TAIHEIYO CEMENT CORPORATION

Transition-Linked Loan Framework

March 8, 2023

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Table of contents

1. Introduction ................................................................................................................. 3
1.1 Background and Outline of the Framework Formulation........................................... 3
1.2 Company outline ...................................................................................................... 4
1.3 Corporate philosophy and action policies for the environment ................................. 4
2. Disclosed Information based on Climate Transition Finance Handbook and Basic
Guidelines on Climate Transition Finance .................................................................... 7
2.1 Disclosure status...................................................................................................... 7
2.2 Element 1: Climate transition strategy and governance of fund raisers .................... 7
2.2.1 About transition strategy .................................................................................... 7
2.2.2 About governance ........................................................................................... 12
2.3 Element 2: Environmental materiality in a business model ..................................... 12
2.4 Element 3: Climate transition strategy with scientific evidence ............................... 13
2.5 Element 4: Transparency of implementation .......................................................... 15
3. Compliance with Five Principles in Guidance on Sustainability-Linked Loan
Principles, etc. ............................................................................................................... 18
3.1 Compliance status ................................................................................................. 18
3.2 Principle 1: Validity of KPIs selection ..................................................................... 18
3.3 Principle 2: Calibration of SPTs.............................................................................. 18
3.4 Principle 3: Loan Characteristics (economic conditions)......................................... 20
3.5 Principle 4: Reporting ............................................................................................. 20
3.6 Principle 5: Verification........................................................................................... 21

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1. Introduction
1.1 Background and Outline of the Framework Formulation

TAIHEIYO CEMENT CORPORATION (hereinafter referred to as “the company”) has
formulated the Transition-Linked Loan Framework (hereinafter referred to as “thisframework”) as follows.



The coverage of this framework is the Transition-Linked Loan (hereinafter referred to as“this TLL”) which promotes Sustainability Performance Targets (SPTs) achievement of
the borrower by interlocking the pre-determined achievement level of SPTs with loan
conditions, etc.



The company is planning financing through this TLL and will take various measures with
all-out efforts to realize carbon neutrality in the whole supply chain in the group’s“Carbon Neutral Strategy 2050”.



The company considers that financing through this TLL will assure our ability to take themaximum measures possible for the realization of the above in the future, and that it will
be a trigger to promote efforts for a decarbonized society through communications withstakeholders.



The company has obtained third-party opinions on the adaptability of the following
standards related to this framework from a third party evaluation organization - Japan
Credit Rating Agency, Ltd.

Standards, etc.

Preparing body

Climate Transition Finance Handbook

ICMA
Financial Services
Agency,Ministry of

Basic Guidelines on Climate Transition Finance

Economy, Tradeand Industry,
Ministry of theEnvironment

Guidance on Sustainability-Linked Loan Principles(Revisedin March 2022)

LMA, etc.

Green Loan and Sustainability Linked Loan Guidelines (revised

Ministry of thein July 2022)

Environment3

1.2 Company outline
The company was established through the merger of Chichibu Onoda Cement
Corporation, with over a 100-year-old history, and Nihon Cement Co., Ltd. in October
1998. Our group companies continue to support infrastructure by supplying high-quality
cement and construction materials with advanced technology from 9 cement plants inJapan and 8 plants in the Pacific Rim region including US, China and Southeast Asia.
The company aims to build a sustainable society making the most of all our abilities.



Our group companies have production and distribution centers at home and abroad,building a stable supply system for cement and resource products. In addition, using theone of the world's best environmental technologies for cement production, we contributeto the realization of a recycling-based society and climate change countermeasures.

1.3 Corporate philosophy and action policies for the environmentThe management philosophy of our group companies is to “contribute to social
infrastructure development by providing solutions that are environmentally efficient,enhance our competitive position and bring value to our stakeholders.”

Under this philosophy, we aim to become a “leading company in the Pacific Rim region”
in core businesses such as domestic cement business, mineral resources business,environmental business, international business, and construction materials business.
By making the most of the properties of cement plants that can treat and recycle a large
amount of waste and byproducts as well as the recycling technology which has beencultivated for many years, the company has contributed to the realization of thepreservation of the planet and a recycling-based society.



To realize the management philosophy, we formulated the group companies’ businessprinciples in 9 sections and are striving to implement them.

