Proterial Group’s Response to Climate Change
Disclosure Based on TCFD Recommendations (September 24, 2024)
1. Response to TCFD Recommendations
As countries around the world intensify their efforts to address
climate change in accordance with the Paris Agreement, theJapanese government announced in October 2020 its policy
goal of reducing emissions of greenhouse gases, as typified
by carbon dioxide (CO2), to virtually zero by 2050. Accordingly,
companies are expected to be more proactive than ever in theirefforts to transition to a decarbonized society.
The Group considers the impact of climate change on its
business as one of our most important management issues,
and we believe that enhanced disclosure of climate-changerelated information is a key factor in building a relationshipof trust with our stakeholders. Accordingly, in June 2021, weregistered our support for the TCFD* Recommendations, and inaccordance with the TCFD Recommendations, the Group willcontinue to enhance our disclosure of information on the impact
of climate change on our business activities. Going forward,
we will also continue to respond to the disclosure standards ofthe International Sustainability Standards Board (ISSB) and theSustainability Standards Board of Japan (SSBJ).

* The Task Force on Climate-related Financial Disclosures (TCFD) was establishedby the Financial Stability Board (FSB) in 2015 in response to requests from theG20 for climate-related disclosures. The TCFD published its final report in June
2017, in which it recommends companies to disclose items related to climatechange-related risks and opportunities.

2. Governance
In April 2010, the Proterial Group established the Group
Basic Policy on Environmental Preservation to clarify theGroup’s unified approach to environmental management.
In June 2021, we registered our support for the TCFD
Recommendations, and in August of that year, following
a report to the Board of Directors, we established a newenvironmental policy named “Aiming for Green Growth While
Taking Risk as Opportunity.”
The Proterial Group Environmental Committee (Group
Environmental Committee, hereinafter) has been established
as a framework for promoting environmental activities such as
climate-change countermeasures. The Group Environmental
Committee is chaired by the Environment Executive Officer,
and its executive office is the Environmental Strategy
Department, Manufacturing & Engineering Division. Its
activities are promoted in cooperation with the environmental
managers of each business unit, business sites, andgroup companies. The Group Environmental Committee is
responsible for developing environment-related regulations,setting targets for reducing environmental impact, andconfirming that activities are appropriate and effective.
Policies and targets concerning environmental activities are
discussed and set by the Group Environmental Committee
as annual environmental action plans. With regard to climatechange countermeasures, the Environmental Action Plan setstargets for CO2 emissions within the Group. On the basis of
those targets, energy-saving activities and the use of renewableenergy are being promoted at each manufacturing site. The
status of CO2 emissions is monitored regularly, and the Group
Environmental Committee meets once a year to share theresults of the previous fiscal year, the status of numerical targets
for the current fiscal year, and major initiatives to promote
continuous improvement of activities.
In addition, the status of efforts toward environmental
issues, including climate-change measures, are reported
twice a year to the Executive Committee and the Board of
Directors, where important issues related to climate change
are also deliberated and decided.

Status of reporting and decision-making on important climate-change-related items in fiscal year 2023
Month/Year

Important issues related to climate change

Meeting body

April 2023

Membership of the GX League(President’s decision)

May, June 2023

Environmental strategy and status of initiatives (initiative results for FY2022,
initiative policy for FY2023, update of TCFD disclosure content (review of
scenarios and Scope 3 disclosure))

Executive Committee,
Board of Directors

October, November
2023

Environmental strategy and status of initiatives (initiative status for FY2023,
setting of GX League targets)

Executive Committee,
Board of Directors

January 2024

• Revision of company regulations (review of responsibilities of officers in chargeof environmental issues, etc.)• Support and participation in Keidanren Declaration for Biodiversity

Executive Committee

Environmental Promotion Structure

Board of Directors
Executive Officers
Chairman, President & CEO
Executive Committee

Environment Executive Officer ◎◎ Manufacturing & Engineering Division
Environmental Strategy Dept.

Proterial Group Environmental Committee*

Corporate◎ General Manager ofRelated Divisions* The Group Environmental Committee is composedof the following persons and bodies: (persons
and bodies marked with ◎ in the Environmental
Promotion Structure diagram)Environmental Executive Officers, Chief
Environmental Management Officer of each business
unit, environmental managers at business sites,
general managers of corporate related divisions,Executive Officer in Charge of Environmental
Issues at domestic group companies, and theEnvironmental Strategy Department, Manufacturing& Engineering Division.

