Contents

We will responsibly leadthe energy transition withgaseous and renewableenergyIntroduction

CEO’s Message
How We Create Value
Compass2030
Invisible Assets
Information Disclosure Basedon TCFD Recommendations
Corporate GovernanceBusiness Overview

Representative Corporate Executive Officer,
President and CEO

Financial Data

UCHIDA Takashi

Moving to a holdings type group structure in
the era of VUCA

*V UCA: This acronym stands for volatility,
uncertainty, complexity, and ambiguity,and refers to a state of society in which
tremendous change is occurring andmaking it difficult to forecast the future.

The global economic outlook remains uncertain, clouded
by various factors such as concerns over current
international affairs, the increased volatility of the energy
market, and the lingering impact of the COVID-19
pandemic. Our world has truly entered what many are
calling the era of VUCA.*
Amid this economic environment, the Tokyo Gas
Group is proactively taking diverse actions guided by ourbelief that in a time of change, we must change
ourselves. In November 2019 November 2019, we set
forth the Tokyo Gas Group management vision“Compass2030” to chart the direction we should take inan era where our business environment is rapidlychanging, particularly with regard to trends such as
decarbonization, digitalization, diversification of customer,and deregulation in the energy market. In June 2021, inorder to strengthen our corporate governance and toenhance our management transparency, we transitioned tobecome a Company with a Nominating Committee, etc.
And, in April 2022, to a holdings type group structure
designed to further streamline our management
processes and accelerate our decision-making. One key
benefit of this transformation is that it transfers greaterWeb Site

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Investors’ Guide (FinancialData and Industry Data)
Financial Results
Presentation Materials
Financial Results Bulletin
Corporate Governance
ReportTokyo Gas Group Integrated Report 2022

9Sustainability ReportContents

authority to our internal companies and businesscorporations, endowing them with a high level ofautonomy in their management decisions—a step that isexpected to help advance their further growth. While thisstructure allows each business unit to stand on its own
feet and strive toward bigger profits, it also creates acentrifugal force in group management. On the otherhand, we believe that it is also vital to generate acentripetal force that will more firmly implant our sharedvalues in every employee so that we, as a group, canmove forward in the same direction. For this purpose, welaid out a new Management Philosophy for the Tokyo Gas
Group on April 1, 2022.

We will ceaselessly march forward, guided by
our new Group Management Philosophy
The new Management Philosophy consists of ourPurpose, which states who we are and why we exist, andour Values, which are the priorities that guide ouremployees’ actions.
“Standing by every person and dedicating ourselvesto the society, we shall be the energy that weaves thefuture.” So declares the statement of our Purpose. But
who is “every person” that we stand by? Until now, wehave seen our customers as the main target of ourservices. What, then, is the “society” to which wededicate ourselves? In our traditional thinking, society
has been the communities to which we supply city gas.
However, these definitions have been greatly
expanded by our new Management Philosophy.
Now, “every person” refers to the many different
stakeholders associated with our businesses. It includes,of course, our customers, shareholders, and investors,
but it also comprises everyone across our supply chain—
the workers at our natural gas fields around the globe,
the people who transport liquefied natural gas (LNG), themembers of our partner organizations, and of course all
our Group employees. Moreover, to “every person” notjust in the present, but to encompass all futuregenerations. We believe that basing our actions on aconscious awareness of everyone tied to our business
operations helps us to contribute more effectively to theachievement of the SDGs.
Meanwhile, our definition of “society” now includes
not only all of Japan, but also the international community,
as well as the various elements that support these societies.
We are thoroughly explaining this expanded concept toour employees as we endeavor to securely embed thenew Management Philosophy across our organization.
As for “we shall be the energy that weaves thefuture,” energy here holds two meanings. One is energy
in the literal sense. Up to now, we have taken that tomean natural gas, but going forward it will also
encompass renewable energies, hydrogen and synthetic
methane, and other forms of energy that we will supply
to support society and to contribute to the realization ofa net-zero carbon society. The other meaning is that weourselves will be “the energy”, a driving force behind thedevelopment of a sustainable society.
Next, I would like to mention the four Values embodiedin our Management Philosophy. The first two, “Challenge”
and “Responsibility” have remained at the forefront of ourminds ever since we became the first company tointroduce LNG to Japan some fifty years ago. Now, weare strengthening our commitment to those values as wetake on the challenge of responsibly leading society andthe world to a net-zero carbon future. These two Values
are underpinned by the other two, “Respect” and“Sincerity,” which we have embraced since our founding.
Positioning these four Values as the mainstay for ouremployees’ behavior and guided by our new Management
Philosophy, we will ceaselessly march forward to help bringsustainability to everyday life, communities, and the planet.