4<Group management philosophy and business principles>(Source: Taiheiyo Cement Report 2022)5In addition, in order to strengthen the business foundation to support sustainable growth,
our group companies formulated key strategies for medium-to-long-term investment
focusing on the business environment during the 10 years between FY 2021 and 2030
including the period of the 23 Medium-Term Management plan. In addition to thesustained growth investment such as overseas M&As and domestic development of
new products, a total of 300 billion yen (100 billion yen each) is planned to be investedin (1) initiatives to deliver carbon neutrality, (2) strengthening plant facilities and (3)quarry development.
<Key strategies including the 23 Medium-Term Management plan (FY 2021 - 2023)>(Source: Taiheiyo Cement Report 2022)
Out of these 4 key strategies, the change of global awareness and the social situation
regarding global warming has an extremely important meaning for the global cement
industry, and efforts to become carbon neutral must be undertaken. Our groupcompanies are leading technological development to realize carbon neutrality as aleading company in Japan’s cement industry.



At the same time, investing a considerable amount of capital and labor to strengthen
plant facilities and limestone mines for long-term table production is a strong message
by our group companies that we will become a leading company which continues togrow in the core cement business under rapid and considerable changes in social
situations and the business environment.

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2. Disclosed Information based on Climate Transition Finance Handbook andBasic Guidelines on Climate Transition Finance
2.1 Disclosure status
This framework is formed to comply with the following 4 elements shown in the “Climate
Transition Finance Handbook” and “Basic Guidelines on Climate Transition Finance.”

4 elements of transition finance

Pointsexplained

Element 1

Climate transition strategy and governance of fund raisers

2.2

Element 2

Environmental materiality in a business model

2.3

Element 3

Climate transition strategy with scientific evidence

2.4

Element 4

Transparency of implementation

2.5

2.2 Element 1: Climate transition strategy and governance of fund raisers
2.2.1 About transition strategy


In May 2021, our group companies published “Carbon Neutral Strategy 2050.”



In March 2022, the group formulated a technological development roadmap for “Carbon
Neutral Strategy 2050” and 2030 Interim Target.

In the cement industry, which produces a significant amount of CO2 emissions,establishment of carbon neutral technologies is the highest priority issue linked to the
future of the industry. At the same time, it is positioned as a growth strategy of our groupcompanies.



Accordingly, we established a “carbon-neutral technological development project team”
to make all- out efforts to realize carbon neutrality in the entire supply chain in 2050.

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<Positioning of carbon neutrality in the management philosophy of our groupcompanies>(Source: Taiheiyo Cement Group, “Carbon Neutral Strategy 2050”)


Our group companies will work on initiatives towards 2030 and 2050 to realize carbon
neutrality in 2050.

As an initiative towards 2030, the group will invest 100 billion yen with the aim to
maximize the use of existing technologies (energy saving, low-CO2 energy/cement) andcompleting innovative technology development (CO2 capture and utilization).



As an initiative towards carbon neutrality in 2050, the group will realize carbon neutrality
throughout the whole supply chain through the sequential development of innovativetechnologies.

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<Initiatives towards 2030 and 2050>(Source: Taiheiyo Cement Group, “Carbon Neutral Strategy 2050”)


About 60% of CO2 generated in cement production processes is from raw materials andabout 40% is from energy. We will reduce CO2 emissions from raw materials by using
our existing technologies such as the technological development of low-carbon cement
and the utilization of admixtures from overseas. We are planning to reduce CO2
emissions from energy by our existing technologies such as high-efficiency coolers andgas/waste heat power generation, which contribute to energy-saving and high-efficiency.

However, in order to reduce CO2 from raw materials and realize carbon neutrality, it isnecessary to develop innovative technologies as well as using existing technologies.
Therefore, in addition to utilizing the above existing technologies, we have been working
on the “development of carbon circulation technology” from 2020, which includes
technologies such as, amine absorption chemical method, and CO2 utilization
technology, which uses cement and concrete-based materials for carbonation. From
2021, the company is also implementing “CO2 -capturing cement production process
and methanation technology development” and will further sequentially develop these
innovative technologies.

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<Development of technological development road map and innovative technologies>(Source: Taiheiyo Cement Group, “Carbon Neutral Strategy 2050”)


Through the aforementioned measures, as the interim goal for the realization of 2050
carbon neutrality, the group companies aim to reduce the CO2 emissions intensity in the
supply chain by 20% from FY 2000 and reduce domestic CO2 emissions by 40% fromFY 2000 by FY 2030.

