-site utilization in domestic/global
scale

Renewable power
Decarbon generatio
ization of n2) power
generatio Thermal
powerngenerationFuel Cells
Low3) carboniza Advancedtion
utilizationof natural

Page of 89 of 124

Solar power plants, onshore wind
farm, offshore wind farm, biomass
power plants, etc.
Use of carbon neutral fuels such assynthetic methane, hydrogen andammonia, CCUS (Carbon Capture,
Utilization and Storage), etc.
Enhancing efficiency anddownsizing, etc.
Support for converting fuel from oiland coal to natural gas
Demonstration of building microgrid

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

SectionRequirements

Requirement
checkWork Undertaken

DNV Findings
gas and
CHP
Advancedenergyutilization
Other(Reduction of CO2
emissionassociated withown
activities)〇

1-⑤

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

Yes
No
Not Applicable

Confirmed documents:/01//11//16//17//18//1
9//20//21/*This report
Interviews withstakeholders◎

1-⑥

In cases where Green Projects haveincidental negative environmental
impacts along with the alleged
environmental benefits, the issuers
should include information regardingthese negative impacts (e.g., how
they are assessed, what the issuers

Yes
No
Not Applicable

Confirmed documents:/01//11//16//17//18//1
9//20//21/
Interviews withstakeholders

Page of 90 of 124

Use of carbon neutral LNG
VPP, smart energy systems, etc.

Cryogenic power generation in thecity gas production process,
Cryogenic power generation
facilities, energy efficiency
renovation work of buildings, etc.

The explanations given to investors, taking into accountconfidentiality and other considerations, clearly outline
the green/transition projects through the disclosure of
the framework and the results of the external review.
Details of the specific eligible project candidates andprojects to be funded are provided to the external review
body to confirm eligibility.
Where the actual project to be allocated is fixed inadvance, this will be disclosed in the amended Shelf
Registration Statement and elsewhere, and if it isundecided, it will be disclosed in the annual report foreach appropriate category.
The following are some of the negative effects of project
implementation that were identified during thepreliminary project evaluation and selection process.
Projects with significant negative effects are limited tothose for which the necessary action has been taken or
will be taken in advance. In addition to the following, if
additional explanations to investors are deemedOsaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

SectionRequirements

Requirement
checkWork Undertaken

do to curb them) to investors so thatthe investors and market participants
can appropriately evaluate these
impacts.

〇

◎

1-⑦

1-⑦

DNV Findings
necessary, they will be provided in the amended Shelf
Registration Statement or other documents.
“In assessing the eligibility of each project, it is confirmedthat the project takes into account the potential negativeenvironmental and social impacts and that the facility
certification, licensing, and environmental assessment
procedures required by the country, region, ormunicipality where the facility or project is to be installed
are appropriate.”(In case of where a part of Green
Bond proceeds is used to refinanceexisting Green Projects,) it isrecommended that the issuers
provide information to the investors
regarding (1) the amount (or theshare) of the bond proceeds being
allocated for refinancing, and (2)which Green Projects (or Green
Project categories) may be
refinanced.

Yes

When Green Bonds are issued
multiple times to refinance an asset
that requires long-term
maintenance, the issuer should
clearly disclose the asset’s age andremaining useful life and the amountto be refinanced as at the time of thebond issuance, evaluate the longterm sustainability of environmental
benefits and obtain an assessment

Yes

No
Not Applicable

Confirmed documents:/01//11//16//17//18//1
9//20//21/
Interviews withstakeholders

No
Not Applicable

Confirmed documents:/01//11//16//17//18//1
9//20/
Interviews withstakeholders

Page of 91 of 124

DNV confirmed that Osaka Gas plans to disclose theestimated amount (or ratio) of the portion of theproceeds allocated to refinancing in the integrated reportpublished on an annual basis or website. If the inclusionof refinancing and the nature of the refinancing isdetermined prior to the issue of the bond, Osaka Gas
plans to disclose the necessary information in legal
documents in accordance with CTF 4-g).

At present, there are no plans to allocate refinancing toprojects that are long overdue.
If the refinancing is targeted, DNV confirmed that areasonable look-back period (e.g., the green/transitional
nature of the target asset must be maintained at the timeof refinancing and the environmental benefits must be
realized during the redemption or repayment period)
should be set.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

SectionRequirements

Requirement
checkWork Undertaken

DNV Findings

from an external reviewers forverification.

GBGLs-2 Process for Project Evaluation and Selection
Ref.

SectionRequirements◎

2-①

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

Requirement
checkWork Undertaken

Yes
No
Not Applicable

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

DNV Findings
The financing that Osaka Gas implements by utilizing
green/transition finance is aimed at achieving its transition
strategy in line with the low-carbon decarbonization strategy
set by the Gas and Electricity Technology Roadmap of theJapan Gas Association and the Ministry of Economy, Tradeand Industry (METI), which aims to align with the goals of
the Paris Agreement.
Osaka Gas has formulated a roadmap for its Transition
Strategy in the Daigas Group Carbon Neutral Vision, which
incorporates medium-term targets and a strategic plan for
decarbonization (a plan to introduce technologies that
contribute to the Transition). Each target based on Osaka
Gas's Transition Strategy is disclosed below.
These are planned to be explained to investors in advancethrough the Framework, the results of the external review
and the amended Shelf Registration Statement.
Table-3 Osaka Gas Transition Targets
Medium-termtargets

Page of 92 of 124

FY2030- Renewable development contribution
on a global basis : 5GW

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

SectionRequirements

Requirement
checkWork Undertaken

DNV Findings- Power portfolio in Japan consisting of
renewable1 : Nearly 50%- CO2 emission reduction
contribution : 10 million
tons/year*2*3 (compared to 2016)
Long-term
2050
targets
Carbon-neutral
1: Including solar, wind, biomass power sources which are eligible
for the feed-in tariff (FIT) scheme
2: Equivalent to one third of the CO2 emission currently produced inour business and by our customers (33 million ton/year)
3: Includes 700,000 tonnes of a partial reduction of Scope 3
emissions equivalent through introduction of high-efficiency gas
appliances, etc.