Business Unit

Business Unit

Business Unit

◎ Chief Environmental
Management Officer◎ Chief Environmental
Management Officer◎ Chief Environmental
Management Officer

Each Business Site

Group Companies in Japan

Group Companies OutsideJapan

General Managers of Works◎ Executive Officer in Chargeof Environmental Issues

Executive Officer in Chargeof Environmental Issues

Internal Environmental
Audit Team

Environment
Committee◎ Environmental Managers
Specialty Sectional
Meeting

Same ason the left

Same ason the left

Each Division

Roles in the Promotion Structure■ Environment Executive Officer ◎The executive officer in charge of manufacturing and technology is incharge as an Environment Executive Officer who is well acquainted withenvironment-related issues and exercises overall control through theGroup Environmental Committee.
■ Proterial Group Environmental Committee
Deliberates and determines policies, targets, etc. related toenvironmental management activities within the Group.

■ Chief Environmental Management Officer
Oversees environmental management activities within the business units.
■ Environment Committee
Deliberates and determines policies, targets, etc. related to environmental
management activities at each business site.
■ Environmental Managers
Take responsibility for and promote environmental-management activities ofeach business site.

3. Strategy (Scenario Analysis)
The Group conducted “scenario analysis” to clarify the risks andopportunities posed by future climate change and to develop
business strategies to reduce risks and expand opportunities.
While we recognize that scenario analysis should cover theentire group, including the supply chain, in fiscal year 2022, we

conducted an analysis of our domestic business. In fiscal year
2023, we reevaluated our domestic business in line with thetransition to the new system. In fiscal year 2024, we conductedanalysis that included major overseas operations.

■Scenario-analysis process

Scenario analysis—consisting of the four steps shown in Figure 1—aims to assess (i) financial and business impacts under different
scenarios and (ii) resilience of the Group strategy in regard to climate-related risks and opportunities.
■Assumptions for scenario analysis

Scenarios:
Refer to the “below 2°C scenario” for transition risks and opportunities and the “4°C scenario” for physical risks.
Target businesses: FY2022: Advanced Components & Materials Division (Domestic sites) and Advanced Metals Division (Domestic sites)
FY2023:
Each division (Domestic sites)
FY2024:Each division (Domestic sites and major overseas sites)
Target Fiscal Year: Impact by 2030
■Reference scenario
Classification

Below 2°C scenario
4°C scenario

Main reference scenario• IEA World Energy Outlook 2020. Sustainable Development Scenario• IPCC RCP2.6• IEA World Energy Outlook 2020. Stated Policy Scenario• IPCC RCP8.5

■Scenario-analysis steps (figure 1)

Step 1

Step 2

Step 3

Step 4

Identify significant climaterelated risks/opportunities

Establish climate-related
scenarios

Assess the financial impactof each scenario

Assess the resilienceof strategies against
climate-related risks andopportunities and consider
further countermeasures

Identify climate-related risks/
opportunities

On the basis of the information in
Step 1, identify the most relevant
scenarios among the existing
scenarios.

● 

● 

Assess most significant risks/
opportunities● 

Set parameters related to the mostsignificant risks/opportunities● 

Analyze the financial impact ofeach scenario on the basis of the
scenarios identified in Step 2 andthe significant climate-related risks/
opportunities and related parameters
identified in Step 1.

● Establish climate-related scenarios(societal vision)●Assess the resilience of our strategy
for climate-related risks andopportunities● Consider further countermeasures●The following table shows the results of our review of the risks and opportunities posed by climate change
Business/financial impact
Classification

Type

Policy/regulations

Transition

Technology

Risk

MarketContent

Increased production andoperating costs due to tighter
regulations on carbon pricing(CP), including carbon taxes,
taxes on fuel and energy
consumption, and emissions
trading.

Acute andchronic

MediumRoll

MediumAutomotive
castings

Our response

MediumCurrently, we are working towards improving
energy consumption per unit of production by 1%
or more per year by promoting various energysaving measures (LED lighting, replacement andintroduction of high-efficiency equipment) andproductivity improvement measures.
Aiming to become carbon neutral by 2050,
we plan to actively promote fuel conversion
and introduction of renewable-energy facilities(installation of solar panels) as additional
measures to achieve the 2030 CO2 reduction
target.