We have formulated “Compass Action” forrealizing our management vision
Compass2030, the management vision we announced inNovember 2019, lays out three overarching challenges:
Leadership in the effort to achieve Net-Zero CO2,
Establishment of a value co-creation ecosystem, andIntroduction

Transformation of the LNG value chain. In October 2020,
roughly a year later, the Japanese government declaredthat it would seek to make Japan carbon neutral by 2050,
and six months later in the following April, announced thegoal of reducing greenhouse gas emissions by 46% inFY2030. With these came the launch of sweeping efforts
toward decarbonization that have factored into thegrowing volatility of the energy market. In response to thebig changes in our business environment over the past
two years, we unveiled “Compass Action” in November
2021 to reaffirm the management vision by presenting
the detailed roadmap for its realization.
With regard to “leadership in the effort to achieve
Net-Zero CO2,” Compass Action states that we will
responsibly lead the transition with gaseous andrenewable energy. This means effecting a transition thatmaintains the stable supply of energy while remaining
both environmentally and economically sound. As welead the shift to carbon neutrality, we will uphold ourcommitment to S+3E.*
Compass Action’s plan for “establishing a value
co-creation ecosystem” involves accelerating value
co-creation via digital transformation and reinforced
face-to-face engagement. We will enhance businesses
that contribute to solving social issues by advancing
digital transformation and combining it with our strengths
in face-to-face engagement.
The path toward “transformation of the LNG valuechain” involves improving each business’s earning powerand resilience to change. Specifically, we are seeking toenhance our earning power across each business andbolster their resilience to the dramatic changes in ouroperating environment by carrying out a series oftransformations, such as the aforementioned actions tostrengthen governance and realign our organization.

CEO’s Message
How We Create Value
Compass2030
Invisible Assets
Information Disclosure Basedon TCFD Recommendations
Corporate GovernanceBusiness Overview
Financial Data

Web Site

Investor Relations Website

We will boldly advance toward Net-Zero CO2 byenhancing sophisticated use of natural gas whiledecarbonizing our gas and electricity supply

Investors’ Guide (FinancialData and Industry Data)
Financial Results
Presentation Materials

The Tokyo Gas Group is committed to playing its part in

Financial Results Bulletin*S+3E: This is Japan’s basic energy policy. It envisions giving top priority to safety while working to simultaneously achieve the country’s goals in energy security, economic efficiency, and environment.
Tokyo Gas Group Integrated Report 2022

Corporate Governance
Report10Sustainability ReportContents

firmly establishing a net-zero carbon world by 2050. Inorder for us to do so, we must pursue diverse forms ofinnovation that enable us to decarbonize our gas andelectricity businesses.
To decarbonize our gas operations, our Group islooking to develop methanation technologies and replace
the gas we supply with synthetic methane. However,given the current level of technology, it will requireconsiderable innovation to conquer the formidable
challenge of replacing a supply that measures tens ofbillions of cubic meters. Nevertheless, we must now
strive to move forward by peering into the future andstarting to develop the technologies we will need to getthere. At the same time, it is vital that we reduce ourcarbon emissions by leveraging existing technologies
and making effective use of natural gas. For example,
one step we can take is to reduce our customers’emissions by switching to natural gas in place of theother fossil fuels. In other words, while we fully exploit
the potential of natural gas utilizing best available
technologies and in doing so steadily reduce carbon
emissions, we also pursue development of forwardlooking technologies. These approaches will enable us tolead the transition to a net-zero carbon society.
Such innovation is also essential for decarbonizing
our electric power business. Since Japan is short on
suitable land for installing solar panels and wind turbines,
it is unlikely that these onshore renewables will beenough to generate the level of power needed to meetthe decarbonization goal. As a last resort in this case, weare currently developing technologies for floating offshore
wind power generations, which are better suited for thiscountry’s marine environment where there are limited
shallow coastal waters. Another challenge is that
renewable energies such as solar and wind power are
significantly affected by weather conditions, whichmeans the amount of electricity generated by them isvery unstable. While it is generally considered that
renewable power cannot be stabilized without
breakthrough innovation in large-scale storage battery