◎

2-①

In advance, issuers should provide
investors with information regarding
the following:
The criteria for determining theappropriateness of Green Projects
based on the environmental
sustainability objectives described
above

Yes
No
Not Applicable

Confirmed
documents:/01//02//03//14//2
0/Interviews withstakeholders

It was confirmed through the framework and assessmentthat the eligibility of Osaka Gas's green/transition project is
described based on which evaluation criteria (standards).
Specifically, the criteria are as follows
-

-

-

-

Page of 93 of 124

The Climate Transition Finance Handbook
International Capital Markets Association (ICMA),
2020
Basic Guidelines on Climate Transition Finance
Financial Services Agency, the Ministry of Economy,
Trade and Industry, the Ministry of theEnvironment, the2021
Green Bond Principles
International Capital Markets Association (ICMA),
2021
Green Bond Guidelines
Ministry of the Environment 2020

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

SectionRequirements

Requirement
checkWork Undertaken

DNV Findings--

Green loan principles
Loan Market Association and others (LMA andothers), 2021
Green Loan Guidelines
Ministry of the Environment, 2020

These will be specified in the Framework or in the External
Review, and will be explained in advance to investors throughthe Amended Shelf Registration Statement.
DNV conducted the eligibility assessment for the green projects using
the technical criteria available for reference in the Climate Bond
Initiative's Climate Bond Standard.

◎

2-①

In advance, issuers should provide
investors with information regarding
the following:
The process for determining how
Green Projects fit the criteria for theachievement of the environmental
sustainability objectives (The process
for the determination refers to thereason why issuers determine that
Green Projects can provide
environmental benefits appropriately
in light of the objectives and criteria
for the use of Green Bond proceeds,
how and by whom are the criteria
applied and used to determine
whether Green Projects areappropriate in light of the objectives,
and the like)Yes
No
Not Applicable

Confirmed
documents:/01//02//03//14//21/
Interviews withstakeholders

Page of 94 of 124

DNV confirmed that there is a description of the process bywhich decisions on the selection of green/transition projects
were made in the framework.
Specifically, the Finance Department selects candidates basedon the Eligibility Criteria, and the Director in charge of Financemakes the final decision after consultation with the Business
Units, etc. and the Planning Department. These processes havebeen established as internal documents of Osaka Gas, and DNV
has confirmed that the plan is to be implemented in accordancewith the appropriate processes.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

SectionRequirements〇

2-⑥

It is recommended that the issuers
explain to investors in advance any
environmental standards orcertifications that the issuers willrefer to in evaluating and selecting a
Green Project to be financed.

Yes

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

Yes

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

Yes

It is recommended that issuers
position their environmental
objectives, criteria and information

Yes

◎

〇

〇

2-⑦

2-⑨

2-⑪

Requirement
checkWork UndertakenNo
Not Applicable

Confirmed
documents:/01//02//03//14//21/
Interviews withstakeholders

No
Not Applicable

Confirmed
documents:/01//02//03//11//14//16//17//18//19//2
0//21/
Interviews withstakeholders

No

Not Applicable

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

No

Not Applicable

Confirmed
documents:

Page of 95 of 124

DNV Findings
The transition strategy, which forms the basis for theevaluation and selection of transition finance, is Osaka Gas'
roadmap based on the technology roadmaps for the gas andelectricity sectors of the Japan Gas Association and theMinistry of Economy, Trade and Industry, with specific targets(medium and long term) and plans. These will be explained toinvestors through the framework and second party opinions.
There are no project-specific environmental standards orcertifications. Some projects may be funded through subsidies(e.g. FIT).
Osaka Gas has established the following as common checks
for green/transition finance (a concept equivalent to exclusion
criteria).
“In assessing the eligibility of each project, it is confirmed thatthe project takes into account the potential negativeenvironmental and social impacts and that the facility
certification, licensing, and environmental assessment
procedures required by the country, region, or municipality
where the facility or project is to be installed are appropriate.”
DNV confirmed that there is a description of the process bywhich decisions on the selection of green/transition projects
were made in the framework.
Specifically, the Finance Department selects candidates basedon the Eligibility Criteria, and the Director in charge of Financemakes the final decision after consultation with the Business
Units, etc. and the Planning Department. These processes havebeen established as internal documents of Osaka Gas, and DNV
has confirmed that the plan is to be implemented in accordancewith the appropriate processes.
The transition strategy, which forms the basis for theevaluation and selection of transition finance, is Osaka Gas'
roadmap based on the technology roadmaps for the gas andOsaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

SectionRequirementson their processes in the context of
their comprehensive environmental
sustainability objectives, strategy,
policies and so on (e.g., mediumterm management plan,sustainability strategy, CSR strategy)
when explaining them to investors.

Requirement
checkWork Undertaken/01//02//03//08//09//10//14/
Interviews withstakeholders

Page of 96 of 124

DNV Findings
electricity sectors of the Japan Gas Association and theMinistry of Economy, Trade and Industry, with specific targets(medium and long term) and plans. These will be explained toinvestors through the framework and second party opinions.
Osaka Gas' transition strategy, the "Daigas Group Carbon
Neutral Vision" and roadmap, is closely linked to the mediumterm management plan and the work with TCFD.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

GBGLs-3 Management of proceeds
Ref.