Increased procurement risk due
to strengthened CP regulations
for raw materials.

Medium

Small

Small

As for principle raw materials, we will strengthen
surcharges and cultivate new suppliers.
From the perspective of life-cycle assessment(LCA), we will increase the utilization ratio ofscrap (which generates low CO2 emissions) andnurture new suppliers

Increase in operating costs due
to capital investment involved in
the introduction of manufacturing
processes (electrification
and alternative fuels) to meet
decarbonization requirements.

Small

Small

Large

When introducing new manufacturing processes,
we will examine equipment specifications withthe aim of reducing its impact on operating costs

Decreased demand for peripheral
components of internal
combustion engines owing to the
expansion of xEVs and decreasein sales due to excessivecompetition with competing xEV
suppliers.

Medium

Small

Large

As for capturing demand for components ofautomotive internal-combustion engines, we will
target the commercial-vehicle and agricultural/
construction-equipment fields

Medium

As for reducing CO2 emissions frommanufacturing processes, we will continue topromote both energy conservation and renewableenergy, and we will focus on how to respond to
customer requests for decarbonization.

Large

We will systematically improve our production
systems in anticipation of extreme weather
events.
We will expand the BCP system and refine theaction manual for emergencies.

Decrease in sales due to delays
in responding to customer
requests for decarbonization andlost opportunities to expand newsales.

PhysicalSpecialty
Steel

Orders and sales decreased
owing to delays in delivery
accompanying the suspensionof operations caused by natural
disasters due to abnormal
weather.

Small

Small

Small

Small

Business/financial impact
Classification

Type

Content

Increased production andoperating costs due to tighter
regulations on carbon pricing(CP), including carbon taxes,
taxes on fuel and energy
consumption, and emissions
trading.

Magnetic
materials

MediumPowerelectronics

Large

Electric
wires

Small

Automotive
components

MediumWe are reducing CO2 emissions by promoting
various energy-saving measures (e.g., LED
lighting and renewal/introduction of highefficiency equipment) and measures to improve
productivity.
From now onwards, aiming to achieve our
CO2 reduction target for 2030, we will actively
promote fuel conversion and purchase ofrenewable electricity as well as the introductionof renewable energy (i.e., installation of solar
panels).

Small

As for principle raw materials, we will work
to strengthen surcharges and cultivate new
suppliers.
In the magnet business, we will continue todevelop materials that use fewer heavy rareearth elements and introduce them to themarket. In the electric wire business, we will
reduce the amount of copper used by improving
productivity, develop and commercialize
aluminum alloy conductor cables, and further
expand the ratio of recycled copper.

Policy/regulations

Increased procurement risk
due to strengthened CP
regulations for raw materials.

Transition

Risk

Technology

MarketPhysicalAcute andchronic

Small

MediumMedium

Our response

Increase in operating costs
due to capital investment
involved in the introductionof manufacturing
processes (electrification
and alternative fuels) tomeet decarbonization
requirements.

Small

Small

Small

Small

When introducing new manufacturing processes(e.g., introduction of the latest energy-saving
technologies), we will examine equipment
specifications with the aim of reducing theirimpact on operating costs. And the increased
costs will be passed on to sales prices.

Decreased demand for
peripheral components ofinternal combustion engines
owing to the expansion ofxEVs and decrease in sales
due to excessive competition
with competing xEV
suppliers.

Small

Large

Small

Small

We will reduce costs by introducing highefficiency equipment, improving productivity, andprocuring parts locally.

Decrease in sales due todelays in responding tocustomer requests for
decarbonization and lost
opportunities to expand newsales.

Small

Large

Small

Large

We will improve the ratio of renewable energy
use by promoting introduction of renewableenergy and selecting electric power companies
with high RE power-generation ratio.

Orders and sales decreased
owing to delays in delivery
accompanying thesuspension of operations
caused by natural disasters
due to abnormal weather.

Small

MediumMediumLarge

We will systematically improve our production
systems in anticipation of extreme weather
events.
We will expand the BCP system and refine theaction manual for emergencies.

Business/financial impact
Classification

Type

Content

Resource
efficiency

We will increase sales
by increasing productvalue through efficient
production and efficientuse of materials andenergy.

