Practical guide for Scenario Analysis in linewith the TCFD recommendations 3rd edition

Ministry of the Environment, Government of Japan
Climate Change Policy Division
March 2021

Contents

1. Introduction

3. Scenario Analysis -1-1. Purpose of this Practical Guide

1-1

1-2. Significance of the TCFD
recommendations /positioning of scenario analysis

1-3

2. Scenario Analysis - Key Points ofPractice
Scenario Analysis Guide - Key Pointsof Practice2-i

2-1. For beginning scenario analysis

2-52-2. STEP2. Assess materiality ofclimate-related risks

2-14

2-3. STEP3. Identify and define
range of scenarios

2-21

2-4. STEP4. Evaluate business
impacts

2-31

2-5. STEP5. Identify potential
responses

2-39

2-6. STEP6. Document anddisclose information

2-50

3. Scenario Analysis -3-1

Development Bank of Japan Inc.

3-9

ORIX Asset Management Corporation

3-24

Chiyoda Corporation

3-41

Kyushu Railway Company

3-49

Kajima CORPORTAION

3-61

LIXIL Group Corporation

3-72

Shin-Etsu Chemical Co., Ltd.

3-85

FUJIFILM Holdings Corporation

3-97

Furukawa Electric Co., Ltd.

3-109

Mitsui Mining & Smelting Co., Ltd.,

3-121

Kagome CO.,LTD.

3-137

Calbee, Inc.

3-153

Meiji Holdings Co., Ltd.

3-164

KYOCERA Corporation

3-181

YASKAWA Electric Corporation

3-193

ASKUL Corporation

3-206

Seven & i Holdings Co., Ltd.

3-221

Lion Corporation

3-234

Appendix.
Appendix1. Parameter list

4-1

Appendix2. Physical risk assessment
tools

4-53

Appendix3. Examples of scenario
analysis

4-59

[Structure and Use of this Practical Guide]

Composed of The TCFD recommendations,examples, and Appendix
Corporate Needs

Key points for scenario

ractical

Chapters and the Practical Guide and Their Summaries

Companies want to know what the TCFD
recommendations are and what scenario
analysis is in terms of the TCFD
recommendations in the first place.

CHARTER 1. Introduction
This chapter explains the purpose of this practice guide, outlines the TCFD
recommendations and significance in the background, and positions of scenario
analysis.

Companies want to know the specificpromotion means and practical points for
scenario analysis.

CHAPTER 2. Scenario Analysis - Key Points of PracticeThis chapter explains how to practically undertake scenario analysis and describes
key points of its practice, based on use cases performed by companies under the
support program of the Ministry of the Environment.

Companies want to know the actual
scenario analysis conducted by
Japanese companies for each step in theanalysis.

CHAPTER 3. Scenario Analysis - Practice Examples
This chapter explains how scenario analysis is carried out based on the support
cases of the Ministry of the Environment (18 companies).

Companies want to know the reference
tools and literature for scenario analysis.

Appendix.
Provide useful materials for scenario analysis based on the support cases

TCFD's approach for scenario analysis in this Practical Guide has been developed based on a technical supplement to scenario analysis ("TCFD Technical Supplement: The Use of Scenario
Analysis in Disclosure of Climate-related Risks and Opportunities" (2017.6)) as well as its own methodology and interpretations.
Figures for each case are based on information at the time of acquisition.
Examples of projects supported by the Ministry of the Environment are examples of projects supported by the Project to Analyze Scenarios of Climate Risks and Opportunities in Accordance with
TCFD implemented in FY2018, FY2019 and FY2020.

1. Introduction
1-1. Purpose of this Practical Guide
1-2. Significance of the TCFD recommendations /positioning of scenario analysis

Chapter 1. Introduction
This chapter explains the purpose of Practical Guide,
concept and significance of the TCFD recommendations,and positioning of scenario analysis

1. Introduction
1-1. Purpose of this Practical Guide
1-2. Significance of the TCFD recommendations /positioning of scenario analysis
Chapter 1. Introduction
This chapter explains the purpose of Practical Guide, concept and significance of
the TCFD recommendations, and positioning of scenario analysis
1-1[Challenges for companies in implementing scenario analysis]

There are roughly 5 difficulties that companies face in implementing scenario analysis
Scenario analysis is roughly understood, but no specific implementation process is known.
The processes and departments involved in scenario analysis differ for each company and product, and the level of
implementation of scenario analysis cannot be determined uniformly.
Efforts are required to ensure that internal management understands the purpose and the results of scenario
analysis.
Utilizable external data for scenario analysis is lacking.

The above issues can be resolved in this Practical Guide.
: Understanding of Practical Points and Practical Examples by Sector in this Practical Guide.
: Have management understand the significance of the TCFD recommendations and scenario analysis throughin this Practical Guide.
: After this, scenario analysis is conducted using parameters within a known range. Start dialogue with the management
team based on the result.
: Describe the external data and parameter in Appendix.
: Understand the direction to take for making scenario analysis more sophisticated (example: after the second year)
throughin this Practical Guide, and perform implementation.

The key is to begin scenario analysis with what you understand, and progress and deepen your knowledge andexperience.
Example: First, conduct qualitative scenario analysis. Then, try quantitative scenario analysis.
Example: First, apply scenario analysis to a certain segment. Then, apply to a greater part of your company.

The goal of scenario analysis is tosame time.

-

It is important not only to conduct scenario analysis, but also to
dialogues with management.
Seize opportunities by continuing the cycle and incorporate it into business plans.
1-2

increase corporate value
disclose information and hold

1. Introduction
1-1. Purpose of this Practical Guide
1-2. Significance of the TCFD recommendations /positioning of scenario analysis

Chapter 1. Introduction
This chapter explains the purpose of this practice guide, outlines the TCFD
recommendations and significance in the background, and positions of scenario analysis.
1-3[Background of the TCFD]

Climate change risks could destabilize the financial system and become a possible threat tofinancial institutions
reassessment of the value of a large range of assets with a large volume of greenhouse gas emissions and destabilize
Bank of England
Dr. Carney also refers to the possibility that a sudden reassessment could destabilize markets like the subprime loan
crises.

Speech by Mark Carney, Chair of the Financial Stability Board (FSB),
Then Governor of the Bank of England (September 2015)

There are three broad channels through which climate change can affect financial stability:
Physical risks : The direct impacts on property from climate related events, such as floods andstorms and indirect impacts on blocked global supply chain or depletion of resources;
Liability risks : The impacts that could arise if parties who have suffered loss or damage fromthe effects of climate change seek compensation from those they hold responsible;
Transition risks : The risks which could result from reassessment of the value of a large
range of assets with a large volume of greenhouse gas emissions during the process ofadjustment towards a lower carbon economy.

Source: Financial Times Online, September 30, 2015
1-4

[Trends toward Decarbonization]

Various countries and institutional investors have declared decarbonization targets, andcompanies are also being required to decarbonize their operations

declares target of net zero GHG
emissions by 2060 at UN
General Assembly

Sept. 11, 2020

Oct.

Prime Minister Suga
declares target of net zero
GHG emissions by 2050

U.S. presidential election
won by Democrat Biden,
whose goals include net
zero GHG missions by 2050

Oct. 26

Nov.

Oct. 28

Dec. 9investors (with a total of 20 trillion USD
AUM) ask 1,800 companies to set
emission targets for 2050 or earlier
Several U.S. and European institutional
investors (with a total of 47 trillion USD
AUM) demand that 47 companies
disclose information on their climatechange lobbying activities

Moon Jae-in declares targetof net zero GHG emissions
by 2050

U.S. New York State pension
fund declares target of net
zero carbon emissions in its
portfolio by 2040

Sources: Websites for various countries and organizations, news websites such as NHK, Reuters, and AFP news
1-5

[Corporate Management and Climate Change]

For corporate management, climate change has the potential to become a clear risk andopportunity for the company as a whole

Business management
Risks (opportunities) increase
Business sustainability
Business common
sense and intelligence

Changes in modalities ofcompetition
Boycott and exclusionfrom market

Corporate value

Management

Investor-analyst
dialogue

Corporate brandimage

Non-financial
reporting disclosures

Business

Credit-rating
agencies
Environment/
CSR

Finance

Climate change requires reportingon not just the environment and CSR
but all matters.

The environment and CSR department has responded to the climate change, however,there is a growing need for a company to respond to the issues as a whole, as climate-

1-6

[Management and Climate Change Risks]Management around the world also considers environmental/social risks related to climatechange to be important, and environmental risks rank at the top in terms of likelihood of
occurrence
Environmental risks
Societal risks

Top 10 Risks By
1

Extreme weather

Infectious diseases

2

Climate action failure

Climate action failure

3

Human environmental damage

Weapons of mass destruction

4

Infectious diseases

Biodiversity loss

5

Biodiversity loss

Natural resource crises

6

Digital power concentration

Human environmental damage

7

Digital inequality

Livelihood crises

8Interstate relations fracture

Extreme weather

9

Cybersecurity failure

Debt crises

10 Livelihood crises

IT infrastructure breakdown

http://www3.weforum.org/docs/WEF_The_Global_Risks_Report_2021.pdf
1-7[Climate Change Risks/Opportunities: Projected Changes in Carbon Pricing]

Carbon pricing may increase to as much as 10,000 to 20,000 JPY; this could become both arisk and an opportunity

Market prices for each country (2020) and future predictions*As of Feb. 2021

(JPY/t-CO2)

16,00014,000

Advanced nations

14,70014,400SwedenPrice increase indicated(IEA/SDS scenario)

13,125Developing countries(IEA/SDS scenario)

12,00010,752
Switzerland

10,000
8,000

6,625

Tradable Green Certificates

6,383

6,000

4,000

6,615
Finland

5,460

5,575

3,958

Non-fossil fuel energy
certificatesFrance4,515

EU-ETS

3,570

EU(IEA/STEPS scenario)

2,533+

2,000 excess
reduction amount0

180 900

J-Credits (renewable energy)

1,887
J-Credits (energy conservation)

1,473

2020

2025

2040

*1 USD = 105 JPY, 1 EUR = 128 JPY (as of 2/10/2021)*Tradable Green Certificates have been temporarily determined as 3 JPY/kWh
0.00047(thttps://ghg-santeikohyo.env.go.jp/calc)
specific emitters) FY2019 results published 1/7/2021 by the Ministry of the Environment and the Ministry of Economy, Trade and Industry*See Section 4 for details on each scenario
Sources: JEPX:
2020 transaction results for the nonhttp://www.jepx.org/market/nonfossil.html-Credit Scheme): https://japancredit.go.jp/(renewable energy: 6/22/2020 6/29/2020, energy conservation: 1/62020 1/10/2020),-NET): https://pps-net.org/co2_price,
http://www.env.go.jp/council/06earth/01_shiryou1.pdf (exchange rates are average of 2018 2020 exchange rates (TTM) as indicated in the sources. For EU-ETS, the exchange rate listed above for February 2021
was used),https://www.iea.org/reports/world-energy-outlook-2020

1-8

[Increased Decarbonization Awareness in Investors(1)]ESG investments continue to increase,with investments reaching 103 trillion USD globally, and 336 trillion JPY in Japan
Number of PRI signatures (globally)
The number of PRI signatures as of the end of March 2020

was 3,038 organizations(Number ofsignatures) 3,500
3,000
2,500
2,000
1,500
1,000
500
0

63

185

361

523

734

890

3,038

1,501
1,2511,384
1,0501,186

2,372
1,951
1,714

Source: https://www.unpri.org/pri/about-the-pri (PRI website)

ESG assets under management (globally)

ESG assets under management (Japan)

As of late March 2020, the total amount of AUM wasapproximately 103 trillion USD

As of late March 2019, the total amount of AUM wasapproximately 336 trillion JPY(Trillions USD) 120

100
80
60
40
20 6.50(Trillions JPY) 400

103.4
86.3

Source: https://www.unpri.org/pri/about-the-pri (PRI website)

1-9

336

300

231

200
100

136
26

56

0

Source: https://japansif.com/survey#toc5 (JSIF (Japan Sustainable Investment Forum) website)*1 USD = 105 JPY (as of February 10, 2021)[Increased Decarbonization Awareness in Investors (2)]Trends can be seen where institutional investors make requests for companies to set specificdecarbonization targets, and declare targets for net zero CO2 emissions in portfolios
Institutional investors set targets for zero CO2 emissions
Major institutional investors call for emission reduction targets
137 of the world's largest institutional investors, including AXA Group andNikko Asset Management (with a total of approximately 20 trillion USD AUM),
have asked 1,800 companies with high greenhouse gas emissions to set targets
for reaching zero emissions by the middle of this century (2050) (October
2020)
Larry Fink, CEO ofBlackRock of the U.S.,
publicly released the letter that he sends every year to the top management of thecompanies that BlackRock invests in. In this letter, he requested that thecompanies disclose their business strategies for achieving carbon neutrality(January 2021)

U.S. and European institutional investors demand disclosure of
information on climate change lobbying activities (October 2020)
U.S. and European institutional investors (with a total of approximately 47
trillion USD AUM) sent a joint letter to the CEOs and board chairs of 47 major
U.S. companies with high CO2 emissions demanding that they disclose theirlobbying activities concerning climate change. This was aimed at
highlighting lobbying against the Paris Agreement

Nippon Life Insurance Company aims to reach zero CO2 emissions in
its portfolio by 2050 (January 2021)
Nippon Life Insurance Company, one of the largest private-sector institutional
investor in Japan, aims to achieve zero overall CO2 emissions by 2050
for its investments in corporate bonds and stock. It plans to encourage
the companies it invests in to make efforts toward reducing emissions, andwill consider divesting if they do not take sufficient action

U.S. New York State pension fund declares a target of net zero CO2emissions in its portfolio by 2040 (December 2020)
New York State manages the third largest pension fund in the U.S. at 226
billion USD (about 23 trillion JPY). It has announced that it will gradually
reduce the number of coal and oil industry shares from its investment
portfolio, and that it will achieve net zero CO2 emissions for its portfolio
companies by 2040. Currently, just over 1% of its portfolio (or 2.6 billion
USD) is invested in coal or oil-related companies

UK government plans to request scenario analysis for large pension
funds (2021)
A conference for requiring reporting in line with the TCFD recommendations,previously held in August 2020, is currently underway (as of January 2021).
Obligations to be introduced for pension scheme trustees will only apply topension schemes with AUM of 5 billion GBP or more, with the thresholdexpected to become 1 billion GBP starting in October 2022

Source: Sustainable Japan: https://sustainablejapan.jp/2020/11/05/climate-lobbying/55503, Reuters: https://www.reuters.com/article/climate-change-investors-idJPL4N2H414W, NHK news: https://www3.nhk.or.jp/news/html/20201210/k10012756381000.html,
https://www.nikkei.com/article/DGXZQODF228IG0S1A120C2000000, Office of the NEW YORK STATE COMPTROLLER: https://www.osc.state.ny.us/press/releases/2020/12/new-york-state-pension-fund-sets-2040-net-zero-carbon-emissions-target
Responsible Investor: https://www.responsible-investor.com/articles/uk-government-releases-draft-tcfd-reporting-guidance-for-pension-schemes, BlackRock website: https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter

1-10[Increased Decarbonization Awareness in Investors(3)]change, and efforts toward the TCFD recommendations is one of their evaluation criteria
Lending based on information disclosure on environmental
considerations such as the TCFD recommendations (example)

Mizuho Bank, Ltd. and Mizuho Information & ResearchInstitute, Inc. promote appropriate information disclosure
on environmental considerations toward the transition to a
decarbonized society
They perform evaluations using an environmental evaluation
model based on globally reliable environmental
certifications and assessments, and have also
incorporated TCFD compliance as an evaluation item

Mizuho Bank will provide loans to customers who meet or
exceed a certain score
Mizuho Information & Research Institute will use monitoring
to give advice to customers for improving or maintaining
their scores

Source: https://www.mizuhobank.co.jp/release/pdf/20190628release_jp.pdf https://www.mizuhogroup.com/information-and-research/news/2019/06/announcing-thelaunch-of-mizuho-eco-finance.html (Mizuho Bank, Ltd. website)

1-11[Evaluation of climate change measures]

recommendations, and initiatives toward the TCFD recommendations may lead to increased
corporate value
The CDP sends out questionnaires at the request of institutional investors and companies that make ESG
The climate change questionnaire conforms to the recommended disclosure items in the TCFD
recommendations,e change questionnaire: there are questions related to
the TCFD recommendations in C3.1,etc.

Source: CDP website
1-12

[Positioning of the TCFD recommendations in information disclosure]

Disclosure frameworks/evaluation organizations are making revisions and reviews to alignwith the TCFD recommendations, and the TCFD recommendations are becoming the standard
for each framework/evaluation
Alignment of evaluation
methods/items with
the TCFD recommendations

Alignment of framework with
the TCFD recommendations
Global participants: 1,769 groups
341 of which are Japanese (as of February 2021)

Disclosure framework

Evaluation organizations

CDP

Revised its questionnaire to include the TCFD
recommendations as of 2018

FTSE
Russell

Added and updated metrics to be consistent withclimate change metrics in the TCFD
recommendations

IIRC

Reported that its existing framework and standards
were found to be mostly in line with the TCFD
recommendations according to the results of surveys
toward the CDP, GRI, SASB, CDSB and similar

MSCI

Began aligning its evaluation of climate-relatedrisks/opportunities with the TCFD for certain
portions of its climate change risk analysis

SASB

Announced new standards responding to the TCFD
recommendations, including industry-specificparameters and targets for climate risk in 2018

DJSI

Revised questions in some sectors to be in linewith the TCFD recommendations

---

---

Sources: TCFD Guidance 2.0, FTSE
MSCI website: https://www.msci.com/our-solutions/esg-investing/climate-solutions/climate-risk-reporting
1-13[Impact on companies who do not implement responses to the TCFD recommendations]

Failure to implement responses to the TCFD recommendations has a possibility of impairing
the sustainable management of companies in the short, medium, and long term
<Possible Impacts>
Short term

Increased financing costs: Perceptions of inadequate measures against climate change will lead to increased
financial costs due to withdrawn investments and lost opportunities for ESG investment and green financing

Environmental reputation/branding: Decline in environmental reputation and branding due to lack ofcompliance with international disclosure rules

Lawsuits: Litigation by shareholders and other stakeholders for failure to uphold obligations for reporting material
information

Medium term

Regulations: Disclosure rules, regulations for stock exchanges, etc., and accounting
standards are being enacted, which will require responses over the entire company

Long term

Weakening of business itself: If the company fails to cope with the uncertainties of climate change,
it will lose opportunities / be exposed to risks that may jeopardize its long-term survival
1-14

Objectives of the TCFD

The TCFD recommendations expect companies to gradually adopt the recommendations.

Objectives of the TCFD
Broad understanding of the concentrationof carbon related assets in the financial
to climate-related risks

Adoption Volume

Greater adaptation, further developmentof information provided (e.g., metrics andscenario analysis), and greater maturity
in using information

Organizations begin todisclose in financial
filings

Final TCFD
ReportReleased June
2017

More complete, consistent, and comparable
information for market participants, increasedtransparency, and appropriate pricing of climaterelated risks and opportunities
Climate-related issues viewed as mainstream
business and investment considerations by bothusers and preparers

Companies already reporting under other frameworks

Five Year Time Frame
Resources: Task Force on Climate-related Financial Disclosures, 2017
1-15

Status of the TCFD recommendations in Each Country

The TCFD recommendations have been institutionalized in advanced nations and are
becoming the global standards
EU revised its directive to comply with the TCFD recommendations

EU

United Kingdom

UK requests its regulators to support the TCFD recommendations

The UK Green Finance Taskforce, established by the government to transition to a low-carbon society
On November 9, 2020, the UK announced the gradual introduction before 2025 of obligatory TCFD information disclosure rules for companies and financial institutions. Starting in 2021, the following
are also expected to be covered: corporate pension funds with AUM of 5 billion GBP or more; banks; insurance companies; and companies listed on the premium market of the London Stock
Exchange (October 2020)

CanadaCompiled recommendations on sustainable financing, including the TCFD recommendations

Expert Panel established by the Ministry of the Environment and Climate Change and the Ministry of FinancePublication of the Final Report on the Issues and Recommendations on Institutionalization of Sustainable Finance, etc. (June 2019)
In addition, banks and other financial institutions and CSA (Canada Standard Authority) are taking the lead in discussing a unique Canadian taxonomy (October 2019).

FranceStarted standardizing and developing frameworks for non-financial data
as a whole to disclose the TCFD recommendations

Economic and Finance Minister consulted the Accounting Standards Authority to develop extra-financial information disclosure frameworks to disclose information based on TCFD.
Introduced a system to establish the Advisory Committee on Climate Change and Sustainable Finance composed of financial institutions, companies, and experts (July 2019)

China

Scheduled revision of Environmental Reporting Guidelines

A pilot project was launched in collaboration with the British government. Exploring the incorporation of a TCFD framework into the Chinese Environmental Reporting Guidelines, and announcing its
intention to make such mandatory for all listed companies by 2020 (January 2018). In addition, ESG has been incorporated into the Governance Disclosure Guidelines (September 2018).

United States

Securities and Exchange Commission (SEC) recommends
that the U.S. use its own ESG disclosure framework

The New York State Department of Financial Services (DFS) joined the Network for Greening the Financial System (NGFS). The NGFS will consider implementing responses to climate-related risks
in areas of financial supervision, including publishing non-binding disclosure recommendations in its April 2019 integrated report such as those based on TCFD recommendations (September 2019)
However, on October 4, 2019, the U.S. made a formal announcement to the United Nations of its intentions to withdraw from the Paris Agreement (October 2019)The SEC issued a report recommending that the U.S. use its own ESG disclosure framework. The report recognized the usefulness of TCFD recommendations, GRI, and U.S. Sustainability
Accounting Standards Board (SASB) criteria in preparing the ESG disclosure framework (May 2020)

Japan

Released guidance on TCFD disclosures

METI released TCFD Guidance*1 by adding explanation to TCFD final report in order to promote disclosure by companies based on TCFD (December 2018)
Summit (October 2020)
The Ministry of the Environment announced a practical guide describing examples and methodologies to be used as a reference when companies conduct scenario analysis (March 2019, March2020)
Led by five founders including Professor Kunio Ito of Hitotsubashi University, the TCFD Consortium was established (May 2019). The consortium formulated the Green Investment Guidance*2 which
provides commentaries on perspectives needed by investors and other stakeholders when understanding the information disclosed based on the TCFD recommendations, and released it at the
TCFD Summit (October 2019).

1-16

Source: TCFD, 2019 Status Report Ministry of the Environment; European Union
Commission website, etc.

*1 Guidance for Climate-related Financial Disclosures *2 Guidance for Utilizing Climate-related Information to Promote Green Investment

Trends toward institutionalization exist

Published a draft revision in March 2019 toward the revision of guidelines for non-financial reporting directive
On June 20, 2019, the draft revision of the guidelines and supplementary materials was announced. TCFD compliant (June 2019)

[Status of support for TCFD]

Japan ranks first in the world in terms of the number of organizations expressing support
As of February 8, 2021, 71 countries, 1,769 companies, governments, multilateral institutions, private organizations, etc., expressed theirsupport for TCFD. The Ministry of the Environment on July 27, 2018, the Ministry of Economy, Trade and Industries on December 25, 2018,
and Financial Agencies Services Agency in December 2017 announced that it agreed to adopt the TCFD recommendations.
Total assets of financial institutions that have expressed their support already exceed 150 trillion USD and have continued to increase
thereafter (from the 2020 Status Report).
Number of Organizations Presenting Support (Top 11 countries &regions)(as of February 8, 2021)

Number of Japanese Companies Presenting Support(as of February 8, 2021)

400
350
300

Industries and Groups,
Number of Companies

Services, 30341
274 261

Financial , 86

Consumer Goods,
Pharmaceutical,

250
200

Electronics, Machinery,
Telecommunications, 58

150
91 90

100

Japanese
Companies 317

75
Energy, 19

43 43 39 39 39

50

Trading, Retail, 150Transportation
Agriculture, Food,and Forest Products, 12Materials and Buildings, 64

See below (the Ministry of the Environment website) for the latest number of companies presenting support and their names

http://www.env.go.jp/earth/datsutansokeiei.html
1-17

Source: TCFD HP
The number of organizations presenting support in Japan is 341, and the number of companies presenting support in Japan (including general incorporated associations and law firms in
addition to general companies) is 317. (as of February 8, 2021)

Outline of TCFD Consortium
In view of the increased awareness on corporate disclosure and use of climate-related information highlighted by the Task Force on Climaterelated Financial Disclosures (TCFD) in Japan, the private-led TCFD Consortium was established on May 27, 2019 by five founders.
* Founders of the consortium: Professor Kunio Ito of Hitotsubashi University; Chairman Hiroaki Nakanishi of Keidanren (Japan Business Federation);
Chair Makoto Takashima of the Japan Bankers Association; President and Chief Executive Officer Takehiko Kakiuchi of Mitsubishi Corporation; andChairman of the Board Shuzo Sumi of Tokyo Marine Holdings.

the Consortium aims to further discussion on effective corporate disclosure of climate-related information and their use by financial
institutions for appropriate investment decision.
Green Investment Guidance was formulated to provide commentaries on perspectives needed by investors and other stakeholders
when understanding the information disclosed based on the TCFD recommendations and released globally at the TCFD Summit
held on October 8, 2019.
er2018) and published it as

It was then released globally at the TCFD Summit 2020 held on October 9.

Achieving a Virtuous Cycle of Environment and Growth through TCFD Consortium

Formulation of TCFD Guidance ver2.0(Addition of sector-specific guidance and case studies, etc.)

step toward TCFD disclosure, thereby encouraging
disclosure by companies based on the TCFD
recommendations.
See below for more information on TCFD guidance.

Information disclosure

Companies
Initiatives forinnovation andcommercialization

Visualization of companies
engaged in innovation

Virtuous cycle

Financial institutions, etc.
Properly utilizing andevaluating disclosed
information

Attracting ESG investment

ESG investment
Formulation of Green Investment Guidance for financial institutions, etc.
(Discussions on points to consider when investors evaluate disclosed information)
Source: TCFD Consortium

1-18

https://www.meti.go.jp/press/2020/07/202007310
02/20200731002.html

Based on the increase in corporate information disclosure, it
provides commentaries on perspectives needed by investors
and other stakeholders when understanding the disclosed
information.
It is also expected that companies will deepen theirunderstanding of the viewpoints of investors and otherstakeholders, leading to further disclosure.
See below for more information on Green Investment
Guidance.

https://tcfdconsortium.jp/pdf/news/19100801/green_investm
ent_guidance-j.pdf

[Guidance/guides related to the TCFD in Japan]--

Practical guide for Scenario Analysis in linewith the TCFD recommendations ver3.0(this guide)

Guidance on Climate-related Financial
Disclosures 2.0(TCFD Guidance 2.0)

Published by the Ministry of the Environment(March 2021)

Published by the TCFD Consortium (July 2020)

Explains c) scenario analysis in Strategy
which is one of the recommended disclosure
items in the TCFD recommendations

Covers all industries

Explains the recommended disclosure items in the TCFD
recommendations
Industry-specific guidance is also provided for the following industries:
automobiles; steel; chemicals; electrical machinery/electronics;
energy; food products; banking; life insurance, and non-life insurance

Covers all industries

Companies

Promotion of climate changerelated initiatives

Disclosure of climate changerelated information

Assessment of climate changerelated information disclosure

Investors

Guidance for Utilizing Climate-related Information to
Promote Green Investment(Green Investment Guidance)
Published by the TCFD Consortium (October 2019)
Provides an explanation that includes the perspectives needed byinvestors and similar stakeholders in interpreting disclosure
information for recommended disclosure items in the TCFD
recommendations
Sources: TCFD Consortium, Ministry of the Environment websites
1-19[The TCFD recommendations]

The TCFD recommendations are structured around four thematic areas: Governance, strategy,
risk management, and metrics and targets
Recommended
disclosures

Governance

Strategy

RiskManagement

Metrics andTargets

Disclose the actual andDisclose how the organization Disclose the metrics andgovernance around climatepotential impacts of climateidentifies, assesses, andtargets used to assess andrelated risks and opportunities related risks and opportunities manages climate-related risks manage relevant climaterelated risks and opportunities
Areas in detailbusinesses, strategy, andwhere such information isfinancial planning where suchmaterial
information is material
oversight of climate-relatedrisks and opportunitiesa) Describe the climaterelated risks and opportunities processes for identifying andthe organization has identified assessing climate-related
over the short, medium, andrisks
long termb) Describe the impact ofrole in assessing andclimate-related risks andRecommended managing climate-related risks opportunities on the
Disclosures and opportunities
strategy, and financial
planningc) Describe the resilience oftaking into considerationdifferent climate-related
scenarios, including a 2 C or
lower scenario
Source: prepared by the Ministry of the Environment based on the Task Force on ClimateClimate1-20

processes for managing
climate-related risksa) Disclose the metrics usedby the organization to assessclimate-related risks andopportunities in line with its
strategy and risk management
processb) Disclose Scope 1, Scope 2,
and if appropriate, Scope 3
greenhouse gas (GHG)
emissions, and the related
risksc) Describe how processes for c) Describe the targets used
identifying, assessing, andby the organization to manage
managing climate-related risks climate-related risks andare integrated into theopportunities, andperformance against targets
management
ort - Recommendations of the Task Force onRequirement of the TCFD Recommendations

The TCFD recommendations disclosure of information related to climate change that poses
financial risks and opportunities

Climate-relatedrisks

Climate-related
opportunities

Incorporating them in businessstrategies and risk management

Understanding financial impact
Disclosing information in financial
reporting
The TCFD recommendations request all companies to (i) use different climate-related
scenarios, including a 2 or lower scenario to (ii) assess their climate-related risks andopportunities, (iii) incorporate such risks and opportunities in their business strategies andrisk management, and (iv) understand and disclose their financial impacts.
of the Task Force on Climate
1-21[Financial Impact]

The TCFD recommendations present the scope of climate-related risks and opportunities, andfinancial impacts to be disclosed

Climate-Related Risks, Opportunities, and Financial Impacts
Transition Risks

Opportunities

Policy and Legal

Resource Efficiency

Risks

Technology
MarketOpportunities

Energy Source
Products / Services

Reputation

Strategic Planning
Risk Management

Physical Risks

Financial Impact

Resilience

Markets

Acute

Financial Impact

Chronic
Revenues
Expenditures

IncomeStatement

Cash Flow
Statement

Source: prepared by the Ministry of the Environment based on the Task Force on ClimateClimate1-22

Balance Sheet

Assets &Liabilities
Capital &Financingort - Recommendations of the Task Force on

[Climate-related Risks]

The TCFD Recommendations divided climate-related risks into two major categories: (1) risks
related to the transition to a lower-carbon economy and (2) risks related to the physicalimpacts of climate change
Category

Definition

Type

Major aspects and policy actions

Policy andLegalEnhancing regulations on GHG emissions, imposing
greater obligations on information disclosure
Replacing existing products with those based on low-

Risks related to theTransitiontransition to a lowerRisks
carbon economy

Physical
Risks

Risks related to thephysical impacts ofclimate change

Technology carbon technologies, investing in new technologies
that eventually turn out to be a failure

MarketChanges in consumer behaviors, market signals withgreater uncertainty, a rise in materials and costs

Reputation

Changes in customer or community perceptions,criticism against certain industries, increased concern
among stakeholders

Acute

Event-driven risks, including severity of extreme
events such as cyclones or floods

Chronic

Longer-term shifts in climate patterns, including
sustained higher temperatures, which may cause sea
level rise or chronic heat waves

Source: prepared by the Ministry of the Environment based on the Task Force on ClimateClimate-ort - Recommendations of the Task Force on

1-23[Climate-related Opportunities]

The TCFD recommendations identified the following five areas of climate-related opportunities thatorganizations can produce in the course of their efforts to mitigate and adapt to climate change
Area

Policy actions

Financial impact

Use of more efficient models of transport
Use of more efficient production anddistribution processes
Use of Recycling
Move to more efficient buildings
Reduced water usage and consumption

Reduced operating costs (e.g., through efficiency gains and cost
reductions)
Increased production capacity, resulting in increased revenues
Increased value of fixed assets (e.g., highly rated energy-efficientbuildings)
Benefits to workforce management and planning (e.g., improved healthand safety, employee satisfaction) resulting in lower costs

EnergySourceUse of lower-emission sources of energy
Use of supportive policy incentives
Use of new technologies
Participation in carbon market
Shift toward decentralized energy generation

Reduced operational costs (e.g., through use of lowest cost abatement)
Reduced exposure to future fossil fuel price increases
Reduced exposure to GHG emissions and therefore less sensitivity tochanges in cost of carbon
Returns on investment in low-emissions technology
Increased capital availability (e.g., as more investors favor loweremissions producers)
Reputational benefits resulting in increased demand for goods/services

Products
andServices

Development and/or expansion of low
emission goods and services
Development of climate adaptation andinsurance risk solutions
Development of new products or services
through R&D and innovation
Ability to diversify business activities

Increased revenue through demand for lower emissions products andservices
Increased revenue through new solutions to adaptation needs (e.g.,
insurance risk transfer products and services)
Better competitive position to reflect shifting consumer preferences,resulting in increased revenues

Markets

Access to new markets
Use of public-sector incentives
Access to new assets and locations needing
insurance coverage

Increased revenues through access to new and emerging markets (e.g.,partnerships with governments, development banks)
Increased diversification of financial assets (e.g., green bonds andinfrastructure)

Resilience

Participation in renewable energy programs
and adaptation of energy-efficiency measures
Resource substitutes/diversification

Increased market valuation through resilience planning
Increased reliability of supply chain and ability to operate under various
conditions
Increased revenue through new products and services

Resource
Efficiency

Opportunities

Source: prepared by the Ministry of the Environment based on the Task Force on ClimateClimate1-24

ort - Recommendations of the Task Force on[Guidance for Specific Sectors]

The TCFD supplemental guidance provides additional context and suggestions for
implementing the recommended disclosures for four non-financial sectors (Energy; Materials
and Buildings; Transportation; and Agriculture, Food, and Forest Products) potentially mostaffected by climate change
SectorIndustry

EnergyOil and Gas
Coal
Electric Utilities

Transportation

Materials andBuildings

Agriculture,
Food, and
ForestProducts

Recommended disclosure
Assessment and potential impacts of legal compliance, operating
costs, changes in risks and opportunities; changes in regulations
and shift in consumer and investor preferences; and changes ininvestment strategy

Air Transport, Maritime
Assessment and potential impacts of financial risks of enhanced
Transportation
regulations and new technology on existing factories andLand Transportation (Railequipment; R&D investment in new technologies; opportunities
Transportation, Tracking for use of new technologies to lower emissions standards andServices)
regulations on higher fuel efficiency
Automobiles
Metals and Mining
Assessment and potential impacts of enhanced regulations on GHG
Chemicals
emissions and carbon pricing; risk assessment of increased
Construction Materials,
severity of extreme weather events on construction materials andCapital Goods
property; and opportunities for products to improve energy
Real Estate Management efficiency or reduce energy consumption
and Development
Beverages, Foods
Assessment and potential impacts of GHG emissions reductions;
Agriculture
recycling and waste management; business of food and textile
products with lower GHG emissions, and shifts in consumer
Paper and Forest
preferences
Products

Source: prepared by the Ministry of the Environment based on the Task Force on ClimateClimate-65

ort - Recommendations of the Task Force on

1-25[Governance = Involvement of Management]

To incorporate climate-related risks and opportunities in business strategy, an organization
should establish a system involving management. The TCFD recommendations require an-related risks and opportunities, and-related risks and opportunities
Processes and frequency by which the board and/or board committees are informed
about climate-related issues
Whether the board and/or board committees consider climate-related issues whenreviewing and guiding strategy, major plans of action, risk management policies,
objectives, monitoring implementation and performance, and overseeing major
capital expenditures, acquisitions, and divestitures

governancearound climaterelated risks andopportunities

How the board monitors and oversees progress against goals and targets foraddressing climate-related issues

Management role in assessing and managing climate-related risks andopportunities
Whether the organization has assigned climate-related responsibilities tomanagement-level positions or committees; and, if so, whether such management
positions or committees report to the board or a committee of the board and whether
those responsibilities include assessing and/or managing climate-related issues
A description of the associated organizational structure(s)How management (through specific positions and/or management committees)monitors climate-related issues

Source: prepared by the Ministry of the Environment based on the Task Force on ClimateClimate1-26

ort - Recommendations of the Task Force on

[Strategy]

The TCFD recommendations require an organization to describe the climate-related risks andtaking into consideration different climate-related scenarios, including a 2 C or lower scenario
The climate-related risks and opportunities the organization has identified over the
short, medium, and long term

Impact on the

A description of what they consider to be the relevant short, medium, and long-term time
horizons
The specific climate-related issues for each time horizon that could have a material financial
impact on the organization
The process(es) used to determine which risks and opportunities could have a material financial
impact on the organization

The impact of climatebusinesses,
businesses, strategy, and financial planning
strategy, andHow identified climate-related issues have affected their businesses, strategy, and financial
financialplanning
planning (where
The impact on their businesses and strategy in the areas of products and services; supply chain
relevant
and/or value chain; adaptation and mitigation activities; investment in research anddevelopment; and operations
information is
The impact of climate-related issues on operating costs and revenues; capital expenditures andcritical)
capital allocation; acquisitions or divestments; and access to capitalclimate-related scenarios, including a 2 C or lower scenario
How resilient their strategies are to climate-related risks and opportunities
Where they believe their strategies may be affected by climate-related risks and opportunities;
how their strategies might change to address such potential risks and opportunities; and theclimate-related scenarios and associated time horizon(s)Source: prepared by the Ministry of the Environment based on the Task Force on ClimateClimate-21

ort - Recommendations of the Task Force on

1-27[Risk Management]

for identifying, assessing, and managing climate-related risks, as well as how these-relatedrisks

How theorganization
identifies,
assesses,and manages
climaterelated risks

Their risk management processes for identifying and assessing climate-related risks(An important aspect is how the organization determines the relative materiality ofclimate-related risks in relation to other risks)
Whether they consider existing and emerging regulatory requirements related to climatechangeTheir processes for assessing the potential size and scope of identified climate-relatedrisks; and definitions of risk terminology used or references to existing risk classification
frameworks used-related risks
Their processes for managing climate-related risks, (including how they make decisions
to mitigate, transfer, accept, or control those risks)
Their processes for prioritizing climate-related risks, (including how materiality
determinations are made)How processes for identifying, assessing, and managing climate-related risks

How their processes for identifying, assessing, and managing climaterelated risks are integrated into their overall risk management
Source: prepared by the Ministry of the Environment based on the Task Force on ClimateClimate-22
1-28

ort - Recommendations of the Task Force on

[Metrics and Targets]

The TCFD recommendations require an organization to describe the metrics used to assessclimate-related risks and opportunities in line with its strategy and risk management process;
GHG emissions; the targets to manage climate-related risks and opportunities, andperformance against targets
The metrics used by the organization to assess climate-related risks and opportunities inline with its strategy and risk management process

The metrics andtargets used toassess andmanage relevant
climate-relatedrisks andopportunities
where suchinformation ismaterial

The key metrics used to measure and manage climate-related risks and opportunities (organizations
should consider including metrics associated with water, energy, land use, and waste management)
Whether and how related performance metrics are incorporated into remuneration policies (whereclimate-related issues are material)
Their internal carbon prices as well as climate-related opportunity metrics such as revenue fromproducts and services designed for a lower-carbon economy
Metrics should be provided for historical periods to allow for trend analysis. The methodologies used
to calculate or estimate metrics should also be included.

Scope 1, Scope 2, and if appropriate, Scope 3 greenhouse gas (GHG) emissions, and therelated risks
GHG emissions calculated in line with the GHG Protocol methodology to allow for aggregation andcomparability across organizations and jurisdictions
Related, generally accepted industry-specific GHG efficiency ratios (as appropriate)
GHG emissions and associated metrics should be provided for historical periods. The methodologies
used to calculate or estimate the metrics should also be included.

The targets used by the organization to manage climate-related risks and opportunities
and performance against targets
Their key climate-related targets (such as those related to GHG emissions, water usage, energy
usage)
Other goals including efficiency or financial goals through the entire life cycle of products and services
Whether the target is absolute or intensity; time frames over which the target applies; key performanceindicators, etc.

Source: prepared by the Ministry of the Environment based on the Task Force on ClimateClimate-23

ort - Recommendations of the Task Force on

1-29[Disclosure contents required by the TCFD]

change scenario analysis is recommended
required items
Recommended
disclosures

Areas indetailGovernancegovernance around climaterelated risks and opportunities

Strategy
Disclose the actual and potential
impacts of climate-related risks
and opportunities on thestrategy, and financial planningwhere such information is materialof climate-related risks andopportunitiesa) Describe the climate-relatedrisks and opportunities theorganization has identified overthe short, medium, and long term

Risk Management

Metrics and Targets

Disclose how the organization
Disclose the metrics and targets
identifies, assesses, and manages used to assess and manage
climate-related risks
relevant climate-related risks andopportunities where suchinformation is material

processes for identifying andassessing climate-related risks

Recommenb) Describe the impact of climateded
assessing and managing climate- related risks and opportunities on processes for managing climaterelated risks
Disclosure related risks and opportunities
strategy, and financial planningsc) Describe the resilience of thec) Describe how processes for
identifying, assessing, andconsideration different climatemanaging climate-related risks
related scenarios, including a 2 C are integrated into theor lower scenario
managementa) Disclose the metrics used by
the organization to assessclimate-related risks andopportunities in line with its
strategy and risk management
processb) Disclose Scope 1, Scope 2,
and if appropriate, Scope 3
greenhouse gas (GHG) emissions,and the related risksc) Describe the targets used by
the organization to manage
climate-related risks andopportunities, and performanceagainst targets(Differences with the existing information
disclosure system (1))
Implementation of scenario analysis:
Recommends disclosure of information using specific climate-related scenario analysis as recommended by the TCFD

1-30

Source: prepared by the Ministry of the Environment based on the Task Force on ClimateRecommendations of the Task Force on Climate-ort -[Significance of Scenario Analysis(1)]Information disclosure through scenario analysis is recommended for assessing the impact
of climate-related risks and opportunities; a technical supplement document for scenario
analysis has also been developed

Usefulnessof scenario
analysis

Scenario analysis is a useful method for organizations to use to strategicallyaddress issues that are long-term and have a high level of uncertainty
Disclosures should also include premises for key scenarios in industries
where climate change-related risks are a concern. Scenario analysis
requires ability/manpower, but it also holds benefits for organizations

TargetScenario groups that may be applied

Transition
risks

IEA WEO NZE2050 / IEA WEO SDS / IEA ETP 2DS / IEA WEO STEPS / IEA WEO NPS/ IEA WEO DRS (scenarios in which the target of 2 C is achieved, and scenarios in which
it is not achieved)
Deep Decarbonization Pathways Project (the target of 2 C is achieved)
IRENA Remap (the renewable energy ratio is doubled by 2030)
Greenpeace Advanced Energy [R]evolution (the target of 2 C is achieved)

Physicalrisks

RCP (Representative Concentration Pathways) scenarios employed by the IPCC: RCP8.5
RCP6.0, RCP4.5, RCP2.6

Sources: prepared by the Ministry of the Environment based on the Task Force on Climate-related Financial Disclosures Final Report - Recommendations of
the Task Force on Climate, 2019, pages 25 - 20;
Task Force on ClimateSupplementary Guidance - Using scenario analysis for disclosing climate-related risks and
1-31

The scenarios listed in the IEA WEO have been updated to reflect the most recently published report[Significance of Scenario Analysis(2)]Scenario analysis enables strategic planning and internal/external dialogue in response to
future uncertainties
In a reasonable

In a longer term, where outcomes are highly

VisionTarget1-32

Medium term business plan (3-5 Years)

Assume multiple scenarios

Business strategy cannot respond to changes in the future
The discussion never reaches a consensus on future
perspectives
Suspected of lacking business resilience

Business management can flexibly respond to future change
The discussion takes places without any subjective
viewpoints on futureManagement can demonstrate business resilience2.

Scenario Analysis - Key Points of Practice
Scenario Analysis Guide - Key Points of Practice2-1. For beginning scenario analysis
2-2. STEP2. Assess materiality of climate-related risks
2-3. STEP3. Identify and define range of scenarios
2-4. STEP4. Evaluate business impacts
2-5. STEP5. Identify potential responses
2-6. STEP6. Document and disclose information

Chapter 2. Scenario Analysis - Key Points of PracticeThis chapter explains how to practically undertake scenario analysis
and describes key points of its practice, based on use cases
performed by companies under the support program of the Ministryof the Environment.

Scenario Analysis Guide - Key Points of Practice
2. Scenario Analysis - Key Points of Practice........................................................2-ii
2-1.

For beginning scenario analysis ............................................................. 2-iii

2-2.

STEP2. Assess materiality of climate-related risks ............................2-viii

2-3.

STEP3. Identify and define range of scenarios ..................................... 2-xi

2-4.

STEP4.

2-5.

STEP5. Identify potential responses.................................................. 2-xviii

2-6.

STEP6 Document and disclose information ...................................... 2-xxii

Evaluate business impacts ...................................................... 2-xv

2-i

2. Scenario Analysis - Key Points of Practice
The momentum for decarbonization among various countries and institutional
investors is growing, and trends can be seen toward decarbonizing of business
operations, the declaration of decarbonization targets, and disclosure of climate-related
information. Climate change has now become a clear risk and opportunity for corporate
management, and addressing the TCFD recommendations will lead to increased
corporate value.1
In the TCFD recommendations' recommended disclosure items, the strategy section
encourages the implementation of climate change scenario analysis in the following
passage: "Describe the resilience of the organization's strategy based on a review ofvarious climate-related scenarios, including scenarios for under 2°C"2. In response, wewill use this section to explain the practical process for undertaking scenario analysis
and to describe key points in its implementation based on use cases of companies
under the support program of the Ministry of the Environment. Furthermore, in each
initiative "STEP", we will describe a step-by-step direction for initiatives in line with theactual situation of the company as shown below.

・For companies that are conducting scenario analysis for the "first time," such ascompanies in their first year of scenario analysis (companies in their "first round" ofscenario analysis): these companies should conduct scenario analysis in a sure andsteady manner while keeping in mind the key points of practice in this guide. They
should also work on implementing the "points for continuing companies" as much as
possible.
・For companies that are conducting scenario analysis for the "first time", but which
are already working on initiatives related to climate change to some degree, orcompanies that have already implemented scenario analysis (companies in their"second round" of scenario analysis): these companies should move on to the next
step of "points for continuing companies" and use this to increase the sophistication of1

Refer to Section 1 for information on the materiality of responding to TCFD recommendations,such as decarbonization trends for various nations and institutional investors.
2

Refer to Section 1, p.1-30.

2-ii

climate change-related management. Additionally, they should use disclosures anddialogue with investors to enhance analysis and the presentation of evidence.

2-1.

For beginning scenario analysis

When beginning scenario analysis, the first step in preparation is to involve internal
stakeholders and establish a target scope for scenario analysis. Specifically, thefollowing must be done: 1) Having management understand the materiality of
responding to the TCFD recommendations (having management be aware of therecommendations and instruct that they be complied with); 2) Establishing an execution
team; 3) Choosing a target scope for scenario analysis; and 4) Selecting a time frameof "X" years in the future to look at when conducting the scenario analysis. In thispreparation stage, the key is in how to input climate change initiatives into
management.
For companies undertaking scenario analysis for the first time, the following areimportant measures for beginning the analysis: establishing internal consensus for
conducting scenario analysis (management has agreed); asking for cooperation fromoperation divisions; and deciding on the target scope/parties responsible (structure) for
scenario analysis.
Meanwhile, companies that are continuing to conduct scenario analysis should aim
for the following: having management/responsible departments understand the resultsof the previous scenario analysis, and having operation divisions take the lead in
conducting the analysis; and expanding the target scope/responsible parties (structure)beyond what it was for the initial analysis.

1. Gain management's understanding
As the first step in preparation, it is necessary to obtain the understanding of the
management team concerning the materiality of conducting scenario analysis.
Conscientious communication with the management team facilitates internal
involvement in scenario analysis through helping management recognize what the
TCFD recommendations are and having them advance the initiatives necessary for
2-iii

scenario analysis in a top-down approach.

First of all, it is crucial for management to understand that investors expect that the
scenario analysis the company performs in the course of its operations (i.e., recognitionof a broad range of risks and identification of potential responses should the risk
actually occur) should also include climate change. For example, if the company only
envisions a foreseeable future with a reasonable degree of probability, it will only
formulate linear PDCA cycles toward goals. This may result in business strategies thatcannot respond immediately to future changes and lack of consensus regarding thecompany's future, which may result in risks such as investors questioning the resilienceof the business. On the other hand, formulating hypotheses based on an uncertain
future (and therefore one that also holds possibilities) allows business managementthat responds flexibly to future changes, enables discussion to take place without
subjective viewpoints regarding the future, and allows management to assert theresilience of the business.

When gaining the understanding of the management team, it is also effective to havestudy groups with experts provide input on the potential impact of climate change
responses on corporate value. There are increasingly frequent requests from multistakeholders for responses to climate change, so there may also be cases whenmanagement hears about these trends directly. However, it is still common that thosemessages do not reach management. In these cases, it is important to compile the"status of requests from multi-stakeholders" and provide input to management throughstudy groups with experts and other means on the possible impact of climate change
responses on corporate value.
Even for companies in their second round of scenario analysis, continuing to provide
input to management from the results of climate change-related scenario analysis willfurther deepen management's understanding of the specific opportunities and risks
climate change holds for the company, and may lead to increased integration of climatechange initiatives and business management within the company.

2-iv

2. Create an execution team for scenario analysis
The second step for preparation is creating an execution team for scenario analysis.
Internal involvement is essential for conducting scenario analysis. Because of this, ateam should be formed where operation divisions are involved from the very beginning.
Having the responsible parties in operation divisions understand the scenario analysis
processes enables the divisions to think of climate change initiatives as something thatinvolves them directly.
There are two separate patterns hypothesized for the structure of scenario analysis
execution teams. The first is a pattern where relevant divisions and departments are
involved as needed during the course of the scenario analysis. The second pattern isfor the internal teams to be formed prior to beginning the analysis. The first pattern has
the advantages of making the scenario analysis easy to begin, and of placing a minimalburden on each division/department. On the other hand, its disadvantages include theneed for internal coordination in the scenario analysis process and the long reporting
process from the environment/CSR division to management. For the second pattern,
the advantages are that divisions are better able to cooperate due to internal
coordination being completed in advance, and that reports reach management swiftly
due to the analysis being conducted by a well-coordinated team. However, its
disadvantages are that it takes time to start the analysis, and that there is a large
burden on each division/department.
For use cases of involving operational divisions for companies that have
implemented scenario analysis, the following examples have been cited as being
effective: 1) using narratives suited to each division (e.g. how reductions in CO2emissions over the entire company can be promoted through contributions by various
areas such as products and procurement), and 2) leveraging management's
commitment. Furthermore, regular communication of information related to the TCFD
recommendations and scenario analysis can facilitate understanding and make iteasier to receive cooperation when moving ahead with the scenario analysis.

2-v

3. Choose target for analysis
The third step for preparation is selecting a target scope for scenario analysis. Whenconsidering a target scope, the following should be determined: the region (e.g. only
domestic sites, or including overseas sites), the scope of operations (only somebusinesses or all businesses), and the corporate scope (only for the scope of theconsolidated financial statements or including subsidiaries).
By defining the scope of operations covered in the scenario analysis in terms of"sales composition", "relation to climate change", and "difficulty of data collection",companies can conduct scenario analysis in accordance with their business model. For
example, companies might consider covering operations with particularly high sales inthe scope defined as "sales composition", or they might cover operations with highCO2 emissions by using the scope "relation to climate change". Operations that areeasy to collect data for may be covered in the scope defined as "difficulty of datacollection", and so on.
In scenario analysis support, it is common to first select certain operations to cover in
the analysis, and then gradually lead up to a scenario analysis for the company as awhole.

4. Choose time horizon to conduct scenario analysis
Select which year in the future to look at when conducting the scenario analysis.
Since the worldviews showing the impacts of climate change vary depending on theyear that the analysis is based on, companies should select a time horizon with the
maximum benefit for the company after comparing advantages and disadvantages inlight of factors such as project length, the amount of internal involvement, and effectfrom physical risks on the company.
For example, if the company selects 2030 as its time horizon, the advantages would
be that there is abundant data available for reference, and that it is relatively easy tolink with business plans. On the other hand, the disadvantages are that the effects fromphysical risk shown in this time horizon are small due to its narrow span, so there is apossibility that the impact shown on the company will be lower than what it would be inreality. The advantages of selecting 2050 are that physical risks from increased
2-vi

temperatures will have become readily apparent, and therefore it should be easy to see
the impact from this. Conversely, the disadvantage of this time horizon is that it is out of
the scope of the business plan timeframe, which may make internal involvement andcooperation difficult.

2-vii

2-2.

STEP2.

Assess materiality of climate-related risks

After finishing the preparations for scenario analysis, it is time to assess the risks
and opportunities the company will face from the effects of climate change. The
company should assess the materiality of these from the perspectives of whether or not
the risks and opportunities hold the potential for significant impact in the future or if they
are of concern to stakeholders.
Specifically, risk materiality should be determined through the following process: 1)
list risks/opportunities for the targeted operation; 2) express the potential impact on
operations from each listed risk/opportunity using qualitative terms; 3) determine themateriality of the risk based on how serious the impact on operations will be if the risk
actually occurs. The key is to select risks from an industry/company perspective, and to
consider the level of granularity to be used in assessing risk materiality.
For companies undertaking scenario analysis for the first time, the following areimportant when assessing the materiality of risks: climate-related risks material to thesector and company have been identified, and the specific impacts of these risks havebeen hypothesized.
Meanwhile, companies who are continuing to conduct scenario analysis should aim
for greater fleshing out of climate-related risks that are material to the sector andcompany, and of the specific impact of risks. They should do this by involving operation
divisions and outside experts, and while considering dialogue with investors on the
results of prior scenario analysis.

1. List risk items
For Phase 1, the company should list out risk and opportunity items for the operation
division it chose to target in the preparation stage. The company should make a list ofrisk and opportunity items based on the examples of risks and opportunities listed in
the TCFD recommendations and in consideration of external reports such as industryspecific reports and other external information such as competitors' CDP responses.
When doing this, it is important that the company consider and list a wide range ofpossible risks and opportunities to eliminate the unexpected, rather than attempting tokeep the number of risk items listed to a minimum.
2-viii

The listed risks and opportunities should be divided into two broad categories:
transition risks, which are related to the transition to a low-carbon economy, andphysical risks, which are related to physical changes caused by climate change.
Examples of transition risks include risks from policies and regulations; market risks;technology risks; and reputational risks (changes in reputation with customers orinvestors). Meanwhile, physical risks include risks that occur on a chronic basis (e.g.
increase in average temperature, changes in rainfall and weather patterns, rising sea
level) and risks that occur on an acute basis (e.g. increasing severity of extreme
weather conditions). When considering risk items, companies may wish to refer toexamples of risk items used by support project companies.3

2. Identify potential impacts on business
The company will qualitatively identify the impact on business, and use qualitative
terms to describe the potential impact on business from the risks and opportunities
listed in Phase 1. When doing this, it is important that the company separates risks andopportunities and evaluates opportunities as well as risks.
The company should use the results of discussions with internal stakeholders as
input when making qualitative descriptions, while also referring to external informationsuch as external reports and CDP responses from competitors. For discussions withinternal stakeholders, in particular: the important thing is that the company match its
awareness with stakeholders and use a narrative (story-like) format to describe
potential impacts based on the company's business model. These discussions on
qualitatively describing impact can further deepen mutual understanding of scenario
analysis within the company or its divisions/departments. Furthermore, discussions
with each individual operation division often reveal unanticipated risks andopportunities. Companies continuing to conduct scenario analysis may also consider
holding discussions that include external stakeholders.

3

Refer to Section 3 for support project company examples.

2-ix

3. Assess materiality of climate-related risks
In Phase 3, the company will determine the materiality of risks based on the scale ofimpact on business in the event that the risk/opportunity occurs. The company will go
on to assess the impact on business for each of the risks/opportunities evaluated inPhase 1 and Phase 2 based on a scale of "Large", "Medium", "Small" and so on.
When assessing materiality, the company should compare each of the risks andopportunities from the perspective of the "scale of impact on the company's business".
For example, the company may consider classifying risks/opportunities with a broad
range of impact or that affect important products as "Large"; risks/opportunities with no
impact on the company as "Small"; and using "Medium" for others. A specific example
would be classifying the risk "increases or decreases in important products" as having
a "Large" impact on the company's business, as it affects the cost toward raw
materials, which occupy a large percentage of the company's sales costs.
It is also key to consider the level of granularity to use when assessing riskmateriality. The same risk/opportunity can be evaluated by subcategorizing it by"differences in product (by sector)" or "affected supply chains (by supply chain)" toenable analysis that is adapted to the company's operations. For example, when
performing assessment by supply chain, the impact from the same risk may be
categorized as "Large" for the procurement stage, but "Small" for the sales stage.

2-x

2-3.

STEP3.

Identify and define range of scenarios

For identifying and defining the range of scenarios in STEP3, the company should
define multiple scenarios that encompass the transitional and physical risks related tothe organization. The company should examine scenario hypotheses and analysis
methods along with perspectives on what scenarios (and narratives) are appropriate forthe organization, and which scenarios out of existing scenario groups should be used
as references.
The following process will be used to identify and define the range of scenarios: 1)choose scenarios; 2) obtain forecast information on relevant parameters; and 3) shape
the worldview in consideration of stakeholders. The key is in selecting the type of
scenario while considering the amount of available information and versatility, as wellas use cases from competitors. Companies should also consider how they will alignworldviews with their relevant divisions/departments.
Companies undertaking scenario analysis for the first time should use reliable
external scenarios and select several scenarios (2°C (1.5°C)/4°C) that include a
scenario for 2°C or lower. The company should aim toward building internal consensus
after detailing the worldview listed in each scenario.
On the other hand, companies that are continuing scenario analysis should aim forthe following: using reliable external scenarios and, based on dialogue with investors
on the results of the previous scenario analysis, supplementing them with additional
data for material risks; having selected multiple scenarios, including one for 1.5°C(1.5°C, 2°C, 4°C); and detailing the worldview in each scenario and holding
discussions that include outside experts.

1. Choose scenarios
In Phase 1, the company will go on to choose scenarios from multiple temperature
ranges, including the 2°C or lower scenario, in order to respond to an uncertain future.
Types of scenarios include the IEA's WEO (World Energy Outlook)4, which is the most4

Medium- to long-term energy market forecasts. Lists future information on energy(qualitative/quantitative).

