Second-Party Opinion

Sumitomo Corporation
Green Finance Framework

Evaluation Summary
Sustainalytics is of the opinion that the Sumitomo Corporation Green Finance
Framework is credible and impactful and aligns with the four core components of theGreen Bond Principles 2021 and the Green Loan Principles 2021. This assessment isbased on the following:
The eligible categories for the use of proceeds
Renewable Energy, Environmentally Sustainable Management of
Living Natural Resources and Land Use, Clean Transportation, Energy
Efficiency, are aligned with those recognized by the Green Bond
Principles. Sustainalytics considers that investments in the eligible
categories will lead to positive environmental impacts and advance
the UN Sustainable Development Goals, specifically SDG 7, 11 and
15.
Sumitomo Corporation’s
Finance Department selects eligible projects based on the eligibility
criteria with the support of the Corporate Sustainability Department.
The final decision is made by the Chief Financial Officer. Sumitomo
Corporation has in place processes for managing environmental andsocial risks associated with the eligible projects. These processes
are applicable to all allocation decisions made under the Framework.
Sustainalytics views that Sumitomo Corporation’s processes forevaluating and selecting projects are in line with market practice.
The Finance Department tracks andmonitors the proceeds once a year, using an internal management
system. Sumitomo Corporation intends to allocate, the full amount of
the proceeds to projects that meet the eligibility criteria withinapproximately three years from the green bond’s issuance date
and/or the green loan’s execution date. Sumitomo Corporation
intends to manage an amount equal to the unallocated proceeds incash or cash equivalents. Sumitomo Corporation’s management ofproceeds is in line with market practice.
Sumitomo Corporation intends to report on the
allocation of the proceeds and environmental benefits annually on its
website until the full allocation of green finance proceeds. This reportwill include the amount of allocated and unallocated proceeds,
planned timing of allocation and management method forunallocated proceeds, as well as quantitative or qualitativeenvironmental performance indicators. Sustainalytics considers
Sumitomo Corporation’s reporting is in line with market practice.

© Sustainalytics 2022

Evaluation dateFebruary 21, 2022

Issuer Location

Tokyo, Japan

Report Sections
Introduction ............................................. 2
Sustainalytics’ Opinion ........................... 3
Appendices ........................................... 10

For inquiries, contact the Sustainable
Finance Solutions project team:
Kosuke Kanematsu (Tokyo)
Project Manager
kosuke.kanematsu@sustainalytics.com(+81) 3 4571 2277
Marie Toyama (Tokyo)
Project Support
Ayaka Okumura (Amsterdam)
Project Support
Shintaro Yanagi (Brussels)
Client Relations
susfinance.japan@sustainalytics.com(+31) 20 399 4482

Second-Party Opinion

Sumitomo Corporation Green Finance Framework

Introduction
Sumitomo Corporation (“Sumitomo Corporation” or the “Company”) is a major Japanese trading company
established in 1919. Sumitomo Corporation and its affiliated companies constitute the Sumitomo Corporation
Group ("Sumitomo Corporation Group" or "the Group"). The Company has 134 offices in 65 countries andregions with 75,383 employees on a consolidated basis (as of September 30, 2021). Its businesses span metal
products, transportation and construction systems, infrastructure, media and digital, living related and realestate, and mineral resources, energy, chemical and electronics. Moreover, the Company launched the Energy
Innovation Initiative to engage in the next-generation businesses to contribute to the realization of a carbonneutral society.
Sumitomo Corporation has developed the Sumitomo Corporation Green Finance Framework (the“Framework”) under which it intends to issue green bonds and loans and use the proceeds to finance and/or
refinance, projects that deliver environmental benefits. The Framework defines eligibility criteria in four areas:
1.
2.
3.
4.

Renewable Energy
Environmentally Sustainable Management of Living Natural Resources and Land Use
Clean Transportation
Energy Efficiency

Sumitomo Corporation engaged Sustainalytics to review the Sumitomo Corporation Green Finance
Framework, dated February 2022, and provide a Second-Party Opinion on the Framework’s environmental
credentials and its alignment with the Green Bond Principles 2021 (GBP)1 and the Green Loan Principles 2021
(GLP).2 This Framework has been published in a separate document.3
Scope of work and limitations of Sustainalytics’ Second-Party Opinion
Sustainalytics’ Second-Party Opinion reflects Sustainalytics’ independent 4 opinion on the alignment of thereviewed Framework with the current market standards and the extent to which the eligible project categories
are credible and impactful.
As part of the Second-Party Opinion, Sustainalytics assessed the following:•••

The Framework’s alignment with the GBP, as administered by ICMA, and the GLP, as administeredby LMA, APLMA and LSTA;
The credibility and anticipated positive impacts of the use of proceeds; andThe alignment of the issuer’s sustainability strategy and performance and sustainability risk
management in relation to the use of proceeds.

For the use of proceeds assessment, Sustainalytics relied on its internal taxonomy, version 1.11.2, which isinformed by market practice and Sustainalytics’ expertise as an ESG research provider.
As part of this engagement, Sustainalytics held conversations with various members of Sumitomo
Corporation’s management team to understand the sustainability impact of their business processes andplanned use of proceeds, as well as management of proceeds and reporting aspects of the Framework.
Sumitomo Corporation representatives have confirmed (1) they understand it is the sole responsibility of
Sumitomo Corporation to ensure that the information provided is complete, accurate or up to date; (2) thatthey have provided Sustainalytics with all relevant information and (3) that any provided material information
has been duly disclosed in a timely manner. Sustainalytics also reviewed relevant public documents and nonpublic information.