SectionRequirements◎

3-①

Issuers should track and manage the net
Green Bond proceeds in an appropriatemanner. These tracking and managing
activities should be controlled by theissuer’s internal process.

Yes

As long as the Green Bonds areoutstanding, issuers manage the amountof the allocation to the Green project isequal to or more than proceed, or issuers
should periodically adjust to match theamount of the total Green Bond proceeds
to the sum of the amount of the proceeds
allocated to Green Projects and theamount of the unallocated proceeds.

Yes

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

Yes

◎

◎

3-②

3-②

Requirement
check
No

Not Applicable

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

No

Not Applicable

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

No

Not Applicable

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

Page of 97 of 124

DNV Findings
DNV confirmed that Osaka Gas plans to manage theproceeds through its accounting system and individualinternal documents (dedicated ledgers) to ensure thatthe total green/transition-eligible project amount (orindividual project amount) is not less than the amountof green/transition finance issued (or allocated).
Based on the interviews with stakeholders and theresults, DNV confirmed that there is an operational
procedure (system) that can track in the above cash
management.
DNV has confirmed that Osaka Gas plans to manage
the allocated and unallocated amounts on a regularbasis (at least once a year) using a special ledger,
based on data extracted from its accounting system on
the allocation status.

DNV confirmed that Osaka Gas keeps track of thebalance of unallocated proceeds through theGreen/Transition Finance Funding Control Sheet andother means, and explains to investors through theframework how the proceeds are managed (in cash andcash equivalents). In addition, DNV confirmed that the
Osaka Gas plans to allocate (including refinance) theproceeds to the projects in a timely manner. The

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

SectionRequirements

Requirement
checkWork Undertaken

DNV Findings
unallocated proceeds are expected to be used within
two years. However, if the project execution (planning,
construction, etc.) is long term, the period of
appropriation and refinancing may be flexibly adjusted
in consideration of the green/transition characteristicsof the project. It was also confirmed that any significant
overruns to the original plan would be reported in thereporting, along with the reasons for such overruns.

◎

〇

◎

3-⑤

3-⑥

3-⑧

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

Yes

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

Yes

In advance, issuers should provide
investors with information on how
unallocated Green Bond proceeds will be
managed when the Green Projects thatwill receive the Green Bond proceeds
have not been determined, or when such
Green Projects have been determined but
the proceeds have not been allocated

Yes

No

Not Applicable

Confirmed
documents:/01//12//15//21/
Interviews withstakeholders

No

Not ApplicableNo

Not Applicable

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

DNV confirmed that Osaka Gas has internal processes
in place to enable it to track and control the proceeds.
It confirmed that Osaka Gas planned to explain to
investors in the framework and other documents.

Interviews withstakeholders

DNV confirmed that Osaka gas has internal processes inplace to ensure that documents relating to the
management of proceeds are properly retained
throughout the reimbursement period in accordancewith Osaka Gas's accounting and document
management rules.

Confirmed
documents:/01//12//15//21/

DNV confirmed that the framework describes how the
pre-allocation equivalent of funds is to be managed (incash or cash equivalents).

Interviews withstakeholders

Page of 98 of 124

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

SectionRequirements

Requirement
checkWork Undertaken

DNV Findings

because the allocation timing has not yet
arrived.
〇3-⑨

It is recommended that issuers manage
unallocated Green Bond proceeds as an
asset with high liquidity and safety suchas cash, cash equivalents, or short-term
financial assets

Yes

No

Not Applicable

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

Page of 99 of 124

Cash or cash equivalents as specified in the framework
are highly secure assets and comply with therequirements.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

GBGLs-4 Reporting
Ref.

SectionRequirements◎

4-①

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

Requirement
check
Yes

No

Not Applicable

Work Undertaken
Confirmed
documents:/01/
Interviews withstakeholders

◎

◎

4-②

4-③

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

Yes

Disclosed information should include thefollowing contents:<Contents>
・ A list of the Green Projects to which
Green Bond proceeds have been allocatedYes

・ A brief description of each Green Project(including up-to-date progress)No

Not Applicable

Confirmed
documents:/01/
Interviews withstakeholders

No

Not Applicable

DNV Findings
DNV confirmed that Osaka Gas plans to report on the use ofproceeds from the Green/Transition Finance issue and theenvironmental benefits from the year following theGreen/Transition Finance issue until at least the completionof the use of proceeds and, if necessary, the environmental
benefits will be reported until the redemption or completionof repayment of the green/transition financing. The annual
report will also be disclosed on the Osaka Gas website.
Same as 4-①.
DNV confirmed that Osaka Gas would report in a timely
manner or in its reporting on any changes in the transition
strategy or pathway, or any major changes in the allocation
plan or in the status of project implementation (e.g.
interruption of a project for which an allocation has been
initiated, significant postponement on an annual basis, saleor disposal, etc.), even after the completion of the allocation.

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

The information to be disclosed will include, for reasons ofconfidentiality, the following information
The report will be disclosed on the website.

Interviews withstakeholders・ The amount allocated to each Green
Project<Allocation Status>
Allocated Amount to be allocated per eligible criteria
Balance of unallocated amount
Estimated amount of the portion of the proceeds
allocated to refinancing<Environmental benefits>

・ The expected environmental benefits ofeach Green ProjectEnvironmental impacts are disclosed within the scopeof confidentiality, to the extent practicable, and inPage of 100 of 124

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

SectionRequirements

Requirement
checkWork Undertaken

・ Information regarding unallocated Green
Bond proceeds (the amount of theunallocated proceeds or the share of theunallocated proceeds to the total amount of
the proceeds, when the unallocatedproceeds are expected to be allocates toGreen Projects, and how the unallocatedproceeds are managed until allocation)

DNV Findings
consideration of the characteristics of the project,including an overview of the project (including
progress, completion, operation, etc.) and the
expected environmental benefits (e.g., t-CO2/year).
<Others>

Efforts to achieve carbon neutrality in 2050 will be
reviewed as necessary in light of policy and technologicaltrends, and will be disclosed where necessary.