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<Initiatives towards 2030 and 2050>(Source: Taiheiyo Cement Group, “Carbon Neutral Strategy 2050”)<Scenario for Delivering Carbon Neutrality>(Source: Taiheiyo Cement Report 2022)11

2.2.2 About governance

We have established the CSR Management Committee, which is chaired by thecompany president. The committee comprises cross-organizationally all board
members and executives under the direct control of the board of directors to promote
CSR management. The CSR Management Committee discusses important matterssuch as CSR activity implementation plans, and reviews the status of CSR activity
implementation.



Seven expert committees are established under the CSR Management Committee towork on individual CSR issues more specifically. The responsible director takes the roleof chairperson in each expert committee and the department with the closest
relationship to the issue functions as the secretariat.
<Promotional structure of CSR management>(Source: Taiheiyo Cement Report 2022)
2.3 Element 2: Environmental materiality in a business model

Sustainability issues are extracted and specified from international guidelines,
information from stakeholders and the company’s business details.



Twenty-two important issues are specified from the above specified sustainability issues
12after considering what important themes the group companies have and prioritized ininternal discussions.


In the environmental field in particular, “realization of carbon neutrality” and “response
to climate change” are positioned as priority issues with extremely high interest andimportance for stakeholders and extremely large importance for the group companies.
<Steps for considering priority issues (materiality)>(Source: Taiheiyo Cement Report 2022)
2.4 Element 3: Climate transition strategy with scientific evidence

In June 2019, the company endorsed the recommendations of TCFD and set scenarios
up to 2050 regarding business risks and opportunities which climate change could
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provide to the group companies and carried out an evaluation and analysis. The
company set out scenarios which have important impacts on climate-related risks andopportunities by using a climate-related long-term scenario developed based on
scientific evidence including IEA “World Energy Outlook (WEO),” “Energy Technology
Perspectives (ETP)” and IPCC “The 5th Assessment Report (AR5).” Looking at the2030s in reference to the IEA World Energy Outlook 2021, we have set two CO2
reduction scenarios (1.5℃, 4℃) which impact our business with an appropriate carbon
price assumption. After that, we analyzed business impacts on each scenario by sizeand period (short, medium and long term).
<Outline of climate-related scenario analysis>(Source: Taiheiyo Cement Report 2022)
The group companies’ transition strategy has a long-term objective of carbon neutrality
throughout the entire supply chain in 2050 and works on measures which comply withthe technical road map on “transition finance” in the cement field, published by the
Ministry of Economy, Trade and Industry (METI) in March 2022.

The sectoral road map shows the aim of Japan to achieve carbon neutrality by 2050
based on scientific evidence. It includes possible ways to reduce carbon emissions
steadily, as well as future innovative technologies along with the background and timeaxis, which refers to domestic policies and international scenarios. We believe that the14

group’s transition strategy, which is consistent with this sectoral road map, has ascientific basis.
<Technical road map in the cement field>(Source: METI, Technical Road Map in Cement Field on “Transition Finance”) (In Japanese)
2.5 Element 4: Transparency of implementation

As mentioned above, as for the investment relating to the transition strategy, the groupwill invest 100 billion yen towards 2030 with the aim to maximize the use of existing
technologies (energy saving, low-CO2 energy/cement) and realizing innovativetechnology development (CO2 capture and utilization). In addition, toward carbon
neutrality by 2050, the group will realize carbon neutrality throughout the whole supply
chain through the sequential development of innovative technologies.

In addition, to strengthen the business foundation that supports sustainable growth, we
aim to work on sustained growth investment, initiatives to deliver carbon neutrality,
strengthening plant facilities and mines and restructuring of domestic business aspriority issues. In particular, in the cement industry where CO2 emissions from raw
materials cannot be avoided, the establishment of technologies to bring CO2 emissions
to net zero is one of the most important issues that will lead to the future of the industry.
We recognize that the realization of carbon neutrality is the core of our growth strategy.



In the “Business Principles” of our group companies, we declare that we will “strive to15

anticipate the changing business environment to assess new opportunities for growth.”
Risk management reduces uncertainty in business management and it is considered tobe the foundation to achieve management objectives. Risks which could trigger
uncertainty in the achievement of management objectives such as social change,changes in the environment, natural disasters, accidents and scandals are managed
based on the “Basic Risk Management Policy.” We established “risk management
regulations” so that we can use the “Basic Risk Management Policy” in specific risk
management activities. The rules on risk management include responses in an
emergency.
In addition, while placing the company president as the chief executive of risk
management and compliance promotion, the officer in charge assigned by the president(officer in charge of General Affairs Department) will hold and manage the “riskmanagement and compliance committee” to promote activities in an organizational andplanned manner. The committee takes the core role in risk management and compliancepromotion in all our group companies, including the development of policies, extraction,assessment and identification of risks in all companies, risk management activities
through PDCA cycle and compliance promotion. It also establishes and revises rules onrisk management and compliance, raises awareness of employees and promotes
education. In each of our business branches and group companies, we placed an“officer responsible for risk management and compliance” and a “risk management andcompliance promoter” to take specific measures; four committee meetings were held in
FY 2021.