1 The Green Bond Principles are administered by the International Capital Market Association and are available at https://www.icmagroup.org/green-social-and-sustainability-bonds/green-bond-principles-gbp/.
2 The Green Loan Principles are administered by the Loan Market Association, Asia Pacific Loan Market Association and Loan Syndications & Trading
Association and are available at https://www.lsta.org/content/green-loan-principles/
3 The Sumitomo Corporation Green Finance Framework will be available on Sumitomo Corporation’s website at (After March 2022):
https://www.sumitomocorp.com/en/jp/sustainability/greenfinance
4 When operating multiple lines of business that serve a variety of client types, objective research is a cornerstone of Sustainalytics and ensuring analyst
independence is paramount to producing objective, actionable research. Sustainalytics has therefore put in place a robust conflict management
framework that specifically addresses the need for analyst independence, consistency of process, structural separation of commercial and research(and engagement) teams, data protection and systems separation. Last but not the least, analyst compensation is not directly tied to specificcommercial outcomes. One of Sustainalytics’ hallmarks is integrity, another is transparency.
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This document contains Sustainalytics’ opinion of the Framework and should be read in conjunction with that
Framework.
Any update of the present Second-Party Opinion will be conducted according to the agreed engagement
conditions between Sustainalytics and Sumitomo Corporation.
Sustainalytics’ Second-Party Opinion, while reflecting on the alignment of the Framework with market
standards, is no guarantee of alignment nor warrants any alignment with future versions of relevant market
standards. Furthermore, Sustainalytics’ Second-Party Opinion addresses the anticipated impacts of eligible
projects expected to be financed with bond and loan proceeds but does not measure the actual impact. The
measurement and reporting of the impact achieved through projects financed under the Framework is the
responsibility of the Framework owner. Upon twenty-four (24) months following the evaluation date set statedherein, Sumitomo Corporation is encouraged to update the Framework, if necessary, and seek an update to
the Second-Party Opinion to ensure ongoing alignment of the Framework with market standards andexpectations.
In addition, the Second-Party Opinion opines on the potential allocation of proceeds but does not guarantee
the realised allocation of the bond and loan proceeds towards eligible activities.
No information provided by Sustainalytics under the present Second-Party Opinion shall be considered as
being a statement, representation, warrant or argument, either in favour or against, the truthfulness, reliability
or completeness of any facts or statements and related surrounding circumstances that Sumitomo
Corporation has made available to Sustainalytics for the purpose of this Second-Party Opinion.

Sustainalytics’ Opinion
Section 1: Sustainalytics’ Opinion on the Sumitomo Corporation Green Finance
Framework
Sustainalytics is of the opinion that the Framework is credible and impactful, and aligns with the four corecomponents of the GBP and GLP. Sustainalytics highlights the following elements of the Framework:•

Use of Proceeds:- The four eligibility categories for the green finance use of the proceeds– Renewable Energy,
Environmentally Sustainable Management of Living Natural Resources and Land Use, Clean
Transportation, and Energy Efficiency are recognized by the GBP and GLP as project categories
that provide clear environmental benefits. Please see Section 3 for Sustainalytics’ assessment
on impact of the use of proceeds.
- For refinancing of existing projects, Sumitomo Corporation has set a look-back period, limiting
the allocation of proceeds to expenditures for projects implemented within 36 months from thegreen bond’s issuance date and/or the green loan’s execution date. Sustainalytics views this to
be in line with market practice.
- Within the Renewable Energy category, the Company has defined that the proceeds raised bygreen bonds and/or loans will be used to finance the investment, development, construction,
operation, and maintenance of renewable energy generation by wind, solar, and geothermal
power. In this category, Sustainalytics positively assesses the following points as being alignedwith market practice:・
Financing of solar and wind energy projects.
・-With regard to geothermal power generation projects, the proceeds will beallocated only to projects with direct CO2 emissions of less than 100 g/kWh.
・
Regarding investment to corporations, allocation of proceeds is limited to pure
players who engage exclusively in, or generates at least 90% of their sales fromrenewable energy business that meets the eligibility criteria set under the
Framework.
In the category of the Environmentally Sustainable Management of Living Natural Resourcesand Land Use, Sumitomo Corporation intends to allocate the proceeds to finance acquisition offorests that have obtained FSC certifications from the Forest Stewardship Council (FSC), aninternational organization that certifies forests. Sumitomo Corporation Group operates a3

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•

•

•

forestry business for owning forests, logging, selling timber, and planting/growing forests.
Certified forests will be acquired in order to engage in sustainable forest management and to
expand sales of certified timber. Sustainalytics views the setting of the eligibility criteria basedon this forestry certification program to be in line with market practice. Please see Appendix 1
for more details on Sustainalytics’ evaluation.
- In the Clean Transportation category, Sumitomo Corporation intends to allocate the proceeds tothe operation and maintenance of urban passenger railway projects. Sumitomo Corporationcommits to Sustainalytics that the proceeds will be allocated only to projects related to railway
vehicles that are powered by electricity or with direct CO2 emissions less than 50g CO2/per
passenger-km. Sustainalytics views the setting of such restriction to be in line with market
practice.
- In the Energy Efficiency category, the Company intends to allocate proceeds for upgrading
mobile network to 5G from the existing 4G or earlier generation, with investment in construction
and operation of poles and antennas that telecommunication carriers commonly utilize for their
5G network. With the investment, this service of sharing 5G base stations enables a certain levelof network coverage with fewer base stations compared to when each operator installs poles
and antennas individually, which leads to less required resource including lower power
consumption. While Sustainalytics recognizes that the expansion of 5G networks will potentially
increase the overall demand for electricity, it positively evaluates the use of proceeds,
considering that the technology contributes to improve energy efficiency. Sustainalytics also
encourages Sumitomo Corporation to report on estimated or achieved energy efficiency gains
though its service of 5G base stations sharing, where feasible.
Project Evaluation and Selection:- Sumitomo Corporation’s Finance Department creates a list of candidate projects and based on
the eligibility criteria, selects the eligible projects with the support of the Corporate Sustainability
Department. The final decision is made by the Company’s Chief Financial Officer.
- The Company has due diligence and monitoring processes for managing environmental andsocial risks associated with the eligible projects. These processes are applicable to all allocation
decisions made under the Framework. Sustainalytics considers that the Company’s processes
for managing environmental and social risks to be adequate. For more details, please see
Section 2.
- Based on the clear delineation of responsibility for project evaluation and selection,
Sustainalytics considers these processes to be in line with market practice.
Management of Proceeds:
The Finance Department tracks and monitors the proceeds once a year, using an internalmanagement system. The Company intends to allocate the full amount of the proceeds toprojects that meet the eligibility criteria within approximately three years from the green bond’s
issuance date and/or the green loan’s execution date. Sumitomo Corporation commits that any
unallocated proceeds generated from the sale of assets or for other reasons will be reallocatedto other projects that meet the eligibility criteria. The Company intends to manage an amountequal to the unallocated proceeds in cash or cash equivalents.
Based on the defined allocation timeframe and disclosure around management method forunallocated proceeds, Sustainalytics views this process to be in line with market practice.
Reporting:- Sumitomo Corporation intends to report on the allocation of the proceeds and environmental
benefits annually on its website until the full allocation of green finance proceeds.
- Allocation Reporting will include the amount of allocated proceeds and number of financed
projects by project category, amount of unallocated proceeds and planned timing of allocation,and management method for unallocated proceeds.
- Impact Reporting will include quantitative and qualitative indicators by category to the extent
reasonably practicable. Specifically, achieved annual reduction in CO2 emissions (t-CO2) andpower generation capacity (MW) for Renewable Energy; forest area acquired (ha); the numberof stations and route distance (Km) for Clean Transportation; and case studies of facilities
installed with 5G base stations, will be disclosed.
- Based on the Company’s commitment to report on the allocation as well as environmental
benefits, Sustainalytics consider the Company’s reporting to be in line with market practice.