〇

〇

◎

4-④

4-⑤

4-⑦

If Green Bond proceeds have been allocatedto the refinancing of existing projects, it isrecommended that disclosed information
include: 1) the approximate amount (or theshare) of the allocated proceeds used forrefinancing, and 2) a list of the Green
Projects (or the project categories)
refinanced.

Yes

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

Yes

When disclosing information regarding the
expected environmental benefits of projects,
issuers should use appropriate indicators
while ensuring consistency with the

Yes

No

Not Applicable

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

DNV confirmed that Osaka Gas plans to disclose on its website
an annual report on the approximate amount (or percentage)of proceeds that are used for refinancing, if the proceeds areused for refinancing.

Interviews withstakeholders
No

Not Applicable

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

No

Not Applicable

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

Page of 101 of 124

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

The environmental benefits will be based on the CO2 emission
reduction effect, but will use appropriate indicators according
to the nature of the project for which the transition finance is
to be allocated, and the progress of the project.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

〇

SectionRequirements

Requirement
check“environmental sustainability objectives,”the “criteria” for Green Projects specified in
Section 2, “Process for Project Evaluationand Selection,” and the characteristics ofGreen Projects.
4-⑧

When disclosing the expected environmental
benefits of projects, it is recommended thatissuers, where feasible, use quantitative
indicators and disclose information on
methodologies and/or assumptions as wellas these indicators.

Work Undertaken

DNV FindingsInterviews withstakeholders

Yes

No

Not Applicable

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

Page of 102 of 124

Environmental benefits will be disclosed using quantitative
indicators, but will be carried out on a transition project basisor by transition project category, taking into accountconfidentiality and the rationality of the evaluation process.
The calculation method will be disclosed to the extent
necessary.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Schedule-6 Green Loan Guidelines (Transition Finance Loan with specific use of proceeds)
Eligibility Assessment
The following check list (GLGLs-1 to GLGLs-6) is prepared based on the Green Loan Guidelines (GLGLs, MOE, 2020).
According to the GLGLs, Requirements/Evaluation aspects are divided into following two terms, Should:◎ Recommend:〇
The numbers /01/, /02/ ~ /21/ listed in the Work Undertaken column are the confirmed documents, and the details (document name) are shown in Reference
dcoument-1 (See the Attachment).
In addition to the confirmed documents, the Work Undertaken includes the case where the information obtained through discussions and interviews with the
publishers is used as evidence.
This assessment applies as a requirement for Use of Proceeds based on CTFH and CTFBG, so any term "green" and “bond” in Schedule-6 should beread as "transition” or “finance (bond)".

GLGLs-1 Use of proceeds
Ref.

SectionRequirements◎

1-①

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

Requirement
check
Yes

No

Not Applicable

Work Undertaken
Confirmed
documents:/01//02//03//11//16//17//18//19//20/
Interviews withstakeholders〇

1-①

The borrowers is recommended toquantify them where possible.

Yes

No

Not Applicable

Confirmed
documents:

Page of 103 of 124

DNV Findings
The proceeds from green/transition finance will beallocated to Osaka Gas’s projects that contribute to low
and decarbonization through the business related toclimate change, which is a materiality issue for OsakaGas. Specific environmental benefits have been
evaluated by the issuer as leading to a CO2 emission
reduction.

Osaka Gas has quantified the environmental improvement
effects of the Green/Transition Project. Specifically, Osaka
Gas has established a calculation formula in advance forOsaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

SectionRequirements

Requirement
checkWork Undertaken/01//11//16//17//18//19//20/
Interviews withstakeholders

◎

◎

1-④

1-⑤

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

Yes

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

Yes

No

Not Applicable

Confirmed
documents:/01//11//16//17//18//19//20//21/
Interviews withstakeholders
Confirmed
documents:No
Not Applicable/01//11//16//17//18//19//20//21/
Interviews withstakeholders

DNV Findings
the CO2 reduction effect, and quantified the effects. (Someprojects involve research and development or installationof equipment for future environmental improvements,
which may make it difficult to disclose or quantify results.)

Osaka Gas plans to explain the use of proceeds toinvestors in advance through the Framework and theAmended Shelf Registration Statement, etc.

The proceeds will be allocated to fund one or more of the
projects listed in the table below and will be explained toinvestors through the Framework, the Amended Shelf
Registration Statement and other documents and theresults of external reviews.
Table Daigas Group Key initiatives to achieve carbon neutrality(Green/transition finance candidate projects)
Eligible Criteria
1)

Decarbon Hydrogenization of utilizationgas
energyBiogasRenewabl
Decarbon e power
2) ization ofgeneratio
powernPage of 104 of 124

Eligible Criteria & Project Overview
Methanation, direct use (chemicallooping combustion technology),etc.
On-site utilization in domestic/global
scale
Solar power plants, onshore wind
farm, offshore wind farm, biomass
power plants, etc.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

SectionRequirements

Requirement
checkWork Undertaken

DNV Findings
generatio Thermalnpower
generationFuel Cells
Advancedutilizationof natural
gas and
CHP
Advanced
Lowenergy3) carboniza
utilization
tion
Other
(Reduction of CO2
emissionassociated withown
activities)〇

1-⑤

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

Yes

Confirmed
documents:No
Not Applicable/01//11//16//17//18//19//20//21/
Interviews withstakeholders

Page of 105 of 124

Use of carbon neutral fuels such assynthetic methane, hydrogen andammonia, CCUS (Carbon Capture,
Utilization and Storage), etc.
Enhancing efficiency anddownsizing, etc.
Support for converting fuel from oiland coal to natural gas
Demonstration of building micro
grid
Use of carbon neutral LNG
VPP, smart energy systems, etc.

