ReportInitiatives in line with TCFD recommendations
Nippon Fine Chemical uses raw materials derived from fossils and fossil fuel as energy sources in the manufacture of many ofour products. Based on our recognition that risks and opportunities due to climate change are key management issues, inDecember 2021, we declared our support for the recommendations of the Task Force on Climate-related FinancialDisclosures (TCFD). Going forward, we will use scenario analysis to assess the risks and opportunities of the impact ofclimate change on our business, and we will recognize the signiﬁcance of such impact, strengthen the resilience of ourstrategies by reﬂecting such impact in our management measures and strengthen relationships of trust with our stakeholders.

Governance
We have established a Sustainability Committee, chaired by
our Representative Director, President and composed ofSustainability Organizations
Board of Directors

members selected from each division.
The Sustainability Committee identiﬁes risks and opportunities
based on scenario analysis of climate-related issues, assesses
their importance, formulates plans for promotional activities,
and manages the progress of such activities. The Sustainability
Committee puts together a promotion action plan once a year,
which is approved by the Board of Direc tors following
deliberation by the Management Meeting.
The Sustainability Committee checks the state of promotional
activities on a quarterly basis, in principle, and reports theresults of such checks to the Management Meeting and theBoard of Directors.

Representative Director, PresidentManagement Meeting
Sustainability Committee(Membership: Sales, Purchasing, Production, Research,
Administration Divisions and Committees of Group companies)

Sustainability Committee Secretariat
Administration Divisions

Sustainability Oﬃce

Details of external trends and information on climate change
are shared with the Management Meeting and the Board of Directors through the Sustainability Committee by endorsing theTCFD recommendations and joining the TCFD Consortium.

Risk Management
The Company-wide Risk Management System Committee, chaired by the Representative Director, President and composed ofmanagers, is the highest decision-making body in our risk management system (RMS). The committee discusses risk management
policies, plans, implementation, RMS improvements, and other general RMS-related matters, and ﬁnal decisions on such matters
are made by the chairman based on the outcome of such discussions. The Sustainability Committee identiﬁes risks relating toclimate-related issues, with reference to the risk items in the ﬁnal TCFD report and examines risk severity based on the impact on
our business activities, customers, and suppliers, etc. and the likelihood of such risks occurring. The Sustainability Committee uses
scenario analysis to assess the risks and opportunities of the impact of climate change on our business, conducts business impact
assessments, and formulates measures to be taken by Nippon Fine Chemical with respect to items that are assessed as having alarge impact on risks and opportunities. The Committee manages the progress of promotional activities, and reports such progressto the Management Meeting. The Management Meeting deliberates management plans and business strategies based on the stateof current initiatives and other factors, and such plans and strategies are then approved by the Board of Directors.

Strategies
We have set 2030 as the time frame for considering the impact of climate change on our business, and we have analyzed
scenarios for risks and opportunities associated with the transition to a low-carbon economy and risks and opportunities
associated with the physical impact of climate change in a 1.5°C world in which climate change measures have progressed
and the Paris Agreement targets have been realized and in a 4°C world in which no new climate change measures aretaken and greenhouse gases have increased. In assessing the impact on our business, we found that under the 1.5°C
scenario, there will be a signiﬁcant impact on our business of policies and regulations relating to carbon taxes and emission
reductions, while there will also be opportunities to expand the sale of raw materials for perovskite solar cells. Under the4°C scenario, we found that there will be a signiﬁcant impact on our business of soaring crude oil prices and concerns overthe procurement of naturally-derived raw materials, while there will also be opportunities to expand the sale of raw materials
for UV care and cooling-related products and for infectious disease-related products. Note that this analysis only covers
Nippon Fine Chemical. Going forward, we will consider whether to conduct analysis for the entire group.

1Results of 1.5°
C and 4°
C Scenario Analysis (Climate Change Risks and Opportunities)

Main
Category

Type

Risk/Opportunity
Envisaged Risks and Opportunities
Sub Category

Importance
Assessment
1.5℃ 4℃

Carbon pricing (carbon tax and emissions trading) will be applied mostly to suppliers of raw materials withhigh greenhouse gas (GHG) emissions, which will be passed on by being added to the price of rawmaterials, resulting in an increase in procurement costs. Product manufacturing and transportation costs
will also increase and proﬁtability will deteriorate.