Small

Small

Small

To achieve the 2030 CO2 reduction target, we plan topromote energy-saving measures through fuel conversion
for industrial furnaces and boilers, introduction of highefficiency equipment and waste heat utilization, andactively promote further introduction of solar power
generation facilities. We will also proceed with PR
activities relating to our efforts and achievements.

Source ofenergyWe will increase sales
by improving customers’
supplier selection
evaluation throughdecarbonization efforts.

Small

Small

Small

We will promote CO2 reduction by introducing renewableenergy and switching to carbon-neutral fuels.

Small

We will promote new orders and increase market shareof target products by shortening development lead times
and reducing costs of environmentally friendly products.
We will continue to expand sales of environmentallyfriendly products, which are expected to be in greater
demand in the future.
• Mold materials that provide longer service life
• Materials for various industrial machinery, undercarriage
parts, and exhaust-gas filters that contribute toimproved fuel efficiency and reduced emissions by cars• Aerospace products that are expected to improve fuelefficiency of airplanes• Battery materials (clad products) and powersemiconductor materials for use in batteries and otherproducts

Specialty
Steel

Our response

Automotive
castings

Roll

Opportunity

Products/
Services

We will increase
sales by developing
and launchingenvironmentally friendly
products onto themarket.

Type

Content

Resource
efficiency

We will increase sales
by increasing productvalue through efficient
production and efficientuse of materials andenergy.

Small

MediumSmall

MediumTo achieve the 2030 CO2 reduction target, we plan topromote various energy-saving measures (LED lighting,renewal and introduction of high-efficiency equipment,etc.) and productivity-improvement measures while
promoting fuel conversion and introduction of renewableenergy (i.e., installation of solar panels). We will also
proceed with PR activities relating to our efforts andachievements.

Source ofenergyWe will increase sales
by improving customers’
supplier selection
evaluation throughdecarbonization efforts.

Small

Small

Small

Small

We will reduce electricity consumption by improving
productivity and increase the utilization rate of renewableenergy.

Products/
Services

We will increase
sales by developing
and launchingenvironmentally friendly
products onto themarket.

Medium

We aim to expand sales by developing products that
contribute to a low-carbon society.
• Various products for xEVs (high-performancemagnets, SiN, SiC, magnet wires, automotive electricalcomponents, etc.)• Amorphous alloy (MaDC-A) that contributes to higher
efficiency of transformers

Large

Small

Business/financial impact
Classification

Opportunity

MagneticPowermaterials electronics

Large

Large

Electric
wires

Small

Our response

Automotive
components

xEV: A collective term for electric vehicles (EV), hybrid electric vehicles (HEV), and plug-in hybrid electric vehicles (PHEV).
Definition of assessment of business/financial impact
Large: cost or effect is equal to or greater than 5% of sales*1
Medium: cost or effect is equal to at least 1% but less than 5% of sales*1
Small: cost or effect is less than 1% of sales*1*1 Net sales of target businesses

As described above, in response to the assessment of domestic sites disclosed in October 2023, we have reverified the response to risks andopportunities for each business, including major overseas sites, and we have confirmed that our environmental strategy is resilient.

4. Risk Management
The Group has established a “Risk Management Committee”(RMC) under the supervision of the Chief Risk Control Officer(CRCO) executive officer. The function of the RMC is to identify
various risks surrounding the Group, and comprehensively
manage risks by summarizing the status of controls against
those risks and assessing and weighting the degree to which
they manifest and their level of impact. Risks related to climatechange identified by the Group Environmental Committee,
corporate departments, and business divisions are reported to
the RMC together with other risks as one of the risks related toenvironmental regulations. The RMC meets twice a year to sharethe status of risk controls and related monitoring results, and toreport to the Executive Committee.

Risk management structure
Executive Officers
ReportingExecutive Committee
Directions and orders

Risk Management Committee (RMC)
Chairperson of the Committee
Chief Risk Control Officer (CRCO)
Committee Members
General Manager of Corporate Departments,
and General Manager of Planning Department, each Business Unit
Consolidation of status of controls

Assessment and monitoring

Risk control by risk owner department
Raw-material procurement, information security, environment,
natural disasters, foreign exchange, intellectual property rights, etc.

5. Indicators and Targets■ About Scopes 1 and 2

The Group has set the Scopes 1 and 2*2 targets for CO2 emissions as shown in the illustration below. In promoting carbon neutrality, we willcontinue our conventional energy-saving activities while striving to improve processes such as capital investment, convert to alternative fuels
for melting furnaces, heating furnaces, and other manufacturing processes, develop technologies based on carbon-free fuel, and introduce
renewable energy.