technology, progress can still be made with existing
technologies. Specifically, natural gas fired thermal
power plants and gas engines can act as the balancing
electricity source mitigating the volatility of renewable
powers. The conversion of conventional thermal power
plants to natural gas fired systems would significantly
lower carbon emissions, and thus promises to serve as apivotal solution for the decarbonization transition.
In the coming years, we will step up ourdecarbonization efforts not only on the supply side, butalso on the demand side. In our gas business, as we
pursue the aforementioned switching over to natural gas,
we are taking action to realize methanation that utilizes
the CO2 emitted by customers’ offices and factories. And,in our electricity business we are working to expand thedeployment of renewables on the demand side, including
by offering services that enable customers to efficiently
use electricity supplied from solar panels and storage
batteries that we install at their sites.
As these examples illustrate, we will boldly advancetoward Net-Zero CO2 by maximizing technologies at handand innovating future technologies, on both the supply
and demand sides of our businesses. That is what wecall “responsibly leading the transition.”

Achieving S+3E by supporting society with adecarbonized energy mix
It is widely believed that decarbonization can be achievedby shifting to renewable power and utilizing that electricity
to power everything we use in our daily lives, and putting
more electric vehicles on the roads. However, as I havealready indicated, electricity alone does not make for astable energy system, nor can Japan attain its S+3E vision
with this approach. Moreover, such a strategy prompts acritical concern—what do we do when a disaster or othercontingency causes a major power outage and there areno other energy sources we can rely on? However, if Gas
cogeneration systems that continue to operate at times ofpower outage are installed, we could generate electricity
as long as gas is supplied. Residential fuel cells could also

Introduction

play a supporting role.
From the standpoint of energy resilience, it is desirable
for communities to have access to diversified sources ofenergy. Accordingly, the Tokyo Gas Group will seek out
decarbonization solutions for different forms of energy.

CEO’s Message
How We Create Value
Compass2030
Invisible Assets

The Compass2030 management vision isadvancing smoothly and steadily

Information Disclosure Basedon TCFD Recommendations

Let’s take a look at how progress is being made intackling the three challenges laid out by Compass2030.
We have only begun to implement initiatives towarddemonstrating “leadership in the effort to achieve NetZero CO2,” but those actions are firmly moving forward.
Notably, salient advances have been achieved in thedevelopment of methanation technologies. We
established a methanation plant at our Yokohama Techno
Station in Yokohama’s Tsurumi Ward, and have alreadylaunched demonstration testing of the methanation
process. The project will include demonstration testing ofmethanation utilizing CO2 emitted from the city’swaterworks and garbage incinerators. In addition, we are
jointly carrying out a project with SCREEN Holdings Co.,
Ltd. to develop technology for rapidly and economicallymass-producing water electrolysis cell stacks, which are
the core component of a hydrogen production system.
Progress is also being seen in initiatives that we arecarrying out with diverse customers to reduce carbon
emissions through the use of natural gas. One example isthe commencement of Niihama LNG Terminal this spring,which we plan to switch the raw fuel to LNG for
Sumitomo Chemical Co., Ltd.’s Ehime Works (NiihamaCity, Ehime Prefecture).
As for “transformation of the LNG value chain,” weare implementing various actions to further enhance thevalue of LNG. This includes not only its value as a raw
material for city gas or a fuel for power generation, butalso its value as a commodity to be traded.
The third, and toughest, challenge is “establishmentof a value co-creation ecosystem.” The key to successhere is to combine both digital and face-to-face