Cryogenic power generation in thecity gas production process,
Cryogenic power generation
facilities, energy efficiency
renovation work of buildings, etc.

The explanations given to lenders, taking into accountconfidentiality and other considerations, clearly outline
the green/transition projects through the disclosure of
the framework and the results of the external review.
Details of the specific eligible project candidates andprojects to be funded are provided to the external review
body to confirm eligibility.
Where the actual project to be allocated is fixed inadvance, this will be disclosed in the amended Shelf
Registration Statement and elsewhere, and if it isundecided, it will be disclosed in the annual report for eachappropriate category.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

SectionRequirements◎

1-⑥

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

Yes

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

Yes

〇

1-⑦

Requirement
checkWork Undertaken
Confirmed
documents:No
Not Applicable/01//11//16//17//18//19//20//21/
Interviews withstakeholders

DNV Findings
The following are some of the negative effects of project
implementation that were identified during thepreliminary project evaluation and selection process.
Projects with significant negative effects are limited tothose for which the necessary action has been taken or
will be taken in advance. In addition to the following, if
additional explanations to investors are deemednecessary, they will be provided in the amended Shelf
Registration Statement or other documents.
“In assessing the eligibility of each project, it isconfirmed that the project takes into account thepotential negative environmental and social impacts andthat the facility certification, licensing, and environmental
assessment procedures required by the country, region,or municipality where the facility or project is to beinstalled are appropriate.”

Confirmed
documents:No
Not Applicable/01//11//16//17//18//19//20//21/
Interviews withstakeholders

Page of 106 of 124

DNV confirmed that Osaka Gas plans to disclose theestimated amount (or ratio) of the portion of theproceeds allocated to refinancing in the integrated reportpublished on an annual basis or website. If the inclusionof refinancing and the nature of the refinancing isdetermined prior to the issue of the bond, Osaka Gas
plans to explain the necessary information to lenders in
documents related to loan contracts in accordance with
CTF 4-g).

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

SectionRequirements

Requirement
checkWork Undertaken

DNV Findings

applicable period of the Green
Project refinanced (Lookback
Period).
◎1-⑦

When Green Loans are used multiple
times to refinance an asset that
requires long-term maintenance, theborrower should clearly disclose theasset’s age, remaining life and theamount to be refinanced as of thetime of procurement, evaluate thelong-term sustainability ofenvironmental benefits and receive
an assessment from an outside
agency for verification as necessary.

Yes

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

Page of 107 of 124

At present, there are no plans to allocate refinancing toprojects that are long overdue.
If the refinancing is targeted, DNV confirmed that areasonable look-back period (e.g., the green/transitional
nature of the target asset must be maintained at the timeof refinancing and the environmental benefits must be
realized during the redemption or repayment period)
should be set.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

GLGLs-2 Process for Project Evaluation and Selection
Ref.

SectionRequirements◎

2-①

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

Requirement
check
Yes
No
Not Applicable

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

DNV Findings
The financing that Osaka Gas implements by utilizing
green/transition finance is aimed at achieving its transition
strategy in line with the low-carbon decarbonization
strategy set by the Gas and Electricity Technology Roadmapof the Japan Gas Association and the Ministry of Economy,
Trade and Industry (METI), which aims to align with thegoals of the Paris Agreement.
Osaka Gas has formulated a roadmap for its Transition
Strategy in the Daigas Group Carbon Neutral Vision, which
incorporates medium-term targets and a strategic plan for
decarbonization (a plan to introduce technologies that
contribute to the Transition). Each target based on Osaka
Gas's Transition Strategy is disclosed below.
These are planned to be explained to investors in advancethrough the Framework, the results of the external review
and the amended Shelf Registration Statement.
Table-3 Osaka Gas Transition Targets

Medium-termtargets

FY2030- Renewable development contribution
on a global basis : 5GW- Power portfolio in Japan consisting of
renewable*1 : Nearly 50%- CO2 emission reduction
contribution : 10 million
tons/year*2*3 (compared to 2016)
Long-term
2050
targets
Carbon-neutral
1: Including solar, wind, biomass power sources which are eligible
for the feed-in tariff (FIT) scheme

Page of 108 of 124

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

SectionRequirements

Requirement
checkWork Undertaken

DNV Findings
2: Equivalent to one third of the CO2 emission currently produced inour business and by our customers (33 million ton/year)
3: Includes 700,000 tonnes of a partial reduction of Scope 3
emissions equivalent through introduction of high-efficiency gas
appliances, etc.

◎

2-①

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

Yes

No

Not Applicable

Confirmed
documents:/01//02//03//14//21/
Interviews withstakeholders

It was confirmed through the framework and assessmentthat the eligibility of Osaka Gas's green/transition project is
described based on which evaluation criteria (standards).
Specifically, the criteria are as follows
-

-

-

-

-

The Climate Transition Finance Handbook
International Capital Markets Association (ICMA),
2020
Basic Guidelines on Climate Transition Finance
Financial Services Agency, the Ministry of
Economy, Trade and Industry, the Ministry of theEnvironment, the2021
Green Bond Principles
International Capital Markets Association (ICMA),
2021
Green Bond Guidelines
Ministry of the Environment 2020
Green loan principles
Loan Market Association and others (LMA andothers), 2021
Green Loan Guidelines
Ministry of the Environment, 2020

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

Page of 109 of 124

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

SectionRequirements

Requirement
checkWork Undertaken

DNV Findings

DNV conducted the eligibility assessment for the green projects
using the technical criteria available for reference in the Climate
Bond Initiative's Climate Bond Standard.