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Alignment with Green Bond Principles 2021 and Green Loan Principles 2021
Sustainalytics has determined that the Sumitomo Corporation Green Finance Framework aligns to the four
core components of the GBP and GLP. For detailed information please refer to Appendix 2: Green Bond/Green
Bond Programme External Review Form.

Section 2: Sustainability Strategy of Sumitomo Corporation
Contribution of framework to Sumitomo Corporation’s sustainability strategy
In accordance with its corporate mission 5 , Sumitomo Corporation aims to “enhance its sustainability
management” to achieve sustainable growth while working to solve environmental and social issues.6 In June
2020, the Company selected the following six key environmental and social areas that it should prioritize:7 (i)Mitigation of Climate Change; (Ii) Circular Economy; (Iii) Respect for Human Rights; (Iv) Development of Local
Society and Economy; (V) Improvement of the Living Standard; And (Vi) Quality Education. Under each area,
the Company set long-term goals. In May 2021, the Company set medium-term goals along with action plans.8
Within the Mitigation of Climate Change area, the Company set the long-term goal of achieving carbon
neutrality in 2050 for the entire Group.9 As a medium-term goal, the Group aims to reduce its CO2 emissions
by 50% or more by 2035 from the level in 2019.10 It also aims to reduce indirect CO2 emissions from its fossil
fuel upstream business by 90% or more and to reduce CO2 emissions from its power generation business by
40% or more respectively by 2035 from the level in 2019. Intending to gradually shift its power generation
portfolio toward energy sources with low environmental loads, the Company aims to increase the share of
renewable energy generation capacity (net ownership basis) in its portfolio from 20% in 2020 to 30% by2035.11Furthermore, as one of the medium-term goals to realizing sustainable energy cycles, it aims to increase thesupply of renewable energy to 3GW or more by 2030.12 In Japan, the Company operates six solar power plants
and two wind power plants in the renewable energy business. 13 Additionally, the Company engages in
geothermal power operations in Indonesia14 and offshore wind power operations in Europe.15 The Company
engages in sustainable forestry management and has obtained FSC (Forest Stewardship Council) certificatesfrom the FSC for part of its 2.66 million hectares of forest areas in Russia and a large part of its 52,000
hectares of forest areas in New Zealand.16
To enhance the business structures for contributing to the realization of a carbon-neutral society, in April 2021,
the Company launched the “Energy Innovation Initiative (EII)” for building decarbonating/recycling energy
systems across the organization, as a high-priority measure in its medium-term management plan.17
Given the above, Sustainalytics is of the opinion that the Framework by Sumitomo Corporation aligns with its
sustainability policies, goals, and initiatives, and promotes the Company’s contribution to the mitigation ofclimate change through its business.

5 Sumitomo Corporation, “Corporate Mission Statement”, at: https://www.sumitomocorp.com/en/jp/about/policy/principles
6

Sumitomo Corporation, “Enhancing Sustainability Management”, at: https://www.sumitomocorp.com/en/jp/sustainability/management

7 Sumitomo Corporation, “Enhancing Sustainability Management”, at: https://www.sumitomocorp.com/en/jp/sustainability/management
8 Sumitomo Corporation, “New Medium-Term Management Plan