2-xi

versatile and data-rich, SSP (Shared Socioeconomic Pathways)5, and the PRI's IPR(Inevitable Policy Response)6.
The TCFD recommendations encourage companies to perform scenario analysis byselecting scenarios for multiple temperature ranges, including the 2°C or lower
scenario. It is important that scenarios be chosen based on their characteristics andparameters, and that the scenario match the company's industry and situation, investor
trends, and trends for domestic and international policies. Companies continuing withscenario analysis may also consider using a 1.5°C scenario.
The 2°C scenario is a scenario predicting that the temperature will rise 0.9°C to
2.3°C above pre-industrial levels, if strict measures against climate change are taken.
Meanwhile, the 4°C (2.7°C or above) scenario is defined as a scenario that predicts
that the temperature will rise 3.2°C to 5.4°C above pre-industrial levels unlessmeasures more rigorous than current measures are taken. In the 2°C or above (2.7°C
to 4°C) scenario, it is predicted that the temperature will rise 2.7°C to 4°C above preindustrial levels. While the 2°C and 4°C scenarios show a nearly identical change intemperature up until 2030, the gap between the two scenarios widens after 2030.
For the 1.5°C scenario, the Paris Agreement indicates that the increase in average
global temperature will be kept well below 2°C compared to pre-industrial levels, while
efforts will be pursued to limit it to 1.5°C. A portion of information on parameters for the
1.5°C scenario has been published, including carbon taxes and changes in primaryenergy demand.
Selecting scenarios in this manner, with different temperature ranges and worldviews
whenever possible, may help eliminate the unexpected. When selecting each scenario,
it is important to draw an appropriate transition path focusing on decarbonization in
2050 based on the time horizon for scenario analysis that was chosen in the
preparation stage.

5

Socioeconomic scenario based on recent policies and the socioeconomic environment. Lists
the macroeconomic information scenarios that are based on for each scenario.
6

Scenario for climate-related policies that are likely to be implemented in the short-term. Lists
qualitative and quantitative forecasts for climate-related policies.

2-xii

2. Obtain information on parameters (variables)
For Phase 2, the company will obtain objective forecast information on parameters
related to risks/opportunities to enable it to address an uncertain future. The company
will also identify the effects of these on the company in further detail. For example, if
the popularization of EVs is listed as an opportunity item, the task would be to obtain
information on the EV penetration rate for the relevant year of the analysis timeframe.
When obtaining information, the company may use external sources such as IEA,
PRI and SSP reports to obtain objective forecast information on parameters fortransition risks. For physical risks, it may use climate change impact assessment tools
such as physical risk maps and hazard maps.7
The point to keep in mind here is that the company may not be able to find all
forecast information for the target year set as the analysis time horizon, so it will needto consider using other methods such as estimates and collecting qualitative
information. For example, if the analysis timeframe is 2050, but data are only available
up to 2040, the company may use estimation to calculate forecast information for 2050.
(The company will need to consider which estimation method to use, such as linear or
cumulative, according to the type of data). In cases where quantitative information is
not available, it may also be useful to use qualitative information to draw a picture of
the future world. At this stage, the key is that the company gather a wide range of
forecast information on risk/opportunity items without getting too caught up in trying toobtain quantitative information.

3. Shape the worldview in consideration of stakeholders
In Phase 3, the company should, if necessary, use forecast information to clarify theworldview surrounding the company, including the behavior of future stakeholders(including investors), and build consensus on the worldview within the company.
In the process of coordinating worldviews with the related divisions/departments, thekey is to use dialogue to build a worldview that is convincing to thesedepartments/divisions (including operation divisions). When staging dialogues, the7

Refer to Section 4 for examples of transition risk and physical risk parameters.

2-xiiicompany may consider preparing materials that facilitate discussion to move
discussions with operation divisions forward. It can do this by organizing the worldview
by factors such as newcomers/sellers/buyers/substitute products/the industry centeredon the company, which is a method that uses 5forces analysis (a framework forbusiness environment analysis). The company may also use narrative descriptions orillustrations in these discussion materials to give visible form to the worldview.
It may be useful to aim to build internal consensus after establishing acomprehensive worldview that also incorporates perspectives from outside of thecompany.

2-xiv

2-4.

STEP4.

Evaluate business impacts

When evaluating business impacts, we will evaluate the potential effects from eachof the scenarios defined in STEP3 on the organization's strategic and financial position,and then perform a sensitivity analysis.
Business impact evaluation is performed by using the following process: 1) identify
potential financial indicators affected by risks and opportunities; 2) consider acalculation formula and estimate financial impact; and 3) be aware of the gap between
financial indicators in the estimated impact and in the business as usual. The key
points are in deciding what kind of internal data can be used for estimation, and how
the company treats data that cannot be quantitatively estimated. The company should
also take care not to focus excessively on pursuing numerical accuracy.
Companies undertaking scenario analysis for the first time should aim toquantitatively (or qualitatively, if this is difficult) calculate the estimated impact on
business for "significant risks", and have a rough understanding of the gap between theestimated impact on business and business as usual. The company will also need to
involve operation divisions to obtain their consensus regarding the method of
calculating the impact on business and the resulting figures.
Continuing companies should aim for the following: performing trial estimates forquantitative calculation of the impact on business from significant risks, even for impactthat was initially calculated qualitatively (though qualitative calculation may still be used
where this is difficult); understanding the gap between the impact on business andbusiness as usual; and promoting discussion to obtain consensus from managers andoutside experts regarding the method of calculating the impact on business and theresulting figures.

1. Identify potential financial indicators affected by risks and opportunities
In Phase 1, the company should identify which financial indicators from its financial
statements (P/L and B/S) are affected by impact on business brought on by climatechange.
When identifying the affected financial indicators, the key is in first roughly sorting out
whether the business impact falls under "sales" or "expenses" in the P/L. This is
2-xv

because, while changes in expenses may be recorded as-is without any problems,changes in sales become changes in profit (as sales x profit ratio = profit), resulting in amuch greater impact. For example, companies may consider organizing impact itemsin the following manner: having sales be affected by changes in operating revenues
due to the effects of climate change, and having expenses be affected by changes in
raw material procurement costs, carbon tax fluctuations, and damage from increased
physical risk.
By using data that is commonly used by operation divisions (e.g. sales information bybusiness/product, operational costs, cost structure, greenhouse gas emissions), it ispossible to create estimates that are closer to actual company conditions. Since thecompany will need to gather information by making requests of/receiving cooperationfrom each operation division, it would be ideal to have each operation division develop
an understanding of the TCFD recommendations scenario analysis through the
preparation phase and the risk materiality assessment.

2. Consider calculation formula and estimate financial impact
In Phase 2, the company will consider a calculation formula for financial indicators,
and then estimate the financial impact based on internal information. Since performing
calculation for all financial indicators would be too difficult, the key is in starting withfinancial indicators that are possible to estimate.
The company should consider a calculation formula by combining the data collected
when obtaining the forecast information for related parameters in STEP3 with theinternal data obtained in Phase 1. A hypothetical example would be taking the financial
parameter "carbon tax fluctuations" and using the formula: "the company's 2050 Scope
1 and 2 CO2 emissions amounts (estimated based on internal data) x carbon tax per tCO2 for Scope 1 and 2 emissions amounts (obtained from forecast information)".
Interviews with outside experts and continuous monitoring may be effective methods
for risk/opportunity items that cannot be quantitatively estimated due to the information
being qualitative or having little scientific basis. The key is in classifying risks by review
status (evaluated/not yet evaluated) and clarifying what the next action should be. Forinterviews with external sources, the company could conduct interviews toward outside
experts such as research institutes and specialists regarding risks/opportunities that2-xvi

cannot be calculated, and store the interview results as qualitative information. For
continuous internal monitoring, the company could perform continuous monitoring inorder to obtain up-to-date information on risks/opportunities.

3. Be aware of the gap between future outlook and financial indicators in thebusiness as usual
In Phase 3, the company will develop awareness of the degree of impact on the
future business outlook based on the estimate results it calculated in Phase 2. By
giving visible form to the degree of impact climate change will have on businessoutlook as it currently stands (future business targets/plans), the company will be able
to grasp which risks/opportunities have a significant impact on business, as well as
how great of a threat climate change is to business outlook for future
operations/targets.
When giving visible form to impact, the company should not simply make a list offinancial figures from impact, but rather use waterfall graphs (for example) to illustrate
this by adding/subtracting the estimated financial impact from the predicted operating
income for the target year in the scenario analysis time horizon. This will show the final
profit figures and make it easier for viewers to visualize the impact.

2-xvii

2-5.

STEP5.

Identify potential responses

In identifying potential responses for STEP5, the company should identify applicable,
realistic choices for managing the identified risks and opportunities. The following
responses are indicated here: "changes to the business model", "changes to theportfolio mix", and "investments in capabilities and technologies".
Specifically, the following process will be used: 1) understanding current in-house
responses to risks/opportunities; 2) considering future actions for responding to risks
and acquiring opportunities; 3) establishing an organizational structure and reviewing
specific actions and procedures for the scenario analysis. The company will need toconsider whether any modifications should be made to strategic/financial plans. The
key is that the company be prepared for multiple scenarios and that it discloses
information from the perspective of the reader.
On premise, when considering business strategies, the actions of each operation
division are determined in the process of creating the corporate vision, formulating the
medium-term business plan, and incorporating the business strategies into theoperation division's activities plan. It is possible that, in the course of this process, there
may be a difference in the direction taken by operation divisions versus responses
based on corporate visions and medium-term business plans that do not take climatechange into account. Consequently, it is important that, on principle, the company
include climate change in medium-term business plans. If this is not possible,
approaches should be made based on management's approval (top-down). The
company should take care in such cases, however, as this may vary according to thecorporate culture.
Meanwhile, the TCFD recommendations require specific responses, such as portfoliochanges, business model changes, and low-carbon investment. However, these are
not possible to implement all at once. Consequently, in this Practical Guide, we
describe a process that starts with having the company consider responses according
to the "limited personnel and time period" of the scenario analysis as an extension of
the TCFD recommendations. Based on this, the company will then go on to implement
responses for the company as a whole and in a manner that facilitates incorporation
into the medium-term business plan and implementation by the related
divisions/departments (applicable and realistic options, as stated in the TCFD
recommendations).
2-xviii

Companies undertaking scenario analysis for the first time should proceed in thefollowing direction: 1) identify significant risks requiring responses, and understand thecompany's current response status to significant risks; 2) establish a direction for future
responses to significant risks; and 3) create a rough roadmap for implementing future
responses/scenario analysis.
On the other hand, continuing companies should establish specific initiatives for
future responses to significant risks based on dialogues with investors concerning theresults of prior scenario analysis. It is also important that they work to further flesh out
roadmaps for implementing these initiatives, as well as the framework for theorganization structure needed to carry them out. In addition, one guideline thesecompanies may wish to consider is incorporating the TCFD recommendations andclimate change as a concept into the medium-term business plan.

1. Understand company's current status on risks management and seizing
opportunities
The company should understand its response status concerning risks/opportunities
with a large impact on its business and confirm the response status of rival companies
if necessary. It is common to have a situation where the company already has
responses in place (but relevant parties did not realize this due to barriers between
divisions/departments). Because of this, it is key that the company first confirm its
current responses while involving internal stakeholders. It will also be important for thecompany to check that there are no problems with its current initiatives by using othercompanies as benchmarks.

2. Consider countermeasures for climate-related risk management and seizing
opportunities
In Phase 2, the company will consider specific responses for risks/opportunities witha large impact on its business. The important point is in planning responses that are
resilient in any given situation. The company may also consider deciding on a roughdirection for responses as a bare minimum before going on to consider responses in
2-xixthe course of ongoing implementation. When considering responses, the members
responsible for scenario analysis initiatives may work as a team to come up with
examples to use to identify candidates for potential relevant divisions/departments.
Additionally, there may be cases where, when incorporating responses into themedium-term business plan, the members responsible for scenario analysis initiatives
will need to negotiate a list of responses with the relevant departments/divisions ifclimate change has been included in the departments/divisions' activities plans. If a
good relationship has already been established with the relevant department/division, it
will be possible to immediately select responses that are related to existing business
operations (for example, EV development for automobile companies). In cases where
there is no relationship with existing business operations, then it will be key to establish
responses based on the medium-term business plan described above.

3. Establish practical action plans and an organizational structure
In Phase 3, the company should establish the organizational structure required toproceed with responses and commence with practical actions with the cooperation of
the relevant department/division. It should also consider how it will proceed withscenario analysis in the future. Once the responses have been incorporated into themedium-term business plan and management has given its approval, the next step isto establish an organizational structure (involving the relevant departments/divisions)and moving on to practical actions with the relevant departments/divisions. It is
important that the company continue conducting scenario analysis itself as well as
monitoring external information at least once per year, so the company will need todefine the methodology for these processes.
The key points are the following: 1) incorporating climate change into business planssuch as medium-term management plans; 2) establishing an organizational structure(or restructuring) based on management's understanding of the above (covered by therequired governance items in the TCFD recommendations: "Describe the board's
oversight of climate-related risks and opportunities"; and "Describe management's rolein assessing and managing risks and opportunities"8). When establishing an
8Refer to Section 1, p.1-30.
2-xx

organizational system, a cross-sectional organization on climate change and related
issues could be created directly under the corporate planning department in order tomake the scenario analysis results more effective.
Additionally, it is key that the company conduct scenario
analysis/disclosure/business strategy as a cycle (not as a one-time effort, as the goal is
to create corporate value), because this will give the process consistency and enable
the necessary continuous monitoring.

2-xxi

2-6.

STEP6

Document and disclose information

In STEP6, the company will perform information disclosure after appropriately
documenting the contents of the steps up to STEP5. The key points are for thecompany to document the positioning of the scenario analysis in the TCFD's
recommended disclosure items as well as the results obtained from each step toensure proper disclosure and enhance corporate value. Specifically, this should bedone according to the following process: 1) describe the relationship between the
TCFD's recommended disclosure items and the scenario analysis; 2) describe theresults from each step. It may also be helpful to reference the TCFD Guidance9.
Companies undertaking scenario analysis for the first time should proceed in thefollowing direction: 1) describe the relationship between the TCFD's recommended
disclosure items and scenario analysis; 2) describe the results for each step ofscenario analysis toward significant risks; and 3) describe the company's response
policy to risks.
On the other hand, companies continuing with scenario analysis should aim for thefollowing based on dialogues with investors concerning the results of prior scenario
analysis: 1) describe the relationship between TCFD's recommended disclosure items
and the scenario analysis; 2) describe the results of scenario analysis toward
significant risks in as quantitative a manner as possible for each step; and 3) describe
the company's response policy to risks and specific initiatives.

1. Describe the relationship between the TCFD's recommended disclosure
items and the scenario analysis
When performing disclosure, the company should first describe the positioning of the
scenario analysis in relation to the TCFD's recommended disclosure items (11 items
total)10. Specifically, the relevant part of scenario analysis considered here is Strategy:
C in the TCFD recommendations, which states: " Describe the resilience of theRefer to “TCFD Guidance 2.0” at the link below:
https://www.meti.go.jp/press/2020/07/20200731002/20200731002.html
910Refer to Section 1 p.1-30, and Section 2 p.2-52.

2-xxiiorganization’s strategy, taking into consideration different climate-related scenarios,
including a 2°C or lower scenario ".
Scenario analysis is only part of the TCFD's recommended disclosure items, so it
may be helpful to effectively use contrast charts and other methods to show an overall
picture of the disclosure in line with the TCFD recommendations.

2. Describe the results obtained from each step
The next process is to list the scenario analysis results obtained up until now foreach individual step. The key points are to clearly describe what kinds ofrisks/opportunities have been identified as a result of scenario analysis and show theorganization's strategic resilience regarding climate change, such as what kinds of
responses the company will implement. There is the view that it is not the disclosure
itself that investors and experts are actually interested in; they are more concerned thatthe disclosure show the identified risks/opportunities and the impact on businessstrategy that can be seen in the scenario analysis results.
Specific items that should be included in order to show the organization's strategic
resilience include the following: the status of climate change-related governancestructure; information of data used as the basis for each scenario analysis; explanationof the appropriate transition of the company toward decarbonization by 2050;
current/future initiatives toward risks/opportunities identified from the scenario analysis;
narrative for climate change-related value creation based on scenario analysis results;
and how the company will proceed with scenario analysis in the future and achieve thegoals.
On the other hand, the question of what information to disclose, and to what extent(when disclosing quantitative information, for example) is an issue often faced bycompanies undertaking scenario analysis. However, some investors say that, atpresent, they do not necessarily want quantitative information on the results of scenario
analysis. Companies may consider performing disclosures while bearing in mind thatinvestors are focusing on the effect on business, such as management's involvement in
scenario analysis and how scenario analysis results will be leveraged into the
2-xxiii

company's business/management.
Furthermore, companies should not perform disclosure once and then leave it atthat, but rather continuously increase the sophistication of the scenario analysis byhaving continued dialogue with investors based on the disclosure. Gradually enhancing
the disclosure of the information used as evidence in the analysis based on dialogues
with investors may lead to increased corporate value.

2-xxiv

Points to consider when implementing scenario analysis in line with the TCFD
recommendations were mapped out for 18 companies, forming the basis for the trial
1

Ensure governanceIs in place

2

Assess materiality ofclimate-related risks

Integrate scenario analysis into strategic planning and/or enterprise risk management processes.
Assign oversight to relevant board committees/subcommittees.
Identify which internal (and external) stakeholders to involve and how.

3

Identify and define
range of scenarios

4

Evaluate business
impacts

Get management andoperation divisions involved

Identify potential
responses

5

Impact on:

Market andTechnology
ShiftsReputation

Policy andLegalPhysical
Risks

Pick and choose fromyour industry andcompany viewpoint!

Responses might include

Scenarios inclusive of arange of transition andphysical risks relevant to
the organization

technologies

Clearly imagine a futureworld undercertain assumptions!

Do not narrow down!
Take multiple scenarios
into account.

Try not to seek
too much accuracy!

Tips(examples)

What granularity should be usedin assessments such as riskmateriality?

Subdivision by sector/supply
chain enables analysis that
conforms to the business's
operations

6

Documentation and disclose

Which kinds of scenarios should
be selected?

Selecting scenarios withtemperature ranges andworldviews with as muchvariation as possible will help
Overviews of each scenario
and example parameters arealso provided

How should items that cannot be
estimated quantitatively behandled?

What kinds of steps should be
used to proceed in the future?

Continuous monitoring andinterviews with external experts
will be used for information whichis qualitative or lacks sufficientscientific evidence.
It is important to sort out theevaluated/unevaluated risks andclarify the next action to be taken

The goal is to integrate climatechange strategies with operations
and increase corporate value.
Scenario analysis will be themomentum behind a continuous
cycle of disclosure and system
restructuring (integration withmanagement strategy)

Document the process; communicate to relevant parties: Be prepared to disclose
key inputs, assumptions, analytical methods, outputs, and potential management responses

Disclose information

osure of Climate Related Risks and(Notes in red: Points to consider in each step were added after the support program)

2-1[How to View the Key Points of Practice]

We describe scenario analysis procedures and the different levels for companies based on
their prior experience with conducting scenario analysis

TCFD scenario analysis procedures

Description of the different levels for
implementing gradual initiatives based
Level

companies

Assumed targets
Companies conducting
scenario analysis for the(for example,
companies in their firstyear of scenario
analysis)

Explanation of points
Explains key points and points that may be tricky
when conducting scenario analysis

1-2Sure and steady
implementation withawareness of the key
points of practice, in linewith the direction for
Try starting to implement

Explanation of practical steps
Explains the necessary steps for conducting
scenario analysis

initiatives

possible

Continuing
companies

Companies conducting
scenario analysis for the, but which
are already working on
initiatives related toclimate change tosome degree

Move on to the next stepCompanies that havealready implemented
scenario analysis (forexample, companies intheir second year of
scenario analysis)

Use disclosures anddialogue with investors
to enhance analysis andpresentation of evidence

and use this to increase
the sophistication of
decarbonizedmanagement

[Directions for Scenario Analysis (1/2)]

Scenario analysis should be conducted on an ongoing basis, and built upon gradually

Direction for

For beginning scenario analysis

STEP2
Assess materiality of climate-related
risks

STEP3
Identify and define range of
scenarios

Internal consensus has been reached
for conducting scenario analysis(management consents)
2-7, 8Main climate-related risks for thesector and the company have been
identified
2-16 to 20

Reliable external scenarios arebeing used
2-24 to 27

The cooperation of operation
divisions has been obtained

Additionally, the specific impacts fromrisks have been hypothesized

2-9 to 11

companies

The scope/parties responsible(structure) for scenario analysis havebeen identified
2-9 to 11

The results of the previous scenario
analysis are understood bymanagement / the heads of the
responsible divisions
2-7, 8
Direction forcontinuing
companies

Page
numberOperation divisions are able to takethe lead in conducting scenario
analysis
2-9 to 11
The scope / parties responsible(structure) for scenario analysis has
increased compared to the initial
2-9 to 11
effort2-18,19

Multiple scenarios, including thosefor 2oC or lower, have been
selected
2-24 to 27(2oC (1.5oC)/4oC)
The worldview for each scenario has
been described in detail, andinternal consensus has beenreached2-29,30(Based on dialogue with investors)
Main climate-related risks for the sector
and the company have been further
specified through increasing the
involvement of operation divisions
and outside experts
2-16 to 20
The specific impacts from risks havealso been further specified throughincreasing the involvement ofoperation divisions and outside
experts
2-18, 19

(Based on dialogue with investors)
Reliable external scenarios are being
used, and additional scenario
information for significant risks havealso been supplemented
2-24 to 27
Multiple scenarios, including those for
1.5oC, have been selected (1.5oC, 2oC,
4oC)
2-24 to 27
The worldview for each scenario has
been described in detail, and has also
been discussed with outside experts
2-29, 30

2-2

[Directions for Scenario Analysis (2/2)]

Direction forcompanies

STEP4
Evaluate business impacts

STEP5
Identify potential responses

STEP6
Document and disclose information

The impact on business from significant
risks has been calculated quantitatively(or qualitatively if the former provesdifficult) even if this is only a trial
estimate
2-36, 37

Risks requiring responses have been
identified
2-43

The relationship between TCFD
disclosure items and the scenario
analysis has been described
2-52

addressing significant risks is understood
2-43
Policies for future responses toward
significant risks have been established2-44
A rough roadmap for future response
measures / how to proceed after scenario
analysis has been prepared2-45

The results of scenario analysis toward
significant risks has been described foreach step
2-53 to 59

The gap between the impact on businessand normal results is understood
2-38
The operation division agrees with themethod of calculating the impact on
business and the resulting figures
2-36 to 38(Based on dialogue with investors)

Direction forcontinuing
companies

2-3

Page
numberTrial estimates for quantitative calculationof the impact on business from significant
risks has been performed even for
impact that was initially calculated
qualitatively (though qualitative
calculation may still be used where this isdifficult)
2-36, 37
The gap between the impact on businessand normal results is understood
2-38
Management and outside experts
agree with the method of calculating theimpact on business and the resulting
figures2-36 to 38

has been described

2-53 to 59(Based on dialogue with investors)(Based on dialogue with investors)

Risks requiring responses have been
identified
2-43

The relationship between TCFD
disclosure items and scenario analysis
has been described
2-52

addressing significant risks is understood
2-43
Specific initiatives for future
responses toward significant risks havebeen established
2-44

The results of scenario analysis toward
significant risks has been described in as
quantitative a manner as possible foreach step
2-53 to 59

A roadmap and organizational
structure for future response measures /scenario analysis has been
established2-45, 48and specific initiatives have been
described
2-53 to 59

2. Scenario Analysis - Key Points of Practice2-1. For beginning scenario analysis

2-2. STEP2. Assess materiality of climate-related risks
2-3. STEP3. Identify and define range of scenarios
2-4. STEP4. Evaluate business impacts

2-5. STEP5. Identify potential responses
2-6. STEP6. Document and disclose information
Chapter 2 Scenario Analysis - Key Points of PracticeThis chapter explains how to practically undertake scenario analysis and describes key
points of its practice, based on use cases performed by companies under the support
program of the Ministry of the Environment.
2-5[When starting a Scenario Analysis ]Gaining understanding from management on the significance of scenario analysis isimportant. Establishing a team, scope and time horizon is necessary when starting scenario
analysis.
Preparation

understanding
Make sure management
understands the materialityof the TCFD
recommendations(Recognizes the TCFD
recommendations andinstructs that they becomplied with)

Preparation

Preparation

Establish execution
team

Choose target foranalysis

Setting the analysis
time axis

Create an execution team for
scenario analysis

Set a target scope for the
scenario analysis

Choose time horizon to
conduct scenario analysis
that looks beyond X years in
the future

Note

Note

How to provide input tomanagement in termsof climate change

How to involve each
operation division

2-6

Preparation,

Preparation

Companies conduct scenario analysis regularly (recognition of a broad range of risks andidentification of potential responses). It is crucial for management to understand that investors
expect companies to conduct scenario analysis on climate change.

In a longer term, where outcomes are highlyIn

VisionTargetMedium term business plan (3-5 Years)

Assume multiple scenarios

Business strategy cannot respond to changes in the
futureThe discussion never reaches a consensus on future
perspectives
Suspected of lacking business resilience

Business management can flexibly respond to futurechangeThe discussion takes places without any subjective
viewpoints on futureManagement can demonstrate business resilience

2-7

How to provide input to managementin terms of climate change
It is effective to convey the effect that climate change solutions have on the value of businesses
through workshops with experts.

Input from multi-stakeholders

Investors andexperts

NPONGO

ESG investments
Requirement of TCFD
Disclosures
Engagement
OthersOther
companies
in the same
industry

Management level

Compliance
Requests, etc.

Comparison withpeer companies, etc.

Business-related departments
Environment-related departments

Changes in consumer preferences
Specific impacts of climate change on your company, etc.

2-8

There are increasingly frequent requests
from multi-stakeholders for responses toclimate change. While there are cases
where management hears about thesetrends directly, there are also cases
management.
In such a case, it is important to compile
the status of requests from multistakeholders, and input to management
through study groups with experts andother means that responding toclimate change can affect corporate
value.
Continuing to input the results of climatechange-related scenario analysis fromthe second round and after onward will
understanding of the specificopportunities/risks related to climatechange for the company.

Create an execution team for scenario analysis

Preparation

The implementation of scenario analysis requires internal involvement.
It is important to involve business divisions from the initial stage and have them consider

Pattern A

Pattern B

Get relevant divisions and departments involvedin the course of scenario analysis

Develop internal teams and start scenario analysis
Image

Start

STEP2

Image

STEP3
Business
Divisions

Business
Divisions

Accounting and
Finance

Accounting and
Finance
Management

Management
IR

Scenario analysis team

Environment and
CSR
IRCorporate Planning

Advantages
Easy to start
Minimum burden on each division/department
Disadvantage
Internal coordination needed in the scenario analysis
process
Long process from the environment/CSR division to
management

Environment and CSR

Corporate
Planning

Advantages
Divisions are cooperative as internal coordination iscompleted in advanceThe process swiftly reaches top management as awell-coordinated team performs analysis
Disadvantage
Takes time to start analysis
Great burden on each division/department

2-9

How to involve each operation division
The following use cases exist as examples for involving operation divisions
for companies that have implemented scenario analysis.
useful strategies, and daily communication of information within the company will also help promote understanding.

Narratives for each operation division
It may be good to put the focus on how the company as a whole can reduce its CO2 emissions through the contributions ofvarious areas such as products and procurement, rather than concentrating only on reducing emissions from processes. Framing
it in such a way could promote greater participation from each operation division.
Since each operation division is connected, we can motivate them by having each operation division consider strategies they
can implement and come up with a storyline for what to do. The important thing is showing what they can do as a business,
and not being limited to environmental measures.

reviewed based on external data at the management committee, so if there is anything that you as a division
think should be corrected, please let us know
The backing ofallows us to use the momentum to involve operation divisions
There are many other issues besides climate change, and some might argue that those issues should be
addressed first. However, we emphasize that there is a need for us to focus on measures against climatechange, as this is something that is required of us as a company.
Having management position climate change measures as a priority issue enables us to gain operation

Strengthening communication of information within the company
We started communicating information within the company about the TCFD recommendations from the
beginning stage of their implementation, so there was no sense of resistance internally as our staff was alreadyaware of them.
When it became time to proceed with the scenario analysis, each division responded quickly by assigningmembers to the scenario analysis team.
2-10

How to involve each operation division
Operation divisions should also take the lead and be involved in the scenario analysis process.
In the initial stages, it is assumed that operation divisions will provide interviews/data regarding the analysis
results from ESG/sustainability-related departments.

Companies
undertaking
scenario
analysis for the
first time

Companies
continuing toconductscenario
analysis

Structure for conducting
scenario analysis

How operation divisions
are involved

Departments or otherunits responsible for
ESG/sustainability willtake the lead in
conducting scenario
analysis and interviews
with operation divisions

Provide data to those
conducting scenario
analysis
Provide feedback on
analysis results (foranalysis conducted byother divisions)

ESG/sustainabilityrelated departments
perform a secretarial role

Provide data to those
conducting scenario
analysis

Operation divisions
conduct scenario
analysis/intra-divisional
interviews

Conduct scenario
analysis for related
target areas

Positions in the operation
division that are involved
Not specified
However, the responsible
parties within theoperation division should
understand thesignificance andoverview of scenario
analysis
Positions closest to decision
making processes should be
involved, as it will benecessary to involve
operation division members
in tasks such as datacollection and promoting
countermeasures

Intra-divisional interviews

2-11

Choose target for analysis

Preparation

By defining the scope in terms of sales composition, relation to climate change, and difficulty of datacollection, companies can conduct scenario analysis in accordance with their business model. Gradually
expanding the scope of scenario analysis after the second round will enable a more comprehensive analysis.
Item

Options for Scenario Analysis Scenario (Example)

RegionDomestic

Overseas

Scope of
Operations

Some businesses

All businesses

Corporatescope

Only for the scope of consolidated
financial statements

Entire supply chain
Proposal for selection

Proposal for selection

Proposal for selection

Identify scope of business basedon sales composition ratio[Sales composition (%)]

Identify scope of business basedon relevance to climate change[CO2 emissions (tCO2)]

Business C
11.8%
Business C 98,765
Business B

33.3%

123,456 Business A

54.9% Business A
3,549
Business B

Let's analyze business A andbusiness B, which have alarge sales composition

2-12

Consider businesses A and C,
which emit a large amount ofCO2.

Identify the scope based on
difficulty of data collection[CO2 emissions (tCO2)]
Foreignbranch X

Abundant internal
data

Foreignbranch Y

No internal data

Foreignbranch Z

No internal data

As for the overseas business,start with X with ample data.

Preparation

Choose time horizon to conduct scenario analysis

It is important to choose a time horizon with maximum benefit to the company by comparing the merits anddemerits of factors from a perspective of project length, amount of internal involvement, and effect ofphysical risks[Forecast of global average surface temperature] (Difference from the 1986-2005 average)

Difference in theworldview depending on
when is being analyzed

2030

4

C scenario

2

C scenario

1.5

C scenario

2050[Discussions on time horizon decisions raised in support projects (examples)]Benefits

Disadvantage

2030

Abundant data available for reference
Relatively easy to link with business plans

Possibility that the impact of physical risk issmall and that the impact on the company will
be low

2050

Physical risks are emerging.

Cooperation may be difficult (cannot involvethe company) because there is distance fromthe time horizon of the business plan

Source: AR5 SYR Chart SPM.6, IEA, "ETP2017," UNEP, "The Emission Gap Report 2015
2-13

2. Scenario Analysis - Key Points of Practice2-1. For beginning scenario analysis
2-2. STEP2. Assess materiality of climate-related risks
2-3. STEP3. Identify and define range of scenarios
2-4. STEP4. Evaluate business impacts
2-5. STEP5. Identify potential responses

2-6. STEP6. Document and disclose information
Chapter 2 Scenario Analysis - Key Points of PracticeThis chapter explains how to practically undertake scenario analysis and describes key
points of its practice, based on use cases performed by companies under the support
program of the Ministry of the Environment.
2-14

Assess materiality of climate-related risks:
What are the current and anticipated organizational exposures to climate-related risks andopportunities?
Notes in red: Points to consider in each step were added after the support program.

1
2

Ensure governanceIs in place

Assess materiality ofclimate-related risksMarket andTechnology
ShiftsReputation

Policy andLegalPhysical
Risks

What are the current andanticipated organizational
exposures to climate-relatedrisks and opportunities?
Do these have the potential to
be material in the future? Are
stakeholders concerned?
Pick and choose fromyour industry
and company viewpoint!

6

Get management
and operation
divisions involved!

Integrate scenario analysis into strategic planning and/or enterprise risk management processes.
Assign oversight to relevant board committees/subcommittees.
Identify which internal (and external) stakeholders to involve and how.

Documentation anddisclose3

Identify and define
range of scenarios

4 Evaluate business

Identify potential
responses

Impact on:

Responses might include

Scenarios inclusive of arange of transition andphysical risks relevant to
the organization

What scenarios (andnarratives) are appropriate,given the exposures?
Consider input parameters,
assumptions, and analyticalchoices. What reference
scenario(s) should be used?

Clearly imagine a future world
under certain assumptions!

5

impactsmodel
capabilities andtechnologies
Evaluate the potential effects

and financial position undereach of the defined scenarios.
Identify key sensitivities.

Try not to seek
too much accuracy!

Use the results to identify
applicable, realistic decisions
to manage the identified risks
and opportunities.
What adjustments tostrategic/financial plans would
be needed?
Do not narrow down!
Take multiple scenarios
into account.

Document the process; communicate to relevant parties: Be prepared to disclose
key inputs, assumptions, analytical methods, outputs, and potential management responses

Disclose information
osure of Climate

2-15[Overview]

List risk items, identify the potential impacts on business, and assess materiality ofclimate-related risks
Stage1
List risk items
List the risks and opportunities
related to targeted businessareas

Stage2
Identify potential impacts on
business

Stage3
Assess the materiality ofclimate-related risks

From the list of risk andopportunities, qualitatively
describe the potential impact on
business

Conduct risk assessment basedon scale of impact (large tosmall) and determine how
important it isNote

To what extent should the risk assessment be conducted?
Source: This Practical Guide (example of Chiyoda Corporation: 3-43)
2-16

[Stage1: List risk items]

List risk and opportunity categories for targeted business areas
Classification

Risks and Opportunities Related to Climate Change(Examples)

Carbon price

PolicyRegulation

External reports

Carbon emissions targets/policies
olicies in eachcountry
Energy-saving policy
Fossil fuel subsidies(Industry-specific reports,
etc.)

Subsidies for renewable energy, etc.
Transition

Changes in the energy mix

RiskMarketChanges in energy demand
Changes in important products/prices

Technologies

TCFD Recommended
Disclosures

Reputation

CDP responses fromcompetitors

Other external
information(CDP responses, etc.)

Diffusion of renewable energy and energysaving technologies

Changes in customer reputation
Changes in investor's reputation
Increase in average temperature

Physical

Chronic

Risk

Changes in rainfall and weather patterns
Rising sea level

Acute

Increasing severity of extreme weather
conditions

2-17[Stage 2: Identify potential impacts on business]

From the list of risk and opportunity items, qualitatively describe the potential impact on
business

It is important toconsider not only thecompany's risks but
also its opportunities.
Separate and examinerisks and opportunities

CDP
responses
fromcompetitors
External reports and other external
information
Source: This Practical Guide (example of Chiyoda Corporation: 3-43)
2-18

Describe the possible impact in a narrative manner throughdiscussions with related parties within the company, basedon the company s business model, etc. If the analysis is tobe conducted in the second round, it may be a good idea toinclude external stakeholders in the discussion.

Discussions with internal stakeholders

[Stage3: Materiality assessment of climate-related risks]

Conduct risk assessment based on scale of impact (large to small)Business
impactLarge

Risks and opportunities tied
to business impact

Policies and regulationsof each country
Changes in rainfall andweather conditions

Carbon price
Changes in important
products/prices

MediumChanges in the energymix
Changes in the
reputation of customers
and investors

Small

Energy-saving policy
Fossil fuel subsidies
Subsidies for renewableenergy, etc.
Energy demand
Improving efficiency

Comparison of each risk andopportunity item from the perspective of
the size of the business impact forthe company
Example: Describe risks andopportunities that impact in a wide
range, and those that relate to
Describe those that have no impact.

Diffusion ofrenewable/energy-saving
technologies
Rising sea levels
Increasing in severity of
extreme weather conditions

Examples of Analysis (Changes
in Important Products)
Since raw materials accountfor a large proportion of thecost of sales, the business
impact may be large.

2-19

To what extent should the risk assessment be conducted?
Assessing materiality of risks after categorizing them by differences in products (by sector)
and affected supply chains (by supply chain) enables an analysis
that is convincing to management
ExampleExampleMateriality assessmentof risks by sector

Risk Item

Materiality assessmentof risks by sector
X

2-20

Materiality assessment of risks
by supply chain

Y

Risk ItemZ

Materiality assessment ofrisks by supply Chain
Procur Transpo
Sales
ement rtation

Risk A

Large Medium Small

Risk A

Large Large

Small

Risk B

Small

Large

Risk B

Small

Large Large

Opportunity C

Large Medium Medium

Opportunity C

Large Medium Medium

Opportunity D

Medium Large Large

Opportunity D

Medium Large Large Large

Small

Small

MediumSmall

2. Scenario Analysis - Key Points of Practice2-1. For beginning scenario analysis

2-2. STEP2. Assess materiality of climate-related risks
2-3. STEP3. Identify and define range of scenarios
2-4. STEP4. Evaluate business impacts

2-5. STEP5. Identify potential responses
2-6. STEP6. Document and disclose information
Chapter 2 Scenario Analysis - Key Points of PracticeThis chapter explains how to practically undertake scenario analysis and describes key
points of its practice, based on use cases performed by companies under the support
program of the Ministry of the Environment.
2-21

Identify and define range of scenarios:
What scenarios (and narratives) are appropriate, given the exposures?
Notes in red: Points to consider in each step were added after the support program.

1
2

Ensure governanceIs in place

Assess materiality ofclimate-related risksMarket andTechnology
ShiftsReputation

Policy andLegalPhysical
Risks

What are the current andanticipated organizational
exposures to climate-relatedrisks and opportunities?
Do these have the potential to
be material in the future? Are
stakeholders concerned?
Pick and choose fromyour industry
and company viewpoint!

6

Documentation anddisclose

Get management
and operation
divisions involved!

Integrate scenario analysis into strategic planning and/or enterprise risk management processes.
Assign oversight to relevant board committees/subcommittees.
Identify which internal (and external) stakeholders to involve and how.

3

Identify and define
range of scenarios

4 Evaluate business
impacts

Identify potential
responses

Impact on:

Responses might include

Scenarios inclusive of arange of transition andphysical risks relevant to
the organization

What scenarios (andnarratives) are appropriate,given the exposures?
Consider input parameters,
assumptions, and analyticalchoices. What reference
scenario(s) should be used?

Clearly imagine a future world
under certain assumptions!

5

model

capabilities andtechnologies
Evaluate the potential effects

and financial position undereach of the defined scenarios.
Identify key sensitivities.

Try not to seek
too much accuracy!

Use the results to identify
applicable, realistic decisions
to manage the identified risks
and opportunities.
What adjustments tostrategic/financial plans would
be needed?
Do not narrow down!
Take multiple scenarios
into account.

Document the process; communicate to relevant parties: Be prepared to disclose
key inputs, assumptions, analytical methods, outputs, and potential management responses

Disclose information
osure of Climate

2-22

[Overview]

Choose scenarios, obtain forecast information on parameters, and shape the worldview
Stage 1

Choose scenarios

Stage 2

Stage 3

Obtain forecast information on
relevant parameters (variables)

Shape the worldview inconsideration of stakeholders
Based on forecast information,

Choose a number of scenarios withdifferent temperature targets,o

Note

What kind of scenarios
should be chosen?

Obtain objective forecast
information of relevant parameters
on each risk and opportunity items,
and identify the effects to thecompany in further detail.

Note

What kind of scenario is the
scenario?

performance, and work towards
achieving internal and external
consensus by incorporating theperspectives from outside ofcompany (If needed).

Note

How to coordinate theworldview with eachbusiness division?

Sources: This Practical Guide (example of ORIX Asset Management Corporation 3-38, example of KAJIMA Corporation 3-65, example of Mitsui Mining &Smelting Co., Ltd. 3-127)
2-23[Stage1: Choose scenarios]

in order to respond to an uncertain future[Forecast of global averages surface temperature](Difference from the 1986-2005 average)

Definition
above) scenario
The temperature will rise 3.2-5.4 C above preindustrial levels, unless more rigorous
measures are taken.

-

scenario:

The temperature will rise 2.7-4.0 C above preindustrial levels, unless more rigorous
measures are taken.

The temperature will rise 0.9-2.3 above preindustrial levels, if strict measures are taken.

(Reference) 1.5
Almost the same temperature changes would occur in the
It is important to draw an appropriate transition pathfocusing on decarbonization by 2050 for each timeframe
selected in the scenario analysis
Sources: AR5 SYR Chart SPM.6, "ETP2017," UNEP, "The Emission Gap Report 2015, Global Warmingof 1.52-24

scenario:

The temperature will rise less than 1.5
above pre-industrial levels with highprobability, if fundamental system migrationis achieved

Scenario analysis in the TCFD
recommendations indicates applying
multiple temperature scenarios

What kind of scenarios should be chosen?

Scenario/tempera
ture
range

IEA WEO

SSP (Shared Socioeconomic

PRI IPR(World Energy Outlook)

Pathways)(Inevitable Policy Response)

Lists medium- to long-term energy
market forecasts
Lists future information(quantitative/qualitative) related toenergySocioeconomic scenario based onrecent policies and thesocioeconomic environment
Lists the macroeconomic
information scenarios are
based on for each scenario

Scenario for climate-related policies
that are likely to be implemented in
the short term
Lists qualitative andquantitative forecasts forclimate-related policies

SSP1
RCP 8.5

CPS (Current Policies, removed in 2020)

RCP 6.0

STEPS (Stated Policies)
DRS (Delayed Recovery, added in 2020)(below

SSP2

SSP3

SSP4

SSP5

FPS (Forecast Policy Scenario)

RCP 4.5
RCP 3.4
RCP 2.6( )Incomplete

SDS (Sustainable Development)

RCP 1.9

NZE 2050(Net Zero Emissions by 2050, added in 2020)*RCP stands for Representative Concentration Pathways. The subsequent values
are the radiative forcing values (for example, RCP 2.6 indicates a radiative forcing
increase of 2.6W/m2 by the end of the 21st century compared to pre-industrial
levels): Climate models corresponding to
RCPs exist( ) Some portions lacking models

See the Appendix for the overview and parametersof each scenario

Sources: IEA website, Riahi et al. (2017) https://doi.org/10.1016/j.gloenvcha.2016.05.009 , PRI website
2-25

The Paris Agreement indicated that efforts will be pursued to keep the global average temperature increase well
below 2 and to keep it at 1.5 compared to pre-industrial levels.
In October 2018, the Intergovernmental Panel on Climate Change (IPCC) prepared a special report on the effects
of a 1.5 global warming and the pathways through which it can emit greenhouse gases.

Impact difference between
scenario
Examples1.5

C scenario

Sea level rise by
Rise of 26~77cm
2100

Biological
species loss

C scenario

Rise of 30~93cm

Insects:18%
Insects 6%
decreasedecrease
Plants:16%
Plants 8% decrease
decrease
Vertebrates 4%
Vertebrates:8%
decreasedecrease

Disappearance
frequency of sea
ice in the Arctic Once in 100 years
Ocean during
summerOnce in 10 years

Decrease ratio of
1.5 million tons
catches

3.0 million tons

Impacts on coral Approximately
reef
70%~90% dies

Mostly annihilated

Source: Global Warming of 1.5 C (IPCC)
2-26

2Greenhouse gas emissions pathways to 1.5

Examples of 4 representative pathways (P1 to P4) are listed.
P1: Low energy demand. No use of CCS
P2: Wide focus on sustainability
P3: Middle of the road scenario (business as usual)P4: Expected use of CCS

Parameter information such as the following can be obtained for the 1.5 C scenario and the 2 C scenario.
Parameter(example)

The following carbon prices are predicted:
2030: 135 USD/tCO2 +2050: 245 USD/tCO2 +Carbon tax(2030/2050)

2030: 15 USD/tCO2 +2050: 45 USD/tCO2 +In thethe following changes
are predicted compared to 2019:
Renewable energy/nuclear power demand
increases by approximately 2,200Mtoe
Fossil fuel (coal, oil, gas) and biomass
demand decreases by approximately
4,700Mtoe

Change inprimary energy
demand(2019 2030)

scenario, the following changes are
predicted compared to 2019:
Renewable energy/nuclear power demand
increases by approximately 1,700Mtoe
Fossil fuel (coal, oil, gas) and biomass
demand decreases by approximately
2,700Mtoe

Sources:
2-27[Step 2: Obtain forecast information on parameters (variables)]Obtain forecast information on parameters and identify the effects to the company
in further detail
List of Risks and Opportunities
Parameters list

It is important to obtain objective forecast information on parameters from external sources

Scenario Report

External reports(IEA WEO, IEA ETP (Energy Technology
Perspectives) etc.)(Industry-specific reports, academic
papers, etc.)

Source This Practical Guide (example of CHIYODA Corporation: 3-43, 44
2-28

Climate Change Impact
Assessment Tools(Physical Risk Map, Hazard Map, etc.)
See Appendix for examples of parameters.

[Stage 3: Shape the worldview in consideration of stakeholders]

performance and work towards achieving internal and external consensus by incorporating
the perspectives from outside of company (if needed)
Components of the worldview surrounding the company (e.g.)

Government

Industry

Buyer(Customers)

Seller(Suppliers)

It would be useful to aim for building internal
consensus after incorporating the perspectives
from outside of company in order to understandcomprehensive worldview.

Legal systems and regulations related torisks
Policies to promote opportunities
Trends, technologies and tendencies
related to climate change that are
mainstream in the industry
Customer trends and tendencies affecting
products, businesses, and services weprovideTrends affecting raw materials and costs
required for businessNew comer

Businesses themselves and new entrants
who can change supply chains

Substituteproduct

Substitutes, etc., that could affect themarket for the products, businesses, andservices provided

Source: This Practical Guide (example of Mitsui Mining & Smelting Co., Ltd.: 3-127
2-29

How to coordinate worldview with each business division?
It is important to create a worldview that can convince relevant departments including business division
through dialogue. In order to encourage relevant department members to think of climate change as theirown problem, and to share the scenario's meaning and perspective, it is important to have a written
narrative or some type of visualization to facilitate discussion.

Points in the discussion with eachdepartment to coordinate theworldview (Example)

Worldview (draft) developed by the Scenario
Analysis TeamAre there any discrepancies in theworldview, technology, products, etc.,
related to each business?

Business
Divisions

Is it a worldview that is likely to occur inthe future relative to the behavior of thesellers and buyers who interact with us inour day-to-day operations?

Are there any discrepancies comparedwith the company's management
strategy?

Corporate
Planning

Source: This Practical Guide (example of Mitsui Mining & Smelting Co., Ltd.: 3-127
2-30

Are there any prospects for the futurecompared to the industry outlook
mentioned in our daily operations?

2. Scenario Analysis - Key Points of Practice2-1. For beginning scenario analysis

2-2. STEP2. Assess materiality of climate-related risks
2-3. STEP3. Identify and define range of scenarios
2-4. STEP4. Evaluate business impacts

2-5. STEP5. Identify potential responses
2-6. STEP6. Document and disclose information
Chapter 2 Scenario Analysis - Key Points of PracticeThis chapter explains how to practically undertake scenario analysis and describes key
points of its practice, based on use cases performed by companies under the support
program of the Ministry of the Environment.
2-31

Evaluate business impacts:of the defined scenarios.
Notes in red: Points to consider in each step were added after the support program.

1
2

Ensure governanceIs in place

Assess materiality ofclimate-related risksMarket andTechnology
ShiftsReputation

Policy andLegalPhysical
Risks

What are the current andanticipated organizational
exposures to climate-relatedrisks and opportunities?
Do these have the potential to
be material in the future? Are
stakeholders concerned?
Pick and choose fromyour industry
and company viewpoint!

6

Documentation anddisclose

Get management
and operation
divisions involved!

Integrate scenario analysis into strategic planning and/or enterprise risk management processes.
Assign oversight to relevant board committees/subcommittees.
Identify which internal (and external) stakeholders to involve and how.

3

Identify and define
range of scenarios

4 Evaluate business
impacts

Identify potential
responses

Impact on:

Responses might include

Scenarios inclusive of arange of transition andphysical risks relevant to
the organization

What scenarios (andnarratives) are appropriate,given the exposures?
Consider input parameters,
assumptions, and analyticalchoices. What reference
scenario(s) should be used?

Clearly imagine a future world
under certain assumptions!

5

model

capabilities andtechnologies
Evaluate the potential effects

and financial position undereach of the defined scenarios.
Identify key sensitivities.

Try not to seek
too much accuracy!

Use the results to identify
applicable, realistic decisions
to manage the identified risks
and opportunities.
What adjustments tostrategic/financial plans would
be needed?
Do not narrow down!
Take multiple scenarios
into account.

Document the process; communicate to relevant parties: Be prepared to disclose
key inputs, assumptions, analytical methods, outputs, and potential management responses

Disclose information
osure of Climate

2-32

[Overview]

Estimate the financial impact on P/L and B/S, then compare the gap between future
perspectives and financial items in the business as usual
Stage 1

Stage 2

Stage 3

Identify potential financial items
affected by risks and opportunities

Consider calculation formula andestimate financial impact

Be aware of the gap between future
outlook and financial indicators inthe business as usual

Identify which financial indicators
are possibly affected by business
impact of climate change

Consider calculation formula forrisks that can be estimated, thenestimate the financial impact basedon internal information

Based on the estimated results, beaware of the scale of impact on the
future outlook

Note

Note

What kind of internal data can beused for estimation?

How do we treat data that cannot
be quantitatively estimated?

Source: This Practical Guide (example of KAJIMA CORPORATION: 3-68, example of KAGOME Co., Ltd.: 3-146, example of ORIX Asset Management
Corporation: 3-37)
2-33[Stage1: Identify potential financial items affected by risks and opportunities]

Identify which financial items of P/L and B/S are affected by risks and opportunities
Change in operating revenues
affected by climate change

Change in raw material
procurement costs
due to climate change

Increased sales due tothe expansion of CCUS market

Price hike ofsteels

Etc.

Fluctuation of carbon tax

Decline in demandfor plants due totightening regulations

Expenses

Sales

Etc.

Burden of collecting
carbon tax for
Scope 1 and 2 emission

Etc.
Materiality assessment of risks
Etc.
STEP2
Impact on businesses

Risks Opportunities
Major
Class
ification

Minor
Classification

EachTrans CO2 emission
ition target Policies
Risks Subsidies
included

Indi
cat
or

Consideration Risks

Damage of physical risk
Ass
ess
me
nt

Tightening regulations affects ordering fossilProLarfuel-delivered plants, which results infit
geaffecting PL.

Net
incomeProfit ratio =Fluctuation of profit, which also indicates that the impact can be largely different.)
2-34

Increased cost of damage
due to increase
frequency of flood

Etc.

Business impact

What kind of internal data can be used for estimation?
By using data that is commonly used by business divisions (e.g. sales information bybusiness/products, operational costs, cost structure, greenhouse gas emissions), it ispossible to create estimations close to actual company conditions
Information available for consideration

Sales
Struc
ture

Methods for collecting information

Current and future sales andoperating income by businesssegment(Targets for net sales and operating income)Sales forecasts and targets for related
products in the future(By product)

Current operating costs(Electricity and fuel prices, electricity and fuelconsumption, etc.)

Cost
Struc
ture

Information on the cost structure of
raw materials(Amount of raw materials used, procurement
cost, etc.)

Current and future GHG emissions

Refer to the company's long-term management targets, etc.
In the absence of relevant information, it is possible tocalculate the current value using CAGR (annual growth rate),
etc.
Hearings from business divisions, corporate planning,etc.
If owned, also collect information on future market
conditions normally used by relevant departments.
Hearings from business divisions, corporate planning,etc.
Hearings from business divisions, corporate planning,etc.
If owned, also collect information on future market
conditions normally used by relevant departments.
Refer to the company's environment-related targets, etc.

(Scope 1 and 2, Scope3 if needed)

2-35[Stage2: Consider calculation formula and estimate financial impact]

Consider calculation formula for financial indicator that can be estimated, then estimate thefinancial impact based on internal information
Change in raw material
procurement costs
due to climate change

Change in perating revenues
affected by climate change
Revenue/Profitof plant(Yen/Year)

Decline in demand rate
for plant due totightening regulations(%)

Revenue/Profit
of CCUS (%)

Increased rate of profit
due to the expansionof CCUS market(%)

Cost of steels(Yen/Year)

Price hike rateof steels

Etc.

Fluctuation of carbon tax
Expenses
Scope 1,2
GHG
emissions(t-CO2)

Sales

Etc.

Carbon tax for Scope
1,2 GHG emissions(Yen/t-CO2)

Etc.

Damage of physical risks
Damage cost of floodin the past financial
year (Yen/Year)Business impact
Internal information to use (Example)

2-36

Net income(as well as management, etc., for the second round and after)

Increased rate ofdamage cost due
to increased frequencyof flood (%)

Etc.

How do we treat data that cannot be quantitatively estimated?
Regarding qualitative information or information with little scientific basis, measures such ascontinuous monitoring and interviews with external experts could be methods for evaluation.
It is important to identify evaluated/unevaluated risks and clarify the next action[Examples of actions for risks that cannot
be quantified]Interviews with outside experts

Risk Item

Validity ofquantitative
estimation ofbusiness impact

Review status

Hearings with external experts such as
research institutes and experts regarding risks
that could not be calculated

Risk A

Possible

Considered

Risk B

Possible

Considered

The results of the hearings are stored as
qualitative information.

Risk C
Risk D
Risk ENot possible
Considered(Qualitative Information(Qualitative)
Only)
Not possible
Not considered(no scientific data)
Possible

Continuous internal monitoring
Continuously monitor to obtain up-to-date
information on risks.

Considered

2-37[Stage 3: Be aware of the gap between future outlook and financial indicators in the business as usual]

Based on the estimated results, be aware of the scale of impact on the future outlook

Understand the impact of climate change on business prospects (future
management targets and plans)
What risks and opportunities have a greater impact?
It is possible to understand the extent to which climate change threatens thebusiness prospects for future management and targets. In some sectors andindustries, the impact may be smaller than anticipated.
Source: This Practical Guide (example of ORIX Asset Management Corporation: 3-37)
2-38

2. Scenario Analysis - Key Points of Practice2-1. For beginning scenario analysis

2-2. STEP2. Assess materiality of climate-related risks
2-3. STEP3. Identify and define range of scenarios
2-4. STEP4. Evaluate business impacts

2-5. STEP5. Identify potential responses
2-6. STEP6. Document and disclose information
Chapter 2 Scenario Analysis - Key Points of PracticeThis chapter explains how to practically undertake scenario analysis and describes key
points of its practice, based on use cases performed by companies under the support
program of the Ministry of the Environment.
2-39

Identify potential responses:
Use the results to identify applicable, realistic decisions to manage the identified risks andopportunities.
Notes in red: Points to consider in each step were added after the support program.

1
2

Ensure governanceIs in place

Assess materiality ofclimate-related risksMarket andTechnology
ShiftsReputation

Policy andLegalPhysical
Risks

What are the current andanticipated organizational
exposures to climate-relatedrisks and opportunities?
Do these have the potential to
be material in the future? Are
stakeholders concerned?
Pick and choose fromyour industry
and company viewpoint!

6

Documentation anddisclose

Get management
and operation
divisions involved!

Integrate scenario analysis into strategic planning and/or enterprise risk management processes.
Assign oversight to relevant board committees/subcommittees.
Identify which internal (and external) stakeholders to involve and how.

3

Identify and define
range of scenarios

4 Evaluate business
impacts

Identify potential
responses

Impact on:

Responses might include

Scenarios inclusive of arange of transition andphysical risks relevant to
the organization

What scenarios (andnarratives) are appropriate,given the exposures?
Consider input parameters,
assumptions, and analyticalchoices. What reference
scenario(s) should be used?

Clearly imagine a future world
under certain assumptions!

5

model

capabilities andtechnologies
Evaluate the potential effects

and financial position undereach of the defined scenarios.
Identify key sensitivities.

Try not to seek
too much accuracy!

Use the results to identify
applicable, realistic decisions
to manage the identified risks
and opportunities.
What adjustments tostrategic/financial plans would
be needed?
Do not narrow down!
Take multiple scenarios
into account.

Document the process; communicate to relevant parties: Be prepared to disclose
key inputs, assumptions, analytical methods, outputs, and potential management responses

Disclose information
osure of Climate

2-40

STEP5 Definitions of Actions/ Target of Practical Guide

as it is crucial
for countermeasures involving business model transformation.

In-house Participation

Managements

Phase 3
Consideration of establishing anorganizational structure and its
practical actions, and scenario
analysis procedure

Relevant
Departments
Operation
Divisions
Scenario Analysis

Business modeltransformation responding toclimate change,
Portfolio transformation
Investments for technologies

Incorporating climatechange into medium
term business plan

Incorporating climatechange into business plan

Phase 2
Consideration of future actions forresponding to risks and acquiring
opportunities

Phase 1

Team
Relevant In-house
Department
Solutions

Understanding of current in-house
response to climate-related risks
and opportunities

Actions suggested by
Scenario Analysis
team

Actions that could beundertaken by relevant
departments within thecurrent medium termbusiness plan

Actions on medium
term business planthat includes climatechange2-41[Overview]

establish practical action plans and an organizational structure
Stage1status on risk management
Regarding climate-related risks withgreat financial impact, it is important tostatus for risk management. If
necessary, confirm the current statusof rival companies

Note
How will scenario analysis
results be used in management?

Stage2
Consider future countermeasuresfor climate-related risk management
and seizing opportunities
Consider practical countermeasures
for risks and opportunities with great
financial impact

Note
What kind of organizational
structures are suitable after
conducting scenario analysis?

Stage3
Establish an organizational
structure and consider practicalcountermeasures and how toproceed scenario analysis
Establish an organizational structure inorder to promote countermeasures,and take practical actions cooperatingwith relevant department. And also
consider how to proceed with scenario
analysis

Note
What steps should be taken in
the future?

Source: This Practical Guide (examples of FUJIFILM Holdings Corporation: 3-108, Kajima Corporation: 3-70, Development Bank of Japan Inc.: 3-23)
2-42

Regarding climate-related risks and opportunities with great financial impact, it is important
If necessary, confirm the current status of rival companies
Risks and Opportunities

Status of thecompany's own
response

Status of responses by competitors
Company X

Company Y

Company Z

Risk A
Policies/
TargetRisk B
Opportunity C
Risk D

MarketOpportunity E

Organizing
the status ofthecompany's
own
responses

Benchmark Survey of Competitors'
Responses

Opportunity F

It is a suggestion to conduct comparative analysis on the company andcompetitors regarding risk management
2-43[Stage 2: Consider countermeasures for climate-related risk management and seizing opportunities]

Consider practical countermeasures for risks and opportunities with great financial impact

Scenario

2 C
scenario

4 C
scenario

Future business impact

Countermeasures (Example)

Operating income -JPY X trillion

Change in business model
Consideration of procuring
alternative materials
Investments in low carbon
technology

Operating income -JPY Y trillion

Strengthen supply chain
performance considering climatechangePromote response to BCP
Invest to improve quality of
raw materials

It will become important to plan resilient countermeasures that can be used in any situation.
Companies may also try deciding on a rough direction for countermeasures as a bareminimum before going on to consider specific countermeasures in the course of ongoing
implementation.