◎

〇

◎

2-①

2-⑥

2-⑦

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

Yes

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

Yes

If the borrower intends to establish
exclusion criteria to identify andcontrol such potentially material
environmental and social risks ofGreen Projects, the borrower should
explain them to lenders in advanceYes

Confirmed documents:/01//02//03//14//21/

No
Not Applicable

Interviews withstakeholders

Confirmed documents:/01//02//03//14//21/

No
Not ApplicableNo
Not Applicable

Interviews withstakeholders

Confirmed documents:/01//02//03//11//14//
16//17//18//19//20//2
1/

Page of 110 of 124

DNV confirmed that there is a description of the process bywhich decisions on the selection of green/transition projects
were made in the framework.
Specifically, the Finance Department selects candidates basedon the Eligibility Criteria, and the Director in charge of Financemakes the final decision after consultation with the Business
Units, etc. and the Planning Department. These processes
have been established as internal documents of Osaka Gas,
and DNV has confirmed that the plan is to be implemented inaccordance with the appropriate processes.
The transition strategy, which forms the basis for theevaluation and selection of transition finance, is Osaka Gas'
roadmap based on the technology roadmaps for the gas andelectricity sectors of the Japan Gas Association and theMinistry of Economy, Trade and Industry, with specifictargets (medium and long term) and plans. These will be
explained to investors through the framework and second
party opinions.
There are no project-specific environmental standards orcertifications. Some projects may be funded through subsidies(e.g. FIT).
Osaka Gas has established the following as common checks
for green/transition finance (a concept equivalent to
exclusion criteria).
“In assessing the eligibility of each project, it is confirmedthat the project takes into account the potential negativeenvironmental and social impacts and that the facility

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

SectionRequirements

Requirementcheck

as part of thecriteria it applies.

〇

〇

2-⑨

2-⑪

Work Undertaken
Interviews withstakeholders

It is recommended that internal
departments who have expertise,such as the environment related
department, or external institutions
are involved in the evaluation andselection process of Green Projects toensure suitability from anenvironmental point of view.

Yes

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

Yes

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

No
Not ApplicableNo
Not Applicable

Interviews withstakeholders

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

Page of 111 of 124

DNV Findings
certification, licensing, and environmental assessment
procedures required by the country, region, or municipality
where the facility or project is to be installed areappropriate.”
DNV confirmed that there is a description of the process bywhich decisions on the selection of green/transition projects
were made in the framework.
Specifically, the Finance Department selects candidates basedon the Eligibility Criteria, and the Director in charge of Financemakes the final decision after consultation with the Business
Units, etc. and the Planning Department. These processes
have been established as internal documents of Osaka Gas,
and DNV has confirmed that the plan is to be implemented inaccordance with the appropriate processes.
The transition strategy, which forms the basis for theevaluation and selection of transition finance, is Osaka Gas's
roadmap based on the technology roadmaps for the gas andelectricity sectors of the Japan Gas Association and theMinistry of Economy, Trade and Industry, with specifictargets (medium and long term) and plans. These will be
explained to investors through the framework and second
party opinions.
Osaka Gas' transition strategy, the "Daigas Group Carbon
Neutral Vision" and roadmap, is closely linked to themedium-term management plan and the work with TCFD.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

GLGLs-3 Management of proceeds
Ref.

SectionRequirements◎

3-①

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

Yes

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

Yes

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

Yes

◎

◎

3-②

3-②

Requirement
check

No
Not Applicable

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

No
Not Applicable

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

No
Not Applicable

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

Page of 112 of 124

DNV Findings
DNV confirmed that Osaka Gas plans to manage theproceeds through its accounting system and individualinternal documents (dedicated ledgers) to ensure that the
total green/transition-eligible project amount (or individual
project amount) is not less than the amount ofgreen/transition finance issued (or allocated).
Based on the interviews with stakeholders and the results,
DNV confirmed that there is an operational procedure(system) that can track in the above cash management.
DNV has confirmed that Osaka Gas plans to manage theallocated and unallocated amounts on a regular basis (atleast once a year) using a special ledger, based on data
extracted from its accounting system on the allocation
status.

DNV confirmed that Osaka Gas keeps track of the balanceof unallocated proceeds through the Green/Transition
Finance Funding Control Sheet and other means, andexplains to investors through the framework how theproceeds are managed (in cash and cash equivalents). In
addition, DNV confirmed that the Osaka Gas plans toallocate (including refinance) the proceeds to the projects
in a timely manner. The unallocated proceeds are expectedOsaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

SectionRequirements

Requirement
checkWork Undertaken

DNV Findings
to be used within two years. However, if the project
execution (planning, construction, etc.) is long term, theperiod of appropriation and refinancing may be flexibly
adjusted in consideration of the green/transition
characteristics of the project. It was also confirmed thatany significant overruns to the original plan would bereported in the reporting, along with the reasons for suchoverruns.

◎

〇

3-④

3-⑤

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

Yes

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

Yes

No
Not Applicable

Confirmed
documents:/01//12//15//21/
Interviews withstakeholders

No
Not Applicable

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

Page of 113 of 124

DNV confirmed that Osaka Gas has internal processes inplace to enable it to track and control the funds raised. It
confirmed that these are planned to be explained tolenders in the Framework and other documents.

DNV confirmed that it has internal processes in place toensure that documents relating to the management ofprocured funds are properly stored for the duration of therepayment period in accordance with Osaka Gas'
accounting and document management rules.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

GLGLs-4 Reporting
Ref.