2021-2023”, at: https://www.sumitomocorp.com/jp//media/Files/hq/ir/report/summary/2020/en/2103_0510Presentaion-ENG_X1nM.pdf?la=en
9 Sumitomo Corporation, “New Medium-Term Management Plan 2021-2023”, at: https://www.sumitomocorp.com/jp//media/Files/hq/ir/report/summary/2020/en/2103_0510Presentaion-ENG_X1nM.pdf?la=en
10 Sumitomo Corporation, “New Medium-Term Management Plan 2021-2023”, at: https://www.sumitomocorp.com/jp//media/Files/hq/ir/report/summary/2020/en/2103_0510Presentaion-ENG_X1nM.pdf?la=en
11 Sumitomo Corporation, “Response to Climate Change”, at: https://www.sumitomocorp.com/en/jp/sustainability/environmental-management/climate
12 Sumitomo Corporation, “New Medium-Term Management Plan 2021-2023”, at: https://www.sumitomocorp.com/jp//media/Files/hq/ir/report/summary/2020/en/2103_0510Presentaion-ENG_X1nM.pdf?la=en
13
Sumitomo Corporation, “Contributing to the sustainable development of local communities and the global environmental protection through therenewable energy business in Japan”, at: https://www.sumitomocorp.com/en/jp/business/case/group/photovoltaic
14 Sumitomo Corporation, “Sustaining Indonesia’s power supply with geothermal power generation”, at:https://www.sumitomocorp.com/en/jp/business/case/group/geothermal
15 Sumitomo Corporation, “Participation in European offshore wind power projects”, at:https://www.sumitomocorp.com/en/jp/business/case/group/wind-power
16 Sumitomo Corporation, “ESG Communication Book 2021”, at: https://www.sumitomocorp.com/jp/-/media/Files/hq/sustainability/report/esg/esgall.pdf?la=en
17 Sumitomo Corporation, “New Medium-Term Management Plan 2021-2023”, at: https://www.sumitomocorp.com/jp//media/Files/hq/ir/report/summary/2020/en/2103_0510Presentaion-ENG_X1nM.pdf?la=en5

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Sumitomo Corporation Green Finance Framework
Approach to managing environmental and social risks associated with the projects
Sustainalytics is aware that while the eligible projects defined in the Framework are expected to provide
environmental benefits, they are also exposed to environmental and social risks. Major risks related to thedevelopment/operation of power generation facilities, operation of railway facilities, and construction of 5Gbase stations include the following: biodiversity loss and adverse impacts on scenery; noise and vibration; air
pollution; safety of passengers and workers; and human right violation in supply chains for acquiring minerals.
By the processes and policies described below, Sumitomo Corporation manages and mitigates environmental
and social risks associated with the eligible projects:
▪

▪

▪

▪

▪

Sumitomo Corporation has established a companywide framework to manage the social andenvironmental impacts associated with the Company’s business activities. Based on this framework,social and environmental risks in climate change, biodiversity, pollution, resource depletion, local
residents’ human rights, and workers’ human rights will be assessed using a dedicated sheet for all
new investments brought to the Investment Committee. The Company also considers the status andresult of an Environmental Impact Assessment as part of the assessment process. The Corporate
Sustainability Department participates in the deliberations of the Company Investment Committee, andinvestment decisions are made based on the assessed social and environmental impact.18 In addition,
Sumitomo Corporation explained to Sustainalytics that when investing in railway-related businesses, it
conducts technical due diligence using external consultants to identify and analyze accident and failurerisks. If any problems are identified, the Company proposes improvement measures to the railway
operating companies.
Post investment, social and environmental risks will be assessed through periodic monitoring andinternal auditing of the investee operating companies, and any identified problems will be addressed.
If, as a result of the screening of new investments and monitoring, some action has been taken formaterial social/environmental problem, the matter will be reported or brought for discussion to theManagement Council and the Board of Directors. Such risk will be addressed under the supervision of
the Board of Directors.19
Sumitomo Corporation Group has set the Sumitomo Corporation Group CSR Action Guidelines for
Supply Chain Management,20 which specify compliance requirements for the following: Prevention ofhuman right abuses such as forced labor or child labor; Provision of safe and healthy work
environments; Protection of the global environment; Ensuring of the safety of products and services;
Prevention of corrupt business practices; Appropriate management of information security;
Contribution to sustainable regional development; and Timely and appropriate disclosure of
information. The Group also requires its suppliers and business partners to comply with the Guidelines,
and if it confirms any violation of the Guidelines, it will request correction. The status of improvement
leads to consideration of whether or not to continue its business with such offender. Furthermore, theCompany set a policy for handling conflict minerals. The Company periodically investigates to prevent
use of conflict minerals by businesses involving the Company.21
Sumitomo Corporation Group has set the Environmental Policy 22 and commits to the following:
Compliance with environmental legislation; Considerations to the preservation of the environment forecosystems and other ecological communities and the conservation and protection of biodiversity;
Response to climate change; Efficient use of resources and energy; Initiative to reduce, reuse, or recycle
waste; and Establishment and operation of environmental management systems and the prevention ofenvironmental pollution.
Sumitomo Corporation Group set the Human Rights Policy,23 in compliance with the United Nations’
Guiding Principles on Business and Human Rights,24 and commits to the following: Implementation ofhuman rights due diligence; Compliance with the relevant laws and international human rights norms;
Engagement and dialogue with stakeholders; and In-house education. When operating businesses thatinvolve development, it also commits to complying with the global standards pertaining to the rights of

18 Sumitomo Corporation, “ESG Communication Book

2021”, at: https://www.sumitomocorp.com/jp/-/media/Files/hq/sustainability/report/esg/esgall.pdf?la=en
19 Sumitomo Corporation, “ESG Communication Book 2021”, at: https://www.sumitomocorp.com/jp/-/media/Files/hq/sustainability/report/esg/esgall.pdf?la=en
20 Sumitomo Corporation, “Corporate Social Responsibility”, at: https://www.sumitomocorp.com/en/jp/sustainability/csr
21 Sumitomo Corporation, “ESG Communication Book 2021”, at: https://www.sumitomocorp.com/jp/-/media/Files/hq/sustainability/report/esg/esgall.pdf?la=en
22 Sumitomo Corporation, “Environmental Policy and Management Structure, Objectives and Results”, at:https://www.sumitomocorp.com/en/jp/sustainability/environment-policy
23 Sumitomo Corporation, “Corporate Social Responsibility”, at: https://www.sumitomocorp.com/en/jp/sustainability/csr
24 United Nations Information Centre, “Guiding Principles on Business and Human Rights: Implementing the United Nations "Protect, Respect andRemedy" Framework” (Japanese only), at: https://www.unic.or.jp/texts_audiovisual/resolutions_reports/hr_council/ga_regular_session/3404/
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indigenous peoples and local communities, including the United Nations Declaration on the Rights ofIndigenous Peoples,25 and the principle of “free, prior and informed consent (FPIC).” 26
Considering the above overall, Sustainalytics views Sumitomo Corporation has in place adequate systems to
manage and mitigate risks associated with the eligible projects.