2-44

[Stage 3: Establish practical action plans and an organizational structure]

Establish an organizational structure in order to implement countermeasures and takepractical actions cooperating with relevant department.
And also consider how to proceed with scenario analysis
Response
implementation period(Example)

Future Actions (Example)
Establish an organizational structure

Taking practical actions cooperating with
relevant department

How to proceed with scenario analysis

Dissemination of the results of
scenario analysis within thecompany (including managements)
Currently or for a few
months1 yearInterviews with experts onimportant risks and opportunities
for which there is little information

Gaining an agreement frommanagements on the needs forestablishing an organizational
structure in order to promote
countermeasures-

Establishing an organizational
structure in order to promote
countermeasures throughexplaining to relevant department

Cooperating with relevant
department and take practicalactions aligned with existing
business plans that is relatively
easy to implement

Establishment of a monitoring
system for scenario analysis
Monitoring

Beginning practical consideration
with relevant department for new
actions
As needed (timings
may differ for eachcompany)

Incorporating climate change into medium term business plan
Encourage dialogue with stakeholders on climate change to create markets
Introduction of internal carbon pricing as a mechanism to promote low-carbon investment

Consider scenario analysis procedure, establishing an organizational structure , and getting relevant
department involved in the course of scenario analysis, alongside with proceeding the incorporation ofclimate change into medium term business plan
2-45

(Column) What is Internal Carbon Pricing?
Internal Carbon Pricing is carbon prices set by companies and used within them.

Internal Carbon Pricing is the price of carbon estimated internally by the company, and is a mechanism forpromoting low-carbon investment by companies
It is a method used in corporate planning, and is leveraged in incentives for promoting energy efficiency, the identification ofrevenue opportunities and risks, and in guiding investment decisions

Companies

A price is placed oncarbon emissions

National/local
governments

A price is placed on carbon emissions

CO2

CO2

internal office

CO2 reduction
initiatives change

CO2 reduction
initiatives change

Systems related to carbon
pricing

Internal Carbon Pricing
for information on ICP

Source:2-46

Divisions-(2017.6)

How will scenario analysis results be used in management?
It is important that climate change be included in the process of business strategy planning.
One tip is to include climate change into the nearest midterm management plan

Report the results of scenario
analysis to managements

Management
PolicyEstablish an organizational
structure and take practicalactions cooperating with
relevant department

Incorporate climate change
into medium term business
plan

Creation of the medium
term business plan

Report the results of scenario
analysis to managements

Alignment of target level and practicalmeasures for achieving the targets inthe medium term business plansession on climate change impacts on

Climate Change

Responding
to Risks andOpportunities

Promoting
Scenario
Analysis

scenario analysis) for managements[Results of the FY2018 Ministry of theEnvironment Scenario Analysis Support
Project]
Company A: Established a new
department specializing in the integrationof IR/Sustainability as the understandingof management progressed. Periodic
discussions with executives on TCFD
held at the Sustainability Committee
Company B: Improved understanding ofmanagement and launched a team forclimate change management. Executive
Vice President assumes chairmanship

Company-wide deployment of scenario
analysis
Materialization of countermeasures forrisk management and seizing
opportunities
Establishment of a system to promote
the above

Input of external environment

Consider indicators andtargets linked to medium
term business plan
Continuation of monitoring

Monitoring of risks andopportunities
Establishment of a system topromote the above

2-47

What kind of organizational structures are suitable after
conducting scenario analysis?
It may be suggested to create a cross-sectional organization directly under the corporate planningdepartment that deals with climate change to give effectiveness to the result of scenario analysis
As a cross-sectional organization with climatechange as a company-wide theme

Remain as limited initiatives by some divisions

Philosophy

Philosophy

VisionVisionManagement
Strategy

Input scenario
analysis results

Management
Strategy

Climate Change Measures Division
Climate Change
MeasuresBusiness
Divisions

XX Division
Collaborate undercommon goals

2-48

Collaborate undercommon goals

CSR
Division

Business
Divisions

XX Division
Cooperation on
climate change
is limited

Cooperation on
climate change
is limited

CSR
Division

Actions to be taken for the next step?
The goal of scenario analysis is to integrate climate change with business management, and to enhance
corporate value. With scenario analysis, it aims to continue the cycle of disclosing information andrebuilding an organizational structure (integration with business management).

Towards improving
corporate value

Scenario
Analysis

4

5
Continuously conducting
scenario analysis
as a cycle

Managements rebuild
an organizational structure
based on feedbacks

Through scenario analysis it
encourages
incorporating climate change
into business plans

Through disclosure it
encourages
Beginning dialogue with multistake holders/
Improving corporate value

Corporate
Management

3
Managements receive
reactionsfor the disclosure

Disclosure

2
Begin disclosing with1
Begin to work on
scenario analysis

Scenario
Analysis
understandings

Structure for
conducting
scenario analysis

2-49

2. Scenario Analysis - Key Points of Practice2-1. For beginning scenario analysis

2-2. STEP2. Assess materiality of climate-related risks
2-3. STEP3. Identify and define range of scenarios
2-4. STEP4. Evaluate business impacts

2-5. STEP5. Identify potential responses
2-6. STEP6. Document and disclose information
Chapter 2 Scenario Analysis - Key Points of PracticeThis chapter explains how to practically undertake scenario analysis and describes key
points of its practice, based on use cases performed by companies under the support
program of the Ministry of the Environment.
2-50

[Overview]and the results obtained from each step; use appropriate disclosure to achieve increased
corporate value
Stage 2

Stage 1
Describe the relationship between the

Describe the results
obtained from each stepand the scenario analysis

Describe the positioning of the

Described the results obtained
from scenario analysis foreach step

recommended disclosure items (11items total).
Show the overall picture using
contrast charts, etc.

*It may also be helpful to reference TCFD Guidance 2.0
Point

disclosed?
2-51[Stage 1: Describe the relationship between theitems (11 items total).Show the overall picture using contrast charts, etc.
Recommended disclosure items in the TCFD recommendations

Area ofdisclosure-related risks and opportunitiesa)p.XX-XX-related risks and opportunities

p.XX-XXb)Strategy: Disclose the actual and potential impacts of climatestrategy and financial planning (when important)p.XX-XXa) Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long termb) Describe the impact of climate-p.XX-XXgp.XX-XX-related scenarios, includ

Risk management: Disclose the processes used by the organization to identify, assess, and manage climate-related risksa)b)p.XX-XX-related risks

p.XX-XX-related risksc) Describe how processes for identifying, assessing, and managing climate-rall risk managementp.XX-XX

Metrics and targets: Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities(when important)a) Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management processp.XX-XXb) Disclose Scope1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks

p.XX-XXc) Describe the targets used by the organization to manage climate-related risks/opportunities and performance against targets

p.XX-XX

allows companies to show the overall picture of TCFD disclosure
Source:2-52-

page 19

[Stage 2: Describe the results obtained from each step (1/2)]

Describe the results of scenario analysis conducted in each step
Visual examples of describing results for each step
STEP2: Assess materiality of climate-related risks

STEP3: Identify and define range of scenarios

STEP4: Evaluate business impacts

STEP5: Identify potential responses

Sources: This Practical Guide (examples of CHIYODA Corporation: 3-43, Mitsui Mining & Smelting Co., Ltd.: 3-127, ORIX Asset Management Corporation 3-37,
FUJIFILM Holdings Corporation: 3-108)
2-53[Stage 2: Describe the results obtained from each step (2/2)]

It is important to describe climate change-related governance, as well as what wasunderstood from the scenario analysis results and how the company plans to respondResults of interviews with investors/experts
It is not the disclosure itself that will be evaluated; showing the results of risk/opportunity identification and the effectscenario analysis results have on management strategy is the important thing
Increasing corporate value is the top priority, and disclosure is needed in cases where climate change is a significant factor forthis. Consequently, if climate change does not have materiality for the company, then there is no need to conduct a detailed
analysis.
It is not the disclosure itself that will be evaluated; what is important is using qualitative terms to ccurrent initiatives/future initiatives. Disclosures should be made on the assumption that dialogue will take place and describe
the scenario analysis in an easy-to-understand manner as a starting point for discussion.
For scenario analysis disclosures, investors want to know how the results of the scenario analysis will affect management
strategy. I am concerned that there will be companies that make scenario analysis an end in itself.

-related strategies
Status of climate change-related governance structure

STEP1 (2-9-11)

Information of data used as the basis for each scenario analysis

STEP3 (2-2528)

appropriate transition toward decarbonization by 2050
Current/future initiatives toward risks/opportunities identified from the scenario analysis

STEP5 (2-43, 44)
Example disclosure (2-56, 57)

Narrative for climate change-related value creation based on scenario analysis results

STEP5 (2-49),
Example disclosure (2-58,59)

How the company will proceed with scenario analysis and achieve the goals

Source: Prepared based on interviews conducted by the Ministry of the Environment in FY2020 toward 30 investors and experts
2-54

STEP5 (2-45): Reference page

Investors are not necessarily looking for "quantitative" information on the results of scenario analysis. They
are focused on the impact on operations, such as management's involvement and how scenario analysis
results are leveraged in the company's business and management.

Results of interviews with investors/experts
For
beginning
scenario
analysis

What is important is whether the company has a structure that allows it to proceed with scenario analysis, as well as
management's understanding
Scenario analysis is an area which is not yet covered by mainstream discussions in company management. Because of this, many companies
have outsourced the first round of scenario analysis to external consultants in their corporate planning and so on, and it is questionable whether
the company has established a structure that enables it to tackle scenario analysis on its own
While involving external experts is a good tactic, investors are more concerned about how the company's senior management understands
sustainability risks and discusses them at board meetings

Assess materiality
This area is the core of scenario analysis, and risks/opportunities affecting businesses should be explained in detailof climate-relatedThis area is the core of scenario analysis, and should be explained in detailrisks

The reasons for scenario selection should be explained. If unique viewpoints have been added, these must be

Identify andexplained in detaildefine range
The reasons for scenarios being selected are important, as opinions on scenarios may vary according to the industry
If the company has added its own variables to the parameters, specific explanation is needed, as side-by-side comparisons with other companies cannot be made in such casesof scenarios
The bare minimum of analysis required in the future, as well as data and assumptions, should be made clear

Evaluatebusiness
impacts

Identify
potential
responses

Opinions concerning quantitative information varied, with some investors saying that they had no problem with the current
qualitative information
There is no international consensus on the methodology for impact evaluation, and at present, investors may be satisfied with qualitative information. It is expected that demand forquantitative information will be determined by the future actions of financial supervisory authorities and the influence those actions have on financial institutions and general businesscompanies afterward
Rather than providing figures, it may be better to disclose the process for internal discussions and have direct dialogue concerning impacts that cannot be publicly disclosed
Investors want to know how climate change will affect business, so the company should put a theoretical image of this into figures, even if it is only a rough one
available for thisInvestors are focused on how the results of scenario analysis will be leveraged in the company's business and management
Investors are focused on how the results of scenario analysis will be leveraged in the company's business and management
It is also important to express how climate change risks / sustainability issues will be addressed in strategies and which kinds of actions are
insufficient

Source: Prepared based on interviews conducted by the Ministry of the Environment in FY2020 toward 30 investors and experts
2-55[Examples of how to show the organization's strategic resilience
Panasonic (electrical appliances/machinery/communications)]:

Panasonic shows the organization's strategic resilience through stating that the impact from the possible
risks in each scenario is minor, or that the company has implemented countermeasures against them

The analysis shows the organization's strategic resilience by stating that the impacts in the scenario
analysis results are minor / are already being addressed

Source: Panasonic Corporation, "Sustainability Data Book 2020"
2-56

Possible risks

Risk impacts, countermeasures

Carbonpricing

Impact is minor due to the company
already making efforts toward CO2
reduction

Changes inenvironmen
tal laws andregulations

Will have a significant impact on homeelectronics businesses dealing with energysaving products
Share information on environmental
laws and regulations and adopt
countermeasures by working with
global sites

Extremeweather

Impact on the supply chain andpotential reduction of economic activity
Work on developing a business
continuity plan

[Examples of how to show the organization's strategic resilience: NTT DOCOMO (service)]

NTT DOCOMO lists the risks for each scenario and states that the company is already working
on countermeasures linked to medium- to long-term strategy
The analysis shows the organization's strategic resilience through stating that the risks
are already being addressed

The company lists physical and transition risks, and describes various initiatives for achieving medium- to long-term
strategies against risks
Source: NTT DOCOMO, Inc. "NTT DOCOMO GROUP SUSTAINABILITY REPORT 2019"
2-57[Examples of how to show the organization's strategic resilience(materials/buildings)]: SEKISUI CHEMICALSEKISUI CHEMICAL describes the scenario worldview and states that the company's
technology is compatible with the scenario
The analysis shows the organization's strategic resilience through stating that there are opportunities toexpand business by leveraging the company's technology

Source: SEKISUI CHEMICAL Co., Ltd, "The SEKISUI CHEMICAL Group's Reponses to Climate Change Issues
Recommendations "2-58

Information Disclosure Based on TCFD

[Examples of how to show the organization's strategic resilience(materials)]: Mitsubishi Chemical Holdings

Mitsubishi Chemical Holdings analyzes business risks and opportunities and uses
quantitative terms to state that there are opportunities for expanding the company's business

Source: Mitsubishi Chemical Holdings Corporation, "KAITEKI REPORT 2020 Integrated Report"
2-59

3.

Scenario Analysis - Practice Cases

Chapter 3. Scenario Analysis - Practice Cases
This chapter explains how scenario analysis is carried out based on
the support cases of the Ministry of the Environment (18 companies).

3. Scenario Analysis - Practice Cases

Chapter 3. Scenario Analysis - Practice Cases
This chapter explains how scenario analysis is carried out based on the support
cases of the Ministry of the Environment (18 companies).

Cases of scenario analysis by sector

For beginning scenario analysis
For beginning scenario analysis
SectorBanks
FinancialCompany

Preparation

Preparation

Preparation

Preparation

Gainingunderstandings frommanagements

Establishing anorganizational structure
for scenario analysis

Setting target analysis

Setting timeline foranalysis

3-10, 3-11

3-10

3-25, 3-26

3-28

3-42

3-42

3-50

3-54

Development Bank of Japan Inc.

Asset
ORIX Asset Management Corporation
Management
EnergyChiyoda Corporation

Transportation Kyushu Railway Company
Buildings

Kajima CORPORTAION

3-62

3-64

Construction
Materials

LIXIL Group Corporation

3-73, 3-74

3-74

Shin-Etsu Chemical Co., Ltd.
Materials

FUJIFILM Holdings Corporation
Furukawa Electric Co., Ltd.
Mitsui Mining & Smelting Co., Ltd.,

NonFinancial
Food

Electronic
Equipment
Retailing
Consumer
Product
3-1

3-88

3-87, 3-92, 3-93

3-90

3-98

3-100

3-110, 3-111

3-114

3-122, 3-123, 3-124

3-126

Kagome CO.,LTD.

3-139

3-141

Calbee, Inc.

3-156

3-158

Meiji Holdings Co., Ltd.

3-165

3-165

KYOCERA Corporation

3-182

3-183

3-195

3-198

YASKAWA Electric Corporation
ASKUL Corporation
Seven & i Holdings Co., Ltd.
Lion Corporation

3-235

3-207, 3-208

3-209

3-222

3-225

3-235

3-235

Cases of scenario analysis by sector

STEP2. Assess materiality of climate-related risks
STEP2. Assess materiality of climate-related risks
SectorBanks
FinancialCompany

Stage 1

Stage 2

Stage 3

Listing risk items

Identifying potential impact
on business

Assessing materiality of
risks

3-13

3-13

3-13

3-27

3-27

3-27

Development Bank of Japan Inc.

Asset
ORIX Asset Management Corporation
Management
EnergyChiyoda Corporation

3-43

3-43

3-43

3-52, 3-53

3-52, 3-53

3-52, 3-53

Kajima CORPORTAION

3-63

3-63

3-63

Construction
LIXIL Group Corporation
Materials

3-75

3-75

3-75

Shin-Etsu Chemical Co., Ltd.

3-94 ~ 3-96

3-94 ~ 3-96

3-94 ~ 3-96

FUJIFILM Holdings Corporation

3-99

3-99

3-99

Furukawa Electric Co., Ltd.

3-113

3-113

3-113

Mitsui Mining & Smelting Co., Ltd.,

3-125

3-125

3-125

Kagome CO.,LTD.

3-140

3-140

3-140

Calbee, Inc.

3-157

3-157

3-157

3-166, 3-167

3-166, 3-167

3-166, 3-167

Transportation Kyushu Railway Company
Buildings

Materials
NonFinancial
Food

Meiji Holdings Co., Ltd.
Electronic
Equipment
Retailing
Consumer
Product

KYOCERA Corporation

3-182

3-182

3-182

YASKAWA Electric Corporation

3-196, 3-197

3-196, 3-197

3-196, 3-197

ASKUL Corporation

3-207, 3-208

3-207, 3-208

Seven & i Holdings Co., Ltd.

3-223, 3-224

Lion Corporation

3-236, 3-237

3-207, 3-208
3-223, 3-224

3-236, 3-237

3-236, 3-237

3-2

Cases of scenario analysis by sector

STEP3. Identify and define range of scenarios
STEP3. Identify and define range of scenarios
SectorBanks
FinancialCompany

Development Bank of Japan Inc.

Asset
ORIX Asset Management Corporation
Management
EnergyChiyoda Corporation

Stage 2

Stage 3Choosing scenarios

Obtaining forecast
information on relevant
parameters (viable)

Shaping worldview inconsideration of
stakeholders

3-14, 3-15

3-13 ~ 3-15

3-16 ~ 3-19

3-28

3-29

3-30 ~ 3-34

3-42

3-44

3-45, 3-46

3-54

3-57

3-55, 3-56

Kajima CORPORTAION

3-64

3-65

3-66, 3-67

Construction
LIXIL Group Corporation
Materials

3-74

3-80

3-76 ~ 3-79

Transportation Kyushu Railway Company
Buildings

Shin-Etsu Chemical Co., Ltd.
Materials
NonFinancial
Food

Electronic
Equipment
Retailing
Consumer
Product
3-3

Stage 1

3-90

FUJIFILM Holdings Corporation

3-100

Furukawa Electric Co., Ltd.

3-101 ~ 3-104
3-115 ~ 3-117

Mitsui Mining & Smelting Co., Ltd.,

3-126

Kagome CO.,LTD.

3-141

3-142

3-143 ~ 3-145

3-127 ~ 3-130

Calbee, Inc.

3-158

3-159

3-160, 3-161

Meiji Holdings Co., Ltd.

3-165

3-168

3-169, 3-170

KYOCERA Corporation

3-183

3-184

3-185 ~ 3-188

YASKAWA Electric Corporation

3-198

3-199

3-200 ~ 3-203

ASKUL Corporation

3-209

3-210

3-211, 3-212

Seven & i Holdings Co., Ltd.

3-225

3-226

3-227, 3-228

Lion Corporation

3-238

3-239

3-240 ~ 3-243

Cases of scenario analysis by sector

STEP4. Evaluate business impacts
STEP4. Evaluate business impacts
SectorCompany

Banks
Financial

Stage 1

Stage 2

Stage 3

Identifying potential financial
indicators affected by risks
and opportunities

Considering calculation
formula and estimating
financial impact

Being aware of the gap
between future outlook andfinancial indicators in thebusiness as usual

Development Bank of Japan Inc.

Asset
Management
Energy3-16 ~ 3-20

ORIX Asset Management
Corporation

3-35

3-35

3-36 ~ 3-39

Chiyoda Corporation

3-47

3-47

3-48

Transportation Kyushu Railway Company

3-58

3-58

Buildings

Kajima CORPORTAION

3-68

3-69

Construction
Materials

LIXIL Group Corporation

3-81

3-82, 3-83
3-91

Shin-Etsu Chemical Co., Ltd.
3-105

FUJIFILM Holdings Corporation

Materials

3-105

3-106, 3-107
3-118, 3-119

Furukawa Electric Co., Ltd.
Mitsui Mining & Smelting Co., Ltd.,

NonFinancial

Kagome CO.,LTD.
Food

3-131, 3-132

3-131, 3-132

3-146

3-146
3-162

3-162

3-171, 3-178

3-171, 3-178

3-172, 3-179

Calbee, Inc.
Meiji Holdings Co., Ltd.

3-147 ~ 3-148

KYOCERA Corporation

Electronic
Equipment

3-189

YASKAWA Electric Corporation

Retailing
Consumer
Product

3-204

3-204

ASKUL Corporation

3-213, 3-214

3-213, 3-214

Seven & i Holdings Co., Ltd.

3-229, 3-230

3-229, 3-230

Lion Corporation

3-244

3-244

3-245, 3-246

3-4

Cases of scenario analysis by sector

STEP5. Identify potential responses
STEP5. Identify potential responses
Stage 1

SectorCompany
current status on risk
management

Banks
Financial

Development Bank of Japan Inc.

Chiyoda Corporation

Electronic KYOCERA Corporation
Equipment YASKAWA Electric Corporation
Retailing
Consumer
Product

3-60

3-89

3-95, 3-96

3-134 ~ 3-136

3-122, 3-123,
3-125 ~ 3-133, 3-136

3-108

3-133
3-149 ~ 3-152
3-163

3-163

3-173, 3-180

3-173, 3-180

3-190 ~ 3-192

3-190 ~ 3-192

ASKUL Corporation
Seven & i Holdings Co., Ltd.
Lion Corporation

3-60

3-118 ~ 3-120

Kagome CO.,LTD.

Meiji Holdings Co., Ltd.

3-5

3-95, 3-96
3-108

Furukawa Electric Co., Ltd.

Calbee, Inc.

3-40

3-84

Mitsui Mining & Smelting Co., Ltd.,

Food

3-23

3-59

Shin-Etsu Chemical Co., Ltd.

NonFinancial

Describe the results
obtained from eachstep

3-70, 3-71

Construction
LIXIL Group Corporation
Materials

Materials

Stage 2

3-48

Kajima CORPORTAION

FUJIFILM Holdings Corporation

Stage 1

3-39

Transportation Kyushu Railway Company
Buildings

Stage 3

Establish an
Consider future
Describe the relationshiporganizational structure
countermeasures for
between theand consider practicalclimate-related risk
recommended disclosure
countermeasures and how
management and seizing
items and the scenario
to proceed scenario
opportunities
analysisanalysis

3-22

Asset
ORIX Asset Management
Management Corporation
EnergyStage 2

STEP6. Document and disclose
information

3-205

3-205

3-205

3-215, 3-216

3-217 ~ 3-220

3-217 ~ 3-220

3-233
3-247

3-247

Cases of scenario analysis by sector in the practical guide ver2.0

For beginning scenario analysis,STEP2. Assess materiality of climate-related risks
For beginning scenario analysis
SectorPreparation

Company

Preparation

Preparation

Gaining understandings Establishing an organizational
structure for scenario analysis
from managements
EnergyNonFinancial

Setting target analysis
the practical guide ver2.0

ITOCHU Corporation

Transportation

Preparation

Setting timeline foranalysisthe practical guide ver2.0 3-24

3-22

Mitsui O.S.K. Lines, Ltd.

the practical guide ver2.0 3-39

Japan Airlines Co., Ltd.

the practical guide ver2.0 3-50

the practical guide ver2.0

Mitsubishi Motors Corporation

3-55, 3-58

Sumitomo Forestry Co., Ltd.
Buildings/Forest
Tokyu Fudosan Holdings
Products
Corporation

the practical guide ver2.0

3-74

the practical guide ver2.0 3-86 the practical guide ver2.0 3-86

STEP2. Assess materiality of climate-related risks
SectorCompany

Stage 1

Stage 2

Listing risk items
ITOCHU Corporation

the practical guide ver2.0 3-23

the practical guide ver2.0 3-23

the practical guide ver2.0 3-23

Mitsui O.S.K. Lines, Ltd.

the practical guide ver2.0 3-38

the practical guide ver2.0 3-38

the practical guide ver2.0 3-38

Transportation Japan Airlines Co., Ltd.

the practical guide ver2.0 3-49

the practical guide ver2.0 3-49

the practical guide ver2.0 3-49

the practical guide ver2.0 3-56, 3-59

the practical guide ver2.0 3-56, 3-59

the practical guide ver2.0 3-72, 3-73

the practical guide ver2.0 3-72, 3-73

the practical guide ver2.0 3-72, 3-73

the practical guide ver2.0 3-87

the practical guide ver2.0 3-87

the practical guide ver2.0 3-87

EnergyNonFinancial

Stage 3

Identifying potential impact on
Assessing materiality of risksbusiness

Mitsubishi Motors Corporation
Buildings/Forest Sumitomo Forestry Co., Ltd.
Products
Tokyu Fudosan Holdings Corporation

Sourcend3-6Cases of scenario analysis by sector in the practical guide ver2.0

STEP3. Identify and define range of scenarios, STEP4. Evaluate business impacts
STEP3. Identify and define range of scenarios
SectorCompany

Stage 1

Stage 2Choosing scenarios
Energy

ITOCHU Corporation

the practical guide ver2.0 3-24

the practical guide ver2.0 3-25

the practical guide ver2.0 3-26, 3-27

Mitsui O.S.K. Lines, Ltd.

the practical guide ver2.0 3-39

the practical guide ver2.0 3-40, 3-41

the practical guide ver2.0 3-42 ~ 3-45

Transportation Japan Airlines Co., Ltd.
NonFinancial
Mitsubishi Motors Corporation
Buildings/Forest Sumitomo Forestry Co., Ltd.
Products

Stage 3

Obtaining forecast information
Shaping worldview inon relevant parameters (viable) consideration of stakeholders

the practical guide ver2.0 0 3-50

the practical guide ver2.0 3-74

the practical guide ver2.0 3-51, 3-52
the practical guide ver2.0 3-56, 3-59

the practical guide ver2.0 3-55, 3-58

the practical guide ver2.0 3-81

the practical guide ver2.0 3-75 ~ 3-80

the practical guide ver2.0 3-88, 3-90

Tokyu Fudosan Holdings Corporation

STEP4. Evaluate business impacts
Stage 1

SectorEnergyCompany

Identifying potential financial
indicators affected by risks
and opportunities

Stage 2

Stage 3

Considering calculation
formula and estimating
financial impact

Being aware of the gap
between future outlook andfinancial indicators in thebusiness as usual
the practical guide ver2.0 3-28

ITOCHU Corporation
Mitsui O.S.K. Lines, Ltd.

Transportation Japan Airlines Co., Ltd.
NonFinancial
Mitsubishi Motors Corporation

the practical guide ver2.0 3-46, 3-47

the practical guide ver2.0 3-46,47

the practical guide ver2.0 3-53
the practical guide ver2.0 3-56, 3-59
the practical guide ver2.0 3-83, 3-84

Buildings/Forest Sumitomo Forestry Co., Ltd.
Products
Tokyu Fudosan Holdings Corporation

Source3-7

the practical guide ver2.0 3-89, 3-91ndCases of scenario analysis by sector in the practical guide ver2.0

STEP5. Identify potential responses

STEP5. Identify potential responses
SectorCompany

Stage 1status on risk management

EnergyStage 2

Stage 3

Establish an organizational structure
Consider future countermeasures forand consider practicalclimate-related risk management andcountermeasures and how to proceed
seizing opportunities
scenario analysis

ITOCHU Corporation
Mitsui O.S.K. Lines, Ltd.

Transportation Japan Airlines Co., Ltd.
NonFinancial

Mitsubishi Motors Corporation
Buildings/Forest
Products
Construction
Materials

Sumitomo Forestry Co., Ltd.
Tokyu Fudosan Holdings Corporation
the practical guide ver2.0 3-104

ITOCHU Corporation

Sourcend

3-8

Financial Sector (Banks)
Practice Case3-

Development Bank of Japan Inc.

1

[Overview]

Overview of our scenario analysis
Scenario analysis of transition risks and analysis of expected impact on loans and investments by 2050
(Principle)
Focus on technological innovations and risks and opportunities due to policies and regulations aimed atrealizing a low-carbon society and a decarbonized society.
It is necessary for us to envision various economic and social scenarios in the future, including climate-relatedrisks and opportunities, and to consider the optimal portfolios accordingly.

To take into account socio-economic trends associated with climate change, utilizing the "Shared
Socioeconomic Pathways: SSP" scenarios
5 technologies (CCS, EV, biomass, hydrogen, renewable energy) are focused as a trial basis from among
technologies closely related to climate change.
Transition risk
[Scope of this analysis (red frame)]Resource efficiency
Each technology is regarded
investment opportunity, and the business
impact is analyzed and evaluated
Policyas
andan
Regal
Technology
Energy Sourceby scenario from the viewpoint oftechnological development and dissemination.
MarketReputation
Physical risk
Acute
Chronic

Risk

Opportunity

Strategic planningplanning
Strategic
Risk Management
Management
Risk

Products / Services
Markets
Resilience

Financial impact
Revenue
Expenditures

IncomeStatement

Cash Flow Statement

Balance
Sheet

Assets and liabilities
Capital and financing

3-10

1

[Overview]

Sectors to be analyzed
We select 3 sectors (A, B, and C) from
Priority Areastaking into account thebalance of money loans and other factors.
Opinions from departments in the relevant sector are
also reflected in the analysis.

3-11

1

[Overview]

Steps to implement scenario analysis
2

Assess materiality ofclimate-related risks
Risk materiality
assessment
Selection of risk items
Assessment of theimportance of risk

3

Identify and define
range of scenarios

4

Evaluatebusiness impacts

Definition ofcountermeasures

Cross-sectoralcomparisons

Cross-sectoral
assessment

Impact on its portfolio

Concentrated anddiversified investment

Selection of
scenarios
SSP

Selection of
timeframe
2050

5

etc

Coverage of our trial

Future Challenges

For this analysis, we select assessment of the importance of risk(technologies/policies),
timeframe (2050), and SSP Scenarios.
3-122[Evaluation of the importance of risk]

Step

2

3

4

5

Risk materiality assessment and analytical perspectives after step 3
Selection and assessment of risk items (example)
Risk item
Small classification

Business impact/Uncertainty
Discussion

Assessment

Introduction of carbon prices to electricity generates additional costs for thecompany's power generation and increases the company's expenditure.
Consumer burdens increase when costs are reflected in electricity sales prices,
but consumers are more likely to choose renewable energy that gives them acompetitive advantage in terms of carbon prices.

Carbon price
Dissemination of renewableenergy and energy-saving
technologies
Developing next-generation
technologies
Carbon Emissions
Targets/Policies in Each Country

Large

Classify each risk item, and consider and assess thebusiness impact and uncertainty associated with each item.

MediumSmall

In the many of scenario
analyses, company
classifies each risk item
specifically and assess
the importance risk
according to temperaturetargets: 1.5 , 2 , and4 .

Changes in the energy mix

Viewpoints of the analysis after step 3[Target technologies][SSP Scenarios]
Evaluate the degree of importance based on the
degree of dissemination and development oftechnologies, etc.

CCS
BiomassEV

Renewable energy

Hydrogen

NOTE: In order to facilitate data collection,limited to theabove-mentioned technologies on a trial basis

3-13

SSP offers a variety of possibilities forsocioeconomic development, difficulty of
mitigation and adaptation divided into 5
categories

Afterwards, we will focus
on "technology" as aninvestment opportunity,
which is included in risk
items. In order toconsider the economic
and social factors behindclimate change, analysis
was conducted using the
SSP Scenarios.

3 [Definition of scenario groups]

Step

2

3

4

5

Selection of SSP scenarios
Scenario name

IPCC
Overview
temperature zone of the worldview

Sustainable

International cooperation

Policies for sustainability have been
adopted, and a decarbonized society ishighly likely to be realized. Optimization
methods are applied to renewableenergy.

Assuming a world in whichinternational cooperation is advancing
and the Paris Agreement is respected

Policies on environmental issues are of
low priority, and it is difficult to achievea decarbonizing society.

Assuming a world that prioritizes
domestic interests and values rather
than international cooperation suchas the Paris Agreement

Fossil-fueled
Low-carbon
society

The society depended on fossil fuels,
but low carbon will progress to someextent with the use of CCS and othertechnologies.

Assuming a worldview based oncooperation aimed at by the Paris
Agreement

Fossil-fueled
conventional
development
society

Expecting growth depended on fossil
fuels, it is difficult to achieve a
decarbonizing society.

Assuming a worldview that does notpresuppose cooperation aimed at by
the Paris Agreement

SSP1

1.5

Decarbonizedsociety worldwide

SSP3

4

Nationalism/Regio
nalism caused byeconomic
disparities

SSP5-1

2

4

SSP5-2Focusing on
achieving a decarbonized society

Conventional
development

3-14

3 [Definition of scenario groups]

Step

2

3

4

5

(Reference) Economic and policy background data on SSP1-5 scenarios
SSP1

SSP2

SSP3

SSP4

SSP5

Growth rates are high in
low-and middle-income
countries, and moderate inhigh-income countries.

Medium, heterogeneous

Slow (low)Low-income countries have
low growth rates. Others are
mediumHigh

Disparity

Disparity narrows in Japanand overseas

Different conditions for theelimination of disparities inJapan and overseas

There is a large gap
between Japan andoverseas.

Expansion especially inJapan

Disparity narrows sharply inJapan and overseas

International
trade

MediumMediumEnforcement of strong
restrictions

MediumTrade is active. Production
with comparative advantage
of each country

Globalization

Markets are unified andproduction is carried out
in each region.

Some degree of freedom inglobalization

Reverse from globalization.
Active regional security
policies

Elite employees have global
connections

Globalization advancesand markets move towardunification.

Consumption
trend

Physical consumption
decreases in high-income
countries. Expand meat-freemealsConsumption centeres on
physical consumption,
moderate meat consumption

Mainly physicalconsumption

Consumption levels are highamong elites, but low among
others.

Material consumption,
tourism and mobility
consumption
Meat-centric life

International
cooperation

Have the effect

Relatively weak

Weak

Globally unified markets
outside of vulnerable people

Targets for development areachieved, but targets for theenvironment are not achieved.

Environmental
policyImproved management atregional and global volumelevels. Strengthening
pollution regulation

Although there are concerns
about pollution at the local
level, putting into practice issuccessful

Priority on environmental
issues is low.

Policydirection

Sustainability policy

Focus less on sustainability

Concentration of securityrelated policies

Relevant
agencies

The state and internationalorganizations haveinfluence

Have a moderate influence

Weak influence ofinternational organizations

Economic
growthEconomic and lifestyle
Policies and Related Organizations

Middle-and high-income
Focus on domestic policies,
countries focus on
but lack of interest in global
environmental issues, without
initiatives
measures for vulnerable people
Implementation of policies
related to free markets, humanresources development, anddevelopment
To foster a competitive
Effective measures for politics
market, relevant agencies
and business elites
will cooperate more closely
Policies that benefit thebusiness elite

Source: Brian C. O'Neill et al. (2017) "The roads ahead: Narratives for shared socioeconomic pathways describing world futures in the 21st century"
3-15

4 [Business impact evaluation]

Step

2

3

4

5

Steps to evaluate business impact
Step 4-1

Step 4-2

Evaluation of 5 technologies(Qualitative & Quantitative)
Overviewof
Evaluation

Analyticalmethods

Step 4-3
Business impact evaluation(Quantitative)

Business impact evaluation(Qualitative)

Classify of the technologicaldevelopment and acceptanceby scenarios.

Evaluate sector impact based on
scenario worldview andtechnology evaluation

Quantify the degree of impact oftechnology in the scenario andJapan's strengths in technology, andconsolidate them into sectoral units toevaluate "business impact."

Extract technology-related
descriptions from multiple
literature on climate change andclassify "technologicalprogress" into 3 stages

Qualitatively evaluate the external
impact of 3 sectors 4 scenarios
using 5Force analyses

Select recommended technologies
for investment by sector andscenario, and construct ourinvestment portfolio
Scored "degree of impact oftechnology" (up to 6 points) from theviewpoint of necessity of government
support and coverage of technology
Evaluation of Japan's technologicalstrengths on a 3-stage scale basedon comparison with other countries'
policies and budget requests inJapan

We conduct simulations foreach SSP scenario andcalculate "degree oftechnological dissemination" bytaking into account the results.

3-16

4 [Business impact evaluation]

Step

2

3

4

5

Step 4-1 Diagram
Group of scenarios
Scenario name
SSP1

SSP3

SSP5-1

SSP5-2

Technologicaldevelopment

Small to medium

Small to medium

Approachto Step 4-1
Large

Large

Socialacceptability

Maximum installable
volume:%CCS

Technical name

CCS/ primary energy:%
BECCS:
%
Coal
+
CCS:
%
Similar analysis implemented for each
Gas
+
CCS:
%
technology (CCS, EV, biomass, renewableTechnologicaldisseminationenergy,EVhydrogen)

Degree oftechnologicaldevelopment

Degree oftechnologicaldissemination

Classification of degree ofdevelopment (large to small) by
qualitative consideration from theliterature related to technology[Reference: 3-15]

Complement

Calculate the degree oftechnological dissemination under
the scenario by adding "social
acceptability" to "degree oftechnological development".

(Defects of SSP)No detailed definitions of the degreeof technological development(Constraints)
Socialacceptability
Conduct simulations to determine the acceptability of thetechnologies in the world view of the assumed scenarios.

3-17

4 [Business impact evaluation]

Step(Reference)

2

3

4

5

development by scenarios
Scenario name
SSP1

SSP3

SSP5-1

SSP5-2CCS

EV

Approach to Classification of "Development"

Degree of technological development
High

Biomass

MediumLow

CCS Realization of great cost
CCS Technological
CCS Technology would not
cut. Technologies related toCC(U)Sdevelopment advances, as welladvance. EOR project would be
BECCS becomeas cost cut
promotedcommercialized and spread
HydrogDescriptions on each technology were extracted from several literature on climate change, and discussions wereenmade based on their tone volumes, etc., and finally, the degree of technological progress was classified into 3stages.
Due to the nature of the classification, some combinations of technologies and scenarios are represented by ranges
Reas shown in the dashed lines.
Technical
nameTechnical name(Classification
examples)energy3-18

4 [Business impact evaluation]

Step

2

3

4

5

Step 4-2 Diagram: Qualitative evaluation and 5Force analyses
Sector A(Global)New comer

Government

Customer<SSP1's worldview>
Emphasizing global andnational development
and achieving
sustainability goals
Growth rates: high in lowSupplier
Industry/and middle-income
Company
countries but unchanged<SSP1's worldview><Sub-sector 5>
in high-income countries<SSP1's worldview>
Globalization: The market isInternational cooperation:
Diparities: Narrows in Japan and overseas
unified and production isachieving bothcarried out in each region.
international mitigation<Sub-sector 6><Total sectors><Total sectors>
and adaptation to climatechangeDescribe
sectoral
impactinanarrative
mannerbasedonscenarioworldview
andevaluationof<Sub-sector 5><Sub-sector 5>
Policy Direction: Toward<Sub-sector 7>
technology
Sustainability and
Improved Management of
Conduct similar analyses by sector and by scenario
Environmental Policies at<Sub-sector 6><Sub-sector 6>
the Regional
and Global
These analyses clarify the relationship between "sectors" and "technologies" related to climatechangelevel<Total sectors>: Expected actions

Based on these analyses, construct technology portfolio for investment (Step 4-3)

<Sub-sector 7><Sub-sector 7><Sub-sector 5><Sub-sector 6><Sub-sector 7>

3-19

4 [Business impact evaluation]

Step

2

3

4

5

Approach to evaluate business impact
Quantify "degree of impact of technology" and "Japan s strengths" for relative evaluation.
Based on these results, construct technology portfolio to conduct business impact evaluation
Based on 5Force analyses, selectrecommended technologies forinvestment by sector and scenario,
and construct our investment portfolio
in each sector

Technology portfolio

Scored as "degree of technologicalimpact" (up to 6 points) by adding
consistency with global data to "degreeof technological dissemination"
selected in STEP1.

=

Evaluation of Japan's technologicalstrengths on a scale of small to large"Strengths" in this analysis: Defined as anevaluation ratio whether Japan has theuniqueness of its technology and has thepotential to promote it worldwide in the future.
[Reference: 3-18]

Evaluation points (0 to 6)

Evaluation ratio (0.5 to 1.5)

Evaluation
Summary

Degree ofimpactTechnologies

SectorTechnological advantage

Assistance of the Japanese
government

Scenario

Scenario

Total points (4 grade evaluation: ++ toBusiness impact

)

3-20

4 [Business impact evaluation]

Step

2

3

4

5

(Reference) Approach to evaluate Japan's technology strengths
Setting technologies in which Japanese companies have relative advantages
Evaluation Points

A. Technological advantages (Current strengths)
StrongRe-energy

Hydrogen

B
i
g

EV
CCS

Biomass

Note: Created based on information as of February 2019
3-21

S
m
a
l
l

B. Support from the government of Japan (Potential
for future development)

Weak

Significance of Evaluation

1.5

Japan has a high degree of uniquenessregarding technology, and the size of thegovernment's budget is also large.

1

Medium both in terms of technicaluniqueness and budget size in Japan

0.5

Other countries are ahead of the othercountries in terms of technology, and thebudget is low.

Evaluation Standards
A. Current strengths
Comparing the content of reports published by the governmentand related organizations, if the technology strategy is unique, itis evaluated as strong, and if the technology is implemented inEurope, Central America, it is evaluated as weak, depending on
the strategy's expansion.
B. Assistance of the Japanese government
Referring to METI's "Outline of Resource and Energy Related
Budget" for FY2020, evaluation is made on a big scale when thebudget is JPY50 billion or more, on a medium scale when thebudget is JPY10 billion or more, and on a small scale when thebudget is less than JPY10 billion.

5

Definition of Countermeasures

Step

2

3

4

5

Step 4-3 Diagram: Business impact evaluation
Consider the priority of investment based on the evaluation of business impact
Sector A

Sector B

Sector C

+

++

+

SSP1

+For each scenario, the- total+ points are calculated based on the impact
and strength assessments of the evaluated 5 technologies. Based on
this evaluation, we set a threshold value and evaluate it on a scale from++ to - - 4.
They are allocated to each sector, and the average was used as the- + assessment.
ultimatebusiness impact

SSP3

SSP52

++

Approach to Business Impact Assessment
-

SSP5
-1

Investment priorities

+

-

Rank

Significance of Evaluation

++
+ --

High impact of target technologies in the sector and high growth potential- --technologies in sectors and expected to growInfluence of target
Limited impact and growth of target technologies in the sector
Low impact of target technologies in the sector and no growth expected

3-22

5

Definition of Countermeasures

Step

2

3

4

5

Future challenges
opportunities this time.
Consider utilizing the scenario analysis as one of the tools for strategic investment in the future. Issues tobe addressed are developing the scenario analysis and establishing organizational structure.

Enhancement of
scenario analysis

Points of Attention and Issues
Update and review of technology
Development ofparameters
evaluation tools
Adoption of the Japanese version of SSP
Physical risk
Research of other risks
Transition risk
Organizational
Collaboration

To build a system
Business continuity

3-23

Communication with related departments
Investigation of evaluation method
Establishment of a monitoring system

Financial Sector (Asset Management)
Practice Case
ORIX Asset Management Corporation

3-24

Properties
Finance

Properties

3-25

3-26

3-27

3-28

3-29

3

3-30

3-31

3-32

3-3333

3-3434

3-35

3-36

3-37

3-38

3-39

3-40

EnergyPractice Case

3-41

Chiyoda Corporation

Define range of scenarios
Analytical
Assumptions

TargetTarget2040

Scenarios

42
against climate change(ex: introduction of carbon tax, etc.)

Reference data

Sources: IEA WEO 2019 (Sectors

LNG/ Green Energy EPC/
Non-EPC such as hydrogen, CCU, and distributed composite
utilities* EPC = Engineering, Procurement, Construction* CCU = CO2 Capture and Utilization

Financial Data

Extending the data to 2040 based on business plan until 2023
disclosed in recovery plan.

3-42[Step 2: Assess materiality of climate-related risks]

Step

2

3

4

5

Scenario

4

2

Future climate change poses significant risks and opportunities for
Chiyoda Corporation
Risks and Opportunities
Major
classification

Small classification

Business impact
Index

Discussion: Risks

Discussion: Opportunities

Revenue

The introduction of carbon prices is expected to reduce thedemand for fossil fuels (to reduce the demand for petroleum
plants), which will have a medium-scale impact on PL.

Developments in carbon tax markets could create new opportunities in lowcarbon energy markets, such as hydrogen, CCU and bio-based chemicalindustries and decentralized utilities

Carbon emission
targets/policies of each
Revenuecountry (including
subsidies)

Regulatory tightening affects orders for fossil-fuel-derived
plants, affecting PL

The market for green energy, hydrogen, etc. is expected to expand withthe advancement of policy support, and the demand for plant andenergy transportation, etc. is expected to increase, creating business
opportunities.

In the energy mix
ChangeRevenue

Large impact on PL due to changes in fossil fuel-derived
power generation rate, which affects plant orders

Alternatives to coal such as LNG and natural gas may increase demandfor plant production, which can be an opportunity as well as a risk
Increased demand for green energy creates new business
opportunities

Energy Demand

RevenueSignificant impact on PL due to decrease in demand forgasoline and decrease in orders for petroleum refineries
Smaller plant size and diversification of customers andregions reduced business opportunities.

Promoting LNG and natural gas as low-carbon fuels creates business
opportunities in new markets (increased exports and imports in North
America and Asia)
New opportunities could emerge in low-carbon energy markets, such ashydrogen, CCU and bio-based chemical industries and decentralized utilities

Spread of low-carbon
technologies

Revenue

Influence on PL due to the spread of electric vehicles,
reduced demand for gasoline, etc., affecting the volume oforders received for petroleum plants.

Promoting LNG and natural gas as low-carbon fuels creates business
opportunities in new markets (increased exports and imports in North
America and Asia)
New opportunities could emerge in low-carbon energy markets, such ashydrogen, CCU and bio-based chemical industries and decentralized utilities

Developing nextgeneration
technologies

Revenue
Spending

Popularization of decarbonizing materials (bio-plastics, etc.)
reduces the market size of petroleum products and has alarge impact on orders for petroleum refineries

New opportunities could emerge in low-carbon energy markets, suchas hydrogen, CCU and bio-based chemical industries and decentralized
utilities

Changes in customer
reputation, changes ininvestor reputation,
Revenuerising mean
Spendtemperatures, risinging
sea levels, and extreme
weather conditions

Die investment accelerated for oil and LNG, and plant orders
declined or were suspended. In addition, the postponement andcancellation of projects have an impact on PL.
Construction delays caused by extreme weather conditions havean impact on PL due to increased construction costs, etc.

Investors' evaluation improves due to orders received for projects aimed atrealizing a low-carbon society such as renewable energy.
Expected increase in demand for plant resilient to natural disasters, etc.

Carbon priceTransition
Risk

Other

Assessment

Large

Small tomediumThe effects of "Carbon price","policy","change in energy consumption","demand transition" and "new technology ,which have an influence on orders, aresignificant. It is also assumed that the development of next-generation technologies linked to market opportunities will have a great financial impact.
3-43

[Step 3: Identify and define a range of scenarios]

2

Step

3

4

5

Scenario

4

2

Defining worldview for each scenario based on scientific evidence fromIEA and others.
2040

At present

4 (STEPS)

2 (SDS)(Reference) 2 C (FPS)

SourceIEA WEO2019
PRI FPS scenarios

Carbon price

Carbon tax-$31 to $39/t$125 to $140/t$25 to $100/t

Carbon Emissions
Targets/Policies in
Each Country

GHG emissions(Millions of tCO2)

Japan :1,078
Global: 6,087(2018)

Japan :666
Global: 7,117

Japan :287
Global: 3,748

No FPS data

EnergyChange in mix

Power Supply
Composition(TWh)Japan :1,069
Global: 26,603(2018)

Japan :1,062
Global: 41,373

Japan :1,005
Global: 38,713

Japan: no FPS data
Global: 40.4 thousand

IEA WEO2019
PRI FPS scenarios

Primary energy demand(Million tons)

Japan :434
Global: 14,314 (2018)

Japan :353
Global: 17,723

Japan :300
Global: 13,279

Japan: no FPS data
Global: 13,469

IEA WEO2019
PRI FPS scenarios

Final energy demand(Million tons)

Japan :293
Global: 9,955 (2018)

Japan :234
Global: 12,672

Japan :185
Global: 9.5 thousand

No FPS data

IEA WEO2019

LNG: Pipeline ratio(bcm)

352:436(2018)

729:549

636:358

No FPS data

IEA WEO2019

ZEV ratio

58 thousand units (EV, PHV, FCV)(2017)

PHV/ZEV:7%(123.81 million units)

PHV/ZEV:63%(1023.44 million units)

No FPS data

IEA Report and Global Calculator

World's storage capacity

4.67 TWh(2017)No IEA data

Hydrogen penetration rate0
(To the final energy of the world
Hydrogen demand in 2018

(No spread at 4 C)

2. 7EJ/ years

CCU penetration rate

CO2 reductions by CCUs: 0(2018)

113 million tons

1,770 million tons

Domestic Bio-plastics shipments:
70 thousand tons (2013)
Global disposable plastic raw materials
usage: 3.4Mb/d (2015)

Japan: No IEA data
Global: No IEA data

Ministry of the Environment, "FY2017
Greenhouse Gas Emissions" and "Longterm Strategy as a Growth Strategy Basedon the Paris Agreement"
IEA WEO2019

EnergyDemand trends

Low-carbon
technologies
Penetration

Next generation
technology
Progress

Penetration rate of
bioplastics

No IEA/FPS data
-15.75 TWh for IRENA

6.1Mb/d used

IRENA Report

Steel sector: 4. 0EJ/ years
Cement Division: 2. 0EJ/ years
No FPS data
CCU market size: US$1.5 trillion

Japan: No IEA/FPS data

IEA WEO2019
PRI FPS scenarios

IEA WEO2019
ICEF Roadmap

Ministry of the Environment's Global
Warming Prevention Plan

million tons were shipped.
Global: No IEA/FPS data

BP"Energy Outlook 2019" ET scenarios

3-44[Step 3: Identify and define range of scenarios]

Step

2

3

4

5

Scenario4

2

In the 4 C world, low carbon and carbon cycles are not promoted, anddependence on fossil fuels continues.
Government
GlobalNo active promotion of energy conservation and green
energy policies

Carbon tax introduced in some areas

MarketNo carbon tax
introduced

Increasing demand for
optimization of O&M due
to digitization

Large plant remains.
Small to medium sized
and modular plantincrease

Maintenance andmanagement

CO2
Diversification ofplayers(Rise of Chinesecompanies, etc.)

CO2

LNG : Increased
Petroleum Maintained
Hydrogen No opportunity
CCU No opportunity

N/A
N/A

Industrial Plants (fossil fuels) Increased(Green Energy) MaintainedPlayers

CO2
Green Energy Power
Fossil fuels

3-45

Due to intensified extreme weather,longer construction period and much
more construction cost are required

The use ofbatteries and
EVs have notspread andconventionalenergy generation
remains

LNG Maintained
Petroleum Decline or matintained
Hydrogen No opportunity
N/A
N/A
CCU No opportunity
Industrial Plant (fossil fuel) Maintained(Green Energy) Maintained

Increased demandfor efficiency
improvements andstructural changes
in the supply chainof building
materials

No carbon regulations
were introduced,building material
costs depend on
the market

[Step 3: Identify and define range of scenarios]

Step

2

3

4

5

Scenario4

2

In the 2 C world, low carbon and carbon cycles are promoted, and demand for green
energy facilities expands. The introduction of hydrogen and CCU is accelerated
Government

GlobalPromoting policies such as subsidies and R&D
for energy-saving

Introduction of acarbon tax

Introduction of acarbon tax

MarketWith digital technology,
demand for optimizationof resources grows

Large plant remains,small to medium sized
and modular plantincreased

CO2
H2

H2

Companies
with advanced
technology
may enter themarketIntroducing
hydrogen tosome industries

CCU
Technology

CO2

New entry
Clean tech digitalcompany

CCU
technology

LNG (subject to responding tochange in business structure) :Maintained
Petroleum Maintained

LNG Decline or maintained

Petroleum

Hhydrogen Slightly increased
CCU Slightly increased

Hhydrogen Slightly increased
CCU Increased
Plants (fossil fuels) Declined(Green Energy) Increased

Spread ofdecentralizationand sector
coupling

Promoting clean-tech, including
use of EV at construction sites

Promotinggreen energy
power and the
spread ofstoragebatteries andEVs

Declined

Plants (fossil fuels) Declined(Green Energy) Increased

Increased demandfor efficiency improvements Cost increase ofbuilding materials
and the structural majorchange for building materials due to carbon
regulations

3-46[Step 4: Evaluate business impacts]

Step

2

3

4

5

Scenario

42

Considering the direction of the calculation (business as usual/our potential) from"market growth" and "market share"
Market growth

LNG
Green Energy(PV/Biomass)

In response to
structural changes inbusiness promotion

Marketexpansion

Green Energy

MarketShrink or expand

Utility

Hydrogen

CCU

The present market
share maintainedMarket expansion(Creation of newmarkets)

Direction of Estimation
Business as usual

Our Potential

No increase in profit
beyond the businessplan

No countingof potential

Due to the small
market expansion

Not counted

Profit declined
Assume 10% *1
acquisition of Japanesemarket(Offshore wind
power)
Oil-related

Share

The present
market share
maintained

Not counted

Market expansion iscounted as an opportunity

Profit declined due
Market expansion isto the shrinking
counted as an opportunity*2
marketAssume 1%
acquisition*3 of themarketNot counted

Market expansion iscounted as an opportunity

Assume 2%
acquisition*4 ofhydrogen supply

Profit increased dueto the market
expansion

Not counted

Assume 5%*3
acquisition of CCU
marketNot counted

Market expansion iscounted as an opportunity*1: Assuming an internal share ratio of 10%, *2: At 4 C, the oil-related market will expand, so there will be no decrease in sales at the time of completion. *3: Since entry into a new market and major
players have already been established, it is temporarily set at 1%. *4: Assuming that 2% of hydrogen supply will be obtained from our efforts to date, *5: Entering into a new market, it is temporarily set at
5%.

3-47

[Step 5: Identify potential responses]

Step

2

3

4

5

Scenario

42

Considering the direction of countermeasures for responding torisks and securing opportunities
Summary of impact calculations and policy for countermeasures
Items(Impact on our company)

2

4

Policy for countermeasures

Provide services that respond to changes inthe business structure

LNG

Petroleum
Fossil fuel plant

Hydrogen

CCU

Green Energy Plant

Respond to optimization of customer
assets by utilizing digital technology

Early entry into the market and securingmarket share is required due to increasing
demand for low-carbon and carbon cycle-

Develop utility business based on future
trends

3-48

Transportation
Practice Case

3-49

Kyushu Railway Corporation

1. Covered business[Selection of businesses covered in this project]

Business portfolio
Other
8.8%

Retail /food service

24.1%

38.4%

Other

Transportation
service

15.2%
Total operating profits
173.7 billion yen*1

Total operating profits
432.6 billion yen(March 2020 term)(March 2020 term)

8.7%

147.3
billion yen

Railway passenger
transport

84.8%

Construction

20.0%

Real estate/hotels
Value chain for the covered business (hypothesized)

3-50

Transition risks

Transition risks

Train cars procurement

Energy procurement

Development of lowemission products
Spread of low-carbon
technologies
Spread of renewableenergy/energy-efficienttechnologies

Carbon pricing (gasoline tax)
Changes in prices for significant
commodities/products(electricity/gasoline prices)
Policies for energy efficiency(stricter energy efficiency
standards)
Shifts in energy demands
Subsidy policies for renewableenergy, etc.
Fossil fuel subsidies

Transition/physical risks
Power transformation/energy supply

Operations
Extreme weather conditions
Changes in precipitation/weather
patterns
Increased average temperatures
Changes in reputation withcustomers
Development of next-generation
technologies
Water stress (droughts)
Elevated sea levels

Note 1: Prior to the elimination of inter-segment transactions

Scenario analysis steps
1

Establishinggovernance

Incorporate scenario analysis into strategy formulation and risk management processes. Perform monitoring of relevant board meetings.
Identify which internal/external stakeholders to involve and how to involve them.

2
Risk significanceanalysisMarketchanges/
technology
changes

Government
policies andlaws

6

Physicalrisks

5

Scenario groupdefinition

Business impact
assessment

Multiple scenarios that
include transition
risks/physical risks
related to the organization

Impact on business:
Implementation costs
Business costs
Revenue
Supply chain
Suspension ofoperations
TimingReputation

Documentation andinformation disclosure
Source: TCFD

3-51

4

3

Definition ofcountermeasures

Countermeasures:
Business model
reforms
Portfolio reforms
Investment toward
capabilities andtechnology

Direction of disclosure as a tool for internal/external dialogue, disclosure of significant products andtechnologies

Technical Supplement: The Use of Scenario Analysis in Disclosure of Climate-Related Risks and Opportunities

Step

2

3

4

5

2

3

4

5

2. Significance assessment of risks/opportunities
Climate-

3-52

Step

2. Significance assessment of risks/opportunities

3-53

3. Scenario group definition

2

Step

3

[Selected scenarios]
2

4

5

-term

which incorporates a delay in recovery from the COVID-19 pandemic
Definition of[Projected average global surface temperature change](compared with the average from 1986-2005)
3.2-Industrial Revolution
levels if no additional measures against global
warming are taken

scenario:
2.7-Industrial
Revolution levels if no additional measuresagainst global warming are taken

0.9higher than pre-Industrial Revolution
levels if strict measures are taken

scenario:
We are highly likely to achieve an increase of-Industrial
Revolution levels if a radical transition to a
new system is made.

2050

3-54

Prior to 2030, the change in temperature is nearly the same inscenarios.
The gap between the scenarios widens after 2030.

The TCFD recommendations for scenario
analysis suggest that multiple temperature
range scenarios be selected, including

3. Scenario group definition[Visual representation of a 2

2

Step

3

4

5

scenario future society (assumed as 2050) ]Low-carbonization moves forward and modal shifting occurs; renewable energy and smart cities
become popular
There is a slight increase in damage totransportation equipment / railway carsand infrastructure due to extreme
weather / increased temperatures

Urban areas
Transportation will become
more convenient with theadvancement of smart
cities and MaaS

Human inflow(modal shift)
Extreme weather

There is a shift from airplanes
to railways from increased
environmental awareness

Environmentally friendly railway cars
Promotion of renewableenergy use and development ofenvironmentally friendly railways

Renewable energy

3-55

Iron and Steel price rise, andtrack replacement costs
increase

Humanoutflow

Advancement of carbon
taxes/conversion to smart
citiesSupport for the use of renewable energy,
subsidies for introducing environmentallyfriendly transportation equipment, etc.