SectionRequirements◎

4-①

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

Yes

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

Yes

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

Yes

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

Yes

◎

◎

◎

4-②

4-④

4-⑤

Requirement
check

No
Not Applicable

Work Undertaken
Confirmed
documents:/01/
Interviews withstakeholders

No
Not Applicable

Confirmed
documents:/01/
Interviews withstakeholders

No
Not Applicable

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

No

Confirmed
documents:

Page of 114 of 124

DNV Findings
DNV has confirmed that Osaka Gas plans to report on the useof the proceeds from the transition finance issue and theenvironmental benefits from the issue from the year following
the issue of the transition finance until at least the year
following the completion of the use of the proceeds.
The annual report will also be published on the Osaka Gas
website.
In the event that Osaka Gas finances the transition financing
with a loan, it will state that it is a transition loan and will
disclose to the public on its website updated information on
the use of the funds raised.

Same as 4-①.
DNV confirmed that Osaka Gas would report in a timely
manner or in its reporting on any changes in the transition
strategy or pathway, or any major changes in the allocation
plan or in the status of project implementation (e.g.
interruption of a project for which an allocation has been
initiated, significant postponement on an annual basis, sale ordisposal, etc.), even after the completion of the allocation.
The information to be disclosed will include, for reasons ofconfidentiality, the following information
The report will be disclosed on the website.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

〇

Section

4-⑥

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

Requirement
check
Not Applicable

Work Undertaken/01//11//16//17//1
8//19//20/
Interviews withstakeholders

DNV Findings<Allocation Status>
Allocated Amount to be allocated per eligible criteria
Balance of unallocated amount
Estimated amount of the portion of the proceeds allocatedto refinancing<Environmental benefits>Environmental impacts are disclosed within the scopeof confidentiality, to the extent practicable, and inconsideration of the characteristics of the project,including an overview of the project (including
progress, completion, operation, etc.) and the expectedenvironmental benefits (e.g., t-CO2/year).
<Others>

Efforts to achieve carbon neutrality in 2050 will be
reviewed as necessary in light of policy and technologicaltrends, and will be disclosed where necessary.

Yes
No
Not Applicable

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

Page of 115 of 124

DNV confirmed that Osaka Gas plans to disclose on its website
an annual report on the approximate amount (or percentage) ofproceeds that are used for refinancing, if the proceeds are used
for refinancing.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

Section

〇

4-⑦

◎

〇

4-⑩

4-⑪

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

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

Requirement
check
Yes
No
Not Applicable

Work Undertaken

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

DNV Findings

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

Interviews withstakeholders
Yes
No
Not Applicable

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

The environmental benefits will be based on the CO2 emission
reduction effect, but will use appropriate indicators according
to the nature of the project for which the transition finance is
to be allocated, and the progress of the project.

Interviews withstakeholders
Yes
No
Not Applicable

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

Page of 116 of 124

Environmental benefits will be disclosed using quantitative
indicators, but will be carried out on a transition project basis orby transition project category, taking into account confidentiality
and the rationality of the evaluation process. The calculation
method will be disclosed to the extent necessary.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

GLGLs-5︓Internal reviews
Ref.

SectionRequirements◎

5-(3)②

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

Yes

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

Yes

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

Yes

For a borrower to gain public approval by
expressing that the procured loans are Green
Loans, they need to ensure transparency. It istherefore recommended that they make the self-

Yes

◎

◎

〇

5-(3)③5-(3)④5-(3)④

Requirement
check

No
Not ApplicableNo
Not Applicable

Work Undertaken
Confirmed
documents:/01//11//14//15/
Interviews
withstakeholders

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

Confirmed
documents:

Osaka Gas has established documented internal
processes for the evaluation and selection
process of projects and for the management ofproceeds. Osaka Gas will report on the results ofthese processes when requested by the lenders.

/01//11//14//15/
Interviews
stakeholders

No
Not Applicable

Not Applicable

Page of 117 of 124

with

Confirmed
documents:/01//11//14//15/
Interviews
stakeholders

No

DNV Findings

with

Confirmed
documents:/01//11//14//15/

Osaka Gas plans to disclose to the public that it
has conducted its self-assessment using loans ingreen/transition finance in accordance with theinternal processes set out in the Framework in
advance and the results of the assessment.

Osaka Gas plans to disclose the results of its
self-assessment to the general public throughits website and other means when using loans

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Ref.

SectionRequirements

Requirementcheck

certification results publicly available via theirwebsite or otherwise.

Work Undertaken
Interviews
stakeholders

Page of 118 of 124

with

DNV Findings
for transition finance based solely on selfassessment.

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Schedule-7 Climate Bonds Standard & Certification Scheme Sector Criteria for Solar (version 2.1)
CBS-SE-1 Climate Bonds Standard & Certification Scheme Sector Criteria for Solar (version 2.1) Criteria for Eligible Projects & Assets– Solar (Eligible Activities)
ClausesRequirements

1.1.1.

Onshore solar electricity generation facilities

Requirement checkYes

No

Not Applicable

Work Undertaken

DNV Findings

Confirmed
documents:

Daigas Oita Mirai Solar (Nissan Green Energy
Farm in Oita) is an onshore solar power
generation system.

/01//07/
Interviews withstakeholders

1.1.2.

1.1.3.

Wholly dedicated transmission infrastructure
and other supporting infrastructure foronshore solar electricity generation facilities
including inverters, transformers, energy
storage systems and control systems.

Yes

Onshore solar thermal facilities such as solar
hot water systems.

Yes

No

Not Applicable

Confirmed
documents:/01//07/

Daigas Oita Mirai Solar (Nissan Green Energy
Farm in Oita) with other related support
facilities included

Interviews withstakeholders

No

N/A

Not Applicable

It is an onshore solar power generation
facility.