Target for CO2 emissions (whole Group)
2,779 kt-CO2

1,723 kt-CO2

38%

decrease
Carbonneutral

FY2015

FY2030FY2050

Reduction of CO2 through two measures: energy saving andintroduction of renewable energy
CO2 reduction by improving productivity efficiency as a base measure*2 Scope 1: Direct emissions of greenhouse gases by business operators themselves (fuel burning and industrial processes)
Scope 2: Indirect emissions associated with use of electricity, heat, and steam supplied by other companies

Group-wide Scope 1 and 2 results(kt-CO2)

TargetFY2021

FY2022

Scope 1

876

818

234

Scope 2

1,340

1,096

828

Scope 1 + Scope 2

2,216

1,914

1,062

*3

FY2023*4,*5*3 CO2 emissions (Scopes 1 and 2) in fiscal year 2022 were certified by a third party.
*4 CO2 emissions (Scopes 1 and 2) in fiscal year 2023 received verification from a third party in August 2024.
*5 CO2 emissions in fiscal year 2023 significantly decreased compared to the previous fiscal year due to the impact of business portfolio revision, among other things.

■ About Scope 3

The Company calculated CO2 amount for Scope 3 Categories 1 to 7 and 13 according to “Basic Guidelines on Accounting for Greenhouse
Gas Emissions Throughout the Supply Chain.”CO2 emissions in fiscal year 2023 totaled 2,111 kt-CO2, of which “Category 1: Purchased
Goods and Services” accounted for the largest share (83.8%).

Group-wide Scope 3 aggregated results
FY2021Category

1Category description

Purchased goods andservices

2

Capital goods

3

activities not included in

FY2022Emissions

FY2023Emissions

Emissions[kt-CO2]

Ratio [%]

1,746

74.1

1,787*6

76.5

1,769*7

83.8

115

4.9

106

4.5

115

5.4

412

17.5

391

16.7

182

8.6

38

1.6

24

1.0

21

1.0

27

1.1

11

0.5

7

0.4

[kt-CO 2]

Ratio [%]

Ratio [%]

[kt-CO2]

Fuel and energy related
Scopes 1 and 2
4
5

Upstream transportationand distribution
Waste generated inoperations

6

Business travel

4

0.2

3

0.1

3

0.2

7

Employee commuting

12

0.5

12

0.5

11

0.5

13

Downstream leased assets

2

0.1

2

0.1

2

0.1

2,356

100.0

2,336

100.0

2,111

100.0

Total

*6 CO2 emissions (Scope 3 Category 1) in fiscal year 2022 were certified by a third party.
*7 CO2 emissions (Scope 3 Category 1) in fiscal year 2023 received verification from a third party in August 2024.
Scope of data: Categories 1 to 7 (excluding Category 4) and Category 13 are figures for the whole Group. Figures in Category 4 are based on domestic operations only.
Calculation method: F Y2021, FY2022: Ministry of the Environment DB3.1 and IDEA database Ver. 3.2 were used.
FY2023: Ministry of the Environment DB3.4 and IDEA database Ver. 3.3 were used.

Scope 3 FY2023 results

0.4%
Upstream transportation and distribution 1.0%

Business travel 0.2%

Waste generated in operations

Fuel- and energy-related activities
not included in Scopes 1 and 2

8.6%

Capital goods

5.4%

Employee commuting 0.5%
Downstream leased assets 0.1%

2,111
kt-CO2

Purchased goods and services

83.8%■ Executive compensation

Compensation for our Executive Officers is based upon the achievement of annual targets. From fiscal year 2022, we have added the Group’s
CO2 emissions target as an evaluation item for climate-change response.
■ Internal carbon priceTo promote CO2 reduction, we have added the concept of “internal carbon pricing” to our internal regulations related to capital investment.
In detail, we set a carbon price (8,000 yen/t CO2) based on the total amount of CO2 emissions after capital investment, and the effect of theCO2 reduction of the capital investment is calculated as profit. The concept has been implemented since October 2021, and as a result of the
carbon price review, we have decided to maintain the price with reference to the carbon taxes, carbon credits, and procurement prices ofrenewable energy, both in Japan and overseas. We will continue to review the carbon price periodically.