Government

Railways may lose theiradvantage from anenvironmental perspective
due to the spread ofenvironmentally-friendly
automobiles

Metropolitan
areas

Railways may lose theiradvantage due to the spreadof automatic driving
technology for automobiles3. Scenario group definition

Step

2

3

4

5

Extreme weather becomes more severe, and progress for smart cities is left to the course of nature
There is an increase in damage
to transportation equipment /railway cars and infrastructure
due to extreme weather /increased temperatures

Urban areas

There is no increase inenvironmental awareness,and the shift from airplanes torailways is limited

Progress for smart cities and
MaaS is left to the course ofnature, and there is only a limited
increase in customers

Metropolitan areas

Extreme weather

Popularization of renewableenergy does not advance, andintroduction of environmentallyfriendly railways is limited

There is an increase infuel costs due to rising
diesel oil prices

Delay
(DRS)

There may be a decreasein demand for travel due
to reduced GDP

There may be an influx ofcustomers to railways due tohigher crude oil prices

Decrease intravel demand

There are decreased

CO2

Renewable energy

3-56

Human
inflow

There are increased
cancellations and delays due
to flooding

Government policies toward
energy efficiency / renewableenergy are not actively
promoted (carbon tax is not
introduced)

Increased support opportunities for goingoutdoors in summer due
for disasterto rising temperatures
preparedness

Government

Business impact assessment

Step[Table of parameters used]

2

3

4

*Exchange rate: 1 USD = 105 JPY (based on the October 1, 2020 rate)

We performed an estimate based on scientific evidence from IEA and other sources
2050

Currently

Transition risks(spread of lowcarbon
technologies)

Energy------$191/t-CO2

Electricity price$216/MWh$184/MWh$242/MWh

IEA:

EnergyCrude oil price$63/Barrel$96/Barrel$48/Barrel

IEA:

Energy Outlook 2020

Iron and Steel price$350/t$382/t$506/tAir passenger
volume growth rate

6,290 billion/pkm

Domestic/international:
158%

Domestic/international:
80%
Domestic: 47%
International: 99%

Number of
automobiles with
low-carbon
technology

1,525,850,630

1,339,099,724

Number of EVs/fuelcell vehicles in use

380,981,575

963,804,456

Number of selfdriven vehicles inuse

641,900,000

641,900,000

Carbon tax
Transition risks(increase in
expenses)

SourceIncrease intemperature

will be equivalent to current levels-o-Meter
Reference Scenarios for Financial-o-Meter
Reference Scenarios for Financial

Estimated using IEA:

Estimated using IEA:

Estimated using Fuji Chimera Research

Change Knowledge

Average

Review Meeting of Technologies Related
to Flood Control Planning Based on

Flood frequency

1x

4x

2x

Probability oflandslides

10%

12%

12%

A-PLAT: An information platform adapted
to climate change

Probability of track
buckling

0.6 - 0.63

0.94%

0.65%

ELSEVIER:

Physical risks

3-57

2017

5

Business impact assessment

Step

2

3

4

5

2

3

4

5

will be created if the environmental advantages of railways are maintained
There will be increased costs due to greater severity of natural disasters

3-58

5. Countermeasure definition

Step[Future countermeasures against individual risks (planned)]
Risk
initiatives

Opportunit
y initiatives

Item
Targets
For CO2 emissions
reductions

Carbon pricing /energyPromoting
Promotinguse ofenergyrenewable Advances
efficiency
inenergynext-gentechnologi
esAdvances in
low-carbon
technologies

Extreme weather
conditions

3-59

Category

Risk countermeasures (initial plan)

AdaptedSet long-term targets for reducing CO2
emissions
Set long-term targets for reducing energy
usage

Category

EstablishedCounterme
asurestowardorganizatio
nal issues

Initiatives for seizing opportunities(initial plan)

Implement long-term targets for
reducing CO2 emissions
Plant trees to achieve disaster
preparedness while acquiring emissions
credits for absorbing CO2 at the same time

AdaptedInvest in energy-efficient technologies
Continue introducing energy-efficient train
cars

AdaptedDevelop and introduce renewable energy train cars
Use renewable energy to achieve BCP measures(emergency power generation) while achieving
decarbonization at the same time

Adapted/established

Promote the use of private power
generation and sell electricity

AdaptedDevelop and introduce of renewableenergy train cars

EstablishedLand prices will increase due todevelopment around stations from theprogress of smart cities / MaaS

Retained

Utilize data to increase the sophisticationof risk models

Established

Plant trees to achieve disaster
preparedness while acquiring emissions
credits for absorbing CO2 at the same time

6. Direction for information disclosure
disclosing what you are able to in line with these
2. Scenario Analysis and Future Policies and Initiatives

Governance

Strategy
1 Risks and opportunities
2 Scenario Analysis and Future Policies
and Initiatives

We analyzed the effect of climate change on our railway business, based on
2 to 4 * scenarios outlined by specialist institutions, such as the IPCC
(Intergovernmental Panel on Climate Change) and IEA (International Energy
Agency). Under the 2 scenario, which anticipates an increase in carbon taxes
and cost increases due to the adoption of renewable energy, if theenvironmental superiority of railways can be maintained, then there will be ashift of customers from other means of transportation, and we will be able tosecure opportunities to increase sales.
In addition, under the 4 scenario, due to the increasing frequency/severity ofnatural disasters caused by climate change, there will be damage to railway
assets and an increase in maintenance costs, as well as a decline in sales dueto the suspension of operations.
For society and for the Company, The Group will work to advance initiatives forthe achievement of the 2 world to facilitate the realization of a sustainable
society.
* Including IEA 2020 scenario of 2.7 or higher

Risk management

Parameters and targets

3-60

Building
Practice Case

3-61

Kajima Corporation

[Sales Composition of Kajima Group, Scope of Review]

The scope of consideration is domestic construction (civil engineering + building
construction), which accounts for more than 60% of consolidated net sales.

Overseas
Subsidiaries
and Affiliates

1

15%

23%

Domestic
Subsidiaries
and Affiliates

Civil
Engineering

Non-consolidated
domestic construction
business

Consolidated
Net sales
12%
3%

JPY2
trillion

Real Estate
and Others(Domestic)[Scope of this investigation]

1

47%

2

2

Building

Based on FY2018 results

3-62

2 [Step2: Assess materiality of climate-related risks]

From the characteristics of the industry, it was evaluated that the risks related tothe market and technology were large in addition to the policy trend.
Classification

Transition risk

Consideration of Risks and Opportunities

Assessment

Price competitiveness including carbon price and development of low-carbon materials and construction technologies arenecessary.
A delay in the development of low-carbon is subject to patent royalties from other companies, which reduces competitiveness.
The use and development of low-carbon building materials progresses.
Construction investment decreases due to an increase in construction costs .

Large

Construction investment is restrained by regulations on the total amount of Carbon emissions, our construction revenue isrestrained, and sales decline.
Additional expenses such as credit purchases are incurred when the upper limit is not achieved.
Improvement of design technology on low energy buildings such as ZEB (Zero Energy Building) is required.

Large

PolicyCarbon price

PolicyCarbon Emissions
Targets/Policies

MarketChanges in customer
behaviours

Carbon emissions are some of the evaluation items in order competition.
The global enterprise demands the low carbon construction of the world standard in the domestic.
A decrease in fossil fuel-related construction projects affects orders.
The energy mix changes and construction related to renewable energy increases.

Large

Technologies

Renewable energy andEnergy conservation
technologies

Technology development costs related to renewable energy and energy conservation increase at the construction stage and at
the facility operation stage.
The technology required varies greatly depending on the legislation.
Competition arises with advanced companies such as from Europe etc. where renewable energy is spreading.

Large

-

Energy-saving policies, advances in next-generation technologies, recruitment and education to acquire expertise, changes in investor and bank behavior, andincreases in energy demand and prices

Medium to
Small

Increased heatstroke risk at construction sites leads to a decrease in productivity and an increase in costs.

Chronic

Physical risk

PolicyChronic/
Acute

Deterioration of working andChanges in construction methods and materials are required to ensure quality.
construction conditions Due to the harsh working conditions, the number of prospective employees decreases.
(attributable to increased temperature)

Changes in labor laws

Sales decline due to legislation prohibiting outdoor work during the summer season.
Progress in mechanization and labor-saving in construction is accelerated.

Changes in rainfall and Process delays due to rainfall, strong wind, etc. occur, and costs increase due to countermeasures costs.
Delay in delivery of (overseas) procured materials and increase in procurement (transportation) costs occur.
weather patterns/
Demand for flood control and other measures to strengthen national resilience increases.
Increasing severity of
extreme weather conditions The disaster prevention and disaster mitigation markets expand.

Large

Large

Large

(Due to an increase in disasters)

Market3-63

Lower advantages inlocation

The domestic construction market shrinks due to the transfer of production facilities in the disaster risk area to overseas.

Subsidence, rising sea levels, tightened disaster response regulations and reduced insurance coverage

Large
Medium toSmall

3 [Step3: Identify and Define a range of scenarios]

Analyzed impacts on company by drawing the 2
regarding highly uncertain climate change

and 4

scenarios of 2030

Given the geographical characteristics of Japan, the possibility that natural disasters
will become increasingly severe, which cannot be predicted based on past knowledge.
We recognize that the construction industry's mission is to respond to that kind of
uncertainty.
()[Global Average Terrestrial Temperature Change (Difference from the 1986-2005 Average)][As is]
The temperature willrise 3.2-5.4 C above
pre-industrial levels,
unless more rigorous
measures are taken.

2030
4 C
scenario[Active transition]
The temperature willrise 0.9-2.3 C above
pre-industrial levels,
if strict measures
are taken.

2 C
scenario

3-64

Source: AR5 SYR Diagram SPM.6

3 [Step3: Identify and Define range of scenarios]

Assumptions based on scientific evidence (such as IEA)
Item

Parameter

Carbon price

Carbon tax

Carbon Emissions
Targets/Policies

Target values foremissions

Changes in customer
behaviors

Power Supply
Composition

Renewable energy andEnergy Conservation
Technologies

ZEB target

Deterioration ofworking andconstruction
conditions
Legislation" as a policy
risk is a derivative.

Temperature
increase

Increasing extreme
weather conditions(typhoons, heavy rains, Flood damage insediment, disaster,urban areasstorm surges, etc.)

3-65

2030
4

Average successful bid in
the European EU-ETS: Approx.
$8 per tonne

2

88 USD/t

SourceIEA WEO 2018 SDS(Developed countries)
GoJ Targets
IEA ETP B2DS

100% as a benchmark

-3%

-66%

Coal thermal:337 TWh (32%)
Oil thermal:97 TWh (9%)
Gas-fired thermal: 440 TWh(42%)
Nuclear: 12 TWh (2%)
Renewable energy: 73TWh(7%)

Coal thermal:264 TWh (25%)
Oil thermal:33 TWh (3%)
Gas-fired thermal power: 287
TWh (27%)
Nuclear: 216 TWh (21%)
Renewable energy: 250 TWh(24%)

Coal thermal:83 TWh (9%)
Oil thermal:17 TWh (2%)
Gas-fired thermal power: 284
TWh (29%)
Nuclear: 247 TWh (25%)
Renewable energy: 347TWh(36%)

IEA WEO2018 NPS(Japan)-On average for new buildings
Realize ZEB

On average for new buildings
Realize ZEB

Basic Energy Plan

0.4%

0.99%

0.99%

ILO Working on awarmer planet

Average 2.1(2030-2050)

Average 1.9(2030-2050)"Climate Change
Adaptation Information
Platform" by the
Ministry of theEnvironment, etc.

2.5 days/year

3.0 days/year

2.5 days/year

Ministry of theEnvironment andJapan Meteorological
Agency Report$3.3 billion/year$7.3 billion/year

Rate of decline inlabor productivity
due to heat stress

Changes in rainfall andDays of heavy rain
weather patterns

advantage as market risk

At present

0

C as a benchmark

WRI "The Aqueduct
Global Flood analyze"

42
Increased demand due to increased physical risk
Possibility of labor restriction during summer due to the harsh heat3 [Step3: Identify and Define range of scenarios]

Assumption of Future Society (4Direct impact
to the constructionindustry

C scenario)

Effects ofEnergy mix changes

Damage and working
stoppages increase due tointensified typhoons, etc
Lower productivity due to heatstressRestrictions on summer work
caused by the extreme heat

Adoption of design andconstruction methods tocope with climate change(mechanization and laborsaving)Changes in themarketFundamental review of flood control plans, etc.

CO2
The fossil fuelpower plant willcontinue to exist.

Increase ofrenewable energy
facilities based on
the current policy

Relocation from disaster risk areas(Domestic relocation: Increase in demand,
Overseas relocation: Decrease in demand)
Significant expansion of the disaster prevention,
disaster mitigation, and BCP markets

Strengthening building regulations
ZEB (Zero Energy Building) and energy
conservation
progress based on the current
ZEB
policy.Ready

3-66

3 [Step3: Identify and Define range of scenarios]

Assumption of Future Society (2Direct impact
to the constructionindustry4
2
Increased demand due to increased physical risk
promotion of renewable energy/ZEB (zero energy building) progress while
introducing a carbon tax and reducing fossil fuel power generation as a policy

C scenario)

Effects ofEnergy mix changes

Changes in themarketSignificant review of flood control plans, etc.

Introduction of a carbon tax

Restrictions on businessactivities due to theintroduction of emission
allowances
CO2

Technological development
for low-carbon construction
and materials

Substantial
increase inrenewable energy

Review of the location of new buildings
Expansion of the disaster prevention, disastermitigation, and BCP Market

Significant
decrease in fossil
fuel power
generation
Rapid spread of ZEB (zero energy buildings)

Increase in the
introduction ofhydrogen andother new energy
sources

Increase in energy conservation renewals(decrease in new buildings) /Expansion of energy management services
ZEB
Ready
Market entry from otherindustries
Above

Increased demand for in-house renewableenergy facilities
3-67

4 [Step4: Evaluate business impacts]

Considering the impact of each key driving force on the income statement (P/L)
Changes in demand
Carbon tax

Restraint of investment

Carbonprice

Changes in the energy mix
Fossil fuels
Renewable energy
Nuclear power

CO2 emissions from
cement, steel, etc.

Expenses

Sales

Physical risk
Temperature
increase

Government ZEB target

Disaster prevention,
disaster mitigation, andnational resilienceNet
incomeWeather patternschangeSevere disaster

3-68

4

[Step 4: Evaluate business impacts] Assumptions: around 2030

Reflecting disasters with extreme severity, demand for disaster prevention, disastermitigation, and national resilience is increased
Additionally,
2 C scenario
On the other hand, demand is expected to increase due to the spread of renewable energy and zero-energy-buildings (ZEB).
4 C scenario
The deterioration of working conditions due to the increase in temperature is significant.

Risk/Opportunity Items

4

C scenario

Cost increase due to carbon tax

2

C scenario---

Shrinkage in the construction market due to a tax-

increase
Business restrictions due to CO2 emission-

allowances
Energy mix change (decrease in fossil fuels)-

Increase in renewable energy-related demand++++

ZEB (Zero Energy Building) market expansion+++

Effect on working conditions due to temperature rise---

Disaster prevention, disaster mitigation, and national++++

resilience
Relocation from disaster risk areas

3-69

+-

5 [Step5: Identify potential responses]

For items with large business impact, future countermeasures were examined.
It is necessary to promote technological development that meets market needs.
Response to Carbon Tax and Emission Allowance
Regulations
Cost increase due to carbon tax

Promote activities to reduce CO2 during construction
Development and promotion of introduction of lowcarbon materials
Securing renewable energy

Contraction of the construction market due to the tax increase
Business restrictions due to CO2 emission allowances

Technological development in response to newmarkets and climate change
Energy mix change (decrease in fossil fuels)

Selection of focus areas based on energy mix
Development of engineering and construction
technologies for renewable energy facilities
Pursuit of ZEB profitability and comfort
Development of labor-saving construction technology

Increase in renewable energy-related demand
ZEB (Zero Energy Building) Market Expansion
Effect of rising temperature on working conditions

Promotion of technical development related to disasterprevention, disaster mitigation, and BCP
Development and utilization of hazard maps
incorporating unique knowledge
Construction that contributes to the strengthening of
national resilience including buildings and structures

Responding to Severe Extreme Weather
Disaster prevention, disaster mitigation, and national resilience

Relocation from disaster risk areas

3-70[Development Case of Low-Carbon Building Materials (Concrete)]

Eco-cleat R3

CO2-SUICOMManufacture by reusing the waste returned concrete
Ultimate Recycling-Oriented Concrete

By "sinking" CO2 in a way that trees reath ,Concrete to reduce the amount of CO2 to virtually zero or less

Thermal power plant

Cement plantRaw concreteused atexamination

CementAlternative materials

CO2

Slaked lime

CementAlternative materials

CO2
InhaleChangereturned concrete
into concrete again!

CO2-SUICOM

Zero CO2 emissions or less

Reducing cement consumption byusing coal ash, special admixturesand other materials instead of
cement, and absorbing CO2 into theconcrete during manufacturing, weare able to reduce CO2 emissions tovirtually zero or less.
Co-developed by Chugoku Electric Power Co., Inc.,
Kajima Corporation, and Denka Co., Ltd.

Amounts of CO2 Emission

In "CO2 - SUICOM",

3-71

CementReducing
cementconsumption

Total
CO2
reduction

absorbing
CO2

In general
Concrete

CO2-SUICOMIn "Eco-Crete R3",
This is an environmentallyconscious concrete that reuses thereturned concrete which had been
inevitably disposed. Eco-Cretecontributes to resource recycling
and reduce in CO2 emissions.

Readymixed
concreteConcrete block

Reduce CO2 emissions by up to 90%
Amounts of CO2 Emission

Coal ashRemaining
unused concrete
after being
unloaded

NormalConcrete

Eco-Crete R3

Construction Material
Practice Case

LIXIL Group Corporation

3-72

1. Target Business1 - 1 LIXIL Groups and Target Organizations[Company Overview](The fiscal year ending in March 2019)[LIXIL core philosophy]
The Group's superior products and services
contribute to improving people's comfort and lifestyles.

[Target organization][LIXIL's business domains]
LIXIL Group's products and services support more than 1 billion
people's daily lives worldwide through various partners.
Condominiums
Office Buildings
Detached
Houses
Housing Materials

House Building
Companies
Builders

Commerce
Facilities

Leasing
Houses3-73

Developers
Building materials

Building Contractors

Housing Equipments

Sales JPY1,832.6 billion
Approx. 75 thousand employees
Sites in 150 or more countries

Building
Technology
Business
13.7%

Distribution and Retail9.5% Housing and Services
3.1%
Water
Technology Business44.7%

Net sales

JPY1,832.6 billion(The fiscal year
ending in March 2019)

General Contractors

PublicFacilities

Housing Technology Business
29.5% (Japan 29.0%, Overseas 0.5%)

STEP

1

2

For 2 businesses, estimate financial impacts in 2030 using the 2/4scenario.

1. Target Business1 2 Selection of target business divisions[Target business]
Reasons for selection

Sash door

Due to the impact of higher costs for raw materials
due to tighter regulations and the spread of highperformance products such as energy-saving products

Net Zero
Energy House

4

5[Participating departments]

Targetbusiness

ZEH

3

Sash and door business
ZEH promotion division
Technology development
Environmental division
Cooperation: other related departments at
headquarters

Introduction of renewable energy for climate change
countermeasures,
As demand for ZEH products is expected toincrease[2 future scenarios](C)

Scenarios with large physical impacts
There is no significant tightening of regulations.
4
Expansion of damage caused by extreme weather
Scenario
conditions such as typhoons and floods
Re-energy and ZEH penetration is limited, etc.

2030
Global Average Terrestrial Temperature Change(Difference from the 1986-2005 Average)

Scenarios in which the impact of policy shifts issignificant
Introduction of a carbon tax, drastic tightening of2
recycling regulations, etc.
Scenario
Rising raw material and energy prices
Increasing use of renewable energy and ZEH, etc.

3-74

2. Assessment materiality of climate-related risks

STEP

1

2

3

4

5

Assumed risks and opportunities were identified, and the impact was assessed fromlarge to small.
Assumed risks

Anticipated business impact

Major
classification

MediumSmall

Transition risk

Policies andregulations

Carbon tax
Fuel taxes and soaring electricity prices

Tightening
regulations

Renewableenergy policy

Marketchanges /technologicalchangeTechnology
investment
Changes in
the market

Physical risk

Acute

Risk

ExtremeweatherTightening of regulations, such as energysaving standards
Mandatory use of alternative materials andrecycled materials

Convergence of FITs and subsidies

Opportunity

ImpactTo boost efficiency
Increase awareness of energy conservation
among customers
Strengthening housing energy conservation
standards
renewable energy products
Sustainable raw material utilization
Creation of a market for renewable energyrelated services
Promotion of in-house renewable energy
improvement measures

Increased investment costs in the
manufacturing process

Promoting Innovation in manufacturing
processes

Rising prices of raw materials

Development of alternative materials

Increase in damage caused by natural
disasters
Supply chain disruptions

Business opportunities for disasterprevention products
Increase resilience through BCP measures

Large

Medium to
small

3-75

STEP

3. Identify and define a range of scenarios
3-1 Worldview of the 2 C scenario

1

2

3

4

5

At 2 C, the strengthening of regulations promotes decarbonization and accelerates the spread of ZEH-related
products and the introduction of renewable energy.

Distributed power generation

Green energy

Government

MarketWith the advancement of a wide varietyof renewable energy procurement methods
Promoting the introduction of renewableenergyDevelop manufacturing processes that do
not emit CO2

With the introduction of ZEH housing
and other measures
Increased demand for adaptive
products- Residential solar power- High-performance sashes and insulating
panels- Renovation products

Introduction of a carbon tax
Strengthening of energysaving regulations on housing
Strengthening recycling
regulations, etc.

2

Scenario
Increasing demands for recycled materials
Develop aluminum production that does notemit CO2

CO2

Suspendoperation at plants
due to extreme
weather(Lower than 4 C)

Factory

Abandon fossil fuels

Sea

Green energy

3-76

3. Identify and define a range of scenarios
3-2 5Force analysis of the 2 scenario

STEP

Housing materials industry
Seller(Raw Material
Suppliers)
Cost increase of raw
materials due to carbon
regulations
Shift to recycled materials
Review of low-carbon
procurement methods, etc.,
and response to physicalrisks

New comer
Companies in other industries, such as IoTtechnology and power-related businesses
Strengthening ofcollaboration(Alliances, M&A)

Industry competition
Promote the reuse and electrification of energy atfactories
Reducing the carbon content of raw materials andpromoting R&D of recycled materials
Expansion of sales channels through the spread of
ZEH and renewable energy

Seller(energy, etc.)
Increase in renewableenergy ratio
Renewable energy costs
decreased
Securing power sources forprivate consumption
Investment in renewable energy
Reducing the carbon content offactories

3-77

For low-carbon production
R&D and development

Diversification of re-rnergy-related Systems
As high-performance
Development ofproducts
To consider
new high-value-added
high performanceandproducts products
new high-value-added

2

3

4

5

: Required actions

Buyer(Customers)
Promotion of energy-efficient
products (including recycling)
Needs for energy-saving
products increase
Customers' energy
conservation needs increase
due to the promotion of ZEH
and energy conservation
policies Expanding needs
to high insulation products
for houses
Increased demand forresidential solar power andother renewable energyrelated services due tocustomers' renewableenergy needs and rising
electricity prices(Alternative)
Emergence of disaster response-type products,
etc.

1Development of value-added
products for reducing the cost andcarbon, recycled materials,
residential solar power

Government
Introduction of carbon tax
Promoting energy
conservation, renewableenergy, electrification,
ZEH, low-carbon policies,
and subsidy enhancement
to achieve CO2 reduction
targets
Establishment of a system
for the widespread use of
ZEH
Subsidies (breakwater, etc.)
for increased flood damage
have been developed to acertain extent.
In cooperation with thegovernment,
make an ecosystem/ruleon low-carbon markets

STEP

3. Identify and define range of scenarios
3-3 Worldview of the 4 C scenario

1

2

3

4

5

At 4 C, policies are not implemented, increasing physical risks and increasing demand foradaptive products.
Government

MarketDistributed power generation

Increase in demand forrelaxed-type productsHigh insulation sashes/shades

Green energy

Energy conservation and renewableenergy policies are not advancing.
(Carbon tax not introduced)

Lack of renewable energy
procurement and delays inintroduction

CO2

2
Suspend operation
at plants due to extreme
weatherLack of low-carbon production
at plants, resulting in large
volumes of CO2 emissions

CO2

CO2

Factory
CO2

Fossil fuels

Fossil fuel-derived electricity

Sea

3-78

3. Identify and define range of scenarios
3-4 5Force analysis of the 4 C scenario

STEP

Housing materials industry
Seller(Raw Material Suppliers)

Physical risks emerge insome factories and resource
suppliers
Consideration of diversified
procurement, etc.

Seller(energy, etc.)
Renewable energy will
spread to a certain extent,
but depend on fossil fuels
Optimization of renewableenergy-related investment

3-79

2

3

4

5

: Required actions

New comer
There is no particular entry.

Buyer(Customers)

There is no carbon
regulation.
No shift to recycledmaterials

1

Industry competition
Re-energy and energy-saving measures
implemented as in the past
Development of adaptive products
Physical risks at the company's sites
become apparent
Promotion of measures forrenewal and energy conservation,and examination of portfolios ofsites with high physical risks, etc.

(Alternative)
Develop products for market entry with theincreasing needs for air conditioners

To consider new high-value-added
products

Political support weakened andenvironmentally conscious
products were successful.

Needs for low-carbon,
recycled materials, etc. arelow.
Stakeholders would not
require Response
Demand for highinsulation and sunlightshielding products
increased due to higher
temperature.
Due to flooding damage,demand in high-rise regions
has expanded and demand
for rental properties has
expanded.
Increasing needs foradaptive products

Providing products thatmeet new needs

Government
As the trend of low
carbon/decarbonization weakens
and external pressure from theinternational community weakens,regulations such as carbon tax
and the use of recycled plastics
are not introduced.
In some countries, CO2
emissions at factories are
regulated, and emissions trading
is expected to be more active(not to be introduced in Japan).
ZEH/ZEB penetration has notprogressed, and there are no
aggressive policies.
Subsidies (breakwater, etc.) will
be provided due to rising sea
levels and increased water stress.

Rapid access to policy
information and securing ofsubsidies(mainly in collaboration with thegovernment on physical risks)

3. Identify and define range of scenarios
3 5 Assumptions for each scenario
At present
Carbon price

Renewableenergy policy

Carbon tax

ZEH penetration
rate

Investments
in low carbon
technology

Regulation ofrecycled plastics

Increase/dec
rease inprices ofheavy-use
products

Price ofaluminum

Increasing
disasterswith extreme
severityFrequency offloods

STEP

2

2030
2

C world

4$100/tNewly built houses
54,352 units (2018)

Newly built homes 100%

Existing houses
159 units(2018)%(market at 4-14%
(Price is assumed toincrease by 1.2 times)(No restriction at 4

$2,108/mt(1.25 times higher at
4 C with introduction ofcarbon tax)

1.7 times(Not installed at 4

3

4

5

SourceC world-

1 time1

C)

IEA WEO 2019Japan environment cocreation initiative "Net Zero
Energy House support
project survey presentation
2019 materials"(market at 4 C)C)C)EU "The plastic strategy"

World Bank "World Bank
commodities forecast "$2.2 thousand/mt

Technical review committee
on flood control plans basedon climate change"Recommendations on water
control plans based on
climate change"

3 times

3-80

4. Evaluate business impacts
4 1 Estimated items for business impact evaluation

STEP

1

2

3

4

Select risk/opportunity items to be prioritized in the current scenario analysis.
Estimated Risks and Opportunities
Increase in energy costs due to introduction of carbon tax
Risk

Rising raw material prices and rising costs due to regulations
Increase in operating costs due to flood damage, etc.
Increase in sales of high-performance products for new homes
Increase in sales due to expansion of renovation market

Opportunity

Increase in sales due to market expansion of adaptive products
Reduction of business activity costs through promotion of energy conservation
and renewable energy measures

3-81

5

1

STEP

2

4. Evaluate business impacts
4 2 Business impact evaluation (summary of the 2 C Scenario)

2
Scenario

3

4

5

In the 2 C scenario, there is a large increase or decrease in profit due to institutional development by the government,tightening of regulations, and changes in consumer preferences.
Especially, the renovation of the existing house which occupies the majority of the house is indispensable.
In the analysis, we assume that national policy is expanded.

Risk
Opportunity

There are risks such as "introduction of a carbon tax" and "soaring material prices .
There is the possibility of cost reduction due to sales increase by the renovation market
the introduction of energy saving and creating facilities to factories, etc.

and

3-82

1

STEP

4. Scenario analysis results
4 3 Evaluation of Business Impact (Summary of the 44
Scenario

3-83

3

4

5

Scenario)

As the 4 C scenario is an extension of the current scenario, the increase and decrease ofprofit is relatively small.
Risk
Opportunity

Operating income[FYE2019]

2

Carbon tax
Introduction

Risks such as

material prices" and "flood damage" exist.

Sales increase for high-performance building materials and solar panels due to the dissemination of new ZEH(current pace), in addition to expected increase in profits due to the expansion of market for adaptive products.

Material prices
Steep rise

Flood damage

Increase in sales(Newly built)

Increase in sales Increase in sales(Renovation)(adaptive products)

Cost reduction
Operating income(energy[FYE2031]
conservation, etc.)

STEP

5. Future Challenges and Plans

1

2

3

4

For the next fiscal year and beyond, company plans to
expand scenario analysis into other businesses,
consider countermeasures deeply, anddisclose information
1

2

Ensure governance is in place
3

Assess materiality ofclimate-related risksMarket andTechnology
ShiftsReputation

Policy andLegalPhysical
Risk

Identify and define range of
scenarios

Scenarios inclusive of a rangeof transition and physical risks
relevant to the organization

Assess materiality ofclimate-relatedrisks/opportunities

Set multiple scenarios

4

Evaluate business
impacts

Documentation andInformation Disclosure

Identify potential
responses

Business impact on:
Input costs
Operating costs
Revenues
Supply chaine.g.

Countermeasures
Changes to business
model
Changes to portfolio mix
Investments in capabilities
and technologies
e.g.

Evaluate business impactof risks/opportunities
quantitative

Consider of proposed
revisions to the business
plan

Expand scenario analysis into other businesses

65Consider countermeasuresand utilize into merchandisingor commercialization

Disclose appropriate information about strategies and risk management incorporating scenario analysis
Disclose information andreflect in management strategy

3-84

Materials
Practice Case
Practice Case
Practice Case
Practice Case

3-85

Shin-Etsu Chemical Co., Ltd.
FUJIFILM Holdings Corporation
Furukawa Electric Co., Ltd.
Mitsui Mining & Smelting Co., Ltd.

5

Overview of the Shin-Etsu Group (as of March 31, 2020)
1 Established2

Location of head
officeNumber of group
3companies
4

Number of
employees

September 16, 1926
6-1, Ohtemachi 2-chome, Chiyodaku, Tokyo
150
Japan: 55/Overseas: 19 countries, 95
companies

22,783 (consolidated)

5 Capital

119.4 billion JPY

6 Sales

1.5435 trillion JPY

7 Ordinary income

418.2 billion JPY

8Marketcapitalization

Approx. 8 trillion JPY (as of January
26, 2021)

3-86

Details of the ShinElectronics & Functional Materials
Business

Processing, Trading
and Specialized
Services BusinessBusiness reported on
PVC/Chlor-Alkali Business7%
Rare earthmagnets

Photoresists

Encapsulants

Photomask
blanks31%

15%

Net sales composition
by segment(as of the March 2020
term)

25%
7%

Synthetic quartz
preform for
optical fiber

Synthetic quartz
glass substrate

Polyvinyl chloride

15%
Silicone BusinessSpecialty Chemicals Business

Fluids

Semiconductor Silicon Business

3-87

Powders

Forms
Liquid rubbers

Cellulose derivatives

Polyvinyl alcohol

Caustic soda

Silicon metal

Synthetic pheromones

Rubbers

Structure for scenario analysis of climate change
Scenario analysis is handled by the Climate Change-related Subcommittee establishedwithin the ESG Promotion Committee, as well as the committee members andadministrative staff of the divisions being analyzed[ESG Promotion Committee overview]
Established:

April 1, 2005

CSR Promotion Committee established

August 1, 2017

ESG Promotion Committee established

Committee Chairman: Yasuhiko Saitoh (President and CEO)
Vice Chairman: Toshiya Akimoto (Managing Director)
Committee members, administrative staff:
Group company ESG officers: 45(including the 11 directors andgeneral managers of divisions of Shin-Etsu Chemical)

8
8

3-88

Climate change scenario analysis: Task details

3-89Setting the timeframe for climate change scenariosTheselected based on the impact from climate change[Projected average global surface temperature change](compared with the average from 1986 - 2005)

above) scenario:
As of 2100, temperatures will be 3.2higher than pre-Industrial Revolution
levels if no additional measures against
global warming are taken

scenario:
As of 2100, temperatures will be 0.9higher than pre-Industrial Revolution
levels if strict measures are taken

2050
Prior to 2030, the change in temperature is nearly the same
The gap between the scenarios widens after 2030.
(Source) AR5 SYR, Table SPM.6
3-90

We estimated the revenue for 2050 and evaluated the impact ofclimate change would have on it
Estimate hypotheses

Based on the increased production and growing demand for rare earth magnets,
we assumed that the company would see a steady growth in sales until 2050
Operating profits for 2050: We employed the average value over the operating
profits for the past three years
Amount of emissions for Scope 1: We assumed that they would increase inemissions in FY2019
We assumed that emission factors for electricity would decrease

3-91

Main production sites for the covered businessShin-Etsu Chemical<Fukui, Japan>

Shin-Etsu Technology(Suzhou)
Shin-Etsu (Changting)Technology<China>Shin-Etsu Magnetics
Philippines<Philippines>
Shin-Etsu Magnetic
Materials Vietnam<Vietnam>Shin-Etsu Magnetics Thailand<Thailand>Shin-Etsu Malaysia<Malaysia>

3-92

Greenhouse gas emissions for the covered business: ratio by
scope
97%
3%

Scope 11

Scope 22

Production process for the covered business
Process using large amounts ofenergyMetal
Individual rare earth oxides are
separated from rare earth
concentrate and change to metal
by electrolytic process

Alloy
Rare earth metals and other raw
materials are charge into crucible
and melt by high frequency
inductive furnace.

Forming
Alloys are pulverized to fine
powder. Put the powder into
mold and press in magnetic
field.

Block
Formed block put into
sintering furnace andmake sintered block

Packaging, shipping
3-93

Magnetizing

Products
Sintered blocks are cut andground into the required
shape and the surface istreated by plating or coating.

Business opportunities from climate change (Application

scenario)

Details

ImpactElectric vehicles, hybrid vehicles,
fuel cell vehicles

The use of high-performance, compact rare earth magnets in the drive motors
and other various motors of hybrid, electric, and fuel cell vehicles reduces theoverall weight of the vehicles and increases their energy efficiency

High

Wind turbine generators

Rare earth magnets contribute to making offshore wind turbine generators highly
efficient and reducing generator maintenance costs

High

Compressor motors for air
conditioner

Energy consumption efficiency can be increased and the amount of electricity
consumed can be decreased by using rare earth magnets in air conditioner
compressor motors

Med.

Aircraft

The weight of aircraft can be reduced and energy efficiency improved byconverting to electric or hybrid forms for small aircraft, or by converting toelectric hydraulic drives (motor drive) for large aircraftMed.

Industrial motors

The use of rare earth magnets in industrial motors can increase motor efficiency
and reduce the amount of electricity consumed

Med.

3-94

Risks from climate change (EventRisk to Shin-Etsu

Increased electricity
prices due to theIncreased costs for purchasing electricity
spread of electricity
from renewable energy sourcesfrom renewableenergy sources

Extreme weather
conditions(typhoons, riverflooding, etc.)

Carbon taxes
introduced byvarious countries
around the world,carbon emission
quotas set

3-95

Flooding of production sites
Supply chain disruptions

A carbon tax is imposed
Costs created for purchasing emission
credits in order to meet carbon emission
quotasscenario)
Impact on
profits

Countermeasures

High

Reduction of Scope 2 emission amounts-Further promotion of production processes thatuse less electricity and introduction of highefficiency equipment, etc.
-Introduction of a cogeneration system that uses
carbon-neutral natural gas (natural gas withemission credits)

Low

Regrading of production sites
Decentralization of production sites
Diversification of raw material sources
Securing of product inventory
Purchase of property insurance

Low

Reduction of Scope 1 emission amounts-Further promotion of more efficient production processes
and introduction of high-efficiency equipment, etc.
-Use of hydrogen-reduced iron materials
Set absolute reduction targets for greenhouse gases andachieve them.
Collect information on environmental regulations such ascarbon taxes for each country, and come up with measures
to deal with them.

Risks from climate change (4Event

Risk to Shin-Etsu

Impact on
profits

Increased frequencyof extreme weather
Flooding of production sites
Increased frequency of Supply chain disruptions

Highflooding due tochanges inprecipitation patterns,
etc.
Introduction of carbon
Carbon taxes and carbon emission quotas will not betaxes in certain
countries, setting of
introduced in the countries that the production sites ofcarbon emission
the covered business are located in.
quotasElectricity prices

According to the IEA's scenario analysis (the scenario
for current initiatives), electricity prices will not increase.
Because of this, increased electricity prices are not arisk to Shin-Etsu.

Countermeasures

Regrading of production sites
Decentralization of production sites
Diversification of raw material sources
Securing of product inventory
Purchase of property insurance

-

-

-

-

3-96

Materials
Practice Case
Practice Case
Practice Case
Practice Case

3-97

Shin-Etsu Chemical Co., Ltd.
FUJIFILM Holdings Corporation
Furukawa Electric Co., Ltd.
Mitsui Mining & Smelting Co., Ltd.

Fujifilm Group Basic Information (Business Field)
Copy machines andmultifunction
machines

Color film
QuickSnap

Digital cameras

Imaging
Solutions
Document
Solutions

Laser printerMedical system(medical images, endoscopes,
etc.)

JPY386.9 billion
16%

FY2018
JPY1,039 billion
JPY1,005.6 billion Net sales
JPY2,431.5 billion 43%
41%

Healthcare &Materials Solution

On-demand printing
systemFilm
Processors/Printing
Equipment
Color paper

Healthcare
products

Pharmaceuticals

Recording Media

Flat panel
Display materials(Films for LCDs, etc.)

Graphics system

Optical Devices(Lens unit for mobile phones)

Electronic materials(Semiconductor
Manufacturing Materials)
3-98

Risk Items in Display Business and Industrial Equipment Business
Risk Item

Business impact

Small classification

Index

Discussion (Example)

Plastic regulations

Spending

Regulations on plastics are progressing led by Europe, and expenditures for replacement of alternative materials, upgrading of recycling, introduction of
tracking systems, etc. are increasing, which has an impact on PL/BS.

Developing next-generation
technologies

Revenues, expenditures,
and assets

Strategies for plastics such as material recycling and chemical recycling are required, which affects PL/BS.
Introduction of a carbon tax will impose taxes on fuel procurement costs, which will increase production costs in factories in countries with higher carbon
taxes and have a medium-scale impact on PL/BS.

Carbon priceInvestments in low carbon technology

Revenues, expenditures,
and assets

Environmentally conscious and financing drivers increase demand for low-carbon products such as TACs and require conversion from PETs, affecting
PL/BS.

Risks associatedwith plastics regulations and their response
The damage to employees, factories, and supply chains caused by heavy rains, floods, and typhoons causes additional investment in shutdowns,
productionand equipment restoration.
In addition,
Financialriskdecreases,of introducing
carbontaxcosts such as insurance premiums will increase for assets on high-risk land, which will

Increasing severity of extreme weather
Expenditures and assets
conditions

Spending
Revenues, expenditures,
and assets

Changes in the energy mix

Expenditures and assets

Changes in the energy mix will greatly change the emission factor, greatly change the achievement of the carbon emission target, and affectP/L and B/S including changes in the site.

Renewable energy subsidy policy

Revenue

Subsidies for renewable energies such as CCUS, BECCUS will accelerate the introduction of renewable energies in the world and affectproduct liability.

Energy-saving policy

Spending

Rigorous regulations governing GHGs emitted from factories could increase the cost of investments and affect PL/BS.

Customer reputation change

Revenues andexpenditures

Increase in the average temperature

Expenditures and assets

Transformation to renewable energy is required in order to achieve CO2 reduction target, and correspondence costs such as the purchase of facilities
and green power increase, which has a large impact on PL/BS.
CCUS, BECCUS is assumed in low-carbon societies based on 1.5 C and has a large impact on PL/BS.

Impact on PL/BS due to increased CO2 emissions from in-house manufacturing facilities, increased consumer interest in SDGs (including selection ofpartners), and need for energy conservation, ESG investments, etc.

Business opportunities by promoting the introduction of CCUS, BECCUS

Revenues, expenditures,
Renewable energy subsidy policy
and assets
Revenues, expenditures,
Changes in Important Products/Prices
and assets

Increased temperature induces a move toward decarbonization, requiring suppliers to take measures against global warming, raising procurement costs
for TACs, PETs, etc., and thereby affecting PL/BS.

MediumSubsidies for renewable energies such as CCUS, BECCUS will accelerate the introduction of renewable energies and affect product liability.
Changes in prices of raw materials such as PETs and TACs increase procurement costs and affect PL/BS

Policies on forest protection

Expenditures and assets

Increased production and sourcing costs due to tighter regulations related to decarbonization have an impact on PL/BS

Changes in the investor's reputation

Revenues, expendituresand capital

The trend of die vestment accelerates, and the winds of enterprises that do not practice environmental management become stronger. As a result,financing costs increase and affect PL/BS.

Changes in rainfall and weather
patterns

Expenditures and assets

The water level of the dam declines due to changes in rainfall, and power transmission from hydroelectric power plants is disrupted, and the plant stops
operation and affects PL.

Energy Demand

Expenditures and assets

Changes in energy costs for transporting materials and operating factories, increased operating costs, and medium-sized impacts on PL/BS

Expenditures and assets

Water stress increases supply costs, effectively rendering production virtually impossible, and increases in production costs due to tighter regulations onwater withdrawals for production, thereby affecting PL/BS.

3-99

Large

affect PL/BS.

Carbon Emissions Targets/Policies in
Each Country

Rising sea level

Assessment

SmallDefinition of each worldview based on scientific grounds such as the IEA

2030

At present

Carbon Emissions
Targets/Policies in
Each Country

Introduction ofcarbonsectortax
In the industrial

Carbon price

Changes in theenergy mix

GHG emissions

413 Million tCO2
(2017)

Carbon tax (Japan)

Not introduced

Power Source
Composition (Japan)

Coal: 360 TWh
Nuclear: 33 TWh
Renewable energy: 186
TWh(2017)

Regulations
on theof newsprint
use
Productionof recycled plastics

Impact of low
carbon emissions

42

401 Million tCO2

SourceC world

401 Million tCO2

Ministry of the Environment,"Japan's draft promise" and"Toward a drastic reduction ofgreenhouse gases in anticipationof 2050"$88/t

Estimated from IEA WEO 2018

Coal: 264 TWh
Nuclear: 216 TWh
Renewable energy:
250 TWh

Coal: 83 TWh
Nuclear: 247 TWh
Renewable energy: 347
TWh

IEA WEO2018 (New Policies
Scenario, Sustainable
Development Scenario)

28.3 Mt

31.6Mt31.7 Mt

Estimated from IEA WEO 2018

37%
80Mt

51%
137Mt

42%
138Mt

Estimated from IEA WEO 2018

1.7 Times

Estimated from IEA WEO 2018

(Not installed at 4

Promotion of CCS

Rate of recycled
aluminum
Production of aluminum

C world

C)

Increasing severity of
extreme weather
conditions
1 time(No restriction at 4 C)

Plastic regulations

Recycled plastics
Utilization ratio

Developing nextgeneration
technologies

CO2 recovery by CCSs
(Global)0.00 Gt(market movement at
4 C)

Industrial sector 0.54 Gt
Power generation 0.30 Gt

Estimated from IEA WEO 2018

In extreme weather
conditions
Increasing severity

Days of heavy rainfall
per year (Japan)

2.5 days

3.0 days

2.5 days"Japan's Weather at the End of the
21st Century" (2015) by the
Ministry of the Environment and
the Japan Meteorological Agency

3-100

4 C world: Low carbon/decarbonisation is not promoted and physical risks increase

Government

MarketDigitization of printing technology

Distributed power generation
Increase in procurement costof aluminum has small impact

Green Energy

PS and CTP market

Delays inintroduction due tolack of renewableenergy procurement

No active promotion ofenergy conservation
and renewable energy
policies(Carbon tax not
introduced)

Market expansion ofElectronic paper OLED Micro LED

CO2

Lack of low-carbon production
at plants, resulting in large
volumes of CO2 emissions

CO2

CO2

Factories on asuspension of operation
due to torrential rain andextreme weather

Factory
Brown Electric

CO2

Fossil fuels

Sea
3-101

In the 2

C world: Advanced decarbonization accelerates the progress of adopting

renewable energy, recycled plastics, and CCUS.
Government

Development in paperless
Distributed power generation
Introduction ofcarbon tax, stricter
recycling
regulations, etc.

Acceleration of Digitization of Printing Technologies

Green Energy

Printing process
Forcing the pace

Promoting the introductionof renewable energy basedon various procurementmeans for renewable energy

Electronic paper OLED Micro LED
Market expansion

Diversification of printed materials

Demand is expanding in
the global market for massprinting such as
newspapers, despite
progress in paperlessprinting.

Increase in needs forrecycled materials
Js

Generating renewableenergy on company
property throughimplemented solar panel
on roofGreen Energy

FactoryCCS
technology

Generating plants
incorporating CCS
technology becomes amainstream

In the 4

Offshore wind

Sea
EOR

3-102

Distributed power generation

BECCS

C world: Low carbon/decarbonisation is not promoted and physical risks increase

4

C worldview @2030s (Example)

Display and industrial equipment industries
Seller(Raw Material Suppliers)
There is no carbon regulation.
The shift to recycledmaterials (PET, TAC) is
assumed to be a market trend.
Physical risks emerge forsome factories and resource
suppliers

Considering portfolios
with high physical risk
Seller(energy, etc.)
Grid parity remains insome areas because of thelack of renewable energy
use. Renewable energyrelated costs remained
high in many regions.

New comer
Threat of new market entrants due to the
spread of the organic EL market

Industry
No major changes due to ongoing
renewable energy and energy
conservation measures
Actualization of Physical Risks
to Our Bases
Implemented conventional energysaving and re-energy-saving
measures
Consideration of the portfolio ofsites with high physical risks, etc.
Expansion of organic EL market(Alternative)
For renewable energyrelated investment
Minimization(for some regions only)
3-103

Organic EL and Micro LED display materials
are becoming popular.

Buyer(Customers)
Low-Carbon Constraints
Are Weak, and CCUS
Markets Have Been
Popularing on Stagnation
Needs for low-carbon,
recycled materials, etc. arelow, and no special
response from stakeholders
is required.

: What to do

Government
Regulations are notadvancing as low
carbon/decarbonization
trends weaken and externalpressures from theinternational community
weaken.
Promoting renewableenergy policies in someregions (U.S.)
Regulations on the use of acarbon tax and recycledplastics (PET and TAC) are
not introduced.

Traditional portfolio
Maintain

Popularization of CCUS has
not progressed, and no
positive policies have beenformulated.
Rapid access to policy
Subsidies(breakwater,
information,
securingetc.) subsidies
will be provided(mainlyfor
inincreases
in sea withlevel.thecollaboration
government on physicalrisks)

In the 2 C world: Advanced decarbonization accelerates the progressof adopting renewable energy, recycled plastics, and CCUS.
2

C worldview @2030s (Example): What to do

Display and industrial equipment industries
Seller(Raw Material Suppliers)
Increased procurement costs due
to carbon regulations
Shift to recycled materials
expanded and procurement andmanufacturing costs increased
Intensification of resourcecompetition. As a result, procurement
costs increased.
Responding to factories andresource suppliers with high flooding
risks
Review of low-carbon
procurement methods(strengthening cooperation with
suppliers of recycled materials,
etc.)
Response to Physical Risks(less than 4 C risk)

Seller(energy, etc.)
Increase in renewable energy
ratio
Renewable energy costs
decreased
Securing power sources forprivate consumption
Investment in renewable energy

New comer
Diffreent types of industries that are strong in
CCUS business emerge, and companies which arestrong in organic EL-technology

Industry

Government

Buyer(Customers)

Aiming to achieve CO2 reductions
by promoting the use of renewableenergy, electrification, and theintroduction of CCUS technologies.
Subsidies are also enhanced.

Low-carbon manufacturing
processes (including recycling,etc.) = Increasing demand for lowcost products

In some countries, CO2 emissions
at factories and other facilities are
regulated, and emissions trading is
becoming more active.
(not expected to be introduced inJapan)

Strengthen
Recycling policies increase
collaboration (alliances,demand for recycled materials
M&A, etc.)

Promote the reuse and electrification ofenergy at factories
Increase in procurement costs due toincrease in raw material prices andintensified resource competition
Active R&D on recycled materials
Organic EL, electronic paper, and CCUS
are becoming trends in the marketplace.

Customers' renewable energy
needs are increasing, and reuse ofenergy is required in the
manufacturing process as well.

Introduction of a carbon tax.
Factories that emit a large amount of
CO2 are subject to the regulations.

Demand for organic EL display
materials.

Introduction of regulations
concerning the use of recycledplastics

Low-carbon CCUS technologies
are required.

Subsidies (breakwater, etc.)
associated with sea level rise will
also be developed to a certain extent.

Reducing the carbon content of factories
R&D on recycled materials
R&D on organic electroluminescence,electronic paper, and CCUS

(Alternative)
Threats of market-substitution by organic EL and Micro LED display materials
Alternative technologies for separating membranes such as CO2 absorbent
solutions

CCUS's infrastructure-building
Manufacturing including
recyclingHigh efficiency and low carbon inprocesses
R&D on recycled materials
Develop value-added products
and CCUS technologies

Rapid access to policy
information,
And securing subsidies
Contributing to the disseminationof organic electroluminescence incooperation with the government
Contributing to CCUS Markets

Considering added value through digitalization andintegration with services

3-104

Business Impact Assessment (Example)
Business impact items
4

Response to flood damage caused by heavy rains andfloodsAssessment-

Increase in sales of non-destructive testing services toprepare for extreme weather conditions

2

billion yen+

Sub total

Billion yen

Cost for improving the rate of recycled plastics usage -billion yen

Responding to the strengthening of carbon taxes andregulations-

billion yen

Increase in sales of related materials due to CCUS
penetration+

billion yen

Sub total
4
Physical risks increase in a 4 C world, and costs increase in response to heavy rains and floods
Increasing need for non-destructive testing services from the perspective of preventive maintenance2
Regulatorys and demand for recycled plastics are rising, and costs for recycled materials and other materials are rising.
Financial impact of the introduction of a carbon tax and increased investment in energy conservation to comply with regulations
Increase business opportunities by revitalizing CCS and CCUS markets
3-105

billion yen

Billion yen

Basis of calculation of business financial impact assessment
CCS-Related Market Forecasts
Sales
In the 2 C scenarios, the demand for CCS is increasing, and themarkets for CO2 separation and recovery are growing.
2
Scenario

Expect to launch rapidly

2018

2022

2030

2018

2022

2030

4
Scenario

3-106 Source: Compiled from IEA ETP2017, etc.

Basis of calculation of business financial impact assessment
CO2 self-storage forecast
Unit: Gt CO2

2

Other transformation
Industry
PowerC

scenario

2014

4

2015

C

scenario

Source: Prepared by IEA ETP2017
3-107

2020

2025

2030

2035

Assuming market
movements

2040

2045

2050

Initiatives for Future Scenarios and Examples of Future Measures(Risk Response)
Possible "risk preparations" for future scenarios
Important items

Current Initiatives

Examples of risk countermeasures

Carbon price

Reduce CO2 emissions by 30% by FY2030 (comparedto FY2013)
Contribute to reducing social CO2 emissions by 50
million tons by FY2030
Setting targets for the rate of renewable energy usage

Reducing CO2 Emissions by Introducing Internal Carbon
Pricing
Accelerate investment in environmental facilities by
issuing green bonds

Plastics
Regulation

Reduce waste generated by the Group by 30% by
FY2030 (compared to the same level as in the previous
year)
30% improvement in resource input per unit ofproduction by our group by FY2030 (compared to thesame level above)
Recycling of PET/TAC at Plants

Strengthened monitoring of regulatory trends related tochemical recycling for PET/TAC films and other display
materials
Investigation of setting targets at the recycling PCR rate *1,
including external recycling

Developing nextgeneration
technologies

Demonstration of gas separation membranes atoverseas gas fields
Non-destructive inspections have a track record inregular inspections, detailed designs, repair designs,
and repair work for the maintenance and managementof social infrastructures.

To further develop and study methods for CO2 separation
and recovery(In-house development or alliance)
Transform business by developing and utilizing AI and othertechnologies in non-destructive inspection solutions

Identify water risks using indicators for water stress,
water input, and business impact in each country andregion.

Establishment of specific action guidelines for floods anddisasters
Preparation for long-term infrastructure disruption (response topower outages, etc.)
Establishment of procurement strategy to minimize
procurement risk
Anti-liquefaction, anti-seismic reinforcement and anti-tsunami
measures

Increasing severityof extreme
weather conditions(Flood damage)

3-108* 1: post-consumer recycling ratio: Percentage of commercially recovered materials used in recycled materials.

Materials
Practice Case
Practice Case
Practice Case
Practice Case

3-109

Shin-Etsu Chemical Co., Ltd.
FUJIFILM Holdings Corporation
Furukawa Electric Co., Ltd.
Mitsui Mining & Smelting Co., Ltd.

Overview of Furukawa Electric Group BusinessElectronics & Automotive Systems
Div.

Communications Solutions Div.

Automotive Products Div.

Optical Fiber and Cable Products Div.

Electric Conductor Div.

FITEL Products Div.

Magnet Wire Div.

Broadband Solutions Business Div.

Copper & High Performance
Material Products Div.

Automotive products& batteries

Copper Tube Div.

Communications

SolutionsElectronics&
Automotive
Systems

Infrastru
ctureTarget Div.
(In this analysis)
Electronics
componentmaterials

EnergyInfrastructure

Energy Infrastructure Div.

Functional Products Div.

Power Cable Div.

Thermal Management Solution& Products Div.

Industrial Cable & Power Cable
Accessories Div.

AT & Functional Plastics Div.
Functional
products

Memory Disk Div.
Copper Foil Div.

3-110

Characteristics of Target Businesses
Item

Communications Solutions Business
Optical fiber cables

Energy Infrastructure
Business
Power Cables

Target productcategory
Optical Fiber

Underground
Power Cable

Medium-Low
Voltage Cable

Materials used

Glass materials (optical fiber)
Plastics (fiber, cable dressings, etc.)
Copper (metal communication cable)

Copper (Conducting material)
Plastics (cable dressings)

EnergyAmount used

Large amount used in optical fiber
manufacturing process

Be relatively small

Expansion of production bases globally(Asia, North and South America, EMEA)

Japan, China

Bases

3-111

Hikari/Metal
Communication Cable

Scenario development process
Analysis step

Questions
Analysis level

Level 1
Be based on TCFD
requirements
As a minimum
requirement
Level

Identify and define
range of scenarios

Evaluatebusiness impacts

Identify potential
responses

For any variable
Do you want to target?

In any scenario
Do you set it?

What is the size of which
position?
Should we calculate indepth?

To the extent of themeasures
Do you consider it?

Qualitative and partial
quantitative assessmentsof the business impact ofeach scenario

Present
countermeasures areshown, but linkage with
future scenarios isunclear.

Important variables
identified but not fully
discussed and explained
their importanceThis time
Details of
implementation

Assess materialityof climate-relatedrisks

In multiple scenarios,
Simply cite existingscientific scenarios/only
bivariate scenario branching

Communications
solutions

4 C (business as
usual)

Energy infrastructure2

Identify high-priority risks inthe 2 businesses

C (strict measures)

Define 2 scenarios

Estimated impact
on net sales andoperating income

Insurance, etc.

Estimated Impact ofCarbon Tax and
Copper Price Rise

Considerconversion toother materials

3-112

Assess materiality ofclimate-related risks

Assess materiality of climate-related risks(Communications Solutions Business)

Increase in production costs due to the introduction of carbon prices, an increase in procurement costs due to the increase incopper demand, and the effects of physical risks
On the other hand, opportunities such as market expansion due to the spread of smart cities have a major financial impact.
Risk Item
Major
classification

Asses
sment

Small classification

Index

Discussion (Example)

Carbon Emissions Targets/Policies
in Each Country

Spending
AssetsDepending on the amount of CO2 discharged by the plant, the conversion to renewable energy is required,
and the corresponding costs for purchasing facilities and green power, etc. are increasing.

Dissemination of renewable energy
and energy-saving technologies

Revenue
Assets

Acceleration of introduction of renewable energy, etc. and increase of renewable energy ratio of electricity
supplied to manufacturing plants

Carbon priceSpending

When a carbon tax is introduced, taxes are levied on fuel procurement costs.

Energy conservation, regulations ineach country

Spending

If the energy conservation policy is not achieved, the company's environmental image will be damaged by
the announcement of the company name.

EconomyChanges in the energy mix

Spending

Carbon tax
New
Technology
Rawmaterial
cost
Reputation

In order to achieve CO2 reduction target, the introduction of renewable energy will be accelerated, and the ratio ofelectricity supplied to manufacturing plants will increase. Risks associated with the introduction of emissions trading,etc.

Developing next-generation
technologies

Revenue
Spending
AssetsDemand for optical fibers is increasing due to demands for increased communication volume and speed due to the
spread of next-generation infrastructures utilizing AI and IoT, electrification of transportation systems (autonomous
driving, EV, etc.), micro/digital grid, and smart cities.

Changes in Important
Products/Prices(Intensification of resourcecompetition)

Revenue
Spending
AssetsDemand for copper and plastics, the main raw materials for electric wire and cable, has increased due to the
spread of EV and renewable energy, and procurement costs have increased due to changes in the supplydemand balance.

Rising sea level

Spending

The operation of coastal plants was shut down due to natural disasters such as floods and a sharp increasein tides. Increasing investment in the installation of breakwater.

Drought: changes in rainfall andweather patterns

Spending

Drought, increased production costs due to water restrictions, additional investments for systemdevelopment, etc.

Typhoon: Increasingly severe
extreme weather conditions

Spending
AssetsDue to plant damage caused by typhoons, additional investments were made to shut down operations,
reduce production, and restore facilities. Increase in the premium

Customer reputation changes,
Increase in the average temperature
Changes in the investor's reputation

Revenue
Spending
AssetsDue to the increasing interest of business partners, preference has emerged for SBT and other companies that havemade progress in environmental measures.
MediumDie Best moves faster and more winds into the enterprise. Worsening of the mining working environment due to the
hot weather.

Transition
Toward a
Risk
Low-Carbon

Physical
Risk

Other

3-113

Business impact

Large

Examples of definitions based on scientific grounds suchas IEA
2030* 1

At present

4

C world2

In the industrial sector
GHG emissions

413 Million tCO2
(2017)

401 Million tCO2

401 Million tCO2

Carbon price

Carbon tax-(Not installed at 4 C)

$88/t

In energy
conservation andother countries
Regulation of organic
compounds

Recycled plastics
Utilization rate

12.5%
(2017)(No restriction at 4 C)

14.0%

FIT's purchase price(yen/kWh)Solar: 14 (bidding system)
Wind: 2019-36 (2019)(From FIT at 4 C
Assuming that independence
is difficult)

Re-energy and Energy
Conservation
Dissemination oftechnology

Solar: 21.8
Land Wind: 21.5 (2017)

Ministry of the Environment, "Japan's draftpromise" and "Toward a drastic reduction ofgreenhouse gases in anticipation of 2050"
Estimated from IEA WEO 2018

European plastics strategy,
Plastics Recycling Association

Solar: JPY7/kWh (2025)
Wind: JPY8-9/kWh

Solar: 13.5
Land wind: 20.6

Agency for Natural Resources and Energy

Solar: 12.4
Land wind: 20.6

IEA WEO2017 (450 scenarios)

Capacity to augment thetransmission network-

Increase of more than 6.65
million kW(until 2027)

Increase of more than 6.65 million kW(until 2027)

ZEV ratio

58 thousand units (EV, PHV, FCV) (2017)

PHV/ZEV:5%(72.38 million units)

PHV/ZEV:39%(536.85 million units)

IEAs and JETORO reports
Global Calculator
IRENA Report

Agency for Natural Resources and Energy

World's storage capacity

4.67 TWh (2017)6.62~7.82 TWh

11.89~15.27 TWh

Changes in theenergy mix

Power Source Composition(Japan)(TWh)

Coal: 360
Nuclear: 33
Re-energy: 186 (2017)

Coal: 264
Nuclear: 216
Renewable energy: 250

Coal: 83
Nuclear: 247
Renewable energy: 347

IEA WEO2018 (NPS,SDS)

Next-generation
technology
Progress ofSmart City Market Size and
M2M Communications
VolumeSmart City Market Size: JPY38 trillion
M2M communication volume: 4 exerbites(market at 4 C)

Smart City: 4 thousand trillion yen
M2M: 745 Exabyte/month

Cisco Report
Frost & Sullivan Japan
SMART CITY PROJECT

Increase/Decrease inPrices of Heavy-Use
Products/Products

Predicted value of copper
demand5,000 thousand tons (2015)

9,000 thousand tons

10,500 thousand tons

Than Sebastiaan Deetman and others
Estimate

Sea level rise

Magnitude of sea level rise-

0.25m (2050)

0. 2m (2050)

Ministry of the Environment, Japan
Meteorological Agency Report

Drought

Water stress

Extracting values from eachcountry from tools(2040 *2)-

TyphoonNumber of occurrences-

WRI "Aqueduct," Our CDPs

The number of typhoons approaching is forecast to decrease, but
uncertainty remains.