CBS-SE-2 Climate Bonds Standard & Certification Scheme Sector Criteria for Solar (version 2.1) Criteria for Eligible Projects& Assets – Solar (non solar fuel use)
Page of 119 of 124

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

ClausesRequirements

2.1.

Eligible Project & Assets that have activities insolar electricity generation facilities or solar
thermal facilities shall have a minimum of
85% of electricity generated from solar
energy resources

Requirement checkYes

No

Not Applicable

Work Undertaken

DNV Findings

Confirmed
documents:

No back-up power source was installed for
the PV system, and it was confirmed thatthe system met the requirement of at least
85% solar energy generation source.

/01//07/
Interviews withstakeholders

Page of 120 of 124

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

CBS-SE-3 Climate Bonds Standard & Certification Scheme Sector Criteria for Solar (version 2.1) Assets and projects not
eligible under the Solar Criteria
ClausesRequirements

1.1.1.

Offshore solar electricity generation facilities

Requirement check
Yes

No

Work Undertaken

DNV Findings

N/A

It is an onshore solar
power generation facility.

N/A

It is an onshore solar
power generation facility.

N/A

It is an onshore solar
power generation facility.

Not Applicable
1.1.2.

1.1.3.

Wholly dedicated transmission infrastructure and othersupporting infrastructure for offshore solar electricity
generation facilities including inverters, transformers,
energy storage systems and control systems.

Yes

Offshore solar thermal facilities such as solar hot water
systems.

Yes

No

Not ApplicableNo

Not Applicable

Page of 121 of 124

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

Schedule-8 Climate Bonds Standard & Certification Scheme Sector Criteria for Onshore Wind
Sector Wind Sector Eligibility Criteria of the Climate Bonds Standard Version 1.2
CBS-WE-1 Wind Sector Eligibility Criteria of the Climate Bonds Standard
AssetsNo.

Criteria

Onshore wind
Onshore wind
Assets that
operate or are
underconstruction
to operate:

1

Onshore wind energy generation facilities

Requirement checkYes

No

Not Applicable

Work Undertaken

DNV Findings

Confirmed
documents:

The projects to be verified (subject topotential allocation) are those related to thedevelopment, construction, operation andrefurbishment of onshore wind energy
generation (including equity investment).

/01//16//18//19/
Interviews withstakeholders

2

3

Dedicated transmission infrastructure andsupport facilities (e.g. transformers,
backbone, transmission terminus, gridconnections, dedicated facilities for support
vessels and vehicles, equipment storage,
onshore assembly)

Yes

Dedicated operational production,
manufacturing or distribution facilities for key
components, such as wind turbines,
platforms etc.

Yes

No

Not Applicable

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

No

Not Applicable

Interviews withstakeholders

Projects subject to verification (subject topotential allocation) are those related to theconnection of existing transmission(distribution) facilities, including projects
involving their purchase and installation(including equity investment).

It does not include allocation to direct
production activities, manufacturing andtransport equipment.

Assets listed in Table 1 (with an associated green circle in the mitigation column) automatically meet the Mitigation requirement of the Climate Bonds Standard.
This extends to:• Wind energy generation shall be projects & assets that operate or are under construction to operate in one or more of the following activities:- The development, construction and operation of wind farms

Page of 122 of 124

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion- Operational production or manufacturing facilities wholly dedicated to wind energy development- Wholly dedicated transmission infrastructure for wind farms.
-Wind power dedicated transport facilities as a whole

CBS-WE-2 Wind Sector Eligibility Criteria of the Climate Bonds Standard Version 1.1, Assets and projects not eligible forcertification under the wind criteria
AssetsNo.

Criteria

Offshore wind

1

Offshore wind facilities, dedicatedtransmission infrastructure, dedicatedsupport facilities, manufacturing facilities anddistribution facilities are not eligible for
Certification under the Wind Criteria.
Offshore wind is eligible for Certification
under the Marine Renewable Energy Criteria.

Requirement checkYes
No
Not Applicable

Page of 123 of 124

Work Undertaken

DNV Findings

Confirmed
documents:

Projects subject to verification (subject topotential allocation) are those relating toonshore wind generation. Projects related tooffshore wind generation are not included.

/01//16//18//19/
Interviews withstakeholders

Osaka Gas Co., Ltd. Daigas Group Green/Transition Finance Framework Second Party Opinion

List of reference materials/01/

Daigas Group Green/Transition Finance Framework/02/

Daigas Group Medium-Term Management Plan 2023 Creating Value for a sustainable
Future (March 2021)/03/

Daigas Group Carbon Neutral Vision (January 2021) *includes roadmap/04/

Japan Gas Association Carbon Neutral Challenge 2050 Action Plan

/05/

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

/06/

Green growth strategy with carbon neutrality in 2050

/07/

The Sixth Strategic Energy Plan (October 2021)/08/

Daigas Group Integrated Report 2021

/09/

Daigas Group ESG data collection

/10/

-

/11/

Osaka Gas Project list & estimated CO2 emission reduction/12/

Osaka Gas Accounting Procedures/13/

Osaka Gas Document Control Procedures/14/

Osaka Gas Process for Project Evaluation and Selection/15/

Osaka Gas Management Chart of proceeds (Management Flow & Management Sheet)/16/

Project Information - Inami Wind Power Plant (Environmental Impact Assessment etc.)/17/

Project Information - Daigas Oita Mirai Solar Power Plant (Nissan Green Energy Farm in
Oita)

/18/

Project Information - Noheji Wind Farm (Environmental Impact Assessment etc.)/19/

Project Information – Yokohama-Town Wind Farm (Environmental Impact Assessment
etc.)

/20/

Project Information - Shikoku Central Energy Natural Gas Supply Project/21/

Amendment Shelf Registration Statement (Draft)*Other relevant information from the Daigas Group website

Page of 124 of 124