Large

Small- If emissions are regulated in countries where our raw material suppliers are located, such suppliers
adjustment costs may increase, which could in turn aﬀect purchase prices.
- The replacement of fossil fuels with renewable energy and reductions in GHG emissions are required in
the production process and in distribution, and costs may increase due to reduction of existing assets andinvestment in additional equipment.

Large

MediumMandatory aﬀorestation and changes in land use policies may reduce yields of biological resources, which
in turn may make it diﬃcult to obtain naturally- derived raw materials (wool grease, palm oil) or may
increase procurement costs.

Large

Small

Introduction of water
withdrawal and wastewater
discharge restrictions- Restrictions on water withdrawal and wastewater discharge in areas where raw material suppliers are locatedmay aﬀect operations, resulting in it being diﬃcult to obtain raw materials and increased purchasing costs.
- Water withdrawal restrictions in areas in which we operate due to climate change will lead to lost sales
opportunities due to the suspension of operations.

Small

Small

Energy-saving policies- Restrictions on energy use may increase the cost of changing manufacturing processes, procuring alternative materials,
and installing energy-saving and high-eﬃciency equipment, and the acquisition of new equipment or the disposal ofexisting equipment may result in increased costs and losses, etc.
- Mandatory use of renewable energy following the revision of the Act on the Rational Use of Energy may result in cost increases.

MediumMedium

Litigation- There is a possibility of lawsuits against companies that use fossil fuels.
- There is a possibility of reduced demand for products and increased costs due to ﬁnes and court rulings.

Small

Small

Industry/MarketSoaring price ofraw materials

Soaring crude oil prices will increase the cost of procuring petroleum-derived raw materials.

Small

Large

Changes inenergy demand

Manufacturing costs will increase if the cost of procuring energy to operate plants increases. As a result, thecost competitiveness of products may fall, which may aﬀect earnings.

MediumProducts/ Resource
Services Eﬃciency Technology

Develop new products
and services throughR&D and innovation- The development of decarbonized products through the use of non-petrochemically-derived raw materials will increase ouradvantage over our competitors and create opportunities to increase earnings.
- The development of energy-saving and low-cost production methods during the manufacturing stage will lead to improved proﬁtability.
- Opportunities to increase earnings by developing raw materials for renewable energy (such as perovskite solar cells).

Large

Medium Medium

Streamline production
and distribution
processes- The introduction of renewable energy, energy-saving equipment, and solar power generation equipment
for self-consumption may lead to reductions in production costs.
- Organizing and integrating supply chains (sales channels, distribution bases, etc.) may lead to reductions
in carbon dioxide emissions and distribution costs.

MediumMediumTransition to lowemission technologies

Transition to low emission technologies may lead to higher research & development costs for climatechange-compliant products, higher investment costs for manufacturing processes, and higher costs fortransitioning to low-carbon-emitting technologies and equipment.

MediumMediumChanges inconsumer preferences

Consumers increased interest in the use of natural materials, packaging recycling, and carbon dioxideemissions, etc., may lead them to purchase products from companies which engage in proactive climatechange initiatives, which may lead to a fall in sales.

MediumMediumReputation among
investors- An insuﬃcient response to GHG reduction demands from customers and investors may result in a lower assessment.
- Proactive disclosure of information on how we are addressing climate change will improve our corporate value
and increase opportunities to obtain ESG investments, while securing customer conﬁdence may lead to businessexpansion.

MediumMediumRising average temperatures may reduce yields of biological resources, which in turn may make it diﬃcult toobtain naturally-derived raw materials (wool grease) or may increase procurement costs.

Small

Large

Increase in averagetemperature/changes
in precipitation andtemperature patterns

Rising average temperatures may result in a deterioration in shrimp farming operations at existingcustomers, which may adversely aﬀect sales of our products.

Small

Small- Rising average temperatures may require enhanced cooling equipment needed during the manufacturing
process, which may result in the need for more equipment and increased energy costs.
- Climate change may increase water stress in China, and price increases by suppliers may lead to higher
raw material prices.

Large

Large

Rise in sea level- Rising sea levels may result in ﬂooding, rapid rises in tides, and other water-related damage, which may
shut down operations at plants located in coastal areas vulnerable to disasters and in low-lying areas.
- It may be necessary to relocate bases.