26 (2016)

Ministry of the Environment, Japan
Meteorological Agency Report*1: The time horizon to be examined for physical risks is set at 2050. * 2: Figures for 2050 are not available, and figures for 2040 are used.

Identify and define range of scenario

Select the evaluation items for business impact
Item

Transition risk
Physical risk
3-115

SourceC world

Carbon Emissions
Targets/Policies in
Each Country

Renewable energy, etc.
Subsidy policy
Unit price of renewable energy
generation(yen/kWh)

3-114

Identify and define range of scenario

A

With the spread of smart cities,
increased demand for fiber

B

In the expansion of thetransmission network, demand for
power cable increase

C

Increase in copper procurement
costs

D

Carbon tax

E

Sea level riseF

DroughtG

Typhoon(Increased Stormand Flood Damage)

City

A

Strengthening of SmartCity

Urban Land

B
Expansion of thetransmission network withthe spread of renewableenergyMiningC

Urban areas

Intensification of resource competition due
to low carbon and increased demand forcopperD

Government(Cost increase due to introduction of carbon tax)

I nt r o du ct i on ofcarbon tax,
stricter recycling
regulations, etc.

F

Influence on plant
operations in areas ofhigh water stress

G
Intensification of extreme
weather conditions (typhoons)Effects on factories, etc.

By rising sea
levelsPlant shut downE

Sea

In the 4 C world, low carbon/decarbonization is notpromoted, Increased physical risk (business as usual)
MiningIdentify and define range of scenario

Smart cities are not making
progress, and urban formats aremaintained as in the past.

While low carbon will not
progress, copper demand
will increase as a result ofmarket trends.

City

Government

No active promotionof energy
conservation andrenewable energy
policies

Urban Land

(Carbon tax not introduced)

Lack of renewable energy
procurement and delays inintroduction(Costs also remain high)Urban areas

Renewable power

Re-energy

CO2

Fossil fuels

Renewable power

Influence on plant
operations in areas ofhigh water stress

Factory

In line with the increase in demand forelectricity, the transmission network will
be strengthened to a certain extent.
Increased demand for resilient wire

Brown power

CO2

CO2

Low-carbon plants do notmake progress, and large
volumes of CO2 are emitted.

CO2

Still dependent on
fossil fuels
Plant shut down
due to sea level rise

Sea

Intensification of extreme
weather conditions (typhoons)Effects on factories, etc.

3-116

In the world of 2 C, low carbon is being promoted, renewable energy
consumption and smart cities become popular (severe measures)
MiningIdentify and define range of scenario

Intensification of resource competition
due to low carbon and increased
demand for copper

Government

City(Cost increase due to introduction ofcarbon tax)

Introduction ofcarbon tax,
stricter recycling
regulations, etc.

Urban Land
Promoting integrated supply
and demand through the spreadof storage batteries and EVs
Expansion of the transmission
network with the spread ofrenewable energy
Renewable power

Urban areas

Move away from fossil fuelswith low carbon anddecarbonization

CO2

Brown power

Re-energy

Fossil fuels

Renewable power

Influence on plant
operations in areas of highwater stress(less than 4

C)

Increasing demand
for recycledmaterials

Plant shut down
due to sea level rise

CO2
CO2

Factory
3-117

Achieving low-carbon factories by
securing renewable power sources
and in-house power generation

Brown power(less than 4C)Submarine cable

Demand for submarine cableincreased with the spread ofrenewable energy (e.g.
offshore wind).

Offshore windSea

Evaluate business impacts

Communications Solutions Business: 4

C (business as usual)

Identify potential responses

Working with insurance companies to avoid risks and secure increased profits.
Revenue
Increase

Revenue
Decrease

Countermeasures
Implementation

Risk avoidance throughcollaboration withinsurance companies

Due to insufficientscientific grounds, it isdifficult to estimate.

The impact of the decline in profits due to drought is large.

A

C

D

E

F

(not considering response costs)

Risk avoidance throughcollaboration with insurancecompanies

G

3-118

Evaluate business impacts

Communications Solutions Business: 2

C (strict response)

Identify potential responses

Reduce greenhouse gas emissions and collaborate with insurance companies to avoid
risks and recover the increase in revenues.
Revenue
Increase

Revenue
Decrease

Countermeasures
Implementation

Due to insufficientscientific grounds, it isdifficult to estimate.

Risk avoidance throughcollaboration withinsurance companies(not considering response costs)

Assumed purchase costof non-fossil certificatesfor SBT complianceMarket expansion due to the spread of smart cities, but the
impact of carbon tax and drought is large.

A
3-119

C

D

E

F

G

Risk avoidance throughcarbon tax measures andcollaboration with insurancecompanies

Identify potential
responses

Countermeasures

Carbon tax and physical risks need to be addressed in a timely manner.
Item

Transition risk

C

Cost ofprocuring copper
Increase

Risk response measures
Consider passing on cost increases, etc. In order to minimize the risk, we will
partially consider the possibility of shifting from copper to aluminum, which is
expected to see a steep rise in prices.

Physical risk

D

Carbon tax

Re-energy introduced at headquarters, factories and value chains
Implementation of ambitious target setting (SBT, etc.)

E

Sea level rise

Consider collaboration with insurance companies that have in-house tools tominimize risk
Strengthen preventive measures against existing assets (breakwater, etc.)

F

Drought

Consider collaboration with insurance companies that have in-house tools tominimize risk
Implementation of preventive measures for existing assets (water supply towers
and reservoirs)
Relocation of some bases

G

TyphoonBe scientifically examined in the future, including the quantification of risks

3-120

Materials
Practice Case
Practice Case
Practice Case
Practice Case

3-121

Shin-Etsu Chemical Co., Ltd.
FUJIFILM Holdings Corporation
Furukawa Electric Co., Ltd.
Mitsui Mining & Smelting Co., Ltd.

Step

2

3

4

5

6

4

Scenario

2.7

+

2

[Business covered in this analysis]business,which accounts for approximately 30% of all sales
Automotive Parts& Components
Affiliates Coordination

Metals

20.8

8.0

2.2

Metals

30.4
Net sales

Automotive
Parts &
Components

Affiliates Coordination

CO2 emissions

Engineered
Materials

473.1 billion JPY(as of FY

63.7
1,691.7 thousand
tons -CO26.0)(as of FY)

17.1
Engineered Materials

31.7
Metal business: Business structure and products
Metal Sector

Lead & Zinc Division

Zinc / Zinc-based alloys / Lead / Tin / Antimony trioxide / Bismuth

Copper & Precious Metals Division

Copper / Gold / Silver / Sulfuric acid

Mineral Resources Division

Zinc concentrate / Copper concentrate / Geothermal steam

3-122

Step

2

3

4

5

6

Scenario

4

2.7

+

2

[Business covered in this analysis]

Metal business supply chain and material flow
Final products
Consumer(customer industries)

Steel
Nonferrous
metal productssmanufacturing process(nonferrous smelting)Electrolytic
process

Raw materials(Concentrates)

Including from
Company-owned mines

Recycled materials
Shredder dust, fly ash,steelmaking dust,
waste batteries, etc.

3-123

Smelting
process

Chemicals
Machinery
Storage batteriesetc.

Disposal

etc.

Precious metals
alloys, chemical products,
processed products, etc.

Electricity
Heavy oil, LPG,
coal, coke, etc.

Zinc
Copper
Lead

Electric wire/cable
Rolled copper products

Automobiles
Building materials
Electronics products
Communications

Recycling

Step

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3

4

5

6

Scenario

4

2.7

+

2

2.7

+

2

[Business covered in this analysis]

Metal business: Core business locations

Hibikinada

Takehara Refinery

Ariake Sea
Hikoshima Smelting

Miike Smelting

Seto Inland Sea

Miike

Hikoshima

Takehara

Miike Smelting Co., Ltd.

Hikoshima Smelting Co., Ltd.

Takehara Refinery

Shinkaimachi, Omuta-shi, Fukuoka

Hikoshima-nishiyamacho, Shimonoseki-shi, Yamaguchi

Shiomachi, Takehara-shi, Hiroshima

Hachinohe Smelting

Hibi Smelter
Kamioka Mining and Smelting

Seto Inland Sea

Hibi

Kamioka

Hachinohe

Hibi Smelter

Kamioka Mining and Smelting Co., Ltd.

Hachinohe Smelting Co., Ltd.

Hibi, Tamano-shi, Okayama

Shikama, Kamiokacho, Hida-shi, Gifu

Hamanayachi, Kawaragi, Hachinohe-shi, Aomori

3-124

Step

2

3

4

5

6

Scenario

4[Assessment of risk significance]

Future climate changes will bring significant risks and opportunities to the metal business*

Item <Main category><Subcategory>Predicted impact on business <Risks>

Predicted impact on business <Opportunities>

Transition
risks

Increase incarbon pricing

The introduction of carbon taxes or increases in the coal tax rate could increase
costs for raw material procurement, product manufacturing, and logistics

We can establish low-coke smelting technology through methods such as
developing beneficiation techniques to improve metal grades

The nonferrous metal industry is at risk of incurring a larger cost burden thanother industries as it consumes a large amount of energy for mining, ore
processing, and melting

Changes inenergy costs

Electricity prices and energy prices from crude oil and similar are predicted toincrease due to changes in the supply-demand balance
It will be necessary to make investments toward increasing energy efficiency
in the manufacturing process for nonferrous metals which have particularlyhigh energy consumption

Changes in
product prices/demandTighter regulations on mining for metals with increased demand due to trends
toward electrification and renewable energy may lead to increases in
response costs
Higher market prices due to increased costs for mining raw materials will
accelerate the substitution of other products in place of MITSUI
resulting in lower sales

Physicalrisks

We can reduce the price of energy by strengthening the demand response of theelectrolytic process as a means to level out the large fluctuations in renewable energy

Demand for zinc, platinum, copper, nickel, lithium, and cobalt may increase due
to progress in electrification, etc.
Demand will increase for the following materials in the following areas:
zinc/platinum for automobiles, copper for energy-related facilities andequipment, lithium/cobalt/nickel for battery materials
Demand for copper used in renewable energy-related facilities and equipment
will grow with the spread of renewable energy over society as a whole

Changes in
reputation withcustomers

Increased interest from client companies in environmental measures such as
RE100 will lead to a preference for companies who have made advances insuch measures. Because of this, additional response costs will be incurred
due to the need to make manufacturing processes low-carbon, and PL/BS
will be impacted as a result

Proactive efforts to address ESG issues can be expected to lead to enhanced
competitiveness and a stronger advantage for the company

Extreme weather
conditions

Extreme weather could have a significant impact on production sites andsupply chains, leading to shutdowns, suspension of logistics functions, andincreased response costs

Other sites may be substituted into BCP plans for other plants even if a certain site has
been damaged by leveraging the strengths of having multiple sites (zinc/lead)

Extreme weather may affect slag storage sites and lead to violations of laws
and regulations due to spillage of hazardous substances

Increase inaveragetemperatures

3-125

The company can gain an advantage in terms of total energy output level by
increasing the ratio of recycled materials and eliminating the process from mining toconcentration (beneficiation)

We can strengthen competitiveness from increased collection and use ofenvironmentally friendly raw materials and switching to a product lineup withhigh added value from an environmental perspective

We can use permits for industrial waste treatment to contribute toward local
communities and therevenue through active initiatives toward disposing
waste from natural disasters

Insurance premiums for weather insurance will increase

Processing costs may be reduced if demand is secured for slag as a construction
material for seawalls and breakwaters

Increased heat stress and an increase in infectious diseases may lead tolower productivity for workers, as well as accidents

We could differentiate itself from domestic and overseas competitors by using IOT
and Digital Transformation initiatives to improve working environments, enhance
productivity, and maintain stable operations

Higher temperatures may cause forest fires that damage infrastructure, etc.

Step

2

3

4

5

6

Scenario

4

2.7

+

2

[Scenario group definition]

For climate change, which has a high degree of uncertainty,
we will use two scenarios to study society in 2030
[Projected average global surface temperature change]

Definition of(compared with the average from 1986-2005)

scenarios

3.2higher than pre-Industrial Revolution
levels if no additional measures against global
warming are taken.

-

(

-

scenario:

2.7higher than pre-Industrial Revolution
levels if no additional measures against global
warming are taken.

-

0.9higher than pre-Industrial Revolution
levels if strict measures are taken-(Source) Simplified form of AR5 SYR Table SPM.6

The TCFD recommendations for scenario analysis suggest that multiple temperature range scenarios

3-126

Step

2

3

4

5

6

Scenario

4

2.7

+

2

[Scenario group definition]
temperatures of 2.7

and higher: Actions for responding to risks

Physical risk increases as low-carbon/decarbonization trends weaken: Actions for seizing opportunities

Nonferrous metals industry

Sellers(raw material suppliers)
Carbon regulations are notintroduced
The shift toward environmentallyfriendly products does not progress
scenario
Physical risks on operations
become tangible for certain mining
sites, factories, and resource
suppliers
Conduct assessments towardsuppliers with high physical risk

Sellers

New entrants
The potential for new entrants is low
There is increased competition due to expansion
into developing countries

Industry
Renewable energy/energy efficiency initiatives andinvestments toward smelting technology are carriedout as they had been previously
Physical risks to MITSUI KINZOKU sites become
tangible (flooding, property damage)Decreased worker production due to heat stress
Promote investment related to disaster
preparedness, review labor regulations, etc.,
and increase investment toward decreasing
manpower and similar(energy, etc.)
There is no significant change fromthe current status, and there is noenergy cost burden capable ofaffecting operations
Maintain existing initiatives toward
energy conservation, etc.

3-127

(Substitutes)
Market prices rise and substitution of alternative
products progresses to a certain degree due toincreased raw material costs from catastrophic
weather events
Deal with diverse countries,
improve the product recycling rate

Buyers (customers)
Demand for copper/lead/zinc andother materials increases due toincreased demand forelectrification and EVs, and forstorage batteries
Trends toward low-carbonization/
decarbonization weaken, andpreference toward companies withadvanced environmental measures
does not increase to the extent
seen in the
There is a trend toward substituting
metal products with products from
China or other countries with low
environmental costs
There is a certain increase in thesubstitution of other materials (e.g.
aluminum in place of iron) due torising market prices

Maintain existing portfolios
Create dependable initiatives
toward increased metal
demandGovernment
Carbon taxes and emission credit
trading are not widely introduced due
to weakening trends for lowcarbonization/decarbonization andweakened external pressure from theinternational community
Mining regulations are tightened incertain regions as a result of
increased demand in line with trends
for increased electrification and useof renewable energy
Disaster prevention/mitigationplans are reviewed, and there is agovernment-led increase indisaster responsive architecture
The government establishes
incentives such as subsidies for thedevelopment of technologies forobservation and forecasting of
torrential rains/typhoons/tornadoes
Legislation is created to prohibit
outdoor work during the summer
months (more pronounced than in

Promptly obtain policy informationand secure subsidies (work actively
with the government, particularly
concerning physical risks)

Step

2

3

4

5

6

Scenario

4

2.7

+

2

[Scenario group definition]: Actions for responding to risks

Expansion of carbon regulations and other policies result in the need for introduction of renewable energy
and investment in low-carbon technologies: Actions for seizing opportunities

Nonferrous metals industry

New entrants

Sellers

The potential for new entrants is low(raw material suppliers)

There is increased competition due to expansion
into developing countries

Procurement costs soar due tocarbon regulations
Renewable energy continues tobecome mainstream, and further
renewable energy-related capital
investment becomes necessary

Industry
Manufacturing costs and operating costs forfacilities such as plants increase due to rising
electricity prices

There are accidents at mining sites
and reduced shipments due todisasters from extreme weather(Risk
scenario)

Competition for resources becomes more intense.
There is increased activity in investments toward
smelting technology aimed toward energy
conservation/decarbonization
Heat stress reduces worker productivity

Conduct reviews toward low-carbon
procurement methods, etc., andrespond to physical risksMove forward with introduction of energy efficientand renewable energy practices
Increase investments toward improving quality
Execute suitable and timely pricing strategies

scenario)

Sellers(Substitutes)(energy, etc.)

Substitution of alternative products accelerates due to risingmarket prices resulting from increased demand and rising raw
material costs

Retail prices for electricity increase
due to rising carbon prices

competitiveness can be enhanced bychanging to a product lineup with high added value from anenvironmental perspective
MITSUI KINZOKU

Move forward with introduction ofenergy efficient and renewableenergy practices

Improve the productrecycling rate

Develop environmentallyfriendly products

Government

Buyers (customers)
There are increased needs for energyefficient manufacturing processes(including methods such as recycling)
due to low-carbonization

The government considers a carbon
tax hike and emissions credit trading.
There are expanded efforts related toemissions credits and similar measures
on a global scale

Demand for copper/zinc/lead increases
due to increased needs in areas suchas energy conservation, EV demand,and storage battery demand

The government promotes policies
related to introducing renewable energy,
including the promotion of electrification

Increased interest in client companies
leads to a preference toward
companies that have made advancesin environmental initiatives such as
RE100.

Metal recycling regulations and mining
regulations are further tightened out ofconcern regarding the depletion of
metal resources

There is a trend toward substituting
metal products with products from
China or other countries with low
environmental costs

Disaster prevention/mitigation plans
are reviewed, and there is agovernment-led increase in disaster
responsive architecture

There is a certain increase in thesubstitution of other materials (e.g.
aluminum in place of iron) due to risingmarket prices

The government establishes incentives
such as subsidies for the developmentof technologies for observation andforecasting of torrential
rains/typhoons/tornadoes

Promote investment toward lowcarbon technologies
Promptly obtain policy informationand secure subsidies
Promote investments toward
recycling technology in responseto regulations

Create dependable initiatives
toward increased metal demand
Participate in initiatives such as
RE100

3-128

Step

2

3

4

5

6

Scenario4

2.7

Physical risk increases as low-carbonization/decarbonization does not progress
Government

Energy conservation/ renewable energy policies are not actively promoted(Carbon taxes have not been introduced)

MiningManufacturing

Mining site operations are suspended
due to extreme weather

Factory operations are suspended due toextreme weather and storm surges

City

Conversion to smart cities
does not progress, and theexisting form of cities ismaintainedWorker productivity
decreases due to increased
heat stress and an increase ininfectious diseases
Exhaustgas

Low-carbonization of plants does not progress,
and large amounts of CO2 are emitted

Renewable energy

Brown energy

There are limited means for procuring
renewable energy (costs remain high, as well),and dependence on fossil fuels continues

3-129

The product recycling rate
improves due to increased
demandDemand for materials such ascopper/zinc/lead increases
in line with current trends

+

2

Step

2

3

4

5

6

Scenario

4

2.7

+

2

Demand for nonferrous metals increases due to the global promotion of low-carbonization initiatives
Government

Carbon taxes are introduced, and recycling regulations and other policies are made more severe
Recycling regulations and mining regulations for metal are made even tighter

MiningManufacturing

Mining site operations are impacted by extreme
scenario)
weather

Plant operations are impacted by extreme
weather and storm surges

City

Low-carbonization progresses,
and smart cities increase

scenario)Worker productivity
decreases due to increased
heat stress and an increase
in infectious diseases(Impact is lower than in the
scenario)

Low-carbonization of plants is achieved throughsecuring renewable energy sources and inhouse power generation
Responding to customer needs

Renewable energy

Brown energy

Electricity prices rise due to the promotion ofrenewable energy and the introduction of carbon taxes.
Society moves away from fossil fuels

Demand for copper/zinc/leadincreases due to promotion of
low-carbonization/electrification

The product recycling rate is
further improved due to asignificant increase in demand

3-130

Step

2

3

4

5

6

Scenario4

2.7

demand for base metals also increases(100 million yen)

Based on the expected operating profits for metal business in 2030, which is an extension of current trends(Carbon taxes are
not introduced)

Rising energy prices/
crude oil prices-

in line with current trends

Rising energy costs mainly due torising crude oil prices

Increased frequency ofdamage from disasters
such as floods

Impact on P/L

Impact on P/L
Capitalinvestment

if countermeasures are
implemented(copper/zinc/lead)
Does not include thecost of procuring land
for the construction of
new smelters

Increased
heat-related
expenses

Increased
revenue
Recovery throughcapturing demandfor base metals(copper/zinc/lead)-* This is one example of a possible countermeasure that we have listed based on the various
forecast information collected for this analysis. We will continue to investigate multiple strategies
after further improving the accuracy of the forecast information.

n addition to
responding to the expected increase in demand for base metals
3-131

+

2

Step

2

3

4

5

6

Scenario

4

2.7

+

2

+

2

and strategies toward minimization are essential(100 million yen)

Based on the expected operating profits for metal business in 2030, which is an extension of current trends

Impact on P/L
if countermeasures are
implemented-

Carbon tax

Impact on P/Lin line with current trends

Capitalinvestment(copper/zinc/lead)
Does not include thecost of procuring land
for the construction of
new smelters

Increased frequency ofdamage from disasters
such as floods

Increased
revenue

Reduce greenhousegas emissions andachieve 1.5

Rising energy prices/
crude oil prices

Recovery throughcapturing demandfor base metals(copper/zinc/lead)

Credit purchases

Increased
heat-related
expenses* This is one example of a possible countermeasure that we have listed based on the various
forecast information collected for this analysis. We will continue to investigate multiple strategies
after further improving the accuracy of the forecast information.

-

scenario, approximately half of the impact of carbon tax can be made up for by weighting energy conservation and similar
efforts to curb CO2 emissions and capturing growing demand
3-132

Step

2

3

4

5

6

Scenario

4

2.7[Definition of countermeasures]

We investigate the direction for countermeasures toward responding to risks
and seizing opportunities
Impact estimation items

Increases incarbon pricing

scenario

Carbon tax is not
introduced in the
scenario

Countermeasures corresponding to risks and opportunities

scenario
Risk

Implementation of ambitious target settings (e.g. SBT targets)

Risk

Introduction of internal carbon pricing

Risk

Development of low-coke, carbon-free smelting technology and creation of industry rules

Opportunity

Changes inenergy cost

Changes in demandfor copper, lead andzinc

Extreme weather
conditions

Increased averagetemperatures
3-133

Loss

ProfitDevelopment of carbon-absorbing technology such as blue carbon

Risk

Establishment of target figures for renewable energy introduction rates

Risk

Establishment of long-term targets for the reduction of energy used

Opportunity

Improvement of the rate of recycled materials (energy conservation)

Opportunity

Strengthening of demand response measures

Opportunity

Introduction of renewable energy generation equipment to the roofs of plant buildings
and unused company land

Opportunity

Development toward off-grid buildings with hydrogen storage alloys

Opportunity

Investment toward developing products using copper and other metals

Opportunity

Recycling of metal scrap collected from customers

Opportunity

Improvement of the rate of recycled materials (collection of lithium and other valuable metals)

Op. / Risk

Reevaluation of portfolios in consideration of multiple scenarios

Risk

Company-wide systemization of spare parts management aimed toward swift recovery
after incurring damages

Risk

Construction work toward disaster preparedness at closed mines

Risk

Development of low-environmental burden/low-cost processing technologies at closed mines

Risk

BCP sophistication, including verification of the cost-effectiveness of disasterprevention measures

Opportunity

Strengthened processing of waste from natural disasters

Opportunity

Formulation of product sales strategies tailored to national land resilience needs

Risk

Implementation of FA operations at high-temperature work sites in the smelters

Risk(Development of a system for remote control of mining machinery)

Step

2

3

4

5

6

Scenario

4

2.7

+

2

[Future initiatives]

For metal business, we performed regular monitoringin order to increase the certainty of the scenarios[Projected demand in 2030 for nonferrous metals]

scenario
scenario

Zn Zinc
Pb LeadCu Copper
Ni

Nickel

(*)

0

100

50

150

200

250

(Source, reference) Sebastiaan Deetman, World Bank et al.
For copper, we used the average demand from 2010 to 2015; for other metals, the projected figures are based on using the demand for 2013 as 100%
as raw materials by other divisions, together with cobalt and platinum.

(*)

3-134

Step

2

3

4

5

6

Scenario

4

2.7

+

[Future initiatives]

We will move on to analyze other business divisions after ending scenario analysis
for metal business with the support of this project
Automotive Parts& Components
Affiliates Coordination

2.2

20.8

Metals

Metals

30.4

63.7

Net sales
Automotive
Parts &
Components

Affiliates Coordination

8.0

Engineered
Materials

473.1 billion JPY(as of FY

26.0)

CO2 emissions

1,691.7 thousand
tons -CO(as of FY)

17.1
Engineered Materials

31.7
Engineered Materials: Business structure and products
Engineered Materials Sector

3-135

Engineered Powders Division

Engineered powders / Rare metals / Battery materials

Catalysts Division

Catalysts used in exhaust gas purification (for automobiles, for motorcycles, general purpose)

Copper Foil Division

Electro-deposited copper foil for printed wiring boards / Copper foil with carrier film

PVD Materials Division

Sputtering targets

Ceramics DivisionRefractories / Fine ceramics / Molten aluminum filtration devices

2

Step

2

3

4

5

6

Scenario

4

2.7

+

[Future initiatives]

The goal is to integrate climate change with management and enhance corporate value
With the scenario analysis as a starter, we will go on to implement a continuous cycle of disclosure and system restructuring (integration with management strategy)

Enhanced corporate value
Continued implementation
as a cycle

Scenario analysis
Management will take an involved
approach in restructuring the system
based on feedback

Dialogue with multi-stakeholders
and enhance corporate value(by making the disclosure)
After the disclosure,management receives thereactions to it

Business management
Integration of management strategy
with climate change responses(based on scenario analysis)Disclosure

Begin by disclosing what is
possible to at this time

Begin with undertaking
scenario analysis

Scenario analysis
Establishment of an implementation systemfor beginning scenario analysis

3-136

Food
Practice Case
Practice Case
Practice Case

3-137

Kagome CO., LTD.
Calbee. Inc.
Meiji Holdings Co., Ltd.

2

Introduction of Kagome
Company Overview
As of the end of December 2018
Head Office

Head Office

Nagoya-shi, Aichi

Founded

1899

Common stock

JPY19,985 million

No. of individual
investors

186,095

Sales consolidated)

JPY209,865 million

Number of
employees(Consolidated)

2,504

Business Offices

Head Office, Tokyo Head Office, 1 division office,8 branches,
6 plants, Innovation Division (Research Institute)

Group Companies

Hibikinada Green Farm Co,. Ltd.
Iwaki Onahama Green Farm Co., Ltd.
Kagome Axis Corporation
KAGOME LOGISTICS SERVICE CO., LTD.
Kagome Inc.
United Genetics Holdings LLC
Vegitalia S.p.A.
Holding da Industria Transformadora
DoTomate, SGPS S.A. (HIT)
Kagome Australia Pty Ltd.
Taiwan Kagome Co., Ltd. and others(40 subsidiaries and 5 affiliates)

Innovation Division (ResearchInstitute)

Branches and Offices
Factory

Innovation DivisionTokyo Head
OfficeHead Office

3-138

Introduction of Kagome (Manufacture and sale of beverages and foodstuffs,
development of vegetable varieties, and cultivation)
Description of business

International
business
22%
Agri-businesses(Domestic) 5.5%

Food andothers(Domestic)
32.7%

3-139

FY2018Others/Intersegment
transactions -2.7%

Beverage(Domestic)42%

[Step 2: Assess materiality of climate-related risks]

Step

2

3

4

5

Scenario

Extract the risk of Kagome, evaluate the impact on a large, medium, or small scale, andidentify those with the greatest impact.
Risk Item
Major
Classification
classification

Transition
risk
Reputation

Chronic
Physical
risk

Acute

2

Business impact

Small classification

Index

CO2 emissions in eachcountry
Strengthening Reduction
Policies
Changes in consumer
behavior

Discussion (Example)

Assessment

With the introduction of a carbon tax having a broad impact on raw
materials, containers, and packaging materials
Cost increases

LargeExpenditures
and assets

Energy-saving policies are strengthened and high-efficiency machines
for manufacturing facilities are developed.
Need to be renewed

MediumRevenue

Expansion of purchasing behavior considering environmental impact
due to climate change

Large

Spending

Increase in carbon tax

Policies/
Regulation

4

Changes in theinvestor's reputation

CapitalInvestor reputation if climate change response is inadequate
Deterioration and difficulty in raising funds

Small

Increase in the averagetemperature

Expendituresand revenues

Crop quality and yield deterioration occur.

Large

Changes in rainfall andweather patterns

Expendituresand revenues

Increased rainfall and drought adversely affect crop areas
Reflecting high raw material prices

Large

Reduction of biodiversity

Spending

From the generation ofpests
Declines in production

Expendituresand revenues

Farmers
Lower productivity

Expendituresand revenues

Due to water stress
Declines in production
Increasing severity of
extreme weather
conditions

Procurement due to difficulty of plant pollination due to decrease ininsects
Generation of raw materials that are impossible
With the expansion of pests and pests lowering the production andquality of crops
Difficulty of stable procurement
By lowering the labor productivity of agricultural workers due to higher
temperature
Higher funding costs

MediumExpendituresand revenues

Water shortage makes it difficult to secure water and prices soar.

Large

Expendituresand revenues

Damage due to frequent extreme weather events such as storms
Frequent production areas

Large

Large

Small

3-140

[Step 3: Identify and define range of scenarios]

Step

2

3

4

5

Scenario

42

Consider a 2050 society under 2 scenarios (4°C, 2°C) for highly uncertain climate change(4°C: If the temperature rises without taking any measures, 2°C: If a variety of measures aretaken)[Global Average Terrestrial Temperature Change (Difference from the 1986-2005 Average)]()

4°C scenario

The temperature will rise
3.2-5.4 C above preindustrial levels, unless
more rigorous measures
are taken.

The temperature will rise
0.9-2.3 C above preindustrial levels, if strictmeasures are taken.

2°C scenario

Source: AR5 SYR Diagram SPM.6
3-141

Set 2050-year time horizon
for transition risk andphysical risk

[Step 3: Identify and define range of scenarios]

2

Step

3

4

5

Scenario

4

2

Collect scientific evidence on the situation for 2050 (use in calculating thefuture impact amount)
2050

At present

2°C world-

53USD/tCO2 (EU)180 USD per tCO2
(developed countries)

128.5 billion USD

397.5 billion USD(3.1 times the current level)

397.5 billion USD(3.1 times the current level)

Changes in tomato
yields--17~7%-2~10%

Change in carrot yield--0.1~2%

-2~1%

-

4%

5%

Carbon price

Carbon tax

Purchasing behavior
choices,
Changes in
Sales of Sustainableconsumer behavior
Certification Products(U.S.)
Increase in the
averagetemperature

Source4°C world

Changes in rainfall
Orange yield change
and weather
patterns
Changes in apple
yield

The Deloitte Global Millennial Survey
2019
Nielsen "product Insider"

GAEZ (yield per hectare)

No data

Reduction of
biodiversity

Reduction of pollenborne organisms

Decrease inproduction due towater stress

Production bases inwater-stressedareas

No. of production bases with water
stress of Extremely high: 1

Number of manufacturing
sites that are Extremely
high to water stress: 7

No. of manufacturing sites
with Extremely high water
stress: 7

Annual occurrenceof heavy rain
Incremental days

2.5 days

4.3 days

2.9 days

Amount of rainfall-+8~+15%+8~+15%Flood damage
increase rate-

5.9 times

2.2 times

Increasing severityof extreme weather
conditions

IEA WEO 2019

No data
WIRI Aqueduct"Japan's Climate at the End of the 21stCentury," Ministry of the Environment
and the Japan Meteorological Agency,"Observations and Forecasts of Climate
Change and Integrated Report on
Impact Assessments 2018-Climate
Change and Its Impact in Japan."Supplemental to WRI 2030 annual data

3-142

[Step 3: Identify and define range of scenarios]

Step

2

3

4

5

Scenario

4

2

Using Michael Porter's 5Forces to forecast the 2050 worldview
4°C worldview @2050s (Example)
Procurement, production, and distribution of vegetables
Seller(Suppliers)
Increase in production areas
destroyed by catastrophic
disasters (inability to secure raw
materials even if prices are raised)
Yield decreases in many areas due
to poor harvest and poor quality(pass-through to selling prices)
Growth damage due to increased
soil degradation and the rate ofoutbreak of disease (risk ofincreased use of agrochemicals)
Decrease in production of apples, etc.
due to sharp decrease in insects
through pollen
The possibility of delays in thetransportation of vegetable raw
materials, containers, packaging
materials, etc.
Rising water prices due to water
shortage (difficulty in obtaining water)
Establishment of a system for
cultivating crops even in extreme
weather conditions (storms, etc.)
Collaboration with Agricultural
Suppliers

Development and marketingof climate-resistant varieties
Promoting health services
and other quality businesses

3-143

New comer
Food manufacturers with plant factories (fresh
foods)
Contracts andholding withplant factories

Industry
Production suspended due to increased
damage from extreme weather
To shut down or relocate production lines due
to water shortages and invest in water-saving
facilities
Explore and develop production areas andmove production bases
Development of products compliant withthe certification system

Moving to more secure sites
Drought countermeasures
Strengthen BCP (industry collaborationfor emergency transportation anddelivery risk diversification)
Development of preserved foods

Buyer(Customers)
Expansion of demand for
products compliant with thecertification system
Demand for products declined
when raw material costs werepassed on to product prices.
Increasing frequency of natural
disasters and increasing
demand for stored foods
Changes in the quality
demanded by consumers due
to global warming
Development of products
compliant with thecertification system
Develop products thatmatch the needs of climatechangeBranding as an
Environmentally
Conscious Company

By utilizing big data
New cultivation technology withminimal water(Alternative) Practical application (drought)
Products made from agricultural products that are resilient toclimate change

Government
Establishment of incentives fortechnological development topredict heavy rain, storm,
cyclone, and typhoon
Study and introduce regulations
and policies to deal with water
stress, such as water withdrawal
regulations
Introduction of subsidies forcapital investment, etc. tofarmers
Shortage of raw materials forprocessing due to policyoriented fresh vegetablepriority measures
Relaxation of standards forlabeling of origin (frequentchanges in production areas,inability to maintainproduction areas)
Collaboration with theGovernment for Sustainableagriculture (mainly
adaptation)
To the government's
response to climate changemonitoring

Providers of Capital
Investment in enterprises withongoing environmental initiatives(assuming progression beyond the
2°C scenario)

[Step 3: Identify and define range of scenarios]

2

Step

3

4

5

Scenario

4

2

Using Michael Porter's 5Forces to forecast the 2050 worldview
2°C worldview @2050s (Example)
Procurement, production, and distribution of vegetables
Seller(Suppliers)

Buyer(Customers)

New comer

Some areas where raw material
cultivation is difficult

Active entry into new businesses through low-carbon
and non-carbon products and low-carbon businessmodels (certified products, etc.)

Yield decreases in some areas due
to poor harvest or poor quality(pass-through to sales prices)

Expansion of demandfor products compliant
with the certification
systemTo consider an aggressive businessmodel for decarbonizing

The possibility of delays in thetransportation of vegetable raw
materials, containers, packaging
materials, etc.

To shut down or relocate production lines
due to water shortages and invest inwater-saving facilities

Rising water prices due to water
scarcity
Review of Procurement

Study and introduce regulations
and policies to deal with water
stress, such as water withdrawal
regulations
Considering relief in the eventof frequent agricultural
damageDemand for products
declined when raw
material costs werepassed on to productprices.

Enterprises with contract farms bail out
part of the damage

Strategy(Exploration anddevelopment of new
production areas)
Strengthening the
procurement network(Strengthening the alternative
procurement structure)
Collaboration with
agricultural suppliers

Establishment of incentives fortechnological development topredict heavy rain, storm,
cyclone, and typhoon

Selection of products witha high price advantagethat do not pass throughcarbon price increases

Industry
Partial suspension of production due toincreased damage from extreme weather

Carbon price burden for logistics,
containers and packaging (passed
on to sales prices)

Government
Consider, implement andstrengthen carbon taxes on anational and local level to
implement national commitments,
such as NDCs.

Shift to low-carbon production, use of
low-carbon substitutes, and lowcarbon transportation

Limited amount of water
available for 1 productIntroduction of a government
system for certification of lowcarbon labeled agricultural
products

Shifting costs to carbon
prices and low/decarbonizing

Development of products compliant
with the certification system

Development and marketingof climate-resistant varieties
Promotion of health services
and other quality businesses

Cooperation with Governmentfor Sustainable Agriculture(mainly Mitigation)
Government's monitoring ofclimate change countermeasures
Introduction of Internal Carbon
Pricing

Development of products
compatible with certified
products
To the needs of climatechange productdevelopment that matches
As an environmentallyconscious company
branding

CO2 carbon offsets that cannot be
reducedDrought countermeasures
Strengthen BCP
To expand into high-profit,
low-carbon businesses(Alternative)
Products made from agricultural products that are
resilient to climate change

Providers of Capital
Progress in investment in companies
that are making progress inenvironmental initiatives

3-144[Step 3: Identify and define range of scenarios]

Step

2

3

4

5

Scenario4

2

In the 2°C world, several production areas will be damaged by storms, and many production will not be able toharvest in the 4°C world. Water shortage will worsen due to global warming.
Major Worldwide Views in 2050

Suppliers and ourselves
Production
area

2

4

Water
procurement

Customer
I would buy
vegetables even if
they are expensive

Large
number ofdamagePartialdamage2

Customers and investors
Changes inpurchasing
behavior

I would prefercertifiedproducts

I want to eat
meat, maybe
soybean meat

I want to have somethingrefreshing because it is
hot today

4

I need preserved
foods because
natural disasteroccurs frequently

Factory

Difficulty ofobtaining water for
4 in 10 peoplePriceincrease

Carbontax

2Insect4
pollination crop

CO2

3-145

I take nutrition fromsupplements because
vegetables are expensive

Product

Increaseincertifiedproducts

Steep rise incarbon taxes

Field

RisingpricesInsectloss

Decline inapple
production

2

4

Cost
increase

Certification

Invest in theenvironmentallyconscious
companies

Providersof Capital

Shift tolowcarbon

Investment
target[Step 4: Evaluate business impacts]

Step

2

3

4

5

Scenario

42

Summary of estimated risk items
Determine the calculation logic for risk items and calculate the impact on business.
Risk Item

Carbon price

Assumedparameter

Carbon tax

Increase in the averagetemperature
Changes in rainfall andweather patterns

Impact(Billions of
yen)
4
2

Overview of Impact and Assumptions

Effect factor

Pricing logic

Scope 1 and 2 (in-house) emissions:
CO2 emissions in the process of processing
and manufacturing raw materials are subject
to a carbon tax.

Sales
Cost

CO2 emissions frommanufacturing countries ×
business growth rate × carbon
pricesScope 3 (Supplier) emissions:
CO2 emissions from purchased raw materials
and products are subject to a carbon tax.

Sales
Cost

CO2 emissions of purchased
raw materials and products(excluding N2O) × businessgrowth rate × carbon prices

Rising raw material prices, including those inundesired areas, due to changes in weather
patterns and rising average temperatures

Sales
Cost

Amount procured × degree of
price increase

Increased temperatures in summer in Japanrequire air-conditioning in greenhouses
resulting in capital expenditures and expenses.

Sales
Cost

Estimated Cost of Cooling(Equipment + Expenses)

Rising water prices

Water stress Water shortage increases water prices andputs pressure on profits.
data

Business
ProfitActual increase in costs during
drought × Rate of increase inwater-stressed production sites

Increasing severity of
extreme weather
conditions

Flood
Damage to production sites and production
damagesites due to heavy rain, typhoons, andincrease rate
cyclones
data

DamageCost

Results of damage in the eventof a disaster ×
Flood damage increase rate

Total
3-146

Step

[Step 4: Evaluate business impacts]

2

3

4

5

Scenario4

2

In the 4°C world, business profit will decrease by X billion yen due to water price increase
and damage to production areas.
Transition and Physical Risks
Billion yen(In-house)(Purchased raw materials
and finished goods)

X Billion
yen

Carbon tax effectSignificant impacts
on water priceincrease and thedamage to the
production areas

3-147

Step

[Step 4: Evaluate business impacts]

2

3

4

5

Scenario4

2

In the world of 2°C, the impact of a carbon tax is large, and the business profit will decreaseby X billion yen.
Transition and Physical Risks

Billion yen

The impact of acarbon tax islarge(In-house)

X Billion
yen

Carbon tax (Purchased
effectraw materials
andfinished goods)

3-148[Step 5: Identify potential responses]

Step

2

3

4

5

Scenario

42

Summary of estimated countermeasures
The following measures are necessary in order to recover the business impact that decreasing
operating profits
Impact(Billions of yen)

Means of recovering the business
impactEffectfactorCarbon tax

Achieve the 2050 CO2 reduction target for
Scope 1 and 2 (in-house) (50% reduction)

Cost ofsales

Estimate the avoided costs of a carbon tax if CO2
target of 2050 CO2 emissions is at the current
50% level.

Carbon tax

CO2 reductions at Scope 3 (suppliers)

Cost of
sales

Assuming a 25% reduction on a basic unit basis

Pass-through of tax
burdens accompanied
by CO2 reductions

Passing on cost increases for carbon taxes
that meet reduction targets and remain

Cost ofsales

Shifts over 60% of the carbon tax costs thatcannot be avoided by reducing CO2 above to
products.

Smart Agriculture andClimate Change
Resilience

Climate Change Responses in Agriculture

Cost ofsales

Avoidance of about 70% of cost increase

For summer airconditioning
High efficiency

Reduction of Costs for Cooling ofGreenhouses

Cost ofsales

Avoid about 30% of the increase in costs(assuming an annual level of about 1% based on
the Energy Conservation Law, etc.)

Water recycling
Water saving

Reduction of rising water costs due todrought

Cost ofsales

Reducing and Assuming a 50-Fraction ofElevated Water Costs During Drought.

Resistance toabnormal weather

Establishment of a system that can beprocured even during extreme weather
conditions

Cost of
sales

Assumed to be about 50% of the amount ofdamageFollow-up to and sales expansion ofenvironmentally conscious purchasing
behavior of consumers

OperatingprofitSales of certified products × Business growth rate
×
Projected Increase in Sales of Certified Products

Environmentally conscious products withhigh added value

OperatingprofitAssumed to be about 50% of the cost that cannot
be absorbed by the above-mentioned method at
4°C.
(Temporary assumption of 4°C for 2°C)

Risk Item

Reduced CO2
emissions

Consumer
Behavioral changeHigh added value of
products
Valuing

Assumed parameter

Choice of buying
behavior
Sales of certified
products

Total of measures
3-149

4

Pricing logic

2

Scenario

42

Business impact of risks and its recovery through countermeasures
In the world of 4°C, operating profits decline by X billion yen, and countermeasures
recover the business impact by X billion yen
Billion yen

Transition andPhysical Risks

Implementation ofCountermeasures

Final-X Billionyen

X Billionyen+X Billion
yen

3-150

Scenario

4

2

Business impact of risks and its recovery through countermeasures
In the world of 2°C, operating profits decline by X billion yen, and countermeasures
recover the business impact by X billion yen.
Billion yen

Implementation ofcountermeasures

Transition and Physical
Risks

Final
+X

X Billion
yen

Billion yen+XBillion yen

3-151

[Step 5: Identify potential responses]

Step

2

3

4

5

Scenario

42

Practical measures at Kagome to restore business impact
Item

Specific risk countermeasures

Carbon price
Increase

Achieve the goal of reducing CO2 emissions by 50% by 2050
through energy conservation, energy creation, and energy
purchase within the Kagome Group
Reduce CO2 through collaborating with suppliers
Formulate and implement cost-shifting measures for eachproduct
Raise in-house CO2 reduction target (emissions

A

B

Understanding of consumers' purchasing behavior andaccurate sales activities
Development of environmentally conscious products andcertified products proactively

Develop and sell products that meet the needs ofcustomers under extreme weather conditions

Rainfall and weather
conditions
Shifts in patterns

Respond to climate change through smart agriculture, suchas data utilization
Acquire vegetable varieties that can cope with climatechange (such as high temperature resistance and pest
resistance)

Global expansion of sales of vegetable varieties thatcan cope with climate change

Biodiversity
decrease

Propose and disseminate agriculture that coexists with allliving things

Promote a tomato cultivation that does not use beesin greenhouses

To water stressproduction by
decrease

Promote water recycling and water conservation efforts at plants(membrane treatment, etc.)
Develop and use a tomato cultivation system that can be producedwith minimal water
Promote recycling-oriented agriculture (use of factory wastewater andrainwater in agricultural land)

Global expansion of a tomato cultivation systemcapable of producing with minimal water

Consumer
Behavioral change
Averagetemperature
Increase

C

D
E

F

Opportunity

In extreme
weather
conditions,increasing severity

Upgrade procurement strategies (reviewing and diversifying
production areas)
Create a system that can be cultivated even during storms
Upgrade BCP measures (assuming climate change)

Transition to Koto Businesses(To be a service business that is not susceptible tocost fluctuations)

3-152

Food
Practice Case
Practice Case
Practice Case

3-153

Kagome CO., LTD.
Calbee. Inc.
Meiji Holdings Co., Ltd.

History of the Calbee Group

3-154

Copyright © Calbee, Inc. All rights reserved.

Product Mix ( Fiscal year ended March 2019 )Consolidated net sales

JPY248 billion* Figures are rounded down.

More than 50% of total sales consist of products made from potato.
3-155

Copyright © Calbee, Inc. All rights reserved.

Step[Step 2: Assess materiality of climate-related risks]

2

3

4

5

Assessed Material Risks in Major Value Chain of Domestic Food BusinessSelected domestic foodbusiness for materiality
assessment because it
consists of more than
80% of total businessSelected procurement, production, logistics
and sales as key value chains for materiality
assessment
R&D

Procurement

Production

Distribution

Sales

ConsumeFacilities

Distribution
Inventory

Shift indemandorientation

Disposal

Main raw materials
include potato and oat
Specialty raw materials
include shrimp

Business Portfolio

Main raw materials
and specialty raw
materials are taken
into consideration.

Domestic
food businessNot only production but also distribution,
package and sales activities are taken into
consideration.

Referenced to the list of important parameters of each value chain

3-156

Procurement

Production

Distribution

Sales

Carbon pricePrecipitation
changeEextreme weather
occurrence
Rise in temperature

Carbon price
Energy-saving
policyCarbon price

Changes incustomer
behaviours

Copyright © Calbee, Inc. All rights reserved.

[Step 2: Assess materiality of climate-related risks]

Step

2

3

4

5

Listed Material Risks Related to Climate Change

Risks
1 Carbon price2 Precipitation changes

3

Extreme weather occurrence e.g.
heat wave, tropical cyclone, flood

4 Rise in temperature

Metrics
Cost
Cost
Revenue
Cost
Revenue
Assets
Cost
Revenue

Financial impact
ImpactGHG emissions: Scope 1&2+
packaging material +supply chain
Decreased yield of potato
Decreased yield of Oats
Decreased yield of potato
Decreased yield of Oats
Suspended production
Damage on facilities
Decreased yield of potato
Decreased yield of OatsAssessment
Large
Large

Large

Large

(e.g. temperature rise, acidification)

Cost
Revenue

Decreased yield of prawn

Large

6 Changes in consumer behavior

Revenue

Decreased sales of anti-environmental
products

Large

5

Changes in ocean environment

3-157

Copyright © Calbee, Inc. All rights reserved.

[Step 3: Identify and define range of scenarios]

Step

2

3

4

5

Scenario

42

Considered 2030 Societal Impact of 2 Scenarios as to Climate Change

Changes in Global Ground Temperature fromaverage temperature between 1986 and 2005)
( )

2030

The temperature willrise 3.2-5.4 C above
pre-industrial levels,
unless more rigorous
measures are taken.

4 C scenario

The temperature willrise 0.9-2.3 C above
pre-industrial levels,
if strict measures aretaken.

2 C scenario

Source: AR5 SYR Diagram SPM.6
3-158

Copyright © Calbee, Inc. All rights reserved.

[Step 3: Identify and define range of scenarios]

Step

2

3

4

5

Scenario

4

2

Defined Worldview of 2 Scenarios Based on Scientific Grounds of IEA
At present

Carbon price

Carbon tax

Changes incustomer
behaviours

Response tocertification

Raw material
impacts due toprecipitation
changes causedby rise intemperature

2030

2 C world

4 C world

Average successful bid in
For the developed countries
the European EU-ETS:
88 USD per tonne CO2Approx. $8 per tonne
No procurement

Certification price +%Assumed no carbon tax inJapan

IEA WEO 2016
(450, NPS Scenario

Assuming no certification

Private research firm
(No scenario)
Academic literature(RCP8. 5, RCP4. 5,
SI92a scenarios)

Changes in potato
yields(Base year)

Domestic yield %U.S. yield %Domestic yield %U.S. yield %Changes in oat
yields(Base year)

Australian yield+%

Australian yield+%(Base year)

Assume no change

Japan - %U.S. import - %China import - %Change in ocean
Changes in fisheryenvironment

Occurrence ofIncrease in theextreme weather number of days ofevents such as
heavy rainheat waves,tropical cyclones,
floods, etc.
Severe typhoons
and cyclones

2.5 days a year on averagein Japan

2.5 days a year on averagein Japan(Base year)

Damage +120%

Copyright © Calbee, Inc. All rights reserved.

GAEZ (United Nations)(Scenarios A2 and B1)
Academic literature(A2 scenario)

The Ministry of theEnvironment and other3.0 days a year on average government offices,in Japan
Academic literature(RCP2.6 RCP8.5
Scenario)
Damage +200%

The parameters were set at 2 C and 4 C for each transition risk and physical risk.
3-159

SourceTemporarily based on
IPCC Report

[Step 3: Identify and define range of scenarios]

Step

2

3

4

5

Scenario

4

2

Demand for sustainable products increases as low-carbon and de-carbon
progress.
2 C scenario
Carbon tax incurred carbon-intensive sectors! Need to reduce GHG emissions significantly!

Government
Scarce land availability for afforestation, biofuel
and agriculture

Need toreduce GHG
emissions inagriculture

Certified products
Increase indemand for
certifiedproducts

Slight decrease inboth quantity andquality of harvest

Concerns about
environmental
impact ofpetroleumbased package
and value chains

Resistanceto natural
shrimpConsumer
Negative impact on
harvest for rise intemperature

CarbonpriceburdenReduce CO2
emissions at
plantsEco-friendly
delivery¥¥¥Warehouse

Shift tolowcarbon
packageEV

Increase in risk of
wildfires anddrought

Norther shift ofhabitats

3-160

Disruption of
supply chain

Logistics

CO2

Factory

Copyright © Calbee, Inc. All rights reserved.

[Step 3: Identify and define range of scenarios]

Step

2

3

4

5

Scenario

4

2

Potato harvest and shrimp fishery reduce and extreme weather damage increases
4 C scenario
Government

Ensure thorough safety and healthmanagement of employees!

As agriculture and fishery decrease, develop alternative products!

Newly added
Business

Increased needfor agricultural
efficiency

Demanddecreases due
to rise in prices¥¥¥

Supply shortage due
to shortage of raw
materials

Lower harvest
volumes andquality
Farmers' losses¥¥¥

Consumer
Decrease in
harvest for risein temperature

CO2

CO2

Warehouse
CO2

CO2
CO2

Increased risk of
wildfire anddrought
3-161

Farmerdiscontinuity
increases

Decrease in
the catch ofnatural shrimp

Disrupted
supply chain
Copyright © Calbee, Inc. All rights reserved.

Logistics

Factory

Risk offlooding

Scenario 4
Step
2
3
4
5
2
[Step 4: Evaluate business impacts]
Evaluate the impact of transition and physical risks based on sales, market size, etc. in 2030.

ImpactTransition risk

Risk Item

Parameter

4

Estimated assumptions (common for 2 C and 4 C)

CO2 Emissions from Manufacturing Sites Carbon-Prices
CO2 emissions from use of cardboard and packaging materials
CO2 emissions on logistics carbon prices

Policy Carbon price

Carbon tax

Changes inMarket customer
behaviours

Selective purchasing and need forthe certified sustainable products
in US

Decrease in sales of products not certified for sustainability

Changes in potato yields

Shift harvest area to make up for potential decline in yields

Chronic

Changes inprecipitation,
Impact on raw
material harvest

Changes in ocean
environment
Physical risk

2

sales

Changes in oat yields

Other factors would allegedly exist to hinder the correlation between the increase inyields and the price increase in the market principle,

Changes in fishery

Estimated changes in procurement from each area by referring to the fluctuations offishery in Japan, the U.S., and China.

Response to drought and wildfires

Insufficient parameters of palms and oats (not estimated)
Damage from past heavy rain

Frequency of
extreme weather
events (tropicalAcutewaves, tropical
cyclones, floods,
etc.)carbon prices

Increasing number of days ofheavy rain per year

Increase rate of heavy rain

Damage due to past heavy rainfall Increase rate of heavy rainfall
Production suspension due to inability of employees to come to work (including
suspension of operations due to high tides)

The number of typhoons andcyclones

Damage from past typhoons

Rate of increase in typhoons

Impact assessments are performed using parameters of 2 C and 4 C.
3-162

Copyright © Calbee, Inc. All rights reserved.

[Step 5: Identify potential responses]

Step

2

3

4

5

Scenario

42

Consider initiatives for multiple scenarios
Item

Existing Initiatives

Additional counter measures against risks

Carbon priceincrease

CO2 Reduction Target (30% Reduction by 2030)
Conversion to liquefied natural gas (LNG)
Implementation of high-efficiency operation of
biomass boilers
Aggressive introduction of energy-saving
equipment and energy-saving activities at offices
Improve load factor by standardizing cases
Low and decarbonized logistics
Promoting joint delivery and modal shifts

Integration of production lines and factories to improve energy
efficiency
Implementation of carbon offset by credit, tree-planting andblue-carbon offsetting
Achieve 100% renewable energy

Sales decrease
for shifting
consumer
behavior

Reducing packaging materials and eliminating
plastics
Assessing and obtaining certification
Expansion of best before date to reduce food losses

Actively participating in the initiative
Obtaining sustainability certification and establishing voluntary
certification system

Harvest change
due to rise intemperature

Diversification of farming areas for potato andother raw materials
Promotion of field storage management
systemDevelopment of varieties resilient to climatechange and environmental change
Product development using materials otherthan potato

Utilization of development tools of and collaboration withresearch institutions, etc. to mitigate risks
Promotion of consortia and initiatives in Japan and participate
in working groups to consider countermeasures
Lobbying to deregulations on agriculture
Diversification of product portfolio and raw materials
Storage of carbon in soil, innovation in cultivation methods
and enhancement of variety cultivation
Strengthening BCP with alignment among production andlogistics sites globally

Change inprecipitation
Increase in
extreme weather
eventsIn the marine
environment
Change3-163

Copyright © Calbee, Inc. All rights reserved.

Food
Practice Case
Practice Case
Practice Case

Kagome CO., LTD.
Calbee. Inc.
Meiji Holdings Co., Ltd.

3-164

TCFD scenarios (summary)
Themes to be analyzed

Scenario setting at 2°C and 4°C

Dairy
ingredients

Infectious
diseases

Milk,
Yogurt, etc.

Antimicrobials

Basic year of dairy
ingredientsin 2030

Vaccines

Important risk items

4°C scenario

2°C scenario

Source: AR5 SYR (image) SPM.6

Dairy ingredients
Changes in rainfall and temperature patterns
Container and packaging recycling
Changes in consumer behavior

3-165

Basic year of
infectious diseases
in 2050

Infectious diseases
Increase in the
average temperature

Rising sea level

Increasing frequency of
extreme weather events
Introduction ofa carbon tax

Important products/
Changes in product prices

For internal
use onlyRisk assessment for dairy ingredients
Risk Item
Small classification

Index

Business impact
Discussion
Decrease in production of raw milk. Measures to cope with heat (feeding management, cattle barn environment) are
required, and the cost of procuring raw materials is increasing.
Increased interest in environmentally conscious consumption (ethical consumption) and increased costs associated withconscious procurement of raw materials.

Assessment

Increase in the average temperature

Expenditures andrevenues

Changes in rainfall and temperaturepatterns

Expenditures andrevenues

Increasing frequency of extreme
weather events(typhoons, floods, etc.)

Expenditures, revenues,of manufacturing bases and distribution routes. Cost increase for recovery. Yields of biological resources may decrease
and assets

Carbon price

Expenditures

Increased production and transportation costs due to the introduction of a carbon tax, and higher production costs due tohigher fossil fuel-derived electricity prices, as well as higher operating costs for data centers, etc.

Container and packaging recycling

Revenues andexpenditures

Costs incurred for raw materials, such as the use of environmentally friendly raw materials (certified paper, biomass
plastics, etc.) and the introduction of recyclable raw materials.

Changes in consumer behavior

Revenues

Consumers are increasingly interested in the use of natural materials, recycling of packaging materials, and CO
emissions, and they are increasingly purchasing products from companies that are proactive in addressing climate change(increased ethical consumption).

Risks associated with changes in rainfall and temperature patterns (e.g., deterioration of water quality, drought) increase.
Costs of securing adequate water will increase.
Natural disasters (e.g. heavy rain, floods, droughts) have resulted in suspension of operations or suspension of distribution
and procurement costs may increase due to higher feed costs.

Changes in Important Products/Prices Expenditures and assets Rising operational costs and the threat of collapse of the entire value chain.

Food loss

Expenditures and assets

Increased procurement costs due to stricter regulations on the disposal of milk and GHG emissions, and higher equipment
costs due to the introduction of cooling facilities.

Dairy ingredients emit large amounts of GHG in the process. The unit price of raw milk rises if it becomes regulated in
Carbon emissions targets/policies in
Expenditures and assets
each country
each country.
Soil degradation

Expenditures andrevenues

Energy-saving policy

Expenditures and assets

Rising sea level

Revenues, assets andexpenditures

Changes in the investor's reputation

Revenues and assets

Dairy farms are subject to tighter regulations, which may increase the cost of operating equipment and restrict businessexpansion, thereby affecting raw material availability and procurement costs.
Expenses for changing manufacturing processes, procuring alternative materials, and installing energy-saving equipment
and highly efficient equipment increased.
Water disasters such as floods and a sudden increase in droughts have an impact on production, such as the shutdown ofplants located in coastal areas vulnerable to disasters and areas with low sea levels.
Investors' increased interest in climate change and other environmental issues and sustainability, and inadequate
countermeasures, will adversely affect PL/BS and reputation of investors.