Section 3: Impact of Use of Proceeds
All four use of proceeds categories are aligned with those recognized by the GBP and GLP. Sustainalytics has
focused on three below where the impact is specifically relevant in the local and global context.
Importance of increased use of renewable energy
In 2019, the global electricity sector emitted 13.6 Gt of CO2, accounting for 41% of energy-related CO2
emissions.27 According to the Sustainable Development Scenario (SDS),28 in which the International Energy
Agency (IEA) depicted the steps to achieve the Paris Agreement climate goals, the electricity sector needs toreduce CO2 emissions by an average of 4% per year until 2030. Meanwhile, the sector’s reduction of CO 2
emissions in 2019 was 1.3%, far below the level specified by the SDS. 29 The Scenario also requires theelectricity sector to significantly increase the renewable energy ratio from 27% of the electric power generationin 2019 to about a half by 2030.30
In the category of Renewable Energy, Sumitomo Corporation intends to allocate the green finance proceeds
to solar, wind, and geothermal power generation projects in and outside Japan. In Japan, while renewableenergy accounted for 18.1% of the total electric power generated in FY2019, fossil-fuel-based thermal power
generation accounted for 75.7%. 31 In April 2021, the Japanese government has committed to reducing
greenhouse gas (GHG) emissions by 46% from the level of FY2013 by FY2030,32 and aims to increase the ratioof renewable energy to 36-38 % by FY2030 as a part of the energy mix that is consistent with thiscommitment. 33 Additionally, the government pledged to achieve net-zero GHG emissions by 2050, andformulated the “Green Growth Strategy,”34 which sets out policy directions and action plans to achieve carbon
neutrality by 2050. In this strategy, the government states that it will promote the use of renewable energy,
with the reference goal of reaching 50-60% renewable energy share in the country’s energy supply by 2050.
Considering the above, Sustainalytics considers that Sumitomo Corporation’s use of proceeds in the
Renewable Energy category will contribute to the reduction of CO2 emissions by the global electricity sector
and to the achievement of the medium- and long-term climate change goals of Japan.
Contribution to the reduction of GHG emissions by sustainable forest management
According to the United Nation’s Intergovernmental Panel on Climate Change (IPCC), the forestry sector(forestry and other land-use changes) can contribute to the reduction of GHG emissions through preventionof emissions to the atmosphere by conserving existing carbon pools accumulated in soils or vegetation, andincreasing the size of existing carbon pools and thereby extracting carbon dioxide (CO2) from theatmosphere.35 On the other hand, deforestation and forest degradation may cause stored GHG to be emitted
back into the atmosphere. 36 Therefore, preservation and expansion of forests play an important role in
reducing GHG emissions. In its special report, “Climate Change and Land,” IPCC considers that sustainable“United Nations Declaration on the Rights of Indigenous Peoples (provisional translation)” (Japanese only), at:https://www.un.org/esa/socdev/unpfii/documents/DRIPS_japanese.pdf
26 Sumitomo Corporation, “Corporate Social Responsibility”, at: https://www.sumitomocorp.com/en/jp/sustainability/csr
27 International Energy Agency (IEA), “Tracking Power 2020”, at: https://www.iea.org/reports/tracking-power-2020
28 International Energy Agency (IEA), “Report extract Sustainable Development Scenario (SDS)”, at: https://www.iea.org/reports/world-energymodel/sustainable-development-scenario
29 International Energy Agency (IEA), “Tracking Power 2020”, at: https://www.iea.org/reports/tracking-power-2020
30 International Energy Agency (IEA), “Tracking Renewable Power 2020”, at: https://www.iea.org/reports/tracking-renewable-power-2020
31 Agency for Natural Resources and Energy, “FY2019 Energy Supply and Demand Report (Final Figures) (Japanese only)”, at:https://www.meti.go.jp/press/2021/04/20210413004/20210413004-1.pdf
32 “Japan’s Nationally Determined Contribution (NDC)” at: https://www.env.go.jp/earth/ndc/JAPAN_NDC.pdf
33 Ministry of Economy, Trade and Industry, “Outline of Strategic Energy Plan” (Japanese only), at:https://www.meti.go.jp/press/2021/10/20211022005/20211022005-1.pdf
34
Ministry of Economy, Trade and Industry, “Green Growth Strategy through Achieving Carbon Neutrality in 2050” (Japanese only), at:https://www.meti.go.jp/press/2021/06/20210618005/20210618005-3.pdf
35 Intergovernmental Panel on Climate Change (IPCC), “Climate Change 2014 Synthesis Report”, at:https://www.ipcc.ch/site/assets/uploads/2018/02/SYR_AR5_FINAL_full.pdf
36 World Wildlife Fund (WWF), "INDC Analysis: An Overview of the Forest Sector”, at:https://wwfint.awsassets.panda.org/downloads/r2_wwf_indc_brief.pdf
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forest management aimed at providing timber, fiber, biomass, non-timber resources and other ecosystem
functions and services can lower GHG in the atmosphere by maintaining or enhancing forest carbon stocks.
The Panel also believes that sustainable forest management can contribute to climate change adaptation by
preventing and reducing land degradation, maintaining land productivity, and reversing the adverse impactsof climate change on land degradation.37
Sumitomo Corporation engages in sustainable forest management within its forestry business. Under the
Framework, the Company explains that in the Environmentally Sustainable Management of Living Natural
Resources and Land Use category, it will allocate green finance proceeds to acquire FSC-certified forests.
Given the above, Sustainalytics is of the opinion that the use of the proceeds contributes to the restoration offorests and soils and to the reduction of GHG emissions by preserving forests.
Contribution to reduction of CO2 by promoting clean transportation
In 2018, CO2 emissions from the global transportation sector were approximately 8.2 Gt, accounting for 24%
of energy-related CO2 emissions. 38 By means of transportation, road vehicles (passenger and freight)
accounted for nearly three-quarters of the sector’s CO2 emissions.39 According to the International Transport
Forum (ITF), even if existing commitments by countries to the transportation-related decarbonization efforts
is completely fulfilled, CO2 emissions from the transport sector are expected to increase by 16% by 2050 fromthe 2015 levels due to increase in transport demand.40 The ITF requires that, in order to limit the global averagetemperature rise to 1.5℃, CO2 emissions from the transportation sector be reduced by 70% from the 2015
level by 2050. 41 The IEA's “Net Zero by 2050—A Roadmap for the Global Energy Sector” calls for railway
transportation, with least consumption of energy and CO2 emissions among all motorized transportationmeans, to account for 20% of all passenger transport by 2050 in order to achieve the goal of net-zeroemissions by 2050.42
Within the Clean Transportation category, Sumitomo Corporation intends to allocate green finance proceeds
to urban passenger railway projects. Given the above, Sustainalytics is of the opinion that Sumitomo
Corporation’s use of proceeds is expected to promote low-carbon means of transportation and contribute to
the emission reduction in the global transportation sector.
Alignment with/contribution to SDGs
The Sustainable Development Goals (SDGs) were set in September 2015 by the United Nations General
Assembly and form an agenda for achieving sustainable development by the year 2030. The bonds and loans
issued under the Framework advances the following SDGs and targets:
Use of Proceeds
Category
Renewable Energy