Small

SmallMarkets

Access to newmarkets (demand)- The increase in the population exposed to infectious diseases and other risks associated with rising temperatures
may lead to an increase in demand for raw materials for our products (sanitizer and pharmaceuticals).
- The rise in average temp eratures may increase sales of our func tional oil produc t s for UV care andcooling-related products.

Medium

Large

Acute

Intensiﬁcation ofextreme weather- Flooding caused by torrential rainfall and drought associated with climate change may shut down
production at some oﬃces and plants.
- Production stoppages and lost sales opportunities may increase due to disruptions, etc. in the supply
chain

Small

Small

Carbon tax andcarbon price

Policies/Regulations

Carbon emission targets
for each country/Stricter
reporting requirementsfor policy emissions

Transition Risks and Opportunities

Reputation
Chronic

Physical Risks and Opportunities

2Addressing Climate Change Risks and Opportunities
Scenario

Risk/Opportunity

Carbon tax andcarbon price1.5°
CScenario

4°
C
Scenario

Risks Due to Climate ChangeCountermeasures

The introduction of carbon
pricing, a policy approachthat puts a price on carbon
causing carbon emitters tochange their behavior, may
increase procurement andtransportation costs due tothe increase in the priceadded to carbon emissions bysuppliers and transporters, aswell as the direct tax burden.

- Reduce GHG emissions byreviewing product compositionand production processes- Reduce GHG emissions byintroducing renewable energy,
energy-saving equipment, andsolar power generationequipment for self-consumption- Reduce GHG emissions by
consolidating and integrating
raw material supply chains

Opportunities

Countermeasures

Introduction of carbon
pricing will encourage
the use of renewableenergy.

Develop raw materials forperovskite solar cells andexpand sales- Increase in thepopulation
exposed toinfectious diseases
and other risks.
- Demand for UV
care andcooling-related
products willcontinue to grow.

- Establish of a system to increase
production and expand salesof raw materials for infectious
disease-related products(sanitizer and pharmaceuticals)- Establish of a system to increase
production and expand sales ofraw materials for UV care andcooling-related products(cosmetics, etc.)

Develop new products
and services throughR&D and innovation

Carbon emission
targets/policies
in each countryRestrictions on new plantation
construction due to mandatory
aﬀorestation and changes inland use policies and a shortageof feed due to a decrease inpastureland may make it diﬃcult
to procure naturally-derived raw
materials (wool grease, palm oil)and may increase procurement
costs.

Increase in averagetemperature/changes
in precipitation andtemperature patterns

Poor pasture growth caused bydrought and reduced demand forwool as a result of rising averagetemperatures may make it diﬃcult
to procure naturally-derived raw
materials (wool grease) andprocurement costs may increase.

Soaring price ofraw materials

Soaring crude oil prices following
an increase in demand for fossil
energy may increase the cost of
procuring petroleum-derived raw
materials.

- Secure stable suppliers of wool
grease and palm oil- Consider substituting wool
grease and palm oil-derived raw
materials for naturally-derived
raw materials which have lessof an impact on climate change

Consider substitution withnon-petroleum-derived raw
materials

Access to newmarkets (demand)

Indicators and Targets
The greenhouse gas emitted by Nippon Fine Chemical ismostly energy-derived carbon dioxide. In October 2021,

Unit: tons

30,000Changes in Carbon Dioxide Emissions
Scope 1the Japanese government published its Plan for Global
Warming Countermeasures for Scope 1 and 2* whichc a l l s fo r a 4 6% re d u c t i o n i n Ja p a n's ove ra l l G H G

22,500emissions by FY2030 compared to FY2013 levels. Within
this overall goal, the industrial sector s target is a 38%
reduction in energy-derived carbon dioxide by FY2030,

15,0005,071

and so we are working to reduce our carbon dioxide
emissions by 38% in FY2030 compared to FY2013. We

Scope 2

7,500

will also work to achieve carbon neutrality by 2050.
013,514

5,375

5,336
5,570

15,972 14,601

11,641 12,558

6,044

5,834

13,766 14,104

5,402

12,1312013 2014 2015 2016 2017 2018 2019 2020

*Scope 1: Direct GHG emissions from an operator s own fuel combustion
Scope 2: Indirect GHG emissions from the use of electricity and heat supplied by other companies

35,617FY