For internal
use only

3-166

Risk Assessment in Infectious Diseases

Risk Item
Small classification
Rising sea level

Business impact
Index

Discussion (Example)

Revenue
Assets andexpenditures

Influence from floods, etc., that shut down the operations of plants located in coastal and other areas.
Also affects the reproduction of infectious agents and changes the supply and demand of products.

Increase in the averagetemperature

Revenue

The frequency, spread timing and area of infectious diseases may change, and demand for eachproduct may fluctuate significantly.

Increasing frequency of
extreme weather events(heat waves, typhoons,floods, etc.)

Revenue
Assets andexpenditures

Frequent heavy guerrilla rains, typhoons, etc., cause major damage to inventories and facilities,
resulting in an increase in facility restoration costs, etc.

Changes in important
products/prices

Expenditures
and assets

Product prices fluctuate due to the risk of sharp rises in raw material prices and decreases in theamount that can be secured.

Carbon price

Expenditures
and assets

The introduction of a carbon tax will impose taxes on transportation fuel for raw materials andcommodities and increase transport costs.
Production costs at plants in countries with high carbon taxes also increased.

Carbon emissions
targets/policies in eachcountry

Expenditures
and assets

New technologies and equipment installation costs are incurred due to the tightening of regulations oncarbon emission policies in each country.

Investments in low carbon
technology

Expenditures
and assets

Capital expenditures in the entire value chain, including raw material procurement and transportation,
were incurred in order to transition to low-carbon technologies.

Investment in temperatureadjustment equipment

Expenditures
and assets

Additional temperature control equipment is required for product processing and transportation,
resulting in an increase in equipment costs.

Changes in the investor's
reputation

Revenue

There is growing interest in sustainability, so investors reputation will deteriorate if insufficientmeasures are taken.

3-167

Assessment

For internal
use onlyForecasts of various factors in the base year
Dairy ingredients (food)

Infectious diseases (pharmaceuticals)

2030

2050

At present

Carbon price

Carbon tax-

4°C world

2°C world

EU $23 per tonne
China $23 per tonne
Japan not yet introduced$100 per tonne

Japan and Europe
China $75/ton

Source4°C world

2°C world

China $29/ton
Japan not yet introduced$191 per tonne

Japan and Europe
IEA WEO 2018

China $180 per tonne

Recyclingof containers
and packaging

Recycled plastics
Utilization rate

Not introduced

Not introduced

30%

-

-

EU government

Changein customer
behavior

Rate of decline in sales
due to failure to comply withsustainability certification-

Down 2%

Down 3%--

Private research firm

Changes inrainfall andweatherpatterns

Rate of increasein the frequency of floods

1 times

Japan 1.5 times
China 2.1 times

No change

Japan 1.5 times
China 2.1 times
Indonesia 2.9 times
India 5.8 times
Spain 1.1 times

No change-

Up 4.02%

No increase--

Mosquito-borne infectious
diseasesPopulation at Risk (Asia)

Approx. 3.82 billion--

Approx. 4.36 billion

Approx. 3.86 billion

Academic literature

Number of outbreaks ofwaterborne infections(diagnostics) (Asia)

Approx. 2.53 billion--

Approx. 2.92 billion

Approx. 2.72 billion

Academic literature

Magnitude of sea level rise

-

-

-

0.25m

0.2m

Increase ratio of cost for
operating the barn
Increase in the
averagetemperature

Rising sea level

AQUADUCTUSDA(U.S. government agency)

Ministry of theEnvironment and Japan
Meteorological Agency
ReportInternational Energy Agency: An advisory body to 29 member countries to provide reliable, affordable and clean energy to their citizens.
AQUEDUCT (in the Japanese language, "pipelines and pipelines"): A tool that provides free global maps and other information about the latest water risks released by the World
Resources Laboratory (WRI)
USDA(United States Department of Agriculture): Government Offices governing U.S. agricultural policies

For internal
use only

3-168

Conceptual diagram: 4°C scenario
While low carbon/decarbonization is not promoted (business as usual) and the physical riskincreases, the possibility of the market expansion of infectious diseases is considered.
Dairy ingredients (food)

Infectious diseases (pharmaceuticals)

Productivity decline in dairy cows
due to heat stress
Cost increase for air-conditioning
and other measures

Increased risk of mosquito-borne
infectious diseases
Diarrhea due to water contamination(enteritis, cholera, etc.)

Increase in facility operation andtransportation costs due to natural
disasters

Support for dairy farmers due to declining production of raw milk
Support for countermeasures against physical risks such as
water stress and natural disasters
Government

Environmental pollution
Effects of foodshortages

Government

Increase in facility operationand transportation costs due
to natural disasters

Collaboration with Asian countries based on
Industry-Government-Academia collaboration
Support for countermeasures against physicalrisks such as natural disasters

Possibility of plant
shutdown
due to natural disasters

Establishingproduction bases andreinforcing
production systems

Influence on plant operations
in areas of high water stress

3-169

For internal
use only

Conceptual Diagram: 2°C scenario
Measures to reduce carbon emissions will be promoted, and investors and customers will be more interested inenvironmental issues.
While various cost increases may occur, there is a possibility that the customer's ethical orientation will increase.
Dairy ingredients (food)

Increase in manufacturing costs fromthe introduction of a carbon tax

Infectious diseases (pharmaceuticals)
Increasing interest in environmental issues related to climate change
Corporate environmental initiatives become the axis of corporate investment
Increasing the number of customers purchasing sustainable products
Investors and customers

Increased risk of mosquito-borne
infectious diseases
Diarrhea due to watercontamination (enteritis, cholera,etc.)

Promoting carbon taxes and emissions trading for further carbon reduction
Promoting the regulation of chemical-based plastics and the utilization ofrecycled plastics
Implementation of policies related to recycled plastics
Promotion of low-carbon livestock production as a government policy

Environmental pollution
Effects of food shortages

Government
Possibility of plant shutdown
due to natural disasters

Increase in transportation costs due tointroduction of a carbon tax
Increase in manufacturing andprocurement costs by promoting the useof recycled materials

Establishing production
bases and reinforcing
production systems

Increase in production
costs due to introductionof a carbon tax

For internal
use only

3-170

Important risk items and evaluation of business
impacts on dairy ingredients
Risk item

Expected business impact

Changes in average temperature

Nurturing cows by preventing hot weather(feeding management, cattle barn
environment)

Impact value
Increased cost of raw milk, dairy raw
materials

42

XX billion USD
No impact

Increased demand for products to prevent thirst
due to temperature increase, and increased
heatstroke due to temperature increase

Increased demand for products forprevention of thirst and heatstroke-

Need to improve quality of water inmanufacturing and rearing due to water quality
deterioration*not in 2030

Increased cost due to water risk responses-

Decreased opportunity because of stopped
supply chain

4
2

XX billion USD
XX billion USD

Increased cost due to a carbon tax

42

XX billion USD(only in China)
XX billion USD

Increase in the price of cattle feed ingredients
due to a decrease in crop yield

Changes in precipitation patterns

Increase in the unit price for water supply inanimal-rearing areas due to drought
Frequency of extreme weather events(typhoons, floods, etc.)

Lost opportunities due to suspension of
production and logistics
Restoration of damaged facilities for
production and logistics due to flood

Carbon priceIntroduced a carbon tax in manufacturing sites(plants)
Introduced a carbon tax in logistics

Recycling of packages

Introducing recycled plastics due to plastics
ban

Increased cost due to replacement withrecycled plastics

42

No plastics ban
XX billion USD

Changes in customer behaviors

Growing environmental consciousness(reduction of environmental burden
environmentally-friendly) due to increased
frequency of extreme weather andenvironmental regulation (such as CO2 andplastics).

Increased ethical consumption

4
2

XX billion USD
XX billion USD

3-171

For internal
use only

Profit simulation in Dairy Ingredients by Scenario

Simulation under the 4°C Scenario

Simulation under the 2°C Scenario

Cost increase

Cost increase2030
expected
profits

ImpactRaw milk
Dairy ingredients ofCost increase flood

Impact ofa carbon tax

Cost of using Not responding
recycled plastic to ethicalconsumption

4°C scenario
Profits2030
expected
profits

ImpactRaw milk
Dairy ingredients ofCost increase flood

Impact ofa carbon tax

Cost of usingNot responding to
ethicalrecycled plastic
consumption

2°C scenario
Profits

For internal
use only

3-172

Outline of measures to deal with business risks
and opportunities in dairy ingredients
Existing Initiatives
Seize
opportunities

Expansion of
ethicalconsumption
Expansion ofdemand for
responding totemperature
increases, etc.

Risk
mitigation

Raw material
price increase

Requirements for anti-thirst and heat stroke
countermeasures are increasing. In response tothese needs, products for anti-thirst drinks and heatstroke countermeasures are launched
Shift to environmentally conscious raw materials
FSC-certified paper and recycled paper:
FY2018 Result 55.3%
Certified palm oil:
FY2019 Plan Use approx. 10%

Reduction in plastic consumption due to thinning,etc.
Introduce solar power facilities for renewableenergyPlastic
regulations
Increasedwater risk
Introductionof a carbon
tax

3-173

Future Initiatives
Examination of products that meet the possibility of
expanding demand for products with minimal
environmental impact
Considering expansion of anti-thirst and anti-heatstroke products
Aggressive use of environmentally friendly raw
materials in response to heightened environmental
awareness due to extreme weather and various
regulations

Significant reduction in plastic consumption due tothinner-walled plastics and shift to paper, andreplacement with recycled plastics.
Considering the use of raw materials with minimal
logistics impact
Efficiency of water consumption in production andflood countermeasures
Further promotion of energy conservation and shift
to renewable energy
Considering support for heat countermeasures tomaintain milk production for dairy farmers

Completion drawing (image) the solar facilities of Meiji Co., Ltd.
Kyushu Plant

For internal
use only

Infectious diseases particularly affected bytemperature increases
The vaccine for Japanese encephalitis and dengue fever, and antimicrobials
for diarrhea (cholera, etc.) are assumed to be affected by temperature rise.
Various infectious diseases and routes
Routes oftransmission

Vectors/
VehiclesInfection

Bite
Feces

RabiesToxoplasmosis, Ascaris

Mosquito
Tick
Rodens
Flea
SnailsJapanese encephalitis, malaria, dengue fever, West Nile
fever, and Rift Valley fever
Tick-borne Encephalitis
Hantavirus Pulmonary Syndrome
PlagueSchistosomiasis japonica

Water/
Soil-borne

Water
Soil
contamination

Diarrhea (cholera, etc.)
Anthrax

Food (animal
derived) borne

Meat
Fish meat

Enterohemorragic E. coli O157 infection, salmonellosis
Anisakiasis

Directtransmission
Indirecttransmission

Vector-borne

Infectious
Diseasesassumed to be
impacted by
global warming

Source: What is known about global warming and infectious
diseases today? (Ministry of the Environment)

For internal
use only

3-174

Relationship with Global Warming in Infectious
Diseases
It has been suggested that the risk of infectious diseases is generally
increased by global warming.
Climate change affects rainfall volumes and patterns

Climate change raises temperature
Raises the highest temperatures in summer

Raises the lowest temperature in winterIncrease rainfall volumes during a specific period

Expansion of living areas where

Mosquitoes that had been dead during the winter the number of mosquitos andlive over the winterthe number of natural hosts increase

Increase the number of mosquitos andthe number of natural hosts

Agents intrude into
the body

Existenceof vector
And natural
host

Number of agents and opportunities
Vector (mosquitoes, etc.)that penetrate the human body Natural hosts (mice, livestock, etc.)

Changes in human clothing and living environments(Increase in short-sleeve and field activities, etc.)

Social environment
where agents caneasily intrude

Building patterns,
economic activities,
cultural lifestyles, andother environments thatfacilitate contact with
vectors and natural hosts

Human health

Nutritional and hygiene conditions
that are easily affected

Climate change has also been reported to increase diarrhea by 3%, malaria by 5%, and malnutrition by 10%, assuming thatthe risk of infections other than Japanese encephalitis, dengue fever, and diarrhea has also increased.
Source: What is known about global warming and infectious diseases today? (Ministry of the Environment)

3-175

For internal
use only

Population growth rate at risk due to increased temperature ofmosquito-borne infectious diseases (4°C scenario)
The population at risk for mosquito-borne infections
is predominantly in Asia.
Market size: Population at risk for mosquito-borne infectious diseases (100 millions of people)
Pharma sales bases (subsidiaries)

No pharma sales base (subsidiary)

EuropeNorth America

315%

114%

119%

Asia
South America

Africa and the Middle East

117%

111%

Source: Prepared by Deloitte based on the 4°C scenarios of Ryan SJ and others
Global expansion and redistribution of Aedes-borne virus transmission risk with climate change

For internal
use only

3-176

Increasing rate due to number of diarrhea andtemperature increases (4°C scenario)
The number and increase rate of diarrhea are high in Asia and Africa.
Market size: Number of diarrhea occurring (100 millions of incidents)
Pharma sales bases (subsidiaries)

No Pharma sales bases (subsidiaries)

EuropeNorth America

100%
115%

100%

Asia
Africa and the Middle East

South America

103%
101%

Source: Adaptation costs for climate change-related cases
Deloitte Ltd. from of diarrhoeal disease, malnutrition, and malaria in 2030 (2008) 4°C scenarios

3-177

For internal
use onlyImportant risk items and evaluation of business
impacts on Infectious Diseases
Risk item

Expected business impact

Impact value

Changes in averagetemperature

Increased risk for Mosquito-borne
infection

Increased demand for vaccine
and antimicrobials

42

XX billion USD
XX billion USD

Decreased opportunity becauseof stopped supply chain

4
2

XX billion USD
XX billion USD

Increased cost due to a carbon
tax

4
XX billion USD (only in
China)
2
XX billion USD

Increase cost due to cancelled
manufacturing

4
Assume no damage due torising sea level
2
Assume no damage due torising sea level

Increased cases of diarrhea
Frequency of extreme
weather events (typhoons,floods, etc.)

Lost opportunities due tosuspension of production andlogistics
Restoration of damaged facilities for
production and logistics due toflood

Carbon priceIntroduced a carbon tax inmanufacturing bases (plants)
Introduced a carbon tax in logistics

Rising sea level

Increased flood damage due to thesea level rise

For internal
use only

3-178

Profit simulation in Infectious diseases by Scenario

Simulation under the 2°C Scenario

Simulation under the 4°C Scenario
Cost
increase

2050
expected
profits

3-179

Impact ofa carbon tax

Impact offloodsCost
increase

Profitincrease

Demandfor vaccines

Demand for
antimicrobials

Scenarioprofits

Impact of2050
expected a carbon tax
profits

Impact offloodsProfitincrease

Demandfor vaccines

Demand for
antimicrobials

Scenarioprofits

For internal
use onlyOutline of Business Risks and Opportunities for
Infectious Diseases

Seize
opportunities

Growingdemand for
infectious
diseasedrugs andvaccines

Risk
mitigation

Increasedwater risk
Introductionof a carbon
tax

Existing Initiatives

Future Initiatives

Increase in sales volume of products due tothe expansion of infectious diseases

Strengthen business development in Asian
countries with subsidiaries as bases.

Upgrading of production bases in Asian
countries
Reinforcement of product lineup

Strengthening of stable procurement system
Building a Production System to Ensure
Stable Supply
Periodic maintenance of equipment
Energy conservation promotion
Ensuring the safety of plant employees
Proper management of equipment using
fluorocarbons

Contributing to the Asian market throughindustry-government-academia-medical
collaboration

Implement measures to increase the efficiency ofwater consumption in production and to prevent
plant shutdowns due to natural disasters
Promotion of energy conservation and shift torenewable energy
Reinforcement of management for chemical
resistance in factory wastewater
Appropriate management of plant waste and totalmaterial input
Reduction of plastic consumption by considering
use of thinner-walled and biodegradable plastics

For internal
use only

3-180

Other Sector
Practice Case
Practice Case
Practice Case
Practice Case
Practice Case
3-181

KYOCERA Corporation(Electronic Equipment)
YASKAWA Electric Corporation(Electronic Equipment)
ASKUL Corporation(Retailing)
Seven & i Holdings Co., Ltd.
(Retailing)
Lion Corporation(Consumer Products)

Step

2

3

4

5

Scenario

4

2

Assessing the impact of climate change on the energy sector
Analyzed mainly in the energy field of the Kyocera Group
Item

Technological
Development

Response todecarbonized society

Major Impact

Assessment

Developments in VPP technologies (e.g., power generation forecasting technologies,
power generation stabilization technologies), power generation and storage efficiencies,
high-volume storage batteries production technologies, environmentally friendly
technologies to introduce renewable energy (e.g., offshore and water-based
photovoltaics), and alternative energies (e.g., hydrogen technologies) can have asignificant impact on decarbonized society and sales.

Large

Carbon emissions targets
National targets/energy policies have a major impact on societal decarbonisation andfor each country
sales.
/Energy policy
Transition
Risk(Policy
Risk)

PhysicalRisk(NaturalDisaster
Risk)

Carbon tax

When a carbon tax is introduced, manufacturing costs increase.

Large

MediumRecycling regulations

When recycling regulations are introduced, businesses may bear the recycling fee, which
Mediumaffects sales.

Increasing severity of
extreme weather
conditions

Natural disasters cause costs such as shutdowns, production declines, and equipment
restoration.
Costs for natural disaster countermeasures and insurance premiums increase.

Medium

VPP (Virtual Power Plant): Technologies that can be used to balance power supply and demand by combining
distributed energy resources possessed by factories, households, etc., and then controlling these resources remotely
and in an integrated fashion.
3-182

Assumptions for Scenario Analysis
To keep temperature increases below 2

Step

2

3

4

5

Scenario

4C

Temperature increases can be limited to less than 2
by increasing the proportion of non-fossil fuels in the world
Unit: 1 trillion
kilowatts

About
80%

Source: OECD/IEA, IRENA

Scenario analysis case

2 C Scenario: The Future of Decarbonized society
4 C Scenario: A Current Extended Future
3-183

Scenario analysis is conductedwith 2030 as the target year.

2Assumptions for Scenario Analysis

Stepgeneration(yen/kWh)NaturalDisaster

Increasing
severity
in extreme
weather
conditions

Other

3

4

Scenari
Scenario
o

5

2030

At present
FIT's purchase price(yen/kWh)
Renewable
Economic energy, etc.
Efficiency Subsidies
Unit price of
Policyrenewable energy

2

4

2

Source4 C world

2 C world

Solar: 14 (bidding system)
Wind: 19-36 (2019)(Assumed to havedifficulty in become selfreliant from FIT at
4 C)

Solar: 7 (2025)
Wind: 8-9

Agency for Natural Resources
and Energy

Solar: 21.8
Land wind: 21.5
(2017)

Solar: 13.5
Land wind: 20.6

Solar: 12.4
Land wind: 20.6

IEA WEO2017 (450 scenarios)

Frequency of floods

1 times

3 times

1.7 times

Technical Review Committee
on Flood Control Plans Basedon Climate Change"Recommendations on Water
Control Plans Based on
Climate Change"

Battery cost
(USD/kWh)280 (2015)(business as usual)150 (0.54 times)

Estimated from IEA ETP 20172014 Advanced Battery Societyof Europe Target Value

Demand for solar
power
Amount of electricity(TWh)

190 (2014)

1,402 (7.38 times)

1,757 (9.25 times)

Estimated from IEA ETP 20172014 Advanced Battery Societyof Europe Target Value

Demand forbatteries
Reserves of power(GW)

159 (2015)
EV application 98.8%

219 (1.38 times)

172 (1.08 times)
EV application: 99.8%

Estimated from IEA ETP 2017

Demand response
capacity (GW)

11 (2015)

25 (2.3 times)

39 (3.5 times)

Estimated from IEA ETP 2017

3-184

The 2 C World: Shift toward decarbonized society

Step

2

3

4

5

Scenario

4

2

Governments
Support System for Introduction of Renewable energy
Introduction of A Carbon Tax and Recycling Regulations
Renewable Energy Introduction
Support System

Introduction ofrenewable energy
support system

Introduction ofrenewable energy
support system

Electric power companies
Nuclear power plant resumption and renewable energy introduction ratio increased
Collaboration

Supplying electricity with low CO 2 emission factors
Society and customers

Photovoltaic power generation, storage batteries, and fuel cell industries
Suppliers

KyoceraIncrease in carbon
tax payments

Improve the environment for
introducing renewable energy byadvancing technological development

Physical risks
emerge in someareas

VPP-related technology
Improve power generation and storage
efficiency

VPP Business
Popularization ofalternative energy(hydrogen)

Decarbonization in thesociety advances with policy
support and renewableenergy technologies
Increase in carbon tax
payments
Physical risks materialize

Environmentally friendly renewableenergy introduction technology
Technology for mass production ofrechargeable batteries

To expandsales

Alternative energy development(hydrogen, etc.), etc.
Reinforcement of in-house renewableenergy and energy conservation measures
Increase in carbon tax payments
Physical risks materialize
Increase in recycling costs
3-185

Competition

Newcomer
New VPP operators
New high-efficiency energy companies

The 2 C World: Shift toward decarbonized society
Power consumption increased due to the spread of
IoT technology.

Urban area

Damage from natural
disasters (less than
4 C)

Decarbonization proceeds due to policy support
and advances in renewable energy technologies

2

Step

4

4

2

Electric power companies

Low CO2emission factor
supply ofelectricity

VPP operators

Scenario

Renewable Energy
Introduction Support
SystemGrid integration

Photovoltaic power generation,
storage batteries, and fuel cell industries

5

Governments

City

Corporate buildings and factories

Providing renewable energy

3

Increase inratio ofrenewableenergy use

Resumption of operationsat nuclear power plants

Improve the environment for introducing renewable energy byadvancing technological development
Examples of Technology Development
VPP-related technology Power generation and storage efficiency improvement technology
Environmentally friendly technologies for introducing renewable energy (offshore, water-based solar
power generation, etc.)
Storage battery mass production technology Alternative energy technology (hydrogen), etc.

Collaboration

Plant shut down due totyphoons and other extreme
weather conditions(estimated impacts would beless significant than 4 C)

CO2
CO2

Sea

3-186

The 4

C World: Current Extension

2

Step

3

4

5

Scenario

4

Governments
Policies will remain unchanged
A carbon tax will not be introduced

Electric power companies
Generation continues using fossil fuels and CO2 emission factor of electricity does not decrease
Energy prices of fossil fuels fluctuate depending on social conditions in oil-producing countries.
Supplying electricity with higher CO2 emission factors
Photovoltaic power generation, storage batteries, and fuel cell industries
Suppliers
Increase in costs
for responding tochanges in energy
pricesPhysical risksmaterialize

Society and customers

KyoceraTechnology development for the introductionof renewable energy has been delayed, andthe spread of renewable energy in the market
has not progressed
No progress
VPP-related technology
Technologies for Improving the Efficiency of Power
Generation and Storage
Environmentally friendly renewable energy
introduction technology

inpenetrationofrenewableenergyDecarbonization fails to evolve due
to weak policy support and fewer
renewable energy technology
options
Physical risks materialize
Increase in costs for responding tochanges in energy prices

Technology for mass production of rechargeable
batteries
Alternative energy technologies, etc.

Reinforcement of in-house renewable energy andenergy conservation measures
Physical risks materialize
Increase in costs for responding to changes inenergy prices

3-187

In many companies,
most businesses are stagnant andthey would be in crisis.
Don't make it the 4 C world2The 4

C World: Current Extension

Step

2

3

4

City

Urban area

Society's decarbonization does notadvance

CO2

Supply ofelectricity
with higher
CO2 emission
factors

CO2

Scenario

4

2

4

2

Governments

Policies to be
maintained at thecurrent level
A carbon tax not
introduced

Corporate buildings and factories

Photovoltaic power generation, storage batteries, and fuel cellindustries

5

CO2

Electric power companies
CO2
Power generation from fossil fuelscontinues
Energy costs for fossil fuels fluctuate
depending on social conditions.

Due to a delay in technological development related tothe introduction of renewable energy, the spread ofrenewable energy into the market is not advancing

Plant shutdown due tosevere natural disasters

Examples of Technology Development
VPP-related technology Power generation and storage efficiency improvement technology
Environmentally friendly technologies for introducing renewable energy (offshore, water-basedsolar power generation, etc.)
Storage battery mass production technology Alternative energy technology (hydrogen), etc.

Sea

Most businesses in many companies are stagnant or their survival is at risk.
Don't make it the 4 C world

3-188

Evaluate business impacts

Step

2

3

4

5

Scenario

Carbon tax

2 C scenario

4 C scenario
RecyclingCompliancewithregulations

Measuresfor Nature
Disasters

EnergyIncrease inprofit fromsolutionsbusiness

Most businesses in many companies
are stagnant or their survival is at risk.
Don't make it the 4 C world

BAU
Profitincrease

BAU
Profitincrease
UltimatebenefitCurrent
situation
ProfitLead to the decarbonization ofsociety

Energy Carbon Compliancewith
Increase in tax
recycling Measures
profit fromforregulations
solutions
NaturalDisasters
business

Current
situation
ProfitBAU: Business As Usual1.

echnical issues related to the introduction of renewableenergy2. Economic challenges for renewable energy introduction
Attempt to solve these problems

3-189

UltimatebenefitCountermeasure 1: Solving Technical Challenges

2

Step

3

4

5

Scenario

4

2

Technical Challenges for
VPP
Power generation
forecasting technology

VPP
Hypothetical
Power plant

Power stabilization
technology to connect tothe power system
Capacity improvement ofstorage batteries toachieve power stabilization,
etc.

Rapid diffusion of distributed resources

3-190

Source: Ministry of Economy, Trade and Industries Agency for
Natural Resources and Energy

Solve technical issues related to VPP and increase the rate ofrenewable energy use

Countermeasure 2: Solving Economic Issues and Future
Energy Utilization

2

Step

3

4

5

Scenario

Optimization of intra-regional energy(local production for local consumption)

Power supply by photovoltaic power generationon the roof (Private consumption)

2033
Mega After FIT
Housing use
electricity services

Industrial use
electricity services

Kyocera Kanden
EnergyKyocera EPA

Business
entityLong-term reliability/
High-temperature, highmoisture resistant solar

Electricity
services

Housing withphotovoltaic power generation/industry

New mega

V2H

Fuel cell

Fuel cell

Storage batteries Storage batteries
SurplusElectricity

Electricity
services

Energy-related services

Industrial use
photovoltaic power
generation
RE100

Launched a service that enables theintroduction of photovoltaic power
generation without initial investment
3-191

VPP control

Business
entityPrivate consumption

Housingwith photovoltaic
power generation

Storage batteries Existing mega

Public facilities

Promote regional energy optimization
by resolving technological andeconomic issues

42

Future: Building a Regional Energy Service Base

Step

2

3

4

5

Scenario

Local production andlocal consumption of energy
Automated EVs in 5G Era

ZEH ZEB
Autonomous distributed
energy system

People-friendly andattractive mobile
systemRegional baseenergy services

Emergency assistancepower supply

Safe and secureenergy system even intimes of disasterP2P electricity transaction
Introduction ofcommunity EV
Mobility means that are friendly
to the elderly and the childrearing generation

3-192

Environment-friendly
lifestyle

To create diverse
businesses

Build regional energy service infrastructure
by linking many services

Other Sector
Practice Case
Practice Case
Practice Case
Practice Case
Practice Case
3-193

KYOCERA Corporation(Electronic Equipment)
YASKAWA Electric Corporation(Electronic Equipment)
ASKUL Corporation(Retailing)
Seven & i Holdings Co., Ltd.
(Retailing)
Lion Corporation(Consumer Products)

42

YASKAWA Electric: Profile(as of February 29, 2020)

3-194[Covered business]

narrowed our focus to significant products in these areas to conduct our analysis
Business portfolio
System engineering

Business area

Other

1

6%

Motion control
Motion control

14%
3
Total
411 billion yen

1

2

43%

Robotics

3

37%

Arc welding robots, spot welding robots, painting robots, handlingrobots, sealing/cutting robots, deburring/polishing robots,
clean/vacuum handling robots used with semiconductor/LCD
manufacturing equipment, robot peripheral equipment, robot-applied
FA systems, robots for biomedical applications

Systemengineering

Electrical systems for steel plants, electrical systems for water supply andsewage, electrical systems for various industries, high-voltage inverters, highvoltage matrix converters, industrial motors/generators, wind power
converters/motors, small hydroelectric power generators, electric power
distribution equipment, wind power generation systems, solar power generation
systems, systems for ships and watercraft, energy-related systems

Risks and significant products in each value chain
R&D

Procuring raw materials
Factory automation devices(industrial robots, AC servos)
Industrial inverters
Products related to renewableenergy generation equipment
Changes in prices for significant
commodities/products
Carbon pricing
Changes in reputation with investors
Changes in rainfall/weather patterns
Extreme weather conditions, etc.

3-195

AC servo motors, AC spindle motors for machine tools, linear
motors, various motor control equipment, machine controllers,vision systems, general-purpose inverters, power regenerative
converters, matrix converters

Robotics(February 2020 term)

2

Products: Significant products

Processing/manufacturing
Factory automation devices(industrial robots, AC servos)
Industrial inverters
Products related to renewableenergy generation equipment
Changes in prices for significant
commodities/products
targets/policies
Spread of low-carbon technologies
Changes in rainfall/weather patterns
Extreme weather conditions, etc.

Source: YASKAWA Electric website, summary of financial statements (May 2020 term)

Shipping/
product sales: Main risks

Product use/disposal
Factory automation equipment(industrial robots, AC servos)
Industrial inverters
Products related to renewableenergy generation equipment
Changes in prices for significant
commodities/products
Recycling regulations
Extreme weather conditions, etc.

We evaluated high-impact risks and determinedsignificant products for each value chain

[Risk significance assessment (1/2)]

2

Step

3

4

5

Scenario

2C

We investigated risks/opportunities ranging from procuring raw materials
to product use
Risks/opportunities related to transition risks
Item

A
B
C

Param
eter

Study: risks

Carbon pricing

Expenditures,
assetsThe P/L is impacted by an increased cost of production at factories due to taxes
imposed on fuel procurement costs with the introduction of carbon taxes by thegovernments of various countries

N/A

High

Revenue,
expendituresWith the introduction of emissions trading and stricter regulations on energy
conservation, conversion to renewable energy will be required, and the corresponding
costs for YASKAWA facilities/green power purchasing will increase

P/L is impacted by a decrease in costs such as green power purchasing due to anincreased ratio of renewable energy in commercial electricity

High

Revenue,
expenditures

P/L is impacted when the global shift to electrification, EVs, and hybrids leads to ashortage of rare earths (neodymium and dysprosium) and copper for magnets,
affecting production when prices for these materials soar and they become
difficult to obtain due to restrictions on exports by producing countries

N/A

Low

Revenue,
expenditures

P/L is impacted when expenditures increase due to increased costs from the adoptionof alternative materials caused by regulations on plastic

N/A

Low

Revenue,
expenditures

There is a risk that energy prices will rise due to changes in the supply-demandbalance as a result of the introduction of carbon taxes and a decreased supply offossil fuels due to global warming. As a result, P/L may be impacted by increased
procurement costs
P/L is impacted when the global shift to EVs and hybrid automobiles leads to ashortage of rare earths (neodymium and dysprosium) and copper for magnets,
affecting production when prices for neodymium magnets/copper soar and thesematerials become difficult to obtain
P/L is impacted when the oil and gas market shrinks, and the U.S. inverter businessaimed at the same market shrinks, as well (significance: low)

Demand for factory automation equipment and industrial inverters increases due to thegrowing need for energy-saving measures. As a result, there are expanding opportunities
for solution businesses for improving productivity / energy efficiency of corporate
plants/facilities, impacting P/L.
Demand for solar, wind, hydro, geothermal, and biomass power generation facilities
increases due to FIT policy incentives, etc. As a result, business opportunities for related
control equipment expand, impacting P/LHigh
As the shift to EV automobiles continues, demand for EV motors and drive units increase,and business opportunities for EV-related electrical products expand, impacting P/L(significance: low)Business opportunities for electrical ship products expand due to increased demand forenvironmentally friendly marine transportation and increased demand for EV and hybrid
ships, and P/L is impacted (significance: low)

Expenditures

Competition intensifies for the energy-saving performance of products due to thegrowing need for energy-saving measures. As a result, there is an increased burden ofinvestment costs toward R&D, etc., and P/L and B/S are impacted

N/A

carbon emission
targets/policies

Variousrestrictions onexports

D

Business impact

Subcategory

Recycling
regulations

Changes in

E prices for

significant
commodities/productsF Spread of lowcarbon
technologies

G

Changes in
Expenditinvestor/custom ures,assetser behavior

Study: opportunities

Increased investor interest leads to preference for companies that have madeprogress with environmental initiatives such as RE100, which in turn leads toadditional initiative costs from the need to implement low-carbon manufacturing
processes. As a result, P/L and B/S are impacted
Increased customer environmental awareness leads to demands for environmental
considerations in information disclosure and procurement, and a delayed response tothese demands will result in lost business opportunities and impact P/L

RatingMed.

Making use of green bonds has the potential to reduce risk through diversified investment,
impacting B/S
reputation among investors and increase its corporate value through increased stock
pricesLow

3-196[Risk significance assessment (2/2)]

2

Step

3

4

5

Scenario

We investigated risks/opportunities ranging from procuring raw materials
to product use
Risks/opportunities related to physical risks
Item

Business impact

Subcategory

Param
eter

H

Changes inrainfall/weather
patterns

Revenue,
expenditures,
assetsI

Increasedaveragetemperatures

Revenue,
expenditures,
assetsJ

Increase ininfectious
diseases

RevenueK

Elevated sea
levelsL

M

Study (example): risks

Study (example): opportunities

RatingAn increase in lightning strikes creates a risk of power outages and anincreased possibility of shutdowns for plant equipment. As a result, there are
increased costs for additional investments toward facility restorationand insurance premiums, impacting P/L and B/S

The need for a stable food supply increases demand for food product plants,
impacting P/L

Low

Inverter sales increase due to rising demand for inverter air conditioning
equipment, impacting P/L

Med.

N/A

Increased pandemics result in increased demand for reducing manpower at
production sites, and automation and robotization business expands, impacting
P/L

Low

Expenditures,
assetsAn elevated sea level makes it necessary to relocate production sites
where the risk of flooding exceeds acceptable levels, impacting P/L and
B/S

N/A

Low

Water
management(droughts)

Expenditures,
assetsDuring droughts and similar events, there is a risk of plant shutdowns,
and measures toward water recycling and reuse are required, impacting
P/L and B/S

N/A

Low

Extremeweather
conditions

Revenue,
expenditures,
assetsThere is a risk of shutdowns / reduced production / additional
investments toward facility restoration due to damage to employees/plantsfrom typhoons/tornados/flooding. Furthermore, there are increased costs
for insurance premiums, etc., toward assets in high-risk areas, impacting
P/L and B/S

N/A

High

3-197

There are increased energy costs due to increased use of energy for air

Step[Step 3: Scenario group definition]

2

3

4

5

Scenario

For climate change, which has a high degree of uncertainty, we studied two
scenarios for a 2030 society[Projected average global surface temperature change](compared with the average from 1986-2005)
scenario:
3.2higher than pre-Industrial
Revolution levels if no additional measuresagainst global warming are taken(2.7scenario:
2.7higher than pre-Industrial
Revolution levels if no additional measuresagainst global warming are taken

scenario:
0.9higher than pre-Industrial
Revolution levels if strict measures are taken

2030<Timeframe for this analysis>
The TCFD recommendations for scenario
analysis suggest that multiple temperature
range scenarios be selected, including those(Source) AR5 SYR, Table SPM.6
3-198

Step

[Step 3: Scenario group definition]

2

3

4

5

Scenario

Definition of various worldviews based on scientific evidence from IEA and other sources*Exchange rate: 1 USD = 106 JPY (based on the October 1, 2020 rate)

2030

Currently

SourceIEA WEO2019, 2020

Carbon tax

Transition risks(increased
expenses)

10,600 JPY/t-CO2
23,328 JPY/MWh

22,572 JPY/MWh

24,948 JPY/MWhEmission factors forelectric utilities

0.488kg-CO2/kWh

0.37kg-CO2/kWh

0.37kg-CO2/kWh

Neodymium: 153.6 thousand
tons
Dysprosium: 10.2 thousand
tons

Neodymium: 179.5 thousand
tons
Dysprosium: 12.0 thousand
tons

Sebastiaan Deetman et al.,demand growth of metals in electricity
generation technologies, cars and electronicof the state of the 2020 featured mechatronics
IEA, WEO2019

Neodymium: 84.9 thousand
Volume of demand fortons
neodymium/dysprosium Dysprosium: 5.7 thousand
tons

Transition risks(increased
sales)IEA WEO2019

used

AC servo market size

621.8 billion JPY1189 billion JPY

1343 billion JPY

Industrial robot market
size

1187.7 billion JPY

2293.7 billion JPY

2589.7 billion JPY

Aggregated from: International Federation of
Robotics, World Robotics 2019 Industrial
Robots IEA, WEO2019

Inverter market size

1344 billion JPY

5769 billion JPY

6451.1 billion JPY

Aggregated from: ResearchStation
IEA, WEO2019

Rate of improvement inspecific energy consumption(industrial sector)

Energy mix

Level of flood risk foreach site

Physical risks Percentage increase in
the probability offlooding

3-199 199

scenario will be the same as current levels

Carbon pricing

Length of time businessis interrupted for eachlevel of flooding

Wind power: 2,955TWh
Solar power: 2,265TWh

1.3%

IEA, WEO2019

Wind power: 3,361TWh
Solar power: 2,764TWh

Wind power: 4,770TWh
Solar power: 4,315TWh

IEA, WEO2020(Frequency estimated fromaqueduct data)(Frequency estimated fromaqueduct data)

50%

150%

We estimate the average length of We estimate the average length oftime that business is interrupted for time that business is interrupted foreach level of flooding
each level of flooding

The estimate is based on current sites, as thenumber of sites in 2030 is unknown
The estimate is made by applying the assumed

business is interrupted for each level of
Review Meeting of Technologies Related to
Flood Control Planning Based on Climate

Explanatory materials on the simulation of
estimated damage from flooding by the Cabinet
Office

2

Step

The
risks increase

3

4

5

Scenarioworld: Low-carbonization measures do not advance, and physicalMarketIncreased demand for
FA that can be used forremote production

Renewable energy does not become
more widespread, anddemand for equipment used inrenewable energy generation
continues in line with current trends

Demand for industrial
inverters continues in line withcurrent trends

Increased capital investment
in FA due to relocation of
production sites

Increased
demand forplant factories

FA plant

Increased demand for
private energy
generation andenergy storage

Industrial inverter market(e.g. general machinery, air conditioner for buildings,
elevators, cranes)

Increased demand for powersuits that are used indisaster recovery

Renewable energy
generation facilities

Product supply

YASKAWAproduction sites

Industrial robots/AC servos

Government
Energy-efficiency/renewableenergy initiatives are notactively promoted, andintroduction of carbon taxes islimited to only certain regions

BCP

Increased physical risk due toextreme weather.
Stronger disaster
preparedness / BCP is needed

Investors
Parts/rawmaterials
supplySuppliers(parts/raw materials)
Carbon regulations
are not implemented,
and there is no shift
toward recycledmaterials

Plant operations
suspended due to flood
damages

Increased physical risk
due to extreme weather

Supplier factories

Arctic shipping routes aredeveloped, lowering
logistics costs to Europe
and the U.S.

Suppliers(energy)

There is no great increase indemand for low-carbonization
measures from investors

Energy supply

There is continued
dependence on fossil
fuels
Renewable energy
generation

Fossil fuel energy generation

3-200

2

Step

3

4

5

ScenarioThe
world: Low-carbonization initiatives advance, and there is increased demand for FA
equipment / industrial inverters / devices used in generating renewable energy
There is increasing need forenergy efficiency, and demand forindustrial robots and AC servos
increases

MarketThere is increased demand forindustrial inverters due tomounting energy efficiency needs /various government policies

Renewable energy becomes morewidespread, and demand for equipmentused in generating renewable energy
increases

Connect
Conversion tosmart factories(e.g. FEMS/M2M)

FA plant

Industrial inverter market

A slowdown in oil/gas related
businesses leads to adecrease in sales mainly inNorth America for inverters inthe same industry(e.g. general machinery, air conditioner for buildings, elevators, cranes)

Connect

Product supply

YASKAWAproduction sites
Industrial robots/AC servos

Carbon tax / subsidies

Government

Advances inelectrification / useof renewable energy
in plants(While not to the extent seen in theTightening of regulations /implementation of support initiatives
Increased carbon taxes

Subsidies

Increased physical risk due toextreme weather

There is anincreased shift fromdepleted resources
to recycled materials,
and procurement
costs increase

3-201

trading system
Support for introducing renewable energy, etc.

As EVs become popular, costs soar forcopper wire / neodymium magnets,
which are raw materials used in motors,

Suppliers(energy)

EnergysupplyCarbon tax /subsidies

Renewable energy generation
Supplier factories

Increased activity of the emission credit

Investors

Parts/rawmaterials
supplySuppliers(parts/raw materials)

Renewable energy
generation facilities

Copper/rare earth

Low carbon / environmentallyfriendly business becomes arequirement for investment

Renewable energy
becomes morewidespread, and energy
prices increase
Fossil fuel energy
generation

Step[Scenario group definition]

2

3

4

5

Scenario

Low-carbonization trends weaken, and physical risks increase
The
Sellers(parts/raw materials)
Carbon regulations are notintroduced, and there is nochange in procurement costs
for raw materials(2.7 C+) worldview in the 2030s (examples)

Industrial equipment industry

We hypothesize that there will
be no shift toward recycledmaterials
Physical risks become
tangible for certain plants /resource suppliers
Review procurement
strategies(consider diversifying
procurement sources)

Sellers(energy)
There is no significant
progress toward theintroduction of renewableenergy, and electricity prices
remain at the current level
Optimize investment related
to renewable energy

There is increased capital
investment in FA due torelocation of production sites
prompted by natural disasters, rising
sea levels, etc.
Increased demand for privateenergy generation and energy
storage boosts demand forgenerators and power converters

Industry
Initiatives toward renewable energy / energy
efficiency are implemented as usual(no significant change)

The need to secure a stable foodsupply boosts demand for plantfactories

There is an increased risk of production line
downtime and logistics disruptions due tocatastrophic weather events

Increased infectious diseases
lead to advances in automationaccompanying the reduction of
manpower in many diverse areas

Increased expenses for BCP countermeasures(example: increased demand for robots used to
produce ready-made meals (lunchboxes, etc.))

New arctic shipping routes open, lowering
logistics costs to Europe and the U.S.

Demand is created for power suits
used during disaster recovery

Implement initiatives toward renewableenergy/ energy efficiency as usual, andevaluate portfolios, etc., for sites with highphysical risks: Actions for seizing opportunities

Government
Buyers(customers)

New entrants
There is no particular impact fromclimate change: Actions for responding to risks

Demand is created for FA that canbe used for remote production
due to extreme weather (wehypothesized that there would be
conditions that made workattendance difficult)Carbon taxes are introduced incertain regions, but there is no
increase in activity foremission credit trading, etc.
There is no significant growth indemand for renewable energy
due to renewable energy policies
remaining at the current level
The world continues to dependon gray energy/fuel due todifficulty in achieving targets forCO2 emissions reduction
Initiatives for promoting EVs, etc.,
do not advance, and the numberof vehicles being produced/solddoes not increase
Subsidies (for breakwaters,etc.) are created as sea levels
rise and water stress increases

Promptly obtain information on
government policies, and securesubsidies(Substitutes)
Take actions to address theincreasing demand for products
related to disaster preparedness
as the need for this increases

There is no particular impact from climatechangeInvestors
N/A

3-202

Step

[Scenario group definition]

2

3

4

5

Scenario

As the world moves toward energy efficiency / low-carbonization, there is increased demandfor FA equipment / industrial inverters / renewable energy generation facilities

The
Sellers(parts/raw materials)
Increased procurement costs
due to carbon regulations
Increased shift to recycledmaterials
With the spread of EVs, there
is increased demand for rareearths and copper that are raw
materials used in motors,
affecting production when prices
for these materials soar and they
become difficult to obtain
Review procurement strategies(consider diversifying
procurement sources andstrengthening partnerships with
suppliers of recycled materials)

Sellers(energy)
Renewable energy holds anincreased share in the energy
mix, and electricity prices
increase

Continue/increase
investment related torenewable energy
3-203

worldview in the 2030s (examples)

Industrial equipment industry
New entrants
Increased activity for entry into new businessfrom energy-saving and low-carbon
products/business models

Strengthen partnerships(alliances, M&A)

Industry
Advances in electrification / use of renewableenergy in plants
Increased procurement costs due to increased
prices of raw materials / intensified competition
for resources
Increased R&D activity toward conversion tosmart factories, such as FEMS/M2M

Low-carbonizationof plants

Promoting R&D
toward conversion tosmart factories (e.g.
FEMS/M2M)(Substitutes)
There is no particular impact from climatechange: Actions for responding to risks: Actions for seizing opportunities

Government
Buyers(customers)
Increased demand for FA
equipment and industrial
inverters due to increased
energy efficiency needs
Increased demand forequipment used in generating
renewable energy
Increased demand for motor
drive systems for EVs andFCVscarbon / recycled materials
increase, and they demand theuse of these materials in
manufacturing processes
A slowdown in oil/gas relatedareas leads to a decrease insales mainly in North America
for inverter products in thesame industry

Low-carbonization of
manufacturing processes
Develop/sell products thatmeet the preferences ofcustomers with strong needs
for energy efficiency

Carbon taxes are introduced,
stimulating the low-carbon market
Policies toward spreadingenergy efficiency / renewableenergy and encouraging lowcarbonization are implemented
with the aim of achieving CO2
emissions reduction targets.
Subsidies are also enhanced
Fossil fuel subsidies end
Policies aimed at popularizing
EVs and FCVs are moved
forward
A charging network is establishedto promote popularization of EVs
Certain subsidies (forbreakwaters, etc.) are createdas sea levels rise and water
stress increases
Promptly obtain information on
government policies, andsecure subsidies

Investors
Low carbon / environmentallyfriendly business becomes arequirement for investment

2

Step

3

[Visual representation for assessing impact on business]

4

5

Scenario

We evaluated the impact of each key driving force on the profit/loss
statement (P/L)
A

Revenue from
FA equipment

D

AC servo market size

Resource procurement
expenses
Prices of copper wire/
neodymium magnets

Industrial robot market size
Electricity prices
B

Revenue fromindustrial inverters
Industrial inverter market size

Costs

Sales

E

Carbonpricing

C

Revenue from equipment for
renewable energy generation
F

Market size forgenerators/converters for offshore
wind power generation
Market size for power
conditioners for distributed solar
power generation

Carbon tax
Scope 1&2
emissionsPhysical risks
Flood risk

Net profits

3-204

Step

2

3

4

5

Scenario[Results of the climate change scenario analysis]
When we based our hypotheses in the year 2030, we determined that the impact from

Impact ofclimate change
businesssignificant in either theor the
The following identified risks and opportunities will need to be evaluated dependingon the situation in the future.
Opportunities: FA equipment, renewable energy-related equipment, expansion ofbusiness corresponding to extreme weather conditions
Risks: Carbon tax hike, increase in procurement costs for copper/neodymium
magnets, severe weather[Future TCFD initiatives (suggested)]
TCFD disclosure

Conduct an initial disclosure by preparing information on deficiencies and setting
long-term CO2 reduction targets based on the results of this analysis.

Post-disclosure
initiatives

After disclosing the results of this analysis, confirm the results of feedback fromvarious stakeholders, including investors, and work to review (improve) the
disclosure contents.

3-205

Other Sector
Practice Case
Practice Case
Practice Case
Practice Case
Practice Case
3-206

KYOCERA Corporation(Electronic Equipment)
YASKAWA Electric Corporation(Electronic Equipment)
ASKUL Corporation(Retailing)
Seven & i Holdings Co., Ltd.
(Retailing)
Lion Corporation(Consumer Products)

3-208

3-2103-211

3-213

3-214

3-2163-217

3-2183-219

3-220

Other Sector
Practice Case
Practice Case
Practice Case
Practice Case
Practice Case
3-221

KYOCERA Corporation(Electronic Equipment)
YASKAWA Electric Corporation(Electronic Equipment)
ASKUL Corporation(Retailing)
Seven & i Holdings Co., Ltd.
(Retailing)
Lion Corporation(Consumer Products)

Scope of this analysis
The scope of consideration is Seven-Eleven Japan, which accounts for 60%
of consolidated operating income
Seven & i Holdings Co., Ltd.
Consolidated Operating Income
JPY411.5 billion

Corporate Profile: Seven-Eleven Japan(as of February 28, 2019)

Fiscal year ended in February, 2019

Seven-ElevenJapan
JPY245 billion
60%

Revenue fromoperations

Net Income

873,555 millions yen

153,233 millions yen

Operating Income

Total Store Sale inJapan

245,088 millions yen

4,898,872 millions yen

Ordinary Income

Number of Stores inJapan

252,917 millions yen

21,005 (as of July 31, 2019)

3-222

Assess materiality of climate-related risks and opportunities
Risks and opportunities at Seven-Eleven Japan are extracted from the items
listed in TCFD based on external views
Risks and Opportunities
in Seven Eleven Japan

Risks and Opportunities in TCFDClassifi
cation

TCFD Risks/Opportunities*

Carbon price

Energy-saving policy

Renewable energy subsidy policy
Changes in the energy mix
Industry/
MarketTechnologies

Energy Demand
Changes in important
products/prices
Spread of low-carbon
technologies
Dissemination of renewableenergy and energy-saving
technologies
Developing next-generation
technologies
Customer reputation change

Reputation

3-223

Changes in the investor's
reputation

Acute

Chronic

Increasing severity of
extreme weather conditions
Increase in the averagetemperature
Changes in rainfall andweather patterns
Rising sea level

External Views(Examples)
SASB
EBRD
Retail Industry Leaders
CDP

Classifi
cationPhysical risks andopportunities

Transition risks and opportunities

Fossil fuel subsidies

TCFD Risks/Opportunities

Transition risks and opportunities

Policies/
Regulation

Physical risks andopportunities

Carbon Emissions
Targets/Policies in Each Country

Clas
sific
ation

TCFD Risks/Opportunities
Carbon price
Policies/
Regulation

Technologies

Carbon Emissions
Targets/Policies in EachCountry
Efficiency of resources throughthe introduction of technology
Customer reputation change

Reputation

Changes in the investor's
reputation
Acute

Increasing severity of extreme
weather conditions
Changes in rainfall andweather patterns

Chronic

Rising sea level

Assess materiality of climate-related risks and opportunities
Assess the significance of risk and opportunity for Seven-Eleven Japan(Qualitatively)

Significance
level

Large

Significancelevel

MediumSmall

Significance
level

Small

[Transition risks and opportunities]
Carbon prices
National carbon* emissions targets and policies
Changing consumer reputation[Physical risks and opportunities]
Severity of extreme weather (acute)
Changes in precipitation and weather patterns (chronic)[Transition risks and opportunities]
Efficiency of resources through the introduction of technology[Physical risks and opportunities]
Rising sea level[Transition risks and opportunities]
Changes in investor's reputation

3-224

Identify and define range of scenarios
Consideration of 2030 society based on representative scientific scenarios 2 C
scenario and 4 C scenario
Multiple different forecasts are used, because accurate forecasts are almost impossible.
[Global Average Terrestrial Temperature Change (Difference from the 1986-2005 Average)]
(

*

)

4 C
scenario

2030

2 C
scenario

2030
3-225

Source: AR5 SYR chart, SPM. 6 IEA.

A world that continues
the current measuresagainst climate change.
Increased by 3.2-5.4
compared to preindustrial revolution

A world that adopts
strict climate change
countermeasures.
Increased by 0.92.3 compared topre-industrial
revolution

Definitions of worldview
Define a worldview based on scientific grounds such as IEA
Important items(Items of highsignificance)

Assumed parameter

Carbon price
Carbon prices,
national carbon
emissions targets
and policies

No introduction*

Target for GHG emissions$100 per t-CO2$209/MWh

Ministry of the Environment$231/MWh

IEA

296.7 billion USD-

Nielsen, etc.

Percentage ofvehicles owned
39%

Next Generation Vehicle
Promotion Center

High uncertainty(frequency may decrease or remainunchanged; severity may increase)

Japan Meteorological
Agency and the Ministry of
the Environment
Ministry of the Environment

2.5 days ofoccurrence

3.0 days of occurrence

2.5 days ofoccurrence

3.6 billion USD/ years

8 billion USD/ years

Not adopted at 2

Changes in rice (prime rice)
yields(Base year: 2012)

7% decrease

Increase in hot weather days

(Base year: 2019)+0.3 days per year

Increase in the amount ofelectricity used for airconditioning(Base year: 2016)

1.7 times

Flood damage

IEA

168 Million t-CO2

Percentage of vehicles Percentage of vehicles
owned
owned
0.3%
5%

Diffusion of EV

Increasing severityof extreme weather Frequent heavy rains
conditions

3-226

Not adopted at 4 C

128.5 billion USD

Frequency of typhoons andcyclones

Changes in rainfall
and weather
patterns2$216/MWh

Sales of sustainable
certification products

Source (excerpt)

4207.5 Million t-CO2

Electricity price

Changing
consumer
reputation

2030

At present

5% decreaseC

WRI
Mitsubishi UFJ Researchand Consulting+0.05 days per year Ministry of the Environment
1.6 times

Identify and define range of scenarios (2IEA

C, 2030)

Seven-Eleven Japan in 2 C scenario
Regulation are tightened, low and decarbonizing are advancing, and the transition risks are
increasing.
Introduction of a carbon tax and active promotion of energy-saving andrenewable energy policies
Companies are required to drastically reduce their CO2 emissions.

PolicyProcurement

Manufacture

Product planning and development

Increased temperatureadversely affects
growthGreat interest in
sustainable products

Developing low-carbon
products and services
Adoption of certified
products

Taxation on CO2 emissions and rising
electricity prices throughout the supply chain

Price increase

Logistics

Raw material priceincreases arelimited

Reducing plastic, reducing
packaging materials, andusing environmentallyconscious packaging
materials

Slight increase inlogistics delays anddisruptions

Eco-friendly
logistics

Marketing and sales
Effects of heavy
rain

3-227

Rivers and coastal areas

Expansion of
EV Charging
ServiceExpansion of the useof storage batteries
through the spreadof renewable energy

DisposalFluorocarbon-free
air-conditioning
and refrigeration
systems

Low-Carbon storesthrough energy
conservation inbuildings

Green Energy

Reduction of
the use ofplastics

Great interest in
sustainable products

Consumer

Reduction of carbon emissions atstores through energy
conservation in buildings

Identify and define range of scenarios (4C, 2030)

Seven-Eleven Japan in 4 C scenario
Increase physical risks such as extreme weather
Energy-saving and renewable energy policies are not actively promoted(carbon tax not introduced)

PolicyProduct planning anddevelopment

Procurement
Increased temperatureadversely affects crop
growthManufacture

Cost increase

Interest in emergency
supplies and stockpiles
in addition tosustainable products

Logistics
Increase in logistics delays
and disruptions

Rising pricesof rawmaterials

CO2
CO2

DisposalMarketing and sales
Flood damage caused byheavy rain
Suspension ofoperations

Possibility ofa shortage ofmerchandise

CO2

ConsumerRivers and coastal areas

3-228

Expansion of role ofstorage batteries as
BCP countermeasures

Interest in emergency
supplies and stockpiles in
addition to sustainableproducts

Progress in BCP
measures atstores

Evaluate business impacts (2Flood damage
caused by heavy
rain

C, 2030)*

We have picked up specific examples of risks and opportunities which wereassessed as significant and estimated their impact (based on business as
usual) .
Business impact of 2 C(100 millions
yen)

Positivefactors

Negativefactors
OperatingincomeCarbonprice

Electricity
expenses

Sales ofsustainableproducts

Transition risk

EV
Charging
Service

Negativefactors
Burden of Loss in sales
due toinsurancesuspension
premiums of operations

Increase inChanges in airrice cropconditioning
yieldsload

Total

Physical risk

Increased transition risks
Regulations are tightened, low-carbon and decarbonization are
advancing, and carbon taxes and electricity prices are rising.
3-229

Evaluate business impacts (4, 2030)*We have picked up specific examples of risks and opportunities whichwere assessed as significant and estimated their impact (based on
business as usual) .
Business impact of 4

C(100 millions
yen)

Positive factors
Negative factors

OperatingincomeCarbon priceSales ofsustainableproducts

Electricity
expenses

EV
Charging
Service

Burden of
insurance
premiums

Transition risk

Loss in sales
due tosuspension ofoperations

Changes inrice crop
yieldsPhysical risk

Increase inairconditioning
load

Total

Increased physical risks
Increase in insurance premiums and loss due to suspension ofoperations due to extreme weather.
3-230

Evaluate business impacts - flood risk assessment
The flood risk at the time of Arakawa collapse is assessed by using a
hazard map. Store damages in 8 wards of Tokyo located along
Arakawa river were evaluated.
*

8 wards of Tokyo (Adachi Ward,
Kita Ward, Katsushika Ward,
Edogawa Ward, Sumida Ward,
Itabashi Ward, Arakawa Ward, andKoto Ward) located in the Arakawa
Basin

Adachi Ward
Itabashi Ward
Kita Ward

Katsushika Ward
Arakawa Ward

Sumida Ward
Edogawa-ku
Koto Ward
Source: Prepared by Deloitte Tohmatsu based on Estimated inundation area of Arakawa floodin the river system (estimated maximum scale) (Left chart) and Koto 5 Wards Large-Scale Flood Hazard Map(right chart)

3-231

Evaluate business impacts - flood risk assessment
Percentage of stores that may have flood risk

Calculate the proportion of
stores that may be flooded*
by comparing domestic
store
locations with hazard maps

Increasing importance ofdisaster response

Source: Edited and processed by Deloitte on the basis of
the National Land Value Information Immersion Area Data
(2012) by the Ministry of Infrastructure, Land,Transport andTourism, Land Policy Bureau

3-232

Identify potential responses
Countermeasures to mitigate climate-related risks and expand opportunities
Items that have a major impact on Seven-Eleven Japan*
Carbon priceElectricity
expenses

Changing
consumer
reputation

Increasing
severity of
extreme weather
conditions

Changes in rainfall
and weather patterns

Reducing risks by promoting
GREEN CHALLENGE 2050
We, as Seven-Eleven Japan, will expand business
opportunities through our contribution to implementing various
measures at stores where can contact with customers
3-233Other Sector
Practice Case
Practice Case
Practice Case
Practice Case
Practice Case

KYOCERA Corporation(Electronic Equipment)
YASKAWA Electric Corporation(Electronic Equipment)
ASKUL Corporation(Retailing)
Seven & i Holdings Co., Ltd.
(Retailing)
Lion Corporation(Consumer Products)

3-234

Scope of Scenario Analysis and Promotion Structure
Timeline: 2030
Target businesses: Oral care business and Fabric care business in Japan(Taking into account our core business and the impact of climate change)
2030
Domestic business
Risk[Scope of this investigation]
Mainly Oral Care Business
Fabric Care Business

Overseas businessNot considered

Opportunity

Promotion System: Internal Project
Corporate Planning Division (including IR), Accounting Division,
Marketing Division, and Purchasing Division, CSV Promotion
Department Environmental Strategy Office (Secretariat)
3-235

Step

2

3

4

5

Assess materiality of climate-related risks:
Transition Risk

Increases in production costs due to carbon taxes, changes in raw material
procurement regulations and prices, and changes in customer behavior can havesignificant financial consequences
Risk Item

Carbon tax
Carbonemissionstargets/
Policies ineach country
ContainersRawmaterials
procurement

Regulations
relating toland use

Steep risein prices

Changes in customer
behaviours
Changes in theinvestor's reputation

Blue: Risk,
Red: Opportunity

Business Impact

Assessment

Full-scale introduction of emissions trading and the application of carbon taxes by governments will increase theoperating costs of factories and increase expenditures

Large

The use of low-carbon energy will enable us to cope with future rises in carbon prices and reduce costs.
Introduction of regulations on plastic and other packaging materials and products in each country, incurring
response costs and increasing expenditures
Large

By making use of low-carbon, non-plastics products, it is possible to provide products that meet the ethical needsof consumers, thereby increasing corporate value and generating profits
If demand for raw materials for biofuels and petrochemical substitutes increases and competition arises with theuse of agricultural land to produce agricultural products, procurement costs for agricultural products (palm oil, etc.)
will increase and expenditures will increase
Although regulations are tightened as forest area decreases, by using sustainable paper products (certified paper) thatcomply with regulations,increase the sustainability of products and companies, and may contribute to increasing
corporate value and earnings

Large

Higher premium prices for certified palm oil (nuclear oil) and increased expenditures due to tighter regulations anddemand for biofuels
Costs associated with the switch to alternative raw materials are also incurred, resulting in an increase in expenditures

Large

In procuring palm oil, we can increase the sustainability of our products by helping themacquire RSPO certification
May contribute to enhancing corporate value and increasing earnings
As consumers become more aware of ethical consumption, demand for products using unsustainable plastics andpalm oil declines and profits decline
On the other hand, as consumers become more aware of the importance of ethical consumption, demand for watersaving products, non-plastics, and sustainable raw materials expands and revenues increase
If climate change is not addressed, the investor may have a poor impression, and there is a possibility that a high interest
rate may have to be charged for the issuance of corporate bonds. This may affect the BS due to the impairment of capital.