SDG

SDG target

7. Affordable and Clean
Energy7.2 By 2030, increase substantially the share of
renewable energy in the global energy mix

Environmentally
Sustainable Managementof Living Natural
Resources and Land Use

15. Life on land

15.b Mobilize significant resources from all
sources and at all levels to finance sustainable
forest management and provide adequate
incentives to developing countries to advancesuch management, including for conservation
and reforestation

Clean Transportation

11. Sustainable cities andcommunities

11.2 By 2030, provide access to safe,
affordable,
accessible
andsustainabletransport systems for all, improving road safety,
notably by expanding public transport, withspecial attention to the needs of those in

37 Intergovernmental Panel on Climate Change (IPCC), “Climate Change and Land”, at:https://www.ipcc.ch/site/assets/uploads/sites/4/2020/02/SPM_Updated-Jan20.pdf
38 International Energy Agency (IEA), “Tracking Transport 2020”, at: https://www.iea.org/reports/tracking-transport-2020
39 International Energy Agency (IEA), “Transport”, at: https://www.iea.org/topics/transport
40
International Transport Forum, ”Executive Summary ITF Transport Outlook 2021” at: https://www.itf-oecd.org/sites/default/files/transportoutlookexecutive-summary-2021-english.pdf
41 International Transport Forum, ”Executive Summary ITF Transport Outlook 2021” at: https://www.itf-oecd.org/sites/default/files/transportoutlookexecutive-summary-2021-english.pdf
42 International Energy Agency (IEA), “Net Zero by 2050, A Roadmap for the Global Energy Sector”, at:https://iea.blob.core.windows.net/assets/beceb956-0dcf-4d73-89fe-1310e3046d68/NetZeroby2050-ARoadmapfortheGlobalEnergySector_CORR.pdf
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vulnerable situations, women, children, persons
with disabilities and older persons
Energy Efficiency

7. Affordable and Clean
Energy7.3 By 2030, double the global rate of
improvement in energy efficiency

Conclusion
Sumitomo Corporation has developed the Sumitomo Corporation Green Finance Framework under which it
may issue green bonds and/or loans and use the proceeds to finance and/or refinance projects related toRenewable Energy, Environmentally Sustainable Management of Living Natural Resources and Land Use,
Clean Transportation, and Energy Efficiency. Sustainalytics considers that the projects funded by the green
finance proceeds are expected to provide environmental benefits.
The Framework outlines a process by which proceeds will be tracked, allocated, and managed, andcommitments have been made for reporting on the allocation and impact of the use of proceeds. Furthermore,
Sustainalytics believes that the Framework is aligned with the overall sustainability strategy of the Company
and that the green use of proceeds categories will contribute to the advancement of the UN Sustainable
Development Goals 7, 11 and 15. Additionally, Sustainalytics is of the opinion that Sumitomo Corporation has
adequate measures to identify, manage and mitigate environmental and social risks commonly associatedwith the eligible projects funded by the proceeds.
Based on the above, Sustainalytics is confident that Sumitomo Corporation is well-positioned to issue green
bonds and/or loans and that the Framework is robust, transparent, and in alignment with the four corecomponents of the Green Bond Principles 2021 and the Green Loan Principles 2021.

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Appendices
Appendix 1: Sustainalytics’ Analysis of FSC Certification
Forest Stewardship Council (FSC)
Background

Founded in 1993 after the 1992 Earth Summit in Rio failed to produce any international agreements
to fight against deforestation, FSC aims to promote sustainable forest management practice.

Basic Principles

•
•
•
•
•
•
•
•
•
•

Governance

The General Assembly, consisting of all FSC members, constitutes the highest decision-making
body.

Compliance with laws and FSC principles
Tenure and use rights and responsibilities
Indigenous peoples' rights
Community relations and workers' rights
Benefits from the forests
Environmental impact
Management plans
Monitoring and assessment
Special sites – high conservation value forests (HCVF)
Plantations

At the General Assembly, motions are proposed by one member, seconded by two more, anddeliberated and voted on by all members. Members are entitled to vote to amend the bylaws,
initiate new policies, and clarify, amend or overturn a policy decision by the board.
Members apply to join one of three chambers – environmental, social, or economic – that are
further
dividedinto
northernandsouthern
sub-chambers.
Each chamber holds 33.3% of the weight in votes, and within each chamber the votes are weighted
so that the North and South hold an equal portion of authority, to ensure influence is sharedequitably between interest groups and countries with different levels of economic development.
The votes of all individual members in each sub-chamber represent 10% of the total vote of the
sub-chamber, while the votes of organizational members make up the other 90%.