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<Risk Management and Compliance Promotion System>(Source: Taiheiyo Cement Report 2022)

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3. Compliance with Five Principles in Guidance on Sustainability-Linked Loan
Principles, etc.
3.1 Compliance status
This framework is formulated to comply with the following five principles shown in
Guidance on Sustainability-Linked Loan Principles (revised in March 2022) and Green
Loan and Sustainability Linked Loan Guidelines (revised in July 2022).

Five Principles in Guidance on Sustainability-Linked Loan

PointsPrinciples, etc.

explained

Principle 1

Selection of KPIs

3.2

Principle 2

Calibration of SPTs

3.3

Principle 3

Loan Characteristics (economic conditions)

3.4

Principle 4

Reporting

3.5

Principle 5

Verification

3.6

3.2 Principle 1: Validity of KPIs Selection
In this framework, the “CO2 emissions intensity” and the “amount of CO2 emissions” areused as KPI.



Out of our group companies’ key strategies for medium-to-long-term investment whichwere formulated from the viewpoint of the business environment for 10 years between
FY 2021 and FY 2030 including the 23 Medium-Term Management plan, changes in theworld awareness of global warming and in social situations have an extremely importantmeaning to the global cement industry. Our group companies will lead technologicaldevelopment for carbon neutrality as a leading company in Japan’s cement industry.



Moreover, as a policy of our group companies, we will realize carbon neutrality in thewhole supply chain. We consider that the above KPI is a meaningful index that
contributes to the achievement of the objectives of the “Carbon Neutral Strategy 2050”
in our group companies.

3.3 Principle 2: Calibration of SPTs
In this framework, we set the “reduction of the CO2 emissions intensity in the supply
chain by 20% from FY 2000 by FY 2030” and the “reduction of domestic CO2 emissions
by 40% from FY 2000 by FY 2030” as SPTs.

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In March 2022, the group formulated a technological development roadmap for “Carbon
Neutral Strategy 2050” and 2030 Interim Target and published two aforementioned
objectives for FY 2030.

The “Carbon Neutral Strategy 2050” of the group complies with the contents of thetechnical road map in the cement field on the “transition finance” published by METI in
March 2022. In addition, as the above SPTs is the interim goal of our group companies’“Carbon Neutral Strategy 2050,” it is considered an ambitious target for the realizationof the Paris Agreement.
<Initiatives towards 2030 and 2050> (republishing)(Source: Taiheiyo Cement Group, “Carbon Neutral Strategy 2050”)

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<Scenario for Delivering Carbon Neutrality> (republishing)(Source: Taiheiyo Cement Report 2022)
3.4 Principle 3: Loan Characteristics (economic conditions)

In this TLL, financial and structural characteristics will change according to theachievement status of SPTs. For every finance practice, details including requirements
will be disclosed in the contract documents, etc., of each loan.



If an unanticipated incident occurred (a significant change in the system including rules,
etc., occurrence of an abnormal phenomenon, etc.) due to an unexpected situation at
the time of the procurement of this TLL, which could have a critical impact on themeasuring method and coverage of KPI, settings of SPTs and preconditions, details ofchanges will be disclosed in the contract documents, etc., of each loan.



If there is a critical change in the settings of SPTs, the company will discuss with relatedparties on setting SPTs with the same or above degree of ambition compared to theexisting assessment standards based on the changes and obtain an assessment by athird party assessment agency as needed.

3.5 Principle 4: Reporting

The company will annually publish the progress status of SPTs comprising KPT on thewebsite or in the integrated report, etc., or disclose information to the loaner. Morespecifically, we will disclose the progress status of the CO2 reduction plan (the CO220

emissions intensity in the supply chain related to cement production, the amount ofdomestic CO2 emissions, etc.).
3.6 Principle 5: Verification

As the progress status of SPTs comprising KPT, the company will continue to receive
annual third-party guarantees regarding the progress status of CO2 reduction plan (theCO2 emissions intensity in the supply chain related to cement production, the amount ofdomestic CO2 emissions, etc.). The company will annually publish information on
verification on the website or in the integrated report, etc., or disclose information to theloaner.

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