Large

Small

3-236

Step

Assess materiality of climate-related risks:
Physical risk

2

3

Rising average temperature, raw material prices, water stress, and extreme weather
events can have significant financial influence
Risk Item

4

5

Blue: Risk,
Red: Opportunity

Business impact

Assessment

Expenditures will increase due to higher operating and personnel costs resulting from increased energy costs andburdens on workers.

Increase in the averagetemperature

Higher average temperature will increase the number of laundry operations, while demand for laundry detergentsand antiperspirants will increase, leading to higher earnings.

Large

In some areas, a certain increase in temperature may contribute to increased crop productivity, leading to higher
production and lower raw material costs

Pests
Raw
materials
procurement AtmosphericCO2
concentrations
Increase

Water stress (drought)

3-237

Increasing
severity of
Floodextremeweather
conditions Heavy rains,(Direct/
typhoons andIndirect
stormseffects)

Large outbreaks of pests affect the production volume and price of plant-derived raw materials, increase raw
material costs, and increase expenditures
In some areas, a certain increase in temperature may contribute to a decrease in pests, leading to an increase inproduction and a decrease in raw material costs

MediumIncreased use of herbicides due to improved water efficiency and growth efficiency of weeds and increased
expenditure
On the other hand, increased crop growth potential and increased crop yields could lead to lower raw material
costs

MediumExpenditures increase due to a decrease in earnings associated with a decline in the quality of plant-derived raw
materials or an increase in raw material costs
Expenditure increases due to shortage of water supply due to drought, deterioration of water quality, and increasein operating costs
On the other hand, demand for water-saving products and products that do not require water may increase andprofits may increase

Large

Revenue declines due to delays or disruptions in logistics caused by climate events, etc.
In preparation for natural disasters such as floods, demand for specific products that provide clean and healthcare
in the event of a disaster may increase and earnings may increase

Large

Revenues and asset values will decrease due to damage to equipment caused by heavy rains, typhoons andstorms, and have an impact on infrastructure and business continuity (including transfer costs)
Large
The market for disaster prevention goods used for evacuation in the event of natural disasters such as largescale typhoons and concentrated torrential rains will expand, and profits will increase

Step

2

3

4

5

Identify and define range of scenarios:
Consider society in 2030 under two scenarios
Since there is no unified climate change scenario in the consumer goods industry and it is thoughtthat the influence of the average temperature change is large, we examined society in 2030 byusing the 2 C scenario (tightened regulation) and the 4 C scenario (business as usual).

[Global Average Terrestrial Temperature Change (Difference from the 1986-2005 Average)]()

The temperature will rise
3.2-5.4 C above preindustrial levels, unless
more rigorous measures
are taken.

4 C
scenario

The temperature will rise
0.9-2.3 C above preindustrial levels, if strictmeasures are taken.

2 C
scenario2030
Source: AR5 SYR Diagram SPM.6

238

3-238

Step

2

3

4

5

Definition of each worldview based on scientificgrounds, etc. of the IEA, etc.
Risk Item

Assumed parameter

Current situation

2030
4

2

Carbon emission targets
and policies of eachcountry(A Carbon tax)

Carbon prices in each country(Not iintroduced at 4C)

10,900 Yen and tCO2

IEA WEO 2019

Carbon emission targets
and policies of eachcountry(Plastics)

Use rate of recycled plastics inequipment *1(Not iintroduced at 4

C)

14.0%

European plastics strategy

Changes in customer
behaviours

Sales of sustainable certified
products(Expand in the millennial
generation)(Expand among consumers
as a whole)

Deloitte Survey, Nielsen

Increase in the averagetemperature

+1.14

+1.02

Climate Change Knowledge
PortalDue to heat stress
Loss of labor productivity(Extract figures for eachregion)(Extract figures for eachregion)

ILO "Working on a warmer planet"

Probability of occurrence ofdrought (Water stress)(Extract figures for eachregion)(Extract figures for eachregion)WRI AQUEDUCT

4 times

2 times

Ministry of Land, Infrastructure,
Transport and Tourism,
Recommendation for Ideal FloodControl Plan Based on Climate
Change"Increase in the averagetemperature

Water stress (drought)

Frequency of flooding*2

Extreme weather conditions(flooding)3-239

SourcePopulation affected by floods

0.704 million

1.03 million

1.154 million

WRI AQUEDUCT

Increasing number of days of
Increasing severity ofheavy rain per year
extreme weather conditions(heavy rain, storm,
typhoon)Number of typhoons occurring

4.0 days/year

4.0 days/year

4.2 days/year

Tokyo Regional MeteorologicalObservatory HP and Climate
Change Knowledge Portal(There are no clear figures, but the frequency of occurrence may be decreasing or
unchanged, and the severity may increase)*1 It is assumed that regulations similar to those in Europe will be applied to Japan.
* 2. Figures for 2040 are used as substitute for figures as of 2030.
* 3 Converted at $ 100 per tCO2, 109 ¥/US$

2

Step

Identify and define range of scenarios:
World View at 2 C @ 2030s

3

4

5

Raw material costs soar due to the introduction of regulations and certification
Growing environmental awareness and increased demand for ethical value-added products
Seller(Raw Material Suppliers)
Compliance with RSPO
certification,
Consideration of alternative
raw materials in anticipationof rising procurement costs
Increase in raw material
production and procurement
costs due to carbon
regulations
Increase in procurement
and manufacturing costs for
products using plastics due
to increasingly shift to recycledmaterials
Demand for raw materials toacquire RSPO certification
increased, and procurement
and manufacturing costs
increased
Increased temperatures leadto heat stress, rising laborcosts related to agriculture,and soaring prices fornatural raw materials (palmoil, etc.). There is a possibility
that production may decline
due to pests and changes invegetation areas

3-240

Dealing with plants andresource suppliers with highwater risk

Newcomer

Buyer(Consumer)

Entry and expansion of Loop and other recycle
industries
Other consumer goods manufacturers withcooling-effective products

Government
Compliance with regulations
related to GHGs, recycledplastics and palm oil

Provision of products in line withthe ethical orientation(RSPO certification, use ofrecycled plastic, etc.), expansionof stockpiled products fordisaster prevention

Expansion of stockpiled
products for disasterprevention
in line with the timing of thegovernment's stockpiling ofdisaster preparation sets

Consumer products industry
Reduction of CO2 emissions at
plantsR&D on recycled materials
Providing ethical productsw

Rising production, procurement, andtransportation costs due to soaring fuelprices and rising raw material prices
Active R&D activities for recycled materials(plastics, etc.)
Possibility of passing on cost increases
to recycled materials products as ethicalproducts

Demand for ethical raw
material-using products(RSPO certification, recycledplastics, etc.) increased due toincreased consumer
preference for ethicalmaterials.

Introduction of acarbon tax. Factories
that emit a large amountof CO2 are subject to theregulations

Demand for antiperspirants
is expanding gradually due
to the increase in midsummerdays. Potential growth indemand for household
fabric care products withmore frequency of laundry(Alternative)

Gradual increase in demandfor hand soap and otherproducts with fungicide effects

Changing containers and brushmaterials to biodegradable plastics

Increase in stockpiling fordisasters in households

Introduction ofregulation on the use ofrecycled plastics
Peat land developmentbanned.
Recommendation for
acquiring RSPO
certification when using
palm oil
Stockpiling of disasterprevention sets toenhance the facilities of
evacuation centers

Bio-plastics, Bio-degradable plastics
Air-conditioning clothes, highly deodorizing
clothes, and cooling sprays

Step

2

Identify and define range of scenarios:
Future Social Image under the 2 C Scenario

3

4

5

Raw material costs soar due to the introduction of regulations and certification-added products

Overseas
Increased raw material
costs due to RSPO
certification
Growing demand for RSPO
certified products due to
growing consumer preference
for ethical products

Domestic
Increased costs due tothe expansion ofcarbon taxes

Recommendationto acquirecertification
Ban on thedevelopment ofpeatlands

Development of laundrymachines that use small
amounts of detergents

CO2

Expansion of demand forwater-saving products

GHG reduction
requirements

Government

Consumer ethicalorientation expands

EthicalHigher farm labor costs
due to heat stress

Potential for production to
decline due to thegeneration of pests

Regulation on
plastics in theindustry

Local governments are
asked to expand theirstockpiles for disasters.

Increase in production costs forbottles due to regulations on
recycled plastic containers

Biodegradable plastics andbioplastics as alternative

Entry into the recycling
business for Loop, etc.

Expansion of stockpiling fordisasters in municipalities
and households

Possibility of changes in
production sites due to changes
in average temperature

Raw materials procurement
3-241

Processing

Sales and product use

Identify and define range of scenarios:
4 C Worldwide @ 2030s

2

Step

3

4

5

Low carbon/decarbonization trends weaken and physical risks increase
Increase in demand for certain products due to temperature increase
Seller(Raw Material
Suppliers)

Buyer(Consumer)

Newcomer
Entry of recyclers such as Loop
Manufacturers of consumer goods withproducts having cooling effects

Expanding demand for
products for daily use in the
midsummerand emergency supplies

Response to physical risks
at plants and suppliers

Raw material costs remainunchanged

Increased temperature leads
to heat stresses, rising laborcosts related to agriculture,and soaring prices for plantderived raw materials.
Potential for lower production
due to pest generation andchanges in vegetation areas

Demand for antiperspirants
expanded due to the increasein midsummer days. Potential
growth in demand forhousehold fabric care withmore frequency of laundry

Implement energy-saving measures asin the past (no major changes)
Emerging physical risks to thecompany's plants

Traditional portfolio

Regulations on carbon
tax and use of recycledplastics are notintroduced.

Demand for hand soaps andother products with fungicide
effects expanding

Responses to plants andresource suppliers with highwater risk
Physicalrisks materialized
Maintainffor some factories andsuppliers

Regulations are notadvancing as low
carbon/decarbonization
trends weaken andexternal pressures fromthe international
community weaken.

Interest in ethical products
increased among themillennial generation

Existing energy-saving measures
Response to Physical Risks at
Factories

RSPO Certification requiredfor domestic use palm oil

Expansion of reserve products
for disaster prevention in linewith the timing of thegovernment stockpiling disaster
preparation sets

Need for low-carbon, recycledmaterials, etc. are low

Consumer products industry

Assuming no shift to recycledmaterials

Government

Stockpiling of disasterprevention sets toenhance the facilities of
evacuation centers

Increase in stockpiling fordisasters in households(Alternative)
Air-conditioning clothes, highly deodorizing
clothes, and cooling sprays

3-242

Step

2

3

Identify and define range of scenarios:
Image of the future society of the 4 C scenario

45

Low carbon/ decarbonization trends weaken and physical risks increase
Increase in demand for certain products due to temperature increase
Overseas

Domestic
Increase in washing
opportunities due tohigher temperature

Raw materials fordomestic supplies
require RSPO
certification

Emerging physicalrisks at some factories
and suppliers

Expansion of use of
perspiration control
products such as
sprays and sheets

Government

Millennial generation s
increased emotional
orientation

EthicalHigher farm labor costs
due to heat stress

Potential for production to
decline due to thegeneration of pests

Implementation ofenergy-saving measures
as in the past
CO2

Possibility of changes in
production sites due to changes
in average temperature

3-243

Raw materials procurement

Processing

Local governments are
asked to expand theirstockpiles for disasters

Entry into therecycling businessfor Loop, etc.

Expansion of stockpiling fordisasters in municipalities
and households

Increased opportunities
for handwashing due tothe spread of infectious
diseases

Sales and product use

2

Step

3

4

5

Evaluate business impacts: Image
8 key driving forces* are set to estimate the impact on each of our businesses.
Factors affecting the company that havea large impact on the company's businessand are highly uncertain

Risk

Opportunity

Carbon tax
A

Operating revenues

Carbon price

Increased demand for
detergents andantiperspirants due totemperature increases

E

F

Increased demand fordisaster prevention goods

G

Increased demand forwater-saving products
due to water stress

CO2 emissions

Raw materials procurement

Sales

ExpensesC

B
Procurement costsof plastics

Procurement costs of
raw materials

Physical risk

D
Heavy rain

H

Expanded sales of
ethical products

FloodsTyphoons

Water stress

Profit3-244

Evaluate business impact: Transition and Physical Risks

Step

2

3

4

5

Due to the difficulty of obtaining data, there are items that are limited to qualitative evaluations
Costs are expected to increase due to rising raw material prices caused by policy changes and risingtemperatures, and natural disasters such as typhoons

Risk Item

Carbon emission targets andpolicies of each country
Carbon emission targets andTransition policies of each country

Impact on business

Carbon tax

2

4

A

The effect of carbon tax is significant at 2 , andoperating costs increase
In case of 4 , no carbon tax is included

X.X billion yen

JPY 0 billion

B

Cost increase at 2 due to introduction of recycledplastic regulations
It is assumed that the regulation for recycled plastics will
not be implemented at 4

X.X billion yen

JPY 0 billion

X.X billion yen

X.X billion yen

X.X billion yen

X.X billion
yen

Qualitative

Qualitative

X.X billion yen

X.X billion yen

Qualitative

Qualitative

Qualitative

Qualitative

Plastics

risk

C
Soaring feedstock costs

Palm oilAt 2 , stricter RSPO regulations tighten the supplydemand balance for certified oil and raise palm oil
procurement costs (transition risks)
At 4 , harvest volume increases with temperature
increase, supply-demand tightness does not progress,
and prices remain at the current level (physical risk)

Increase in the averagetemperature

Procurement price ofplant-derived raw
materials

Increase in procurement cost due to decrease incultivated area due to change in vegetation area ofvegetable raw materials

Increase in the averagetemperature

Procurement price of
natural raw materials

D
PhysicalIncreasing severity of extreme Damage to facilities,
risk
weather conditions
impact on infrastructure
Increasing severity of extreme Shutdown and damage toweather conditions
the supply chain
Water stress

3-245

Drought damage

Business impact
on annual earnings

Decrease in cultivated area of natural crops and increasein procurement costs
Besides, the harvest volume of plant-based raw materials
in the sub-tropical region is expected to increase(qualitative assessment)
Increasing frequency of typhoons, storm surges, etc., is
expected to cause damage to plant facilities andinfrastructure and increase costs
Sales are expected to decline due to plant shutdowns orsuspension of product transportation (supply chain
breakdown) (qualitative assessment)
Water shortages are anticipated, leading to an increasein operating costs at production sites and a decline insales due to supply chain breakdowns(qualitative assessment)

Quantitative assessments are difficult, but qualitative assessments are conducted on important matters.

Step

2

3

4

5

Evaluate business impact: Opportunity
The 2 scenario has a greater impact on business profits than the 4 scenario, as the business impact is expected
to see an increase in sales of detergents and other products along with an increase in temperature, as well as anincrease in demand for disaster-prevention goods and water-saving products.

Risk Item

O
p
p
o
r
t
u
n
i
t
y

Business impact
on annual earnings

Impact on business

2

4

X.X billion yen

X.X billionyen

X.X billion yen

X.X billion
yen

Qualitative

Qualitative

Qualitative

Qualitative

Qualitative

QualitativeG

As the frequency of water shortages increases, consumer
demand for water-saving products increases, and sales ofwater-saving products are expected to increase (qualitative
assessment).

H

Increased consumer interest in ethical products (qualitative
assessment)

Qualitative

Qualitative

Increase in the
Increase in sales of detergents due to higher temperature
average
Sales of detergents
temperature
Increase in theSales of perspiration
Increase in sales of antiperspirants due to higher
average
E temperature
control products
temperature
Increase in the
Expansion of infectious diseases increases opportunities
forhandwashing and profits of hand soap are expected toaverage
Increase in infections
increase (qualitative assessment)
temperature
Increasing
severity of
Increase in demand for stockpiles (disaster prevention
Sales of disastergoods) at evacuation centers
extremeF (qualitative
prevention goods
assessment)
weather
conditions
Water stress(drought)

Water-saving products

Changes incustomer
behaviours

Ethical products

X.X billion
X.X
yen
billion yen

Total (transition risk, physical risk, opportunity)
3-246

Quantitative assessments are difficult, but qualitative assessments are conducted on important matters.

Step

2

3

4

5

Identify potential responses:
Proposed Future Countermeasures for Risks/Opportunities
Promoted along with LION Eco Challenge 2050 measures and sustainable raw material purchasing measures

3-247

Measures to Incorporate
Opportunities (Examples)

Item

Lion s Current Initiatives

Carbon priceCO2 emissions generated by each of departments
30% reduction by 2030 (vs. 2017)
Set the total amount and the target of zero
emissions by 2050.

Recycled plastics

Set a target to double the amount ofrecycled plastics and biomass plastics
used by 2030
Cooperation with TerraCycle to develop
toothbrush recycling program

Set further targets for reduction ofvirgin plastics from petrochemical
Conversion to a sustainable resource
circulation program

Steep risein the price ofraw materials(palm oil)Replace all palm oil derivatives from nocertified to RSPO certified products by 2020.
Formulation of sustainable raw material
procurement policy for 2030

Implement measures based on thecompany's own Sustainable Raw
Material Procurement Guidelines

N/A

Steep rise in
the price ofraw materials(other than palm oil)

N/A

Identification and monitoring of risks
associated with the procurement ofplant raw materials due to climatechangeN/A

Changes incustomer behavior

Establishment of in-house Lion Eco
Standards and labeling of EcoProducts

N/A

Expansion of Eco/Ethical Products
Promotion and educational
activities concerning eco/ethicalconsumption

Increasing severityin extreme
weather conditions

Carry out awareness-raising activities forhygiene and health care in the event of adisasterEstablishment of BCPs at business sites

Understand the impact on supply chain(raw material suppliers, transportationand delivery) and strengthencountermeasures

Expand sales of products fordisaster prevention

Risk Countermeasures (Example)

Introduction of renewable energy

N/A

Promoting cooperation with therecycling industry

Appendix.
Appendix1. Parameter list
Appendix2. Physical risk assessment tools
Appendix3. Examples of scenario analysis

Appendix.
Provide useful materials for scenario analysis based on
supporting case studies

Appendix.
Appendix1. Parameter list
Appendix2. Physical risk assessment tools
Appendix3. Examples of scenario analysis

Appendix.
Provide useful materials for scenario analysis based on supporting case studies

4-1[Summary of parameter list]

Partial excerpts on transition risk and physical risk parameters
Literature and Tools (List)

Literature and Tools (excerpt)

Parameters
4-12~4-26

IEA Energy Technology Perspectives (ETP) 2020

4-27~4-35

PRI The Inevitable Policy Response (IPR)

4-36~4-41

SSP (Shared Socioeconomic Pathways) Public Database Ver2.0

4-42~4-52+
AQUEDUCT Water Tool(WRI)
4-56

Physical risk

Physical risk assessment tools
referred in TCFD report
4-54

Physical risk tools used in the
project (excerpt)
4-55

Climate Change Knowledge
Portal (World Bank)
4-57

Climate Impact Viewer(AP-PLAT)
4-58

Data on parameters as of February 2021
4-2

Parameters used in support cases

Transition risk

IEA World Energy Outlook (WEO) 2020

(FY2019
FY2020)

4-3~4-10

Parameters referenced in support cases 1/8

Transition risk 1/5
Item

SourceReference: Companies referenced
parameters

IEA WEO 2018, IEA WEO 2019, IEA WEO
2020
PRI IPR FPS
Information of countries

Kagome, Kajima Corporation., Calbee,
Seven & i HD., Chiyoda Corporation,
FUJIFILM HD, Furukawa Electric,
Meiji Holdings HD, Lion Corporation, LIXIL,ASKUL Corporation, ORIX Asset Management
Corporation, Kyushu Railway Company, ShinEtsu Chemical, Mitsui Mining & Smelting,
YASKAWA Electric Corporation

Electricity price

IEA WEO 2018

Kyocera, Seven & i HD., LIXIL,ASKUL Corporation, ORIX Asset Management
Corporation, Kyushu Railway Company

Target values foremissionsKajima Corporation., Kyocera, Seven & i HD.,
Ministry of the Environment's "Draft Japanese
Chiyoda Corporation, FUJIFILM HD, Furukawa
Commitments," "Toward Significant Reductions
Electric, LIXIL,
in Greenhouse Gases by 2050," IEA ETP
Kyushu Railway Company, Shin-Etsu
Target set by countries
Chemical, YASKAWA Electric Corporation

Parameter

Carbon tax
Carbon priceTransition risk

Carbon emissions
targets/policies

Annual target of forest
area decrease

Changes in the energy
mix

4-3

Indonesia

ASKUL Corporation

Power Generation Mix(Japan)IEA WEO2018,2019,2020
PRI IPR FPSJapanese Government

Kajima Corporation., FUJIFILM HD,
Furukawa Electric, Chiyoda Corporation, LIXIL,
Kyushu Railway Company, Mitsui Mining &Smelting, YASKAWA Electric Corporation

Primary energy demand

IEA WEO2019PRI IPR FPS

Chiyoda Corporation

Final energy demand

IEA WEO2019

Chiyoda Corporation

LNG: pipeline ratio

IEA WEO2019

Chiyoda Corporation

Unit price of renewableenergy generation

IEA WEO2017

Kyocera, Furukawa Electric

The parameters surveyed in the course of support program by the Ministry of the Environment are shown
regardless of whether or not they are actually used by each company.

Parameters referenced in support cases 2/8

Transition risk 2/5
Item
Changes in energy costs
Plastic Regulation

Changes in important
products

Parameter
Energy priceOil, electricity
Recycled plastic usage
rate
Newspaper production
Recycled aluminum
utilization rate
Aluminum production
Aluminum price
Forecast demand forcopper

SourceIEA WEO 2020

Mitsui Mining & Smelting

EU Government
European Strategy for Plastics

ASKUL Corporation,
Shin-Etsu Chemical
FUJIFILM HD

IEA WEO2018
IEA WEO2018
IEA ETP2017

FUJIFILM HD, LIXILWorld Bank " World Bank Commodities Forecast"

LIXIL

Sebastiaan Deetman
metals in electricity generation technologies, cars and

Mitsui Mining & Smelting.

Transition Risk

Forecast demand for zinc

Mitsui Mining & Smelting

Forecast demand for lead

Mitsui Mining & Smelting

Forecast demand for
Cobalt / nickel / platinum
ZEB target
ZEH introduction target

Mitsui Mining & Smelting
METI's Basic Energy ProgramKajima Corporation

Ministry of Economy, Trade and Industry, "Policy Trends for
Promoting ZEV and Related Budget Draft for FY2018"

LIXIL

IEA ETP2017

Dissemination ofrenewable energy andenergy-saving
technologies

ZEV ratio

Increase in the amount ofelectricity used for airconditioning

Shared Socioeconomic Pathway 2: A middle-of-the-road

IEA The Future of Cooling

2018

Seven & i HD., Chiyoda Corporation,
Development Bank of Japan,
Furukawa Electric,
ASKUL Corporation,
Kyushu Railway Company,
Shin-Etsu Chemical
Seven & i HD.

Chiyoda Corporation, Furukawa
Electric
The parameters surveyed in the course of support program by the Ministry of the Environment are shown regardless of whether or not they are actually usedby each company.
World's storage capacity

4-4

Reference: Companies referenced
parameters

Parameters referenced in support cases 3/8

Transition risk 3/5
Item

Transition risk

Development of
next-generation
technologies

Parameter

SourceReference: Companies
referenced parameters

CO2 recovery by CCSs

IEA WEO 2018

FUJIFILM HD

Hydrogen penetration rate

IEA WEO 2019
PRI IPR FPS

Chiyoda Corporation

CCU penetration rate

IEA WEO 2019
ICEF Roadmap

Chiyoda Corporation

Biomass production (primary energy)

SSP Public Database Version 2.0

Development Bank of Japan

Share of biomass in primary energy

SSP Public Database Version 2.0

Development Bank of Japan

Hydrogen-production (primary energy)

SSP Public Database Version 2.0

Development Bank of Japan

Share of hydrogen in primary energy

SSP Public Database Version 2.0

Development Bank of Japan

Production of renewable energy

SSP Public Database Version 2.0

Development Bank of Japan

Non biomass renewables's share inprimary energy

SSP Public Database Version 2.0

Development Bank of Japan

CCSs' share of primary energy

SSP Public Database Version 2.0

Development Bank of Japan

Percentage of each energy (biomass,coal, oil, gas, fossil) in CCSs

SSP Public Database Version 2.0

Development Bank of Japan

Demand response capacity

IEA ETP 2017

KyoceraSpread of environmental friendly trains(fuel cell) test vehicle using hydrogen as energy source and Kyushu Railway Company
2019

The parameters surveyed in the course of support program by the Ministry of the Environment are shown regardless of whether or not they are actually used

4-5 by each company.

Parameters referenced in support cases 4/8

Transition risk 4/5
Item

Parameter
Oil price
Iron price
Energy intensity
Smart city market size and M2M traffic

Transition risk

Changes inimportantproducts/ prices

Industrial robot market size in majorcountries
Sales of sustainable certified productSourceIEA WEO 2020
2ii "The Transition Risk-o-Meter Reference Scenarios
for Financial Analysis"
Japanese Government
A Highest
Statista Smart City Market revenue worldwide 2019Japanese Government and others

Reference: Companies
referenced parameters
ASKUL Corporation,
Kyushu Railway Company,
Shin-Etsu Chemical
Kyushu Railway Company
Shin-Etsu Chemical
Shin-Etsu Chemical

Shin-Etsu Chemical
ASKUL Corporation

Improvement rate of energy consumption
intensity Industrial sector

IEA WEO2019

YASKAWA Electric
Corporation

Market size of industrial robots

International Federation of Robotics, World Robotics
2019 Industrial Robots, IEA, WEO2019

YASKAWA Electric
Corporation

Fuji Keizai

YASKAWA Electric
Corporation

Research Station LCC, Global market forecast for
inverters, IEA, WEO2019

YASKAWA Electric
Corporation

Market size of AC servos for industrial
robotsMarket size of industrial inverters
Neodymium dysprosium demand
forecast

Sebastiaan Deetman
Scenarios for demand growthof metals in electricity generation technologies, cars

YASKAWA Electric
Corporation

The parameters surveyed in the course of support program by the Ministry of the Environment are shown regardless of whether or not they are actually usedby each company.
4-6

Parameters referenced in support cases 5/8

Transition risk 5/5
ItemParameter

Changes incustomer
reputation

Market size of Smart city

Tokyu

Kyushu Railway Company

2ii "The Transition Risk-o-Meter Reference Scenarios
for Financial Analysis"
IEA ETP2017

Changes in the volume of air passenger

Energy intensity of buildings

Transition risk

Compliance with
GHG emission
regulations

Reference: Companies
referenced parameters

Sourcewarming countermeasure plans based on the Paris

Zero emission target of Tokyo

Tokyo

Emission factor of grid power

IEA WEO2020

ORIX Asset Management
Corporation
ORIX Asset Management
Corporation
ORIX Asset Management
Corporation

IEA ETP2017
Agency for Natural Resources and Energy General
Energy Policy 2018.7
METI
Xymax

Mandatory introduction of ZEB / ZEH
Government goal

Kyushu Railway Company

ORIX Asset Management
Corporation

Smart Wellness Office Research Committee
the sustainability of environmental real estate and its
Changes incustomer
behavior

Increase / decrease in rent due toenvironmental performance

Japan Real Estate Institute Investors' perceptions of

ORIX Asset Management
Corporation

DBJ FY2019
Sustainability and ESG Investment in Real
Estate- GRESB evaluation result announcement andreal estate ESG Investment outlook-

The parameters surveyed in the course of support program by the Ministry of the Environment are shown regardless of whether or not they are actually usedby each company.
4-7

Parameters referenced in support cases 6/8

Physical risk 1/3
Item

SourceAverage temperature in Japan

Japan s weather at the end of the 21st Century (2015) by the
Ministry of the Environment and the Japan Meteorological Agency

Changes in tomato, carrots andorange yield

Population at risk for mosquitoborne infections in East Asia

Number of outbreaks ofwaterborne infections(diagnostics) (Asia)

Physical risk

Increases in the averagetemperature

Global Agro-

Increase of hot summer days

Relationship between temperaturerise and electricity demand

Kajima Corporation.,
Lion Corporation
KagomeMinistry of the Environment, Global Warming and Infectious
DiseasesNational Institute for Environmental Research on the Impact ofMeiji HD
Global Warming on Infections
AedesMinistry of the Environment, Global Warming and Infectious
Diseases

Loss of labor productivity due toheat stress in the industrial sector

Increase of temperature

Meiji HD, Lion Corporation

2019

Mitsui Mining & Smelting
ASKUL Corporation,
Mitsui Mining & Smelting

World Bank "Climate Change Knowledge Portal" ASKULWorld Bank "Climate Change Knowledge Portal"

ASKUL Corporation,
Kyushu Railway Company

IEEJ

Kyushu Railway Company

Track buckling rate

Kyushu Railway Company

Air conditioning cost

ASKUL Corporation

Forest fire outbreak situation
Average temperature in Japan

4-8

Reference: Companies
referenced parameters

Parameter

AP-PLATMOE JMA Japan's weather at the end of the 21st century

ASKUL Corporation
2015

Kajima Corporation,
Lion Corporation

The parameters surveyed in the course of support program by the Ministry of the Environment are shown regardless of whether or not they are actually usedby each company.

Parameters referenced in support cases 7/8

Physical risk 2/3
ItemParameter

Days of heavy rain (Japan)
Changes in precipitation /weather patterns

Amount of rainfall

Japan's Weather at the End of the 21st Century (2015) by the Ministry of the Environment and
the Japan Meteorological Agency
Ministry of the Environment, Ministry of Education, Culture, Sports, Science and Technology,
Ministry of Agriculture, Forestry and Fisheries, Ministry of Land, Infrastructure, Transport andTourism, Meteorological Agency, "Observation and Prediction of Climate Change andIntegrated Impact Assessment Report 2018-Climate Change and Its Impact in Japan"

Japan's Climate at the End of the 21st Century, Ministry of the Environment and the Japan
Meteorological Agency, Observations and Forecasts of Climate Change and Integrated
Report on Impact Assessments 2018-Climate Change and Its Impact in Japan.
Technical Review Committee on Flood Control Plans Based on Climate Change
Recommendations on Water Control Plans Based on Climate Change

Physical risk

Changes in potato yield
Effects of raw material
due to the impact ofgrowth due to changes inclimate change
precipitation patterns andChanges in oat yield due torises in average
the impact of climate
temperaturechangeSea level rise

Reference:
Companies
referenced
parameters

SourceKagome,Kajima Corporation,
Seven & i HD.,
FUJIFILM HD,
Lion Corporation

Kagome., LIXIL

CalbeeCalbee.

-Magnitude of sea level rise

Ministry of the Environment, Ministry of Education, Culture, Sports, Science and Technology,
Ministry of Agriculture, Forestry and Fisheries, Ministry of Land, Infrastructure, Transport andTourism, Meteorological Agency, Observation and Prediction of Climate Change andIntegrated Impact Assessment Report 2018-Climate Change and Its Impact in Japan
Japan Meteorological Agency
Past and Future Sea Level Changes in the World

Furukawa Electric,
Meiji HD

Rate of decrease in laborproductivity due to heatstressILO

Kajima Corporation,
Lion Corporation

Ministry of the Environment press release (2014)
Academic paper "Anthropogenic-contribution-to-global-occurrence-of-heavy-precipitation-andhigh-temperature-extremes" (2015)
Ministry of the Environment, Ministry of Education, Culture, Sports, Science and Technology,
Ministry of Agriculture, Forestry and Fisheries, Ministry of Land, Infrastructure, Transport andTourism, Meteorological Agency, "Observation and Forecasting of Climate Change andIntegrated Impact Assessment Report 2018-Climate Change and its Impact in Japan."Calbee, Seven & i HD.

Deterioration of labor andconstruction conditions
Extreme heat (Japan)

The parameters surveyed in the course of support program by the Ministry of the Environment are shown regardless of whether or not they are actually usedby each company.
4-9

Parameters referenced in support cases 8/8

Physical risk 3/3
ItemParameter

Reference: Companies
referenced parameters

SourceKajima Corporation,
ASKUL Corporation, ORIX AssetManagement Corporation,
Kyushu Railway Company,
Mitsui Mining & Smelting

Flood damage in urban areas

Physical risk

Increasing extreme
weather conditions(typhoons, heavy
rains, sediment,
storm surges, etc.)

Flow rate

Ministry of Land, Infrastructure, Transport and Tourism, Proposals for
Flood Control Plans Based on Climate Change

LIXIL

Frequency of floods

Ministry of Land, Infrastructure, Transport and Tourism, Proposals for
Flood Control Plans Based on Climate Change

Kyocera, Lion Corporation, LIXIL,ASKUL Corporation, ORIX AssetManagement Corporation,
Kyushu Railway Company,
Mitsui Mining & Smelting

Occurrence of typhoons andcyclones

MOE JMA and Others Climate Change Observation / Forecast andImpact Assessment Integrated Report 2018 -Japan's Climate Change
and Its Impact-

ORIX Asset Management
Corporation,
Mitsui Mining & Smelting

IPCC Mitigation Pathways Compatible with 1.5
Sustainable Development Mitsui
MOE
Natural Science Basisp.41 ORIX

ORIX Asset Management
Corporation,
Mitsui Mining & Smelting

Average sea level rise

C in the Context of-Working Group 1

Water risk by base (flood,
drought)
Sediment disaster occurrence
probability

4-10

Shin-Etsu Chemical,
YASKAWA Electric Corporation
A-PLAT Climate Change Adaptation Information Platform

Kyushu Railway Company

Drought

Water stress

Kagome., Furukawa Electric,
Lion Corporation

Changes in themarine environment

Changes in fish catches ingeneralCalbee, Furukawa Electric

The parameters surveyed in the course of support program by the Ministry of the Environment are shown regardless of whether or not they are actually usedby each company.

IEA World Energy Outlook 2020

IEA WEO, ETP

Report on transition scenarios published by the IEAIEA Energy Technology Perspectives 2020

What is the International Energy Agency (IEA)?
Organization established in 1974 after the first oil crisis to avert oil supply crises (to establish a stable energy
supply and demand structure) of the member countries.
The objective is to promote energy security through collective response by members to the physical disruptionsof oil supply.
Energy-related surveys, statistical compilation, and publication of various reports and books.
There are 30 members, including Japan.

World Energy Outlook WEO

A report on energy supply and demand publishedevery autumn.
World Energy Outlook includes medium and longterm energy market forecasts.

Energy Technology Perspectives ETP)

Describes the process of energy technology
innovation.
Focusing on opportunities and challenges for
expanding and accelerating clean energy
technologies.

Source: IEA website
4-11

The Outline of IEA WEO2020

The 2
scenario and 2.7
scenario are the main scenarios, and the COVID stagnation
scenario and 1.5
scenario are described.
The Scenario in WEO2020

Stated Policies
Scenario(STEPS)
Delayed New
Recovery
Scenario(DRS)

Sustainable
Development
Scenario (SDS)The Scenario of Current Policy
Economic recovery in 2021 from theinfluences by COVID
2.7DS

The Scenario of World Economy
Stagnation
Due to COVID

The Scenario of Achieving the target of
Paris Agreement
2DS

Net Zero New
The Scenario of Net Zero Emissions
Emissions byin 20502050 case
1.5DS(NZE2050)

Source IEA Website
4-12

The transition of CO2 emissions in Energy Sector

The Outline of IEA WEO 2020 Delayed Recovery Scenario (DRS)DRE expects a 10% reduction in GDP due to COVID, a reduction in fuel consumption basedon it, and changes associated with it.

10%

The Scenario of World Economy Stagnation due to COVID
GDP will recover to 2019 levels in 2023. Energy demand will return to 2019 levels in
2025. World economy shrinks 10% of STEPS in 2040
Source IEA World Energy Outlook 2020
4-13

Parameters in IEA WEO 2020 1/13
Carbon price, CO2 emissions 1/3

IEA World Energy Outlook 2020

Timeframe
Category

Datasets

Carbon price CO2 prices in selected regions by scenario ($2019 per tonne)

Energy-sector and industrial process CO emissions by recovery trajectory
CO emissions from energy infrastructure in use and power plants underconstruction operated in line with past practiceLarge methane emissions from oil and gas operations detected by satellite in2019 and 2020
CO2 emissions reductions in the Sustainable Development Scenario and Net
Zero Emissions by 2050 case, 2019-2030
Key estimated energy demand, CO emissions and investment indicators, 2020
relative to 2019
CO emissions from existing energy infrastructure and power plants underconstruction operated in line with past practice
Change in CO emissions by sector, 2019-2030, and average annual
CO2emissions investment 2021-2025 in the Sustainable Development scenarios in WEO-2019
and WEO-2020
Historical and projected CO emissions from energy infrastructure in use andpower plants under construction operated in line with past practiceCO2 emissions reductions in the Sustainable Development Scenario relative to
the Stated Policies Scenario
CO emissions from coal-fired plants and average annual change by scenario
CO emissions from selected transport modes in the Sustainable Development
Scenario and the Stated Policies Scenario
Direct and indirect CO emissions in buildings in the Stated Policies and theSustainable Development scenarios
Direct CO emissions reductions in selected sectors in the Sustainable
Development Scenario
4-14 Source IEA World Energy Outlook 2020

Past

Country/region
GlobalSeveraJapanl areasIEA World Energy Outlook 2020

Parameters in IEA WEO 2020 2/13

CO2 emissions 2/3
Timeframe
Category

Datasets

Past

Country/region
GlobalSeveral
Japan
areas

Energy and industrial process CO emissions and reduction levers inthe scenarios
CO emissions reductions by sector in the NZE2050, 2019-2030
Global primary energy demand and CO2 emissions in 2030
Behaviour change measures and impact on CO emissions in the
NZE2050 to 2030
Impact of behaviour changes on CO emissions in the NZE2050
Global frequency distribution of car trips by length and corresponding
cumulative CO emissions
CO2
emissions

Impact on CO emissions from reducing space heating temperature
settings by 3 C in the NZE2050
Change in annual global energy consumption and CO emissions fromone day of home working per week
CO emissions from passenger aviation by flight duration and trip
purpose in 2018 and in the NZE2050 in 2030
Announced net-zero CO or GHG emissions by 2050 reduction targets
Remaining CO emissions in selected sectors in the European Union in
the Sustainable Development Scenario in 2050
Global energy demand and CO emissions trends in the Stated Policies
Scenario to 2030
Cumulative energy efficiency savings in selected regions in STEPS

4-15

Source IEA World Energy Outlook 2020

IEA World Energy Outlook 2020

Parameters in IEA WEO 2020 3/13

CO2 emissions 3/3, Energy demand 1/5
Timeframe
Category

Datasets

CO emissions and carbon intensity in the power sector in selected
regions in the Stated Policies Scenario
Reductions in GHG emissions attributable to changes in natural gas
CO2
supply and use in the Sustainable Development Scenario, 2019-2040
emissions Change in CO emissions by effect in the Delayed Recovery Scenario
relative to the Stated Policies Scenario
Energy sector and industrial process CO emissions in the scenarios,
2010-2030

Total primary energy demand by fuel and scenario
Gross domestic product and primary energy demand by scenario

Oil demand by scenario and changes by key sector

EnergydemandChanges in natural gas demand by driver in the Stated Policies andSustainable Development scenarios, 2019-2040
Share of global energy demand affected by full or partial
lockdowns, 2020
Liquids demand and supply in 2020 relative to 2015-2019

Year-on-year change in weekly electricity demand inselected countries, 2020
Change in electricity demand by region

Change in renewables and nuclear power generation and fossil fueldemand by region 2019-2020
Changes in fuel consumption for energy and feedstock use in industry in
the Sustainable Development Scenario, 2019-2030
4-16

Source IEA World Energy Outlook 2020

Past

Country/region
GlobalSeveral
Japan
areas

IEA World Energy Outlook 2020

Parameters in IEA WEO 2020 4/13

Energy demand 2/5
Timeframe
Category

Datasets

Past

Country/region
GlobalSeveral
Japan
areas

Primary energy demand in the scenarios

Total final energy consumption by sector in the NZE2050
Differences in fossil fuel demand in the scenarios in 2030
Efficiency improvements in heavy industry and share of lowcarbonhydrogen used in ammonia and methanol production
Retrofit of existing floor area (left) and share of heat pumps to meetspace heating energy needs (right)
Total final consumption in the Stated Policies Scenario, 2019-2030

EnergydemandChanges in primary energy demand by fuel and region in the Stated
Policies Scenario, 2019-2030
Total primary energy demand by key fuels in the Stated Policies
Scenario relative to the WEO-2019, 2030-2040
Key post-COVID uncertainties affecting oil demand
Key post-COVID uncertainties affecting natural gas demand

Key post-COVID uncertainties affecting coal demand
Key post-COVID uncertainties affecting modern end-use renewables
Global oil demand in the States Policies Scenario

Oil demand by sector in the Stated Policies Scenario, 2019-2030
Source IEA World Energy Outlook 2020
4-17

IEA World Energy Outlook 2020

Parameters in IEA WEO 2020 5/13

Energy demand 3/5
Timeframe
Category

Datasets
Impacts of deferred car sales on oil demand relative to pre-crisis projected
trends, 2020 and 2025
Oil demand for trucks and key drivers of change in the Stated Policies Scenario
Reduction in aviation oil demand due to behavioural changes
Drivers of changes in transport oil demand and impacts of behaviour changes in
the Stated Policies Scenario
Change in natural gas demand by sector in STEPS, 2019-2030
Drivers of change in natural gas demand in the power sector in STEPS in
advanced and emerging economies, 2020-2030
Change in natural gas demand in industry by key driver in STEPS, 2019-2030

EnergydemandCoal consumption by sector (2010-2030)
Annual change of coal demand by region (2020-2030)
Heat supply in residential and industry
Annual change in final demand and avoided demand through energy efficiency
by sector in the Stated Policies Scenario
Global electricity demand and share of electricity in total final consumption in theStated Policies Scenario
Annual change in global electricity demand by sector in theStated Policies Scenario
Changes in electricity demand in selected regions in the Stated Policies
Scenario

4-18

Source IEA World Energy Outlook 2020

Past

Country/region
GlobalSeveral
Japan
areas

IEA World Energy Outlook 2020

Parameters in IEA WEO 2020 6/13

Energy demand 4/5
Timeframe
Category

Datasets

Past

Country/region
GlobalSeveral
Japan
areas

Drivers of electricity demand in emerging market and developing economies in theStated Policies Scenario
Drivers of electricity demand in advanced economies in the Stated Policies
Scenario
Recent revenue trends for transmission system operators
in selected regions
Global oil demand by scenario and declines in supply from 2019
Changes in oil product demand by type and call on refineries in the Stated Policies
Scenario

EnergydemandRefinery runs and capacity at risk in selected regions in the Stated Policies
Scenario
Breakeven costs of non-associated gas resources developed for domestic
consumption in selected Middle East countries in the Stated Policies Scenario,
2020-2040
Global liquefaction capacity versus total LNG demand by scenario
Demand for hydrogen from electrolysis and fossil fuels with CCUS by scenario
Change in energy demand in the Delayed Recovery Scenario relative to the Stated
Policies Scenario
Energy demand by sector and region in the Delayed Recovery Scenario comparedwith the Stated Policies Scenario
Global oil demand by scenario and sector to 2030
Global electricity demand by scenario and sector to 2030
Global natural gas demand by scenario and sector to 2030

4-19

Source IEA World Energy Outlook 2020

IEA World Energy Outlook 2020

Parameters in IEA WEO 2020 7/13

Energy demand 5/5, Energy mix , Price of key commodities/products
Timeframe
Category

EnergydemandDatasets
Coal demand in the DRS and reduction in 2030 by sector relative to
the STEPS
Global total final consumption of renewables by scenario, 2030
Energy sector transformation in advanced economies (top) andemerging market and developing economies (bottom)
Total primary energy demand in the Stated Policies Scenario, 2019and 2030

Energy mix

Change in total primary energy in the States Policies andSustainable Development scenarios, 2019-2030
Growth of renewable energy by sector and by source in the Stated
Policies Scenario
Renewables, nuclear and coal shares of global electricity supply in
the Stated Policies Scenario, 2010-2030
CAAGR of key energy intensity and efficiency indicators by sector
and scenario, 2020-2030
Fossil fuel prices by scenario

Price of key Selected fossil fuel prices in 2019-2020
commodities/products Changes in payback period for key efficiency measures under low
fossil fuel prices
Difference in natural gas import costs in China and the European
Union under 100% spot or 100% oil-indexed prices
Source IEA World Energy Outlook 2020
4-20

Past

Country/region
GlobalSeveral
areas

Japan

IEA World Energy Outlook 2020

Parameters in IEA WEO 2020 8/13

Predictions on production and sales 1/4
Timeframe
Category

Datasets

Past

Country/region
GlobalSeveral
Japan
areas

Average annual solar PV and coal annual capacity additions worldwide
and electricity generation by scenario
Estimated present value of future oil and natural gas production to2040 by scenario
Real GDP average growth assumptions by region and scenario
Evolution of global GDP forecasts for 2020 and historical context
Changes in cost of capital macro indicators for selected countries,
2019-2020, and their indicative impact on the levelised cost of new
onshore wind
Changes in the global average emissions intensity of oil and gas
Predictions operations between 2019 and 2030 in the Sustainable Development
Scenarioon
production Average annual solar PV and wind capacity additions in theand sales Sustainable Development Scenario to 2030
Global installed solar PV capacity by scenario, 2010-2030, and annual
solar PV capacity additions in the NZE2050
Use of fossil fuels for industrial process heat in 2019 and in the three
scenarios in 2030
Annual electric and fuel cell vehicle sales in the three scenarios
Global growth in selected energy-related activities in the Sustainable
Development Scenario, 2019-2030
Electricity generation in the United Kingdom historically and in theElectricity generation by source in the European Union in the
Sustainable Development Scenario, 2019-2050
4-21

Source IEA World Energy Outlook 2020

IEA World Energy Outlook 2020

Parameters in IEA WEO 2020 9/13

Predictions on production and sales 2/4
Timeframe
Category

Datasets

Business models and indicative WACCs of solar PV projects,
2019Electricity outlook in the Stated Policies Scenario, 2019-2030
Global average annual power capacity additions in theStated Policies Scenario
Solar PV and wind power capacity additions in the Stated Policies
Scenario
Power capacity in India by source in the Stated Policies Scenario
Average annual coal-fired power capacity additions andretirements by region in the Stated Policies Scenario, 2011-2030
Nuclear power installed capacity, capacity additions andPredictions
retirements in the Stated Policies Scenario, 2019-2030
on production
and sales Indicative WACC for utility-scale solar PV projects with revenue
supportUtility-scale solar PV LCOE under revenue support mechanisms,
2020 FID
Power system flexibility needs in selected regions in the Stated
Policies Scenario, 2020-2030
Battery storage capacity and share of variable renewables inselected regions in the Stated Policies Scenario

Fuel supply by scenario
Estimated present value of future upstream net income forpublicly listed companies by scenario to 2040
Differences in US tight crude and condensate production at
various levels of average annual investment to 2030
4-22

Source IEA World Energy Outlook 2020

Past

Country/region
GlobalSeveral
Japan
areas

IEA World Energy Outlook 2020

Parameters in IEA WEO 2020 10/13

Predictions on production and sales 3/4
Timeframe
Category

Datasets

Past

Country/region
GlobalSeveral
Japan
areas

Indicators of financial resilience and changes in production for selected
producer economies in the Stated Policies Scenario
Oil production by type and region in the Stated Polices Scenario
Top-12 oil-producing countries in the Stated Policies Scenario, 2019 and2040
Changes in natural gas production in the Stated Policies Scenario, 20192030-largest producers in theStated Policies Scenario, 2019-2040

Share price and cost of long-term debt for selected coal companies
Predictions Coal production by key country
on production
and sales Supply of low-carbon fuels by scenario

Biomethane production by region in the Stated Policies Scenario andsensitivity on cost-competitive volumes available in 2040
Cost gap to be bridged between the costs of delivered lowcarbon andmerchant hydrogen in Europe, 2020 and 2030
Real gross domestic product by scenario, 2019-25

Reduction in oil production by selected regions in the Delayed Recovery
Scenario relative to the Stated Policies Scenario, 2030
Electricity generation mix in the Delayed Recovery Scenario relative to theStated Policies Scenario, 2019-2030
Change in natural gas export revenue in selected regions in the Delayed
Recovery Scenario relative to the Stated Policies Scenario, 2020-2040
4-23

Source IEA World Energy Outlook 2020

IEA World Energy Outlook 2020

Parameters in IEA WEO 2020 11/13

Predictions on production and sales 4/4, Technology, Policy/Regulation 1/2
Timeframe

Category

Datasets

Net income from oil and gas in selected producer economies in
Predictions
successive World Energy Outlook scenarios for 2020-2030
on production
and sales Acquisitions and refinancing of energy supply projects
Evolution of selected technologies in the Sustainable Development
Scenario and Net Zero Emissions by 2050 case
Capital costs for selected energy technologies in 2040 relative to 2019
Coal-fired electricity generation by technology in the NZE2050
Share of most efficient available technologies in cumulative residential
equipment sales, 2020-2030
Evolution of selected end-use technologies in the European Union in
the Sustainable Development Scenario, 2050
Estimated technically avoidable methane emissions for selectedcompanies by type of asset, 2019
Variation of low-carbon hydrogen production capacity with project
capital budget and technology choice, 2020
Average annual energy investment by economy and instrument by
scenario
Average annual energy investment in the Sustainable Development
Scenario
Policy/Regula Clean energy-related investment in the Sustainable Development
tion
Scenario, 2025-2030
Technology

Key financing issues and strategies to bridge investment gaps
Selected new energy-related policies adopted in 2019 and 2020 bycountry
Source IEA World Energy Outlook 2020
4-24

Past

Country/region
GlobalSeveral
areas

Japan

IEA World Energy Outlook 2020

Parameters in IEA WEO 2020 12/13

Policy/Regulation 2/2, Air pollution, Other 1/2
Timeframe

Category

Datasets

Past

Country/region
GlobalSeveral
Japan
areas

Global power sector investment in the Stated Policies Scenario
Redoubling efforts to shift to a sustainable electricity pathway
Length of new and replaced electricity network lines by selected region in
the Stated Policies Scenario, 2019-2030
Annual investment in electricity networks by sector in
Policy/Regula
the Stated Policies Scenario
tion
Historical and planned investments in large-scale CCUS projects, 19802030
Impact of a longer pandemic on global grid investments and revenues
Global energy supply investment by sector in the Delayed Recovery
Scenario and average annual change relative to the Stated Policies
Scenario
Air pollution emissions by pollutant and related premature deaths, 2019and 2030
Premature deaths from air pollution by region and air pollution emissions
Air pollution
by pollutant and scenario, 2019 and 2030
PM2.5 levels in selected cities in 2015 and in the SDS in 2030, andchange in PM2.5 during lockdowns
Annual changes in population without access to electricity in sub-SaharanAfrica by scenario
New reported COVID-19 cases by region
Other

4-25

People with access to electricity in Asia and Africa at risk of losing theability to pay for basic electricity services in 2020
Population without electricity access and sovereign risk in key accessdeficit countries

Source IEA World Energy Outlook 2020

IEA World Energy Outlook 2020

Parameters in IEA WEO 2020 13/13

Other 2/2
Timeframe

Category

Datasets

Population without electricity access and sovereign risk in key accessdeficit countries
Population without access to energy in the Stated Policies and Delayed
Recovery scenarios by region, 2019-2030
Sustainable debt issuance and types of issuers
Key post-COVID uncertainties affecting efficiency
Other

Population without access to clean cooking and traditional use of
biomass per capita by region in the STEPS, 2019-2030
Energy intensity improvements and trajectories
Population without access to electricity by main countries and regionsin the Stated Policies Scenario, 2019-2030
Selected indicators in the Delayed Recovery Scenario
Population without access to electricity and clean cooking by scenario(million)

Source IEA World Energy Outlook 2020
4-26

Past

Country/region
GlobalSeveral
areas

Japan

IEA Energy Technology Perspectives 2020

Parameters in IEA ETP 2020 1/9

CO2 emissions 1/4
Categ
ory

Timeframe

Datasets

Country/region
GlobalPast

Several
areas

Japan

General Global primary energy demand and energy-related CO2 emissions, 1971-2020
General Global energy-related CO2 emissions by region
GeneralGlobal energy sector CO2 emissions by fuel and technology in the Sustainable
Development Scenario, 2019-70

General Cumulative energy sector CO2 emissions by region and scenario, 2019-70

Global CO2 emissions in transport by mode in the Sustainable Development Scenario,
2000-70
Global industrial energy consumption and CO2 emissions in the Sustainable Development
GeneralScenario, 2019-70
Global energy consumption and CO2 emissions in long-distance transport by sub-sector in
Generalthe Sustainable Development and Stated Policies scenarios
Global energy sector CO2 emissions reductions by current technology maturity category inGeneralthe Sustainable Development Scenario relative to the Stated Policies Scenario, 2019-70
Global CO2 emissions reductions by current technology maturity category and sector in the
GeneralSustainable Development Scenario relative to the Stated Policies Scenario, 2040 and 2070
GeneralCO2emissions

General Global energy sector CO2 emissions by sector, 2019 and 2050
General Global captured CO2 emissions by source, 2050
GeneralShare of energy-related CO2 emissions covered by national and supra-national public netzero emissions targets today

Specific
Global energy-related CO2 emissions by fuel (left) and sector (right), 2000-19
sectorSpecific
Global CO2 emissions from existing energy infrastructure by sub-sector, 2019-70
sectorSpecific Global energy sector CO2 emissions by sector and sub-sector/fuel in the Sustainablesector Development Scenario, 2040 and 2070
Specific Growth in global CO capture by sector and fuel in the Sustainable Development Scenario,
sector 2019-70
Specific Global energy sector CO2 emissions by sector in the Sustainable Development Scenario,
sector 2019-70
Specific Global direct CO2 emissions in industry by sub-sector and region in the Sustainablesector Development Scenario, 2019-70

4-27 Source IEA Energy Technology Perspectives 2020

IEA Energy Technology Perspectives 2020

Parameters in IEA ETP 2020 2/9

CO2 emissions 2/4
Categ
ory

Timeframe
Datasets

Specific Global chemical sector direct CO2 emissions and energy consumption in the Sustainablesector Development Scenario, 2019-70
Specific CO2 emissions from the use phase of buildings by sub-sector and region in the Sustainablesector Development Scenario, 2019-70
Specific Global iron and steel sector direct CO2 emissions and energy consumption in the Sustainablesector Development Scenario, 2019-70
Specific Global cement sector direct CO2 emissions and energy consumption in the Sustainablesector Development Scenario, 2019-70
Specific Decomposition of embodied cement and steel sector CO2 emissions in buildings construction,
sector 2000-20
Specific CO2 emissions in the buildings and construction value chain in the Sustainable Development
sector Scenario, 2010-70
Specific World cement- and steel-related CO2 emissions in the buildings construction sector by scenario
sector and driver, 2019-70

CO2
emissions

Specific Share of vehicle sales covered by fuel economy and/or CO2 emissions standards by vehicle
sector type and country/region
Global CO2 emissions from trucks by abatement measure (left) and technology readiness level
Specific(right) in the Sustainable Development Scenario relative to the Stated Policies Scenario, 2019sector
70
Specific Global freight activity, energy consumption and CO2 emissions in international maritime
sector shipping by vessel type and fuel, 2019
Specific Global energy consumption and CO2 emissions in international shipping in the Sustainablesector Development Scenario, 2019-70
Specific Share of activity covered by corporate carbon-neutral targets among the largest corporate
sector players
Specific Global CO2 emissions locked in by existing energy-related assets by sector measured against
sector the CO2 emissions trajectory of the Sustainable Development Scenario, 2019-70
Specific
Unlocking CO2 at the next investment cycle in key industrial sectors
sectorAmount of
The technology portfolio for reducing direct industrial CO2 emissions, 2040 and 2070
reduction
Global CO2 emissions reductions in shipping by mitigation category (left) and technology
Amount ofreadiness level (right) in the Sustainable Development Scenario relative to the Stated Policies
reduction
Scenario, 2019-70

4-28 Source IEA Energy Technology Perspectives 2020

Past

Country/region
GlobalSeveral
areas

Japan

IEA Energy Technology Perspectives 2020

Parameters in IEA ETP 2020 3/9

CO2 emissions 3/4
Category

CO2emissions4-29

Timeframe

Datasets

Past

Amount of
reduction

Selected decarbonisation indicators by scenario in 2050

Amount of
reduction

Global CO2 emissions in aviation by abatement measure (left) and technology readinesslevel (right) in the Sustainable Development Scenario relative to the Stated Policies
ScenarioAmount of
reduction

Contribution to global energy sector annual CO2 emissions reductions in 2050 bycurrent technology maturity category

Amount of
reduction

Global energy sector annual CO2 emissions reductions by type of abatement measure
and total primary energy demand, 2050

Amount of
reduction

Global energy sector CO2 emissions reductions by measure in the Sustainable
Development Scenario relative to the Stated Policies Scenario, 2019-70

Amount of
reduction

Global CO2 emissions reductions in the cement sector by mitigation strategy and current
technology maturity category, 2019-70