Scope

Chain-of-CustodyNon-certified
sourceswood

The members vote for the board of directors, which is accountable to the members. There is aninternational board elected by all members and a US board, elected by the US-based members.
FSC is a global, multi-stakeholder owned system. All FSC standards and policies are set by aconsultative process. There is an FSC Global standard and for certain countries FSC National
standards. Economic, social, and environmental interests have equal weight in the standard setting
process. FSC follows the ISEAL Code of Good Practice for Setting Social and Environmental
Standards.
• The Chain-of-Custody (CoC) standard is evaluated by a third-party body that is accredited by
FSC and compliant with international standards.
• CoC standard includes procedures for tracking wood origin.
• CoC standard includes specifications for the physical separation of certified and noncertified wood, and for the percentage of mixed content (certified and non-certified) of
products.
• CoC certificates state the geographical location of the producer and the standards against
which the process was evaluated. Certificates also state the starting and finishing point of
the CoC.
FSC’s Controlled Wood Standard establishes requirements to participants to establish supplychain control systems, and documentation to avoid sourcing materials from controversial sources,
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Sumitomo Corporation Green Finance Framework

a.
b.
c.
d.
e.
Accreditation/verification

Conclusion

Illegally harvested wood, including wood that is harvested without legal authorization,from protected areas, without payment of appropriate taxes and fees, using fraudulent
papers and mechanisms, in violation of CITES requirements, and others,
Wood harvested in violation of traditional and civil rights,
Wood harvested in forests where high conservation values are threatened bymanagement activities,
Wood harvested in forests being converted from forests and other wooded ecosystems
to plantations or non-forest uses,
Wood from management units in which genetically modified trees are planted.

FSC-accredited Certification Bodies (CB) conduct an initial assessment, upon successful
completion companies are granted a 5-year certificate. Companies must undergo an annual audit
every year and a reassessment audit every 5 years. Certification Bodies undergo annual audits
from Accreditation Services International (ASI) to ensure conformance with ISO standard
requirements.
Sustainalytics views FSC as a robust, credible standard that are based on comprehensive
principles and criteria that are aligned with ISO. The scheme has received praise for its contribution
to sustainable forest management practices 43 and has also faced criticism from civil society
actors.44 In certain instances, the standards goes above and beyond national regulation and arecapable of providing a high level of assurance that sustainable forest management practices arein place. However, in other cases, the standard is similar or equal to national legislation and provide
little additional assurance. Ultimately, the level of assurance that can be provided by the scheme
is contingent upon several factors including the certification bodies conducting audits, national
regulations and local context.

43 FESPA, “FSC, PEFC and ISO 38200”, (2018), at: https://www.fespa.com/en/news-media/blog/fsc-pefc-and-iso-38200.
44 Yale Environment 360, “Greenwashed Timber: How Sustainable Forest Certification Has Failed”, (2018), at:https://e360.yale.edu/features/greenwashed-timber-how-sustainable-forest-certification-has-failed.
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Appendix 2: Green Bond / Green Bond Programme - External Review Form
Section 1. Basic Information
Issuer name:

Sumitomo Corporation

Green Bond ISIN or Issuer Green Bond Framework
Name, if applicable:

Sumitomo Corporation Green Finance Framework

Review provider’s name:

Sustainalytics

Completion date of this form:

February 21, 2022

Publication date of review publication:
Original publication date [please fill this out for
updates]:

Section 2. Review overview
SCOPE OF REVIEWThe following may be used or adapted, where appropriate, to summarise the scope of the review.
The review assessed the following elements and confirmed their alignment with the GBP:☒

Use of Proceeds☒

Process for Project Evaluation and
Selection☒

Management of Proceeds☒

Reporting

ROLE(S) OF REVIEW PROVIDER☒

Consultancy (incl. 2nd opinion)☐

Certification☐

Verification☐

Rating☐Other (please specify):
Note: In case of multiple reviews / different providers, please provide separate forms for each review.

EXECUTIVE SUMMARY OF REVIEW and/or LINK TO FULL REVIEW (if applicable)
Please refer to Evaluation Summary above.

Section 3. Detailed review
Reviewers are encouraged to provide the information below to the extent possible and use the comment
section to explain the scope of their review.

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1. USE OF PROCEEDS
Overall comment on section (if applicable):
The eligible categories for the use of proceeds Renewable Energy, Environmentally Sustainable Managementof Living Natural Resources and Land Use, Clean Transportation, Energy Efficiency, are aligned with thoserecognized by the Green Bond Principles. Sustainalytics considers that investments in the eligible categories
will lead to positive environmental impacts and advance the UN Sustainable Development Goals, specifically
SDG 7, 11 and 15.

Use of proceeds categories as per GBP:☒

Renewable energy☒

Energy efficiency☐

Pollution prevention and control☒

Environmentally sustainable management ofliving natural resources and land use☐

Terrestrial and aquatic biodiversity
conservation☒

Clean transportation☐

Sustainable water and wastewater
management☐

Climate change adaptation☐

Eco-efficient and/or circular economy
adapted products, production technologies
and processes☐

Green buildings☐

Unknown at issuance but currently expected
to conform with GBP categories, or othereligible areas not yet stated in GBP☐

Other (please specify):

If applicable please specify the environmental taxonomy, if other than GBP:

2. PROCESS FOR PROJECT EVALUATION AND SELECTION
Overall comment on section (if applicable):
Sumitomo Corporation’s Finance Department selects eligible projects based on the eligibility criteria with thesupport of the Corporate Sustainability Department. The final decision is made by the Chief Financial Officer.
The Company has in place processes for managing environmental and social risks associated with the eligible
projects. These processes are applicable to all allocation decisions made under the Framework.
Sustainalytics views that Sumitomo Corporation’s processes for evaluating and selecting projects are in linewith market practice.