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Sustainability ReportContents
Introduction

engagement to co-create value with our customers. We
have turned to the UK’s Octopus Energy Group Limited
as an ally in this effort. Octopus Energy, which possesses
keen insights on digital technology and the retailelectricity industry, has attained dramatic growth bycreating new customer experiences through the couplingof digital technologies with expertise in efficient customer
service. In December 2020, we entered into a strategic
partnership with the group and subsequently establishedthe joint venture TG Octopus Energy Co., Ltd. Since then,we have co-developed diverse electricity tariffs cateringto the individual needs of customers across Japan andmade other improvements that we could not do on ourown. The result is that we are truly co-creating value withour customers.
Going forward, we will continue expanding ourportfolio of energy and services to meet the lifestyle andlife stage needs of customers.

Enhancing our long-term corporate value
through targeted investment in growth areas
The Tokyo Gas Group is investing roughly 2 trillion yen in
the growth areas outlined by Compass2030. In addition
to financing renewable energy, methanation, hydrogen,and other elements of Net-Zero CO2 initiatives, this money
will go toward growth areas in overseas projects and thereal estate business, as well as investments that will help
strengthen our risk tolerance vis-à-vis market volatility.
We will consistently evaluate each candidate forinvestment through the lens of our ManagementPhilosophy’s question: What is our purpose?
Our shift to a Company with a Nominating Committee,etc., which drew a clear line between our oversight andexecutive functions, has empowered the executive
leadership to make decisions on large-scale investments.
Needless to say, those leaders are expected to remain
accountable, as all investment choices will be monitored
to ensure that they are aligned with corporate policy.
Greater authority entails greater responsibility for our
executive officers, but this change will accelerate

CEO’s Message
How We Create Value
Compass2030
Invisible Assets
Information Disclosure Basedon TCFD Recommendations
Corporate GovernanceBusiness Overview
Financial Data

decision-making and thus facilitate the investment
process, which is particularly important in overseas
projects, where speed is of the essence.
Meanwhile, we re-examined our policy on shareholder
returns last September and decided to change the total
payout ratio target from 60% to 50%. The resulting 10%
will be applied to growth investments in areas such as
Net-Zero CO2. This outlay promises to help advance ourgrowth over the long run and bear fruit in the lead-up to2030. I see that growth as a vehicle for rewarding ourshareholders, and so I hope that they will lend theirsupport to our long-term growth.
This fiscal year is the last in our current three-year
Medium-term Management Plan, which also means that
it is time to draw up the next plan. In order for us toattain our goals under extremely volatile market
conditions, it is imperative that we optimally leverage ourGroup’s assets to strengthen our resilience to change
and turn change into positive results. This will be a corefocus of our next Medium-term Management Plan.

On a final note about the current state of international
affairs, approximately 10% of our total LNG imports
comes from Sakhalin in Russia. This represents asignificant percentage in terms of our ability to maintainthe stable supply of energy. We will continue to closely
coordinate with the Japanese government and relevantorganizations, while also exploring measures that may
need to be taken in the event of contingencies that
impact supply or demand.
The Tokyo Gas Group’s greatest strength continues tobe its brand value of Safety, Security, and Reliability,
which we have built up over our more than 130-year
history together with our customers and otherstakeholders. The many uncertainties we face today will
not keep us from fulfilling our commitment to ensuringsafety, maintaining the stable supply of energy, andcontributing to the world’s future through our tackling of
new challenges in Net-Zero CO2 and other areas. We
hope that you will continue extending to us yourunderstanding and support.

Web Site

Investor Relations Website
Investors’ Guide (Financial
Data and Industry Data)
Financial Results
Presentation MaterialsFinancial Results Bulletin
Corporate Governance
ReportTokyo Gas Group Integrated Report 2022

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Sustainability Report