Amount of
reduction

Global CO2 emissions reductions from electrification by sector in the Sustainable
Development Scenario relative to the Stated Policies Scenario,2030-70

Amount of
reduction

Global CO use for fuel and feedstock production in the Sustainable Development
Scenario, 2019-70

Amount of
reduction

Global CO2 emissions reductions from hydrogen by sector in the Sustainable
Development Scenario relative to the Stated Policies Scenario, 2030-70

Amount of
reduction

Global CO2 reductions from bioenergy use in the Sustainable Development Scenario
relative to the Stated Policies Scenario, 2030-70

Amount of
reduction

Global CO2 emissions in the power sector by scenario and decomposition of thedifference by technology type

Amount of
reduction

Global development of electrolyser capacity and CO2 capture from hydrogen by region
in the Sustainable Development Scenario, 2019-70

Amount of
reduction

Global cumulative CO2 emissions reductions in the buildings sector by mitigation lever
and technology readiness level in the Sustainable Development Scenario relative to theStated Policies Scenario, 2020-70

Amount of
reduction

Global CO2 emissions reductions in the chemical sector by mitigation strategy andcurrent technology maturity category, 2019-70

Amount of
reduction

Global CO2 emissions reductions in the iron and steel sector by mitigation strategy andcurrent technology maturity category, 2019-70

Powergeneration

Emissions from US coal-fired power plants, 1990-2018

Country/region
GlobalSeveral
areas

Japan

Source IEA Energy Technology Perspectives 2020

IEA Energy Technology Perspectives 2020

Parameters in IEA ETP 2020 4/9

CO2 emissions 4/4, Energy demand
Timeframe
Category
CO2emissions

Intensity
PrimaryenergyPrimaryenergyPrimaryenergyPrimaryenergyPrimaryenergyPrimaryenergyPrimaryenergyDatasets
CO2 emissions by income quartile (left) and air trips by GDP per capita and region, 2018(right)Global total primary energy demand, population and GDP, 1950-2019
Annual change in GDP, total primary energy demand and energy intensity in selected
countries/regions, 2000-19
Global primary energy demand by fuel, 1925-2019
Primary demand for low-carbon energy sources, 2000-19
Primary energy demand by fuel and scenario (Mtoe)
Global primary energy demand by fuel share and scenario, 2019 and 2070

Primary energy demand by region and scenario

Final energy Final energy consumption by sector, fuel and scenario
EnergydemandChange in global final energy demand by fuel and sector in the Sustainable Development
Scenario, 2019-70
Global final energy demand for hydrogen by sector and share of hydrogen in selected
Final energy
sectors in the Sustainable Development Scenario
Final energy demand by fuel shares for total industry and selected sub-sectors in the
Final energy
Sustainable Development Scenario, 2019-70
Global share of hydrogen and electricity in final energy demand by end-use sector (left) and
Final energy
selected adoption metrics of hydrogen technologies (right), 2019 and 2050
Renewable Global bioenergy demand by sector and share of bioenergy use in key sectors in theenergySustainable Development Scenario, 2019-70
Specific Global transport sector energy consumption by fuel in the Sustainable Development
sectorScenario, 2019-70
Specific Global heavy-duty trucking energy demand by fuel and average vehicle efficiency in the
sectorSustainable Development Scenario, 2019-70
Specific Global aviation fuel consumption in the Sustainable Development Scenario and total fuelsectoruse in the Stated Policies Scenario, 2019-70
Global hydrogen production by fuel and hydrogen demand by sector in the Sustainable
GeneralDevelopment Scenario, 2019-70
Final energy

Source IEA Energy Technology Perspectives 2020
4-30

Past

Country/region
Several
Japan
areas

Global

IEA Energy Technology Perspectives 2020

Parameters in IEA ETP 2020 5/9

Energy mix , Price of key commodities/products , Predictions on production and sales 1/2
Timeframe
Category

Datasets

Past

Country/region
Several
Japan
areas

GlobalGrowth in global electricity consumption by sector and scenario and electricity share in total
final consumption in the Sustainable Development Scenario
Contribution of residential cooling and electric vehicles to net electricity load in China in thePower supply
Sustainable Development Scenario, 2030
Coal-fired electricity generation from existing plants in the Stated Policies and Sustainable
Coal
Development scenarios, 2019-70
Global cumulative investment in selected energy infrastructure in the Sustainable
Investment
Development Scenario
The effect of battery and fuel cell prices on total cost of ownership of heavy-duty trucks in
Specific sector
long-haul operations
Capital cost reductions of selected clean energy technologies at early stages of adoption inSpecific sector
the Sustainable Development Scenario, 2019-30
Projected synthetic kerosene production costs from different sources and impact ofPower supply
electricity costs and full-load hours, 2050
Power supply

Energy mix

Price ofkey
commodities/produ
cts

Gas

US production of shale oil* and gas, 2000-19

Predictions on production and sales

GeneralProduction growth in key heavy industries, 2000-30

GeneralPeriod from first prototype to market introduction for selected technologies, including thequickest examples in recent developments

RenewableenergyRenewableenergyRenewableenergyRenewableenergyGlobal biofuels production by technology in the Sustainable Development Scenario, 2019-70

Global hydrogen production and demand in the Sustainable Development Scenario, 2070
Global hydrogen production by technology in the Sustainable Development Scenario, 201970
Production of hydrogen-based fuels in the Sustainable Development Scenario, 2019-70

Specific sector Light-duty vehicle market share by size segment, 2005-17
Specific sector Age profile of global production capacity for key industrial sub-sectors
Specific sector Age profile and geographic distribution of road transport vehicles
Reduction in global steel and cement demand through material efficiency gains by stage inSpecific sector the supply chain in the Sustainable Development Scenario relative to the Stated Policies
Scenario in 2070
Specific sector Global copper and lithium demand by sector and scenario

4-31

Source IEA Energy Technology Perspectives 2020

IEA Energy Technology Perspectives 2020

Parameters in IEA ETP 2020 6/9

Predictions on production and sales 2/2
Timeframe
Category

Datasets

Global primary chemical production by scenario and plastic
demand by market segment, 2019-70
Global primary chemicals production routes by energy feedstockSpecific sector
in the Sustainable Development Scenario, 2000-70
Levelised cost of ammonia and methanol production underSpecific sector
varying techno-economic assumptions
Specific sector Global steel production by region and end use, 2019-70
Global steel production by route and iron production bySpecific sector
technology in the Sustainable Development Scenario, 1990-2070
Levelised cost of steel production for selected production routes
Specific sector
when they reach commercialisation
Levelised cost of steel production for selected production
Specific sector
pathways at varying gas, electricity and CO2 prices
Specific sector Global cement production by region and end use, 2019-70
Global cement production by technology and material
Specific sector
composition in the Sustainable Development Scenario, 2000-70
Levelised cost of cement production under varying technoSpecific sector
economic assumptions
Projected year-to-year growth of residential construction activity
Specific sector
in 2020 relative to 2019
Specific sector Heavy-duty truck fleet and share of road fuel demand, 2019
Specific sector

Predictions on production and sales

Specific sector Growth of revenue passenger-kilometres by region, 2013-19
Share of flights and fuel use in overall commercial passenger
Specific sector
aviation, 2017
Specific sector Levelised production costs of sustainable aviation fuels in 2050
Heating equipment sales share and share of near-zero energy
Specific sector
buildings by region in the Sustainable Development Scenario
Global share of vehicle activity electrified by mode in the Faster
Specific sector Innovation Case relative to the Sustainable Development
Scenario, 2050
4-32 Source IEA Energy Technology Perspectives 2020

Past

Country/region
Several
Japan
areas

Global

IEA Energy Technology Perspectives 2020

Parameters in IEA ETP 2020 7/9

Technology 1/2
Timeframe
Category
GeneralGeneralGeneralGeneralGeneralGeneralDatasets

Technology

Global early-stage venture capital deals for energy technology start-ups

GeneralTechnology readiness level of technologies along the CO2 value chain

GeneralGrowth rates for revenue and R&D for selected sectors, 2007-12

GeneralGeneralRenewableenergyRenewableenergyRenewableenergyRenewableenergyRenewableenergyRenewableenergyCountry/region
Several
Japan
areas

GlobalGlobal power generation by fuel/technology in the Sustainable Development
Scenario, 2019-70
Electricity generation mix by region, fuel/technology and scenario, 2019 and
2070
Four stages of technology innovation, feedbacks and spillovers that improvesuccessive generations of designs
Public energy technology R&D and demonstration spending by IEA member
governments by technology, 1977-2019
Technology readiness level scale applied by the IEA
Global corporate R&D spending as a share of revenue in selected sectors,
2007-19

GeneralGeneralPast

Time to materiality for selected technologies in the Sustainable
Development Scenario
Energy technology attributes that can favour more rapid innovation cycles or
faster learning
Global CO2 emissions savings by current technology readiness category in
the Faster Innovation Case relative to the Sustainable Development
Scenario in 2050
Technology readiness level of technologies along the low-carbon hydrogenvalue chain
Competitiveness of bioenergy for power generation and biofuels, 2050
Technology readiness level of technologies along the bioenergy value chain
Role of hydrogen and liquid and gaseous biofuels in the Sustainable
Development Scenario
Hydrogen production costs by technology in the Sustainable Development
Scenario, 2019 and 2050
Issuance of patents for low-carbon energy technologies in selected
countries/regions

4-33 Source IEA Energy Technology Perspectives 2020

IEA Energy Technology Perspectives 2020

Parameters in IEA ETP 2020 8/9

Technology 2/2, Policy/Regulation
Timeframe
Category

Technology

Renewable Number of clean energy technology designs and components analysed inenergythe "ETP Clean Energy Technology Guide"
Renewable Technology readiness level of technologies along the low-carbon electricity
energyvalue chain
Specific sector Status of the main emerging technologies in the chemical sector
Specific sector Status of main emerging technologies in the iron and steel sector
Specific sector Status of main emerging technologies in the cement sector
Specific sector Logistic companies and electric trucks
Specific sector Status of the main emerging technologies in heavy-duty road freight
Specific sector Status of main emerging technologies in shipping
Specific sector Status of the main emerging technologies in the aviation sector
Fossil fuel Age structure of existing fossil power capacity by region and technology
Reduction in capital cost since 2010 for PV and wind power generation
Investment
technologies
Average annual investment in technologies by technology readiness level
Investmentin the Sustainable Development Scenario
Amount of Unit cost reductions for selected technologies in the Sustainablereduction
Development Scenario, 2020-70
Contribution of material efficiency to reducing cumulative cement and steel
Amount of
demand for buildings construction in the Sustainable Development
reduction
Scenario, 2019-70
PolicyA policy framework for achieving deep emissions reductions in industry

Policy/Regulation

PolicyGovernment carbon or climate neutral targets by legal status

PolicyGoverning process for a strategy towards net-zero emissions
Core target areas for policy instruments to advance a net-zero emissions
strategy by technology maturity level
Number of clean energy technology designs and components analysed inthe "ETP Clean Energy Technology Guide"
Technology readiness level of technologies along the low-carbon electricity
value chain

PolicyPolicyPolicy4-34

Datasets

Source IEA Energy Technology Perspectives 2020

Past

Country/region
SeveralGlobalJapan
areas

IEA Energy Technology Perspectives 2020

Parameters in IEA ETP 2020 9/9

Other
Timeframe
Category

Datasets

Country/region
Several
Japan
areas

Past

GlobalGlobal average energy intensity in selected
end-use sectors, 2000-19
GeneralTypical lifetimes for key energy sector assets
Value and number of global energy-related
Generalventure capital deals (early and late stage) bysemester and year
Building stock by year of construction andSpecific sector
share of stock that remains in 2050
Age profile and geographic distribution ofSpecific sector
aircraft
Total cost of ownership of hydrogen, ammonia
Specific sector
and electric vessels by ship type, 2030
Passenger aviation activity by region in theSpecific sector
Sustainable Development Scenario, 2019-70
Heavy-duty truck fleet by powertrain in theSpecific sector
Sustainable Development Scenario
Total cost of ownership of heavy-duty trucks
Renewable
by low-carbon fuel in the SustainableenergyDevelopment Scenario, 2040 and 2070
Change in average annual energy-related
investment by sector and decade in theInvestment
Sustainable Development Scenario relative to
the Stated Policies Scenario
General

Other

Source IEA Energy Technology Perspectives 2020
4-35

PRI The Inevitable Policy Response

PRI IPR

The scenario announced by PRI in September 2019 about Climate-related
policies that can occur in the short term

PRI The Forecast Policy Scenario (FPS)
8 types of forecast policies

Source4-36

Coal Phase Out

Sales ban on ICE

Carbon price

CCS,
Decarbonization

Zero carbon power

Energy efficiency

GHG removal basedon land use

Agriculture

2013 ,

PRI The Inevitable Policy Response

Parameters in PRI IPR 1/5

Carbon pricing, Energy demand
Datasets

Country / region
Unit#1
Carbonpricing

Timeframe#2

EnergydemandGlobalSeveral
areas

Japan

Corresponding
page

Carbon pricing

US$

PolicyForecasts

Coal demand by sector (Electricity, Industry, Other)million tonnes
coal per year

p.27, 52

Oil demand by sector (Transport, Industry, Buildings, Other)

MMbbl/dp.28, 46

Gas demand by sector (Electricity, Buildings, Industry, Other)bcm per year

p.30, 55

Industry fuel mix (Coal (unabated) , Coal CCS, Gas (unabated),
EJ per year
Gas CCS, Oil, Biomass, Heat, Electricity, Hydrogen)p.34, 67

Hydrogen contribution of energy demand in hard-to abate
sectors (Iron and steel, Non-metallic minerals, Chemicals)(Hydrogen, Other fuels)%

p.35, 71

Biomass Availability

EJ

p.39, 74, 84

Primary energy demand (Coal, Oil, Natural Gas, Biomass, Other
EJ per year
low-carbon)

p.44

Primary energy demand (Coal, Oil, Natural Gas, Biomass, Other
low-carbon)(IPR FPS, IEA NPS, IEA SDS, Shell Sky, Statkraft EJ per year
Scenario)

p.45

Oil use by sector, FPS and comparator scenarios (Transport,
Industry, Buildings, Total, Other) (IPR FPS, IEA SDS, Shell Skye, MMbbl/d
BP Energy Outlook, OPEC Reference case)p.47

Coal demand by sector, IPR FPS vs comparators (Electricity,
million tonnes
Industry, Other, Total) (IPR FPS, IEA NPS, IEA SDS, Shell Sky) coal per year

p.53

Coal demand by industry sector (Non-metallic minerals, Iron andmillion tonnes
steel, Chemical and petrochemical, Pulp and paper, Non-ferrous
coal per year
metals, Autogeneration, Other industry)p.54

Gas use by sector, FPS and comparator scenarios (Electricity,
Buildings, Industry, Other) (IPR FPS, IEA NPS, IEA SDS)

p.56

bcm per year

Sources
4-37

PRI The Inevitable Policy Response

Parameters in PRI IPR 2/5

Energy mix 1/2
Datasets#1#2Electricity generation by fuel (Low-carbon, Gas, Coal)

Timeframe

GlobalSeveral
areas

Japan

Corresponding
page%

p.27, 52

Electricity generation mix (Coal ,Coal CCS, Oil, Gas, Gas CCS, Biomass,%
Biomass w/CCS, Nuclear, Hydro, Solar, Wind)

p.31,48

Electricity generation, IPR FPS vs comparators (Coal, Coal CCS, Oil, Gas,
ThousandGas CCS, Biomass, Biomass with CCS, Nuclear, Hydro, Solar, Wind,
TWh
Other low-carbon) (IPR FPS, IEA NPS, IEA SDS, BNEF NEO)

p.49

Generation mix (Western Europe) (Coal, Coal CCS, Oil, Gas, Gas CCS,
Biomass, Biomass with CCS, Nuclear, Hydro, Solar, Wind, Other lowcarbon)

TWh

p.50

Generation mix (United States) (Coal, Coal CCS, Oil, Gas, Gas CCS,
Biomass, Biomass with CCS, Nuclear, Hydro, Solar, Wind, Other lowcarbon)

TWh

p.50

Generation mix (China) (Coal, Coal CCS, Oil, Gas, Gas CCS, Biomass,
Biomass with CCS, Nuclear, Hydro, Solar, Wind, Other low-carbon)

TWh

p.50

TWh

p.51

Generation mix (India) (Coal, Coal CCS, Oil, Gas, Gas CCS, Biomass,
Energy Biomass with CCS, Nuclear, Hydro, Solar, Wind, Other low-carbon)
Generation mix (Japan) (Coal, Coal CCS, Oil, Gas, Gas CCS, Biomass,
mix
Biomass with CCS, Nuclear, Hydro, Solar, Wind, Other low-carbon)

TWh

p.51

Generation mix (Canada) (Coal, Coal CCS, Oil, Gas, Gas CCS, Biomass,
TWh
Biomass with CCS, Nuclear, Hydro, Solar, Wind, Other low-carbon)

p.51

Generation mix (Australia) (Coal, Coal CCS, Oil, Gas, Gas CCS, Biomass,
TWh
Biomass with CCS, Nuclear, Hydro, Solar, Wind, Other low-carbon)

p.51

Nuclear generation

ThousandTWhp.58

Nuclear generation by region, 2020 and 2050 (Western Europe, UnitedStates, Australia, Canada, China, India, Japan, World)

TWh per year

p.59

World nuclear generation in 2040, IPR FPS vs comparators (IPR FPS,IEA NPS, IEA SDS, BNEF NEO)

TWh per year

p.59

Gas generation by region, 2020 and 2050 (United States, China, Western
TWh per year
Europe, Japan, India, Australia, Canada, World)

p.60

World gas generation in 2040, IPR FPS vs comparators (IPR FPS, IEA
NPS, IEA SDS)

p.60

Sources
4-38

Country / region
Unit

TWh per year

PRI The Inevitable Policy Response

Parameters in PRI IPR 3/5

Energy mix 2/2, Price of key commodities/products, Policy 1/2
Datasets#1

Energy mix

Country / region
Timeframe

GlobalSeveral
areas

Japan

Corresponding
page

Coal generation by region (China, USA, India, Western Europe,
Australia, Japan, Canada, ROW)

TWh peryear

p.61

Coal generation by region (China, USA, India, Western Europe,
Australia, Japan, Canada, ROW)

TWh peryear

p.61

Industry fuel mix, IPR FPS and comparator scenarios (Coal(unabated) , Coal CCS, Gas (unabated), Gas CCS, Oil, Biomass,Heat, Electricity, Hydrogen) (IPR FPS, IEA NPS, IEA SDS)

%

p.68

Iron and steel sector energy mix (Coal (unabated) , Coal CCS, Gas(unabated), Gas CCS, Oil, Biomass, Heat, Electricity, Hydrogen)(IPR FPS, IEA NPS, IEA SDS)

EJ per year

p.69

Cement sector energy mix (Coal (unabated) , Coal CCS, Gas(unabated), Gas CCS, Oil, Biomass, Heat, Electricity, Hydrogen)(IPR FPS, IEA NPS, IEA SDS)

EJ per year

p.69

Biomass demand by sector (Industry, Agriculture, Electricity,
Transport)

EJ per year

p.72

CCS power generation in the SDS scenario (Coal with CCS, Gas
with CCS, Share of CCS)

TWh, %

p.73

Coal-fired power generation in the SDS scenario (Coal with CCSChina, Coal with CCS-ROW, Coal total)

TWh

p.73

Zero-carbon power, Nuclear capacity and renewable power
generation

TWh

Policy Forecasts(Index)p.38, 82%

p.38, 82

(Index)p.39, 74, 84

phase-out of coal in electricity globally-

Policy Forecasts

ICE sales bans-

Policy Forecasts

Carbon Capture and Storage (CCS) and industry decarbonisation-

Policy Forecasts

Energy efficiency-

Policy Forecasts

Afforestation and reforestation

Mha

Policy Forecasts

Restoration of degraded Land

Mha

Policy Forecasts

Soil sequestration-

Policy Forecasts

Price of key Food Price Index (2020=100)
commodities Share of food in household expenditure/products
Bioenergy Price Index (2020=100)

PolicyUnit#2

Sources
4-39

PRI The Inevitable Policy Response

Parameters in PRI IPR 4/5

Policy 2/2, CO2 emissions
Datasets#1

PolicyCO2emissions

Sources
4-40

Country / region
Unit

#2

Timeframe

GlobalSeveral
areas

Japan

Corresponding
page

Dietary shifts-

Policy Forecasts

Mitigation potential

GtCO2e/yr

Policy Forecasts

Productivity-

Policy Forecasts

Enabling the Green Economy
Global energy-related CO2 emissions (IPR FPS, IEA NPS, IEA SDS,
GtCO2
IPCC P1)
Global GHG Emissions (Land CO2, Land CH4, Land N2O, Industrial
Process CO2, Energy net CO2 emissions , CH4 from gas production, GtCO2e
Total)
Global energy-related CO2 emissions (IPR FPS, IEA NPS, IEA SDS) GtCO2
Global GHG Emissions (Land CO2, Land CH4, Land N2O, Industrial
Process CO2, Energy net CO2 emissions , CH4 from gas production, GtCO2 2020-2100 (every 5 years)
Total)
Land use GHG emissions (CO2, CH4, N2O, Total Baseline Gt
GtCO2e 2020-2100 (every 5 years)
CO2e/year)(IPR FPS)
GtCO2eGlobal GHG emissions (IPR SPF, IPCC P1, IPCC P2)
CO2 emissions by sector in 2040 (Power) (Low-carbon generation,
GtCO2
Total electricity demand)
CO2 emissions by sector in 2040 (Transport) (Low carbon fuel share,
GtCO2
Total fuel demand)
CO2 emissions by sector in 2040 (Industry) (Low carbon fuel share,
GtCO2
Total fuel demand)
CO2 emissions by sector in 2040 (Buildings) (Low carbon fuel share,
GtCO2
Total fuel demand)
Energy CO2 emissions by fuel (Coal, Oil, Natural Gas, Fossil CCS,
GtCO2 2020-2100 (every 5 year)
Biomass CCS, Net CO2)
Emissions captured globally per year (Power (fossil), Power (biomass),
GtCO2
Industry) (IEA 2C, IEA B2C, IPCC 2C avg, IPCC 1.5 avg, Shell Sky)
Regional land use emissions (Australia, Canada, Developing East
Asia, United States, Western Europe, Africa, Brazil, Central and South GtCO2e/year
America, Middle East, Mexico, China, Eurasian Economic Union,
Former Soviet Union, India, Other developing Asia)

Policy Forecasts
p.15
p.18, 88
p.19
p.20
p.21, 79
p.22, 89
p.26
p.26
p.26
p.26
p.36, 90
p.75

p.80

PRI The Inevitable Policy Response

Parameters in PRI IPR 5/5

Predictions on production and sales, OtherCountry / region

Datasets
#1

Unit
#2

GlobalSeveral
areas

Japan

Corresponding
page

milion vehicles

p.28, 63

billionp.29, 46%

p.64

Truck travel by powertrain (ICE, ULEV)

Billion vehicle km

p.65

Trucks stock share by powertrain, IPR FPS and BNEF
scenarios%

p.66

Cumulative afforested landMhap.40, 81

Total Forest LandMha

p.40, 81

Crop Yields

tDM/hap.41

Irrigated area

Mha

p.41

Passenger vehicles by powertrain (ICE, ULEV)ICE passenger vehicles
Predictions on
Passenger vehicles stock by powertrain, IPR FPS and BNEF
production
scenarios (ICE, ULEV)
and sales

Other

Timeframe

Regional food price indices (2020=100) Australia, Canada,
Developing East Asia, United States, Western Europe, Africa,
Brazil, Central and South America, Middle East, Mexico, China, (Index)
Eurasian Economic Union, Former Soviet Union, India, Other
developing Asia)
Irrigated area by region (Australia, Canada, Developing East
Asia, United States, Western Europe, Africa, Brazil, Central and
Mha
South America, Middle East, Mexico, China, Eurasian Economic
Union, Former Soviet Union, India, Other developing Asia)
Total cropland by region (Australia, Canada, Developing East
Asia, United States, Western Europe, Africa, Brazil, Central and
Mha
South America, Middle East, Mexico, China, Eurasian Economic
Union, Former Soviet Union, India, Other developing Asia)

p.83

p.85

p.86

Sources
4-41

SSP

SSP was developed as a socio-economic scenario based onrecent policies and socio-economic environment

SSP Public Database Version2.0

The outline of SSP Shared Socioeconomic Pathways
Based on the issues of the sociochange, National Institute for Environmental Studies Japan , PNNL US , PBL Netherland , IIASA Austria
and Germany PIK has developed SSP*1
SPES has problems such as the old base year (1990) and the inability to reflect recent policies
SSP considers recent changes in the external environment such as recent policies, vital statistics, GDP,and urbanization *2, and has relevance to existing socio-economic scenarios such as "SERS" and"RCPs". Developed as a scenario. It consists of 5 scenarios

5 Scenario Composition of SSP
SSP

Scenario

Scenario Outline *3

SSP1

Sustainability

A scenario that assumes the realization of both international
mitigation measures and adaptation measures related to climatechangeSSP2

Middle of the RoadA scenario that assumes that the current socio-economic growth
will continue

SSP3

Regional Rivalry

A scenario that assumes a situation where the country is divided
and it is difficult to realize international mitigation measures andadaptation measures

SSP4

Inequality

A scenario that assumes an international economic society withwidening disparities

SSP5

Fossil-fueled
Development

A scenario that assumes that the international community willdevelop depending on fossil fuels*1 https://www.nies.go.jp/whatsnew/20170221/20170221.html , *2 https://unfccc.int/sites/default/files/part1_iiasa_rogelj_ssp_poster.pdf*3 https://www.carbonbrief.org/explainer-how-shared-socioeconomic-pathways-explore-future-climate-change
4-42

SSP Public Database Version2.0

Parameters in SSP Public Database Version2.0 1/10

IAM Scenarios Model GDP, Population, Primary energy, Secondary Energy (Electricity)
Category
Large
GDP

Medium

SSP

Unit

Small

SSP1

SSP2

SSP3

SSP4

RemarkSSP5billionUS$2005/yr

GDP PPP

millionPopulation Population

EJ/yr

EnergyPrimary Energy

EnergyPrimary Energy

EJ/yr

Some data (traditional, COS) is not available in SSP3

EnergyPrimary Energy

Coal (Total / with CCS /without CCS)

EJ/yr

Some data CCS is not available in SSP3

EnergyPrimary Energy

Oil (Total / with CCS / without CCS)

EJ/yr

Some data CCS is not available in SSP2,3,5

EnergyPrimary EnergyGas (Total / with CCS/ without CCS)

EJ/yr

Some data CCS is not available in SSP3

EnergyPrimary Energy

Fossil (Total , with CCS, without CCS)

EJ/yr

Some data CCS is not available in SSP3

EnergyPrimary Energy

Nuclear

EJ/yr

EnergyPrimary Energy

Non-Biomass Renewables

EJ/yr

EnergyPrimary Energy

Hydro

EJ/yr

EnergyPrimary Energy

Geothermal

EJ/yr

EnergyPrimary Energy

Other

EJ/yr

EnergyPrimary Energy

Solar

EJ/yr

EnergyPrimary Energy

Wind

EJ/yr

EnergyPrimary Energy
Secondary Energy(Electricity)
Secondary Energy(Electricity)
Secondary Energy(Electricity)
Secondary Energy(Electricity)
Secondary Energy(Electricity)
Secondary Energy(Electricity)
Secondary Energy(Electricity)
Secondary Energy(Electricity)
Secondary Energy(Electricity)
Secondary Energy(Electricity)
Secondary Energy(Electricity)

Secondary Energy Trade

EJ/yr

Total

EJ/yr

Biomass(Total / with CCS/ without CCS)

EJ/yr

Some data CCS is not available in SSP3

Coal (Total / with CCS /without CCS)

EJ/yr

Some data CCS is not available in SSP3

Oil

EJ/yr

Some data CCS is not available in SSP3

Gas (Total / with CCS/ without CCS)

EJ/yr

Some data CCS is not available in SSP3

Geothermal

EJ/yr

Hydro

EJ/yr

Non-Biomass Renewables

EJ/yr

Nuclear

EJ/yr

Solar

EJ/yr

Wind

EJ/yr

EnergyEnergyEnergyEnergyEnergyEnergyEnergyEnergyEnergyEnergyEnergy

4-43

Total
#N/A

Source SSP Public Database Version 2.0 As of February 2021

* Extract parameters for which Global values can be obtained* GDP and population are data for each 5 years from 2010 to 2100, and other parameters are data for 2005 and 2010 to 2100 for each 5 years.

SSP Public Database Version2.0

Parameters in SSP Public Database Version2.0 2/10

IAM Scenario Model Secondary Energy, Final energy, Energy Service
Category
Large

Medium

Unit

Small

EnergySecondary Energy (Gases)

Total

EJ/yr

EnergySecondary Energy (Gases)

Biomass

EJ/yr

EnergySecondary Energy (Gases)

Coal

EJ/yr

EnergySecondary Energy (Gases)

Natural Gas

EJ/yr

EnergySecondary Energy (Heat)

Total

EJ/yr

EnergySecondary Energy (Heat)

Geothermal

EJ/yr

EnergySecondary Energy (Hydrogen)

Total

EJ/yr

EnergySecondary Energy (Hydrogen)

Biomass(Total / with CCS/ without CCS)

EJ/yr

EnergySecondary Energy (Hydrogen)

Electricity

EJ/yr

EnergySecondary Energy (Liquids)

Total

EJ/yr

EnergySecondary Energy (Liquids)

Biomass(Total / with CCS/ without CCS)

EJ/yr

EnergySecondary Energy (Liquids)

Coal (Total / with CCS /without CCS)

EJ/yr

EnergySecondary Energy (Liquids)

Gas (Total / with CCS/ without CCS)

EJ/yr

EnergySecondary Energy (Liquids)

Oil

EJ/yr

EnergySecondary Energy (Solids)

EnergyFinal Energy

Total

EJ/yr

EnergyFinal Energy

Electricity

EJ/yr

EnergyFinal Energy

Gases

EJ/yr

EnergyFinal Energy

Heat

EJ/yr

EnergyFinal Energy

Hydrogen

EJ/yr

EnergyFinal Energy

Liquids

EJ/yr

EnergyFinal Energy

Solar

EJ/yr

EnergyFinal Energy (Solids)

Total

EJ/yr

EnergyFinal Energy (Solids)

EJ/yr

EnergyFinal Energy (Solids)

Biomass (Total, Traditional)
Coal

EnergyFinal Energy

Industry

EJ/yr

EnergyFinal Energy

Residential and Commercial

EJ/yr

EnergyFinal Energy

Transportation

EJ/yr

EnergyEnergy Service (Transportation)

Freightbn tkm/yr

EnergyEnergy Service (Transportation)

Passenger

SSP
SSP1

SSP2

SSP3

SSP4

SSP5

RemarkSome data CCS is not available in SSP1,3

EJ/yr

Some data traditional is not available in
SSP1,3EJ/yr

bn pkm/yr* Extract parameters for which Global values can be obtained* GDP and population are data for each 5 years from 2010 to 2100, and other parameters are data for 2005 and 2010 to 2100 for each 5 years.

4-44

Source SSP Public Database Version 2.0 As of February 2021

SSP Public Database Version2.0

Parameters in SSP Public Database Version2.0 3/10

IAM Scenarios Model Land Cover, Emissions (unharmonized)
Category
Large

Medium

Unit

Small

Land Cover

Built-up Area

million ha

Land Cover

Croplandmillion ha

Land CoverForestmillion ha

Land Cover

Pasturemillion ha

SSP
SSP1

SSP2

SSP3

SSP4

SSP5

RemarkMt BC/yr

Emissions (unharmonized) BC

Mt CH4/yr

Emissions (unharmonized) CH4

Total

Emissions (unharmonized) CH4

Fossil Fuels and Industry Mt CH4/yr
Mt CH4/yr
Land Use

Emissions (unharmonized) CH4

Mt CO/yr

Emissions (unharmonized) CO
Emissions (unharmonized) CO2
CO2 (Carbon Capture andEmissions (unharmonized)
Storage)
CO2 (Carbon Capture andEmissions (unharmonized)
Storage)
Emissions (unharmonized) CO2
Emissions (unharmonized) CO2

Total

Mt CO2/yr

Total

Mt CO2/yr

Biomass

Mt CO2/yr

Fossil Fuels and Industry Mt CO2/yr
Mt CO2/yr
Land Use
Mt CO2-equiv/yr

Emissions (unharmonized) F-Gases

Mt CO2-equiv/yr

Emissions (unharmonized) Kyoto Gases
Emissions (unharmonized) N2O

Total

kt N2O / yr

Emissions (unharmonized) N2O

Land Usekt N2O / yr

Emissions (unharmonized) NH3

Mt NH3/yr

Emissions (unharmonized) NOx

Mt NO2/yr

Emissions (unharmonized) OC

Mt OC/yr

Emissions (unharmonized) Sulfur

Mt SO2/yr
Mt VOC/yr

Emissions (unharmonized) VOC* Extract parameters for which Global values can be obtained* GDP and population are data for each 5 years from 2010 to 2100, and other parameters are data for 2005 and 2010 to 2100 for each 5 years.

Source SSP Public Database Version 2.0 As of February 2021
4-45

SSP Public Database Version2.0

Parameters in SSP Public Database Version2.0 4/10

IAM Scenarios Model Emissions(harmonized), Climate
Category
Medium

Large

Unit

Small

SSP
SSP1

SSP2

SSP3

SSP4

SSP5

RemarkMt BC/yr

Emissions (harmonized)

BC

Emissions (harmonized)

CH4

Total

Mt CH4/yr

Emissions (harmonized)

CH4

Fossil Fuels and Industry

Mt CH4/yr

Emissions (harmonized)

CH4Land Use

Mt CH4/yr

Emissions (harmonized)

CO

Emissions (harmonized)

CO2

Total

Mt CO2/yr

Emissions (harmonized)

CO2

Fossil Fuels and Industry

Mt CO2/yr

Emissions (harmonized)

CO2

Land Use

Mt CO2/yr

Emissions (harmonized)

F-Gases

Mt CO2-equiv/yr

Emissions (harmonized)

Kyoto Gases

Mt CO2-equiv/yr

Emissions (harmonized)

N2O

kt N2O/yr

Emissions (harmonized)

NH3

Mt NH3/yr

Emissions (harmonized)

NOx

Mt NO2/yr

Emissions (harmonized)OC

Mt OC/yr

Emissions (harmonized)

SulfurMt SO2/yr

Emissions (harmonized)

VOC

ClimateConcentration

CO2

ppm

ClimateConcentration

CH4

ppb

ClimateConcentration

N2O

ppb

ClimateForcing

Total

W/m2

ClimateForcing

CO2

W/m2

ClimateForcing

CH4

W/m2

ClimateForcing

N2O

W/m2

ClimateForcing

Kyoto Gases

W/m2

ClimateForcing

W/m2

ClimateForcing

F-Gases
Aerosol

ClimateTemperature

Global Average

Mt CO/yr

Mt VOC/yr

W/m2* Extract parameters for which Global values can be obtained* GDP and population are data for each 5 years from 2010 to 2100, and other parameters are data for 2005 and 2010 to 2100 for each 5 years.

Source SSP Public Database Version 2.0 As of February 2021
4-46

SSP Public Database Version2.0

Parameters in SSP Public Database Version2.0 5/10

IAM Scenarios Model Agricultural Indicators, Economic Indicators, Technological Indicators
Large
Agricultural Indicators
Agricultural Indicators
Agricultural Indicators

Category
MediumDemandDemandDemandAgricultural Indicators

Production

Agricultural Indicators

Production

Agricultural Indicators
Economic Indicators
Economic Indicators

Production
Consumption
Price (Carbon)

Technological Indicators
Technological Indicators
Technological Indicators
Technological Indicators
Technological Indicators
Technological Indicators
Technological Indicators
Technological Indicators
Technological Indicators
Technological Indicators

SSP

Unit

Small

SSP1

Crops
Crops (Energy)
Livestock

million t DM/yr
million t DM/yr
million t DM/yr

Crops (Energy)
Crops (NonEnergy)
Livestock

million t DM/yr

Capacity (Electricity)
Capacity (Electricity)
Capacity (Electricity)
Capacity (Electricity)
Capacity (Electricity)
Capacity (Electricity)
Capacity (Electricity)
Capacity (Electricity)
Capacity (Electricity)

Total
Biomass
Coal
Gases
Geothermal
Hydro
Nuclear
Oil
Other

GW
GW
GW
GW
GW
GW
GW
GW
GW

Capacity (Electricity)

Solar (Total, CSP,
PV)

SSP2

SSP3

Capacity (Electricity)

Some data CSP,
PV is notavailable in
SSP3,4
Some data
Offshore,
Onshore is notavailable in
SSP3,4,5Wind (Total,
Offshore, Onshore)
GW

Source SSP Public Database Version 2.0 As of February 2021

RemarkSSP5

million t DM/yr
million t DM/yrbillion US$2005/yr
US$2005/t CO2

GW

Technological Indicators

SSP4* Extract parameters for which Global values can be obtained* GDP and population are data for each 5 years from 2010 to 2100, and other parameters are data for 2005 and 2010 to 2100 for each 5 years.

4-47

SSP Public Database Version2.0

Parameters in SSP Public Database Version2.0 6/10

CMIP6 Emissions Model BC, C2F6, CH4
Category
Large

BC
BC
BC
BC
BC
BC
BC
BC
BC
BC
BC
BC
C2F6
CF4
CH4
CH4
CH4
CH4
CH4
CH4
CH4
CH4
CH4
CH4
CH4
CH4

Unit

MediumAgricultural Waste Burning
AircraftEnergy Sector
Forest Burning
Grassland Burning
Industrial Sector
International Shipping
Peat Burning
Residential Commercial
Other
Transportation Sector
Total
Waste

SSP
SSP1

SSP2

SSP3

SSP4

SSP5

RemarkMt BC/yr
Mt BC/yr
Mt BC/yr
Mt BC/yr
Mt BC/yr
Mt BC/yr
Mt BC/yr
Mt BC/yr
Mt BC/yr
Mt BC/yr
Mt BC/yr
Mt BC/yr
kt C2F6/yr
kt CF4/yr

Agricultural Waste Burning
Agriculture
Energy Sector
Forest Burning
Grassland Burning
Industrial Sector
International Shipping
Peat Burning
Residential Commercial
Other
Transportation Sector
Total
Waste

Mt CH4/yr
Mt CH4/yr
Mt CH4/yr
Mt CH4/yr
Mt CH4/yr
Mt CH4/yr
Mt CH4/yr
Mt CH4/yr
Mt CH4/yr
Mt CH4/yr
Mt CH4/yr
Mt CH4/yr

Source SSP Public Database Version 2.0 As of February 2021
4-48

* Extract parameters for which Global values can be obtained* GDP and population are data for each 5 years from 2010 to 2100, and other parameters are data for 2005 and 2010 to 2100 for each 5 years.

SSP Public Database Version2.0

Parameters in SSP Public Database Version2.0 7/10

CMIP6 Emissions Model CO2, CO, HFC, N2O
Category
Large

CO2
CO2
CO2
CO2
CO2

AFOLU
AircraftEnergy Sector
Industrial Sector
International Shipping
Residential Commercial
Other
Solvents Production andApplication
Transportation Sector
Total
Waste
Agricultural Waste Burning
AircraftEnergy Sector
Forest Burning
Grassland Burning
Industrial Sector
International Shipping
Peat Burning
Residential Commercial
Other
Transportation Sector
Total
Waste

CO2
CO2
CO2
CO2
CO2
CO
CO
CO
CO
CO
CO
CO
CO
CO

CO
CO
CO
HFC
N2O

Unit

Medium

SSP
SSP1

SSP2

SSP3

SSP4

SSP5

Remark

Mt CO2/yr
Mt CO2/yr
Mt CO2/yr
Mt CO2/yr
Mt CO2/yr
Mt CO2/yr
Mt CO2/yr
Mt CO2/yr
Mt CO2/yr
Mt CO2/yr
Mt CO/yr
Mt CO/yr
Mt CO/yr
Mt CO/yr
Mt CO/yr
Mt CO/yr
Mt CO/yr
Mt CO/yr
Mt CO/yr
Mt CO/yr
Mt CO/yr
Mt CO/yr
Mt CO2-equiv/yr
kt N2O/yr* Extract parameters for which Global values can be obtained* GDP and population are data for each 5 years from 2010 to 2100, and other parameters are data for 2005 and 2010 to 2100 for each 5 years.

Source SSP Public Database Version 2.0 As of February 2021
4-49

SSP Public Database Version2.0

Parameters in SSP Public Database Version2.0 8/10

CMIP6 Emissions Model NH3, NO2
Category
Large

NH3
NH3
NH3
NH3
NH3
NH3
NH3
NH3
NH3

NH3
NH3
NH3
NH3
NO2
NO2
NO2
NO2
NO2
NO2
NO2
NO2
NO2
NO2
NO2
NO2
NO2

Unit

MediumAgricultural Waste Burning
Agriculture
AircraftEnergy Sector
Forest Burning
Grassland Burning
Industrial Sector
International Shipping
Peat Burning
Residential Commercial
Other
Transportation Sector
Total
Waste
Agricultural Waste Burning
Agriculture
AircraftEnergy Sector
Forest Burning
Grassland Burning
Industrial Sector
International Shipping
Peat Burning
Residential Commercial
Other
Transportation Sector
Total
Waste

SSP2

SSP3

SSP4

SSP5

Remark

Mt NH3/yr
Mt NH3/yr
Mt NH3/yr
Mt NH3/yr
Mt NH3/yr
Mt NH3/yr
Mt NH3/yr
Mt NH3/yr
Mt NH3/yr
Mt NH3/yr
Mt NH3/yr
Mt NH3/yr
Mt NH3/yr
Mt NOx/yr
Mt NOx/yr
Mt NOx/yr
Mt NOx/yr
Mt NOx/yr
Mt NOx/yr
Mt NOx/yr
Mt NOx/yr
Mt NOx/yr
Mt NOx/yr
Mt NOx/yr
Mt NOx/yr
Mt NOx/yr

Source SSP Public Database Version 2.0 As of February 2021
4-50

SSP
SSP1

* Extract parameters for which Global values can be obtained* GDP and population are data for each 5 years from 2010 to 2100, and other parameters are data for 2005 and 2010 to 2100 for each 5 years.

SSP Public Database Version2.0

Parameters in SSP Public Database Version2.0 9/10

CMIP6 Emissions Model OC, SF6, Sulfur
Category
Large

OC
OC
OC
OC
OC
OC
OC
OC

Agricultural Waste Burning
AircraftEnergy Sector
Forest Burning
Grassland Burning
Industrial Sector
International Shipping
Peat Burning
Residential Commercial
Other
Transportation Sector
Total
Waste

OC
OC
OC
OC
SF6
SulfurSulfurSulfurSulfurSulfurSulfurSulfurSulfurUnit

Medium

SSP
SSP1

SSP2

SSP3

SSP4

SSP5

RemarkMt OC/yr
Mt OC/yr
Mt OC/yr
Mt OC/yr
Mt OC/yr
Mt OC/yr
Mt OC/yr
Mt OC/yr
Mt OC/yr
Mt OC/yr
Mt OC/yr
Mt OC/yr
kt SF6/yr

Agricultural Waste Burning
AircraftEnergy Sector
Forest Burning
Grassland Burning
Industrial Sector
International Shipping
Peat Burning
Residential Commercial
Other
Transportation Sector
Total
Waste

SulfurSulfurSulfurSulfurMt SO2/yr
Mt SO2/yr
Mt SO2/yr
Mt SO2/yr
Mt SO2/yr
Mt SO2/yr
Mt SO2/yr
Mt SO2/yr
Mt SO2/yr
Mt SO2/yr
Mt SO2/yr
Mt SO2/yr

Source SSP Public Database Version 2.0 As of February 2021

* Extract parameters for which Global values can be obtained* GDP and population are data for each 5 years from 2010 to 2100, and other parameters are data for 2005 and 2010 to 2100 for each 5 years.

4-51

SSP Public Database Version2.0

Parameters in SSP Public Database Version2.0 10/10

CMIP6 Emissions Model VOC
Category
Large

VOC
VOC
VOC
VOC
VOC
VOC
VOC
VOC
VOC
VOC
VOC
VOC
VOC

Unit

MediumAgricultural Waste Burning
AircraftEnergy Sector
Forest Burning
Grassland Burning
Industrial Sector
International Shipping
Peat Burning
Residential Commercial
Other
Solvents Production andApplication
Transportation Sector
Total
Waste

SSP
SSP1

SSP2

SSP3

SSP4

SSP5

RemarkMt VOC/yr
Mt VOC/yr
Mt VOC/yr
Mt VOC/yr
Mt VOC/yr
Mt VOC/yr
Mt VOC/yr
Mt VOC/yr
Mt VOC/yr
Mt VOC/yr
Mt VOC/yr
Mt VOC/yr
Mt VOC/yr* Extract parameters for which Global values can be obtained* GDP and population are data for each 5 years from 2010 to 2100, and other parameters are data for 2005 and 2010 to 2100 for each 5 years.

Source SSP Public Database Version 2.0 As of February 2021
4-52

Appendix.
Appendix1. Parameter list
Appendix2. Physical risk assessment tools
Appendix3. Examples of scenario analysis

Appendix.
Provide useful materials for scenario analysis based on supporting case studies

4-53

Physical risk assessment tools referred in TCFD report
Tools at a global level
WRI Aqueduct Atlas

Risk mapping tool that helps companies, investors, governments, and other users understand where andhow water risks and opportunities are emerging worldwide

WBCSD Water Tool

A multifunctional resource for identifying corporate water risks and opportunities, including a workbook, amapping functionality, and Google earth compatibility
Organizations can compare sites based on water availability, sanitation, population, and biodiversity

Global Agro- Ecological Zones

Based on he Global Agro-Ecological Zones (GAEZ) methodology for assessing agricultural resources
and potential
Users can understand forecast changes in yields, production, and other outputs due to climate change.

Tools at a local / national level
UK Climate Impact
Programme

Gathered historical climate records and future climate projections
Climate projections cover low-, medium- and high- emissions scenarios and can be viewed through an
online user interface and associated briefing report

US Interagency Archive ofDownscaled Climate Data andInformation

Provides an archive of simulated historical and future climatology and hydrology
Maintained at Lawrence Livermore National Lab by a consortium of federal and non-federal partners..
Information available from this archive is free and open to all

Management and Impacts of
Climate Change (France)

Meteo-France is the primary provider of climate projections out to 2100, covering temperature,

Projections are provided for the medium term (2021-2050) and long term (2071-2100)

Similar resources are available in other countries including, but not limited to, Australia, Canada, Germany, Japan, the Netherlands, and South Africa
Source
4-54

-

-29

Physical risk tools used in this project (excerpt)#1

Issuing agency

Tool nameWorld Resources Institute
Aqueduct Water Risk Atlas
(WRI)

URL

Subject Area

Explanation Related Page

https://www.wri.org/aqueduct

Global4-56

https://adaptationplatform.nies.go.jp/en/ap-plat/

Asia

4-58

Global4-57

4-59, 4-60

2 AP-PLAT

Climate Impact Viewer

3 World Bank

Climate Change Knowledge http://sdwebx.worldbank.org/climatepo
Portalrtal/

4 A-PLATWeb GIShttps://aplat.nies.go.jp/webgis/index.html

Japan

5 European Commission

European Climate
Adaptation Platform(Climate-ADAPT)

http://climate-adapt.eea.europa.eu/

EU

6 IPCC TGICA

IPCC Data Distribution
Centrehttp://www.ipcc-data.org/

European Adaptation
Platform

Global

Database of theIntergovernmental Panel on
Climate Change (IPCC)

4-55

WRI AQUEDUCT Water Risk Atlas

AQUEDUCT Water Risk Atlas (WRI)

AQUEDUCT Water Risk Atlas
IssuingagencyWorld Resource Institution

Indicators

Scenario

Pessimistic / Business as usual /Optimistic

Indicators (Baseline)

Timeframe

Baseline / 2030~2040

Physical risks(quantity)

Water stress
Water Depletion
Interannual Variability
Seasonal Variability
Groundwater Table Decline
Riverine flood risk/Coastal flood risk
Drought Risk

Physical risks(quality)

Untreated Connected Wastewater
Coastal Eutrophication Potential

Regulatory andreputational risk

Unimproved / No Drinking Water
Unimproved / No Sanitation
Peak RepRisk Country ESG Risk Index
Indicators (2030-2040)

Water StressSeasonal Variability
Water Supply
Water Demand
Source AQUEDUCT Water Risk Atlas https://www.wri.org/applications/aqueduct/water-riskatlas/#/?advanced=false&basemap=hydro&indicator=w_awr_def_tot_cat&lat=30&lng=80&mapMode=view&month=1&opacity=0.5&ponderation=DEF&predefined=false&projection=absolute&scenario=optimistic&scope=baseline&timeScale=annual&year=baseline&zoom=3 (As of February 2021
4-56

World Bank Climate Change Knowledge Portal

Climate Change Knowledge Portal (World Bank)

Climate Change Knowledge Portal
IssuingagencyWorld Bank

Scenario

RCP2.6 / 4.5 / 6.0 / 8.5

Timeframe

2020-2039 / 2040-2059 / 2060-2079/
2080-2099

Indicators
CategoryEssential Climate
Variables

Temperature
Indicators

Agricultu
reIndicators

Source World Bank, Climate Change Knowledge Portal
https://www.wri.org/applications/aqueduct/water-riskatlas/#/?advanced=false&basemap=hydro&indicator=w_awr_def_qan_cat&lat=30.06909396443887&lng=- As of February 2021

Drought/
Water
Indicators

Category

Details
Monthly Temperature
Monthly Maximum
Temperature
Monthly Minimum
Temperature
Monthly Precipitation
Maxima of Daily Tmax
Minima of Daily Tmin
Summer Days (Tmax >25 )Tropical Nights (Tmin >20 )Frost Days (Tmin < 0 )Ice Days (Tmax < 0 )Hot Day (Tmax > 35 )Hot Day (Tmax > 40 )Heat Index 35
Growing Season Length
Days of Consecutive Dry
Spell
Days of Consecutive Wet
Spell
Rainfall Seasonality
Mean Drought Index
Severe Drought Likelihood
Monthly Rainfall Range
Annual Rainfall Range

Precipit
ation
Indicators

EnergyIndicators
HealthIndicators

Details
Days with Rainfall > 20mm
Maximum Monthly Rainfall(10-yr RL)
Maximum Monthly Rainfall(25-yr RL)
Days with Rainfall > 50mm
Rainfall of Very Wet Days
Maximum Daily Rainfall
Maximum 5-day Rainfall
Maximum Daily Rainfall(10-yr RL)
Maximum 5-day Rainfall
Maximum daily Rainfall(25-yr RL)
Maximum 5-day Rainfall(25-yr RL)
Heating Degree Days
Cooling Degree Days
Days without Noticeable
Wind
Probability of Heat Wave
Probability of Cold Wave
Warm Spell Duration index
Cold Spell Duration Index

4-57

AP-PLAT Climate Impact Viewer

Climate Impact Viewer (AP-PLAT)

Climate Impact Viewer
IssuingagencyAP-PLAT

Scenario

RCP2.6 / 4.5 / 6.0 / 8.5

Timeframe

Current / Mid of 21th century /End of 21th century

Indicators
Category

Details

ClimateTemperature
Precipitation

Water resources

Falkenmark Index

Vegetation

Net Primary Production
Vegetation carbon
Soil carbon pool
Net Biome Production
Soil erosion
Fire

HealthHeat stress

The AP-PLAT Platform page introduces climate information for each region andcountry, which can be referred to.
https://ap-plat.nies.go.jp/platforms/index.html
Source AP-PLAT, Climate Impact Viewer https://a-plat.nies.go.jp/ap-plat/asia_pacific/index.html As of February 2021
4-58

Appendix.
Appendix1. Parameter list
Appendix2. Physical risk assessment tools
Appendix3. Examples of scenario analysis

Appendix.
Provide useful materials for scenario analysis based on supporting case studies

4-59

Extract examples of the disclosure of scenario analysis that can be used as reference forfurther implementation
Analysis step
1

Stage
Prep

For beginningscenario analysis

What is the analysis
implementation system

Assess materialityof climate-related
risks

3

Stage2

How the risks andopportunities are described

Which scenarios are usedStage

How the future world views
are described

5

Mitsubishi Corporation Case
Kao Corporation Case
Kirin Group Case
Sekisui Chemical Case
Sumitomo Mitsui Trust Holdings Case

Aurizon Overseas caseStage1

Identify anddefine range of
scenarios

4

Mitsubishi Corporation Case
Neuberger Berman Overseas case
AES Overseas case

Prep

Where is the scenario analysis
range

2

Examples of disclosure

Stage2

Evaluate
How the business impacts arebusiness impacts describedStage2

Identify potential
How the future countermeasures
responses
are described
4-60

Kao Corporation CaseAES Overseas case
Aurizon Overseas case

Kirin Group Case
Sumitomo Mitsui Trust Holdings Case
JFE Holdings CaseAES Overseas case
Unilever Overseas caseMondi Overseas case

Kao Corporation Case
Hitachi Case

Neuberger Berman Overseas
case
Unilever Overseas case[Example

1: Mitsubishi Corporation]

2

3

4

5

Trading Company

Mitsubishi Corporation selects the subjects of analysis from the sectors ofbusiness that has a large financial / non-financial impact and from TCFD recommendations
Choose subjects for analysis
Scenario analysis chooses industries in which businesses with significant financial and non-financial impacts belong.
Furthermore, based on TCFD Recommendations, industries belonging to 4 sectors (energy, transportation, materials andbuildings, agriculture, food and forestry products) that are considered to have particularly large impacts on climate change
are selected as target industries.

Source:ESG DATA BOOK 2019

4-61

1

Case :Kao Corporation

Expand the logic tree for each business and each scenario. It covers theflow from risk enumeration to scenario definition, business impact, and response2

3

Develop a logic tree in 2 / 4 scenarios for 3 industries(cleaning agents, diapers, chemical / oil products)

Not only the response, but also the assumptions / background, influential factors, andbusiness impact leading up to that point are clearly statedSource
4-62

Kirei

4

5

General consumer
goods

1

Case :Kirin Group

Extensive resilience assessments quantitatively show the impact ofclimate change on major agricultural products

2

3

Resilience assessment of climate change
impactClimate change impact on major agricultural
products

Resilience is shown by assessing risks in
raw material procurement and logistics
supply chains and taking countermeasures

Quantitatively evaluate the impact of climatechange in each region on 6 agricultural
products from less than 10% to 50% or more

Source45Agriculture, food andforestry products (Foods)

Report4-63Case : Sekisui Chemical

Conducted risk assessments in five areas and mentioned the timeframesthat are expected to have an impact. Qualitatively implement analysis ofbusiness risks and opportunities and examination of countermeasures

1

2

3

4

Analysis of how long risks andopportunities will become
apparent in three stages:
short-term (less than 3 years),
medium-term (less than 3-6
years), and long-term (6 years
or more)Source Sekisui Chemical
4-64

TCFD REPORT 2020

5

Materials and Buildings(Chemicals)

Case :Sumitomo Mitsui Trust Holdings

Give credit ratings to the power sectors that have large amount of carbon-related,and quantitatively show the amount of increase in credit costs by physical risks
while mentioning the logic
Risk/opportunity evaluation in the
major sectors

1

2

3

4

5

Finance

Transition Risk Changes in credit ratings for the power sector

Credit rating is evaluatedunchanged whenaggressively investingin renewable energy
generation

Physical risk: Changes in credit costs for personal mortgages

Considering the results of qualitativeevaluation of risks and opportunities andexposure, electricity is selected as thetarget for analysis of transition risk andpersonal mortgages are selected foranalysis of physical risk.
After referring to the logic of cost calculation andquantitatively showing the amount of increase in credit cost
due to flooding, the impact is evaluated as limited.

Source4-65

Case

JFE Holdings

Qualitatively assessing the identified risk / opportunity factors (using arrows).
It also mentions the stakeholder's perspective on the group.

Source JFE Holdings,
4-66

1

2

3
Materials

45Case :Hitachi

Explaining the world view of scenarios for multiple businesses that are greatly
affected by climate change, mentioning countermeasures and opportunities thatutilize in-house technology, and showing resilience to climate change

1

2

3

4

5

Electric and Electronic

Explain the world view of the scenario for each of the six businesses

References to countermeasures andopportunities that utilize in-house technology

By presenting an overview of the world view in multiple scenarios and a flexible strategy for climate change for the six
businesses that are greatly affected by climate change, it is possible to appeal that they have resilience to climate change
Source Hitachi,
4-67

Overseas case

Neuberger Berman

Examine the potential impacts of climate change under the control of the
CRO / COO. They also use the results of scenario analysis for engagement andportfolio adjustment

Under the control of COO and CRO, consider the
resilience of the farm regarding the potential
impact of climate-related risks, including efforts toaddress transition risks and physical risks

1

2

3

FinanceUse scenario analysis results to prioritize
engagement candidates

It can also be used by the portfolio manager's
Investment selection process for more accurate
securities pricing.
Used for portfolio construction
Source Neuberger Berman
4-68

-

4

5

Overseas case

: AES

1

2

Assuming future business areas, analysis are conducted in multiple
departments, and the scenario analysis is even in the CEO message.
It also explains the scenarios and calculation process in detail

3

4

5

4

5

EnergyThe details of the assumed world view for eachscenario are explained

In the CEO message, scenario analysis andthe link between analysis and long-termplanning were mentioned

Under a system that also incorporates management, they are considered and managed bymultiple departments based on the level of risk
Source4-69Overseas case1

: UnileverComprehensive and qualitative description of business impact. In addition, as acountermeasure, we are promoting M & A strategies and supply chain initiatives

2

3

General consumer
goods

We plan to acquire new sustainable businesses
through M & A strategies regarding changes incustomer behavior

Qualitatively describe the impact of the 2
C/4
C scenario on the impact on the entire business,and express resilience.
In addition, qualitatively describe the effect on yieldof soybeans and black tea as an important productSource4-70

In addition to transforming our own supply chain
for palm oil, soybeans, paper, and tea, we areworking with governments to promote
deforestation reduction

Overseas case1

: Aurizon

2

3

4

5

Transportation
Understand the risks and opportunities for your own business, including the
supply chain. It also describes the parameters of the scenario and details the world view

mtce Tonn of oil equivalent
60
0
50
0
40
0

Describe the risks and opportunities for your own
business including the supply chain.
Each item is also evaluated on the axis of short-term,
medium-term, and long-term impact occurrence times

30
0
20
0
0

CAGR
CPS

1.9%

NPS
0.9%
SDS
(Share Adjustment)

0.9%
In the 2
C scenario, global coal trading
will decline by 33%, but the share of highquality Australian coal will increase by
10%, explaining resilience.

2017

2020

2025

SDS

1.7%

2030

Based on the IEA scenario, set parametersand define the world view of the scenario.
Also identify key indicators to monitor

Source4-71

Overseas case1

: MondiQuantitatively describe the amount of financial impact of risks and opportunities.
It also explains the expected business background and calculation process
Climate-related risks

Climate-related opportunities

Quantitatively evaluate the impact of risk / opportunity on the financial impact of the entire business
It also describes calculation assumptions and processes
Source
4-72

2

3

4

5

Agriculture, food andforestry products (Foods)

Ministry of the Environment, Government of Japan
Climate Change Policy DivisionThis report is supported by Deloitte Tohmatsu Consulting LLC.