Evaluation and selection☒

Credentials on the issuer’s environmental
sustainability objectives☒

Documented process to determine thatprojects fit within defined categories☒

Defined and transparent criteria for projects
eligible for Green Bond proceeds☒

Documented process to identify andmanage potential ESG risks associatedwith the project13

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Sumitomo Corporation Green Finance Framework☒

Summary criteria for project evaluation andselection publicly available☐

Other (please specify):☐

In-house assessment

Information on Responsibilities and Accountability☒

Evaluation / Selection criteria subject toexternal advice or verification☐

Other (please specify):

3. MANAGEMENT OF PROCEEDS
Overall comment on section (if applicable):
The Finance Department tracks and monitors the proceeds once a year, using an internal management
system. The Company intends to allocate, the full amount of the proceeds to projects that meet the eligibility
criteria within approximately three years from the green bond’s issuance date and/or the green loan’s
execution date. The Company intends to manage an amount equal to the unallocated proceeds in cash or
cash equivalents. Sumitomo Corporation’s management of proceeds is in line with market practice.

Tracking of proceeds:☒

Green Bond proceeds segregated or tracked by the issuer in an appropriate manner☒Disclosure of intended types of temporary investment instruments for unallocatedproceeds☐

Other (please specify):

Additional disclosure:☐

Allocations to future investments only☒

Allocations to both existing and future
investments☐

Allocation to individual disbursements☒

Allocation to a portfolio of
disbursements☒

Disclosure of portfolio balance of
unallocated proceeds☐

Other (please specify):

4. REPORTING
Overall comment on section (if applicable):
Sumitomo Corporation intends to report on the allocation of the proceeds and environmental benefits annuallyon its website until the full allocation of green finance proceeds. This report will include the amount ofallocated and unallocated proceeds, planned timing of allocation and management method for unallocatedproceeds, as well as quantitative or qualitative environmental performance indicators. Sustainalytics
considers Sumitomo Corporation’s reporting is in line with market practice.

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Use of proceeds reporting:☐

Project-by-project☒

On a project portfolio basis☐

Linkage to individual bond(s)☐Other (please specify):

Information reported:☒

Allocated amounts☒

Other (please specify): Amountof unallocated proceeds andplanned timing of allocation, andmanagement method forunallocated proceeds☐

Green Bond financed share of total
investment☐

Semi-annual

Frequency:☒

Annual☐Other (please specify):

Impact reporting:☐

Project-by-project☒

On a project portfolio basis☐

Linkage to individual bond(s)☐Other (please specify):

Information reported (expected or ex-post):☒

GHG Emissions / Savings☐

Energy Savings☐

Decrease in water use☒

Other ESG indicators (please
specify): Power generation
capacity (MW) of renewableenergy; forest area acquired(ha); the number of stations
and route distance (Km) for
Clean Transportation; andcase studies of facilities
installed with 5G basestations☐

Semi-annual

Frequency☒

Annual☐Other (please specify):

Means of Disclosure☐

Information published in financial report☐

Information published in sustainability
report☐Information published in ad hoc
documents☒

Other (please specify):
The Company’s website

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

Where appropriate, please specify name and date of publication in the useful links section.
USEFUL LINKS (e.g. to review provider methodology or credentials, to issuer’s documentation, etc.)

SPECIFY OTHER EXTERNAL REVIEWS AVAILABLE, IF APPROPRIATE
Type(s) of Review provided:☐

Consultancy (incl. 2nd opinion)☐

Certification☐

Verification / Audit☐

Rating☐Other (please specify):

Review provider(s):Date of publication:

ABOUT ROLE(S) OF INDEPENDENT REVIEW PROVIDERS AS DEFINED BY THE GBPi.

Second-Party Opinion: An institution with environmental expertise, that is independent from the issuer may
issue a Second-Party Opinion. The institution should be independent from the issuer’s adviser for its Green
Bond framework, or appropriate procedures, such as information barriers, will have been implemented within
the institution to ensure the independence of the Second-Party Opinion. It normally entails an assessment of
the alignment with the Green Bond Principles. In particular, it can include an assessment of the issuer’s
overarching objectives, strategy, policy and/or processes relating to environmental sustainability, and anevaluation of the environmental features of the type of projects intended for the Use of Proceeds.

ii.

Verification: An issuer can obtain independent verification against a designated set of criteria, typicallypertaining to business processes and/or environmental criteria. Verification may focus on alignment withinternal or external standards or claims made by the issuer. Also, evaluation of the environmentally
sustainable features of underlying assets may be termed verification and may reference external criteria.
Assurance or attestation regarding an issuer’s internal tracking method for use of proceeds, allocation offunds from Green Bond proceeds, statement of environmental impact or alignment of reporting with the GBP,
may also be termed verification.

iii.

Certification: An issuer can have its Green Bond or associated Green Bond framework or Use of Proceeds
certified against a recognised external green standard or label. A standard or label defines specific criteria,
and alignment with such criteria is normally tested by qualified, accredited third parties, which may verify
consistency with the certification criteria.

iv.

Green Bond Scoring/Rating: An issuer can have its Green Bond, associated Green Bond framework or a key
feature such as Use of Proceeds evaluated or assessed by qualified third parties, such as specialised research
providers or rating agencies, according to an established scoring/rating methodology. The output may include
a focus on environmental performance data, the process relative to the GBP, or another benchmark, such as
a 2-degree climate change scenario. Such scoring/rating is distinct from credit ratings, which may
nonetheless reflect material environmental risks.

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About Sustainalytics, a Morningstar Company
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investors around the world with the development and implementation of responsible investment strategies.
The firm works with hundreds of the world’s leading asset managers and pension funds who incorporate ESG
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