TCFD REPORT
2023/2024

Message from the President
We still witness frequent abnormal weather and natural disasters in every corner ofthe globe this year, and the impacts of climate change are becoming more serious.
India, Bangladesh, and Thailand were hit by the heat wave which is considered theworst in the Asian history. Extreme heat in Japan is a fresh memory and every day inAugust was recorded as a tropical day in the heart of Tokyo. It is said to have been arecord-breaking hot summer in the world. Experiences last year taught us responses
to climate change issues and carbon neutrality were urgent.
The progress assessment and future strengthening of measures toward the 1.5°C
target of each country was discussed in COP28. Although there were conflicts of complicated interests and intentions of various parties such as countries and businesses, lots of agreements which advance responses to climate change were reached.
“Together for Action” was the slogan of the Japan Pavilion in COP28. Further effortsof the government and private sectors together in each country are required for transition to a decarbonized society.
We will celebrate our 100th year in business in 2024.
“Trust for a flourishing future”
We have formulated a brand slogan for our 100th anniversary (see the right page). It represents preciousness of “being
believed and entrusted” by clients and the society, and a strong will to respond to “wishes for the future.”
The slogan concludes with a sentence “Because when you flourish, so too will the world.” Not only the working generations but the future generations entrust the earth to us. We will contribute to solving social challenges and climate change
issues on the globe and fulfill our responsibility to the future generations who are our precious stakeholders.
Our group contributes to carbon neutrality through wide-range and flexible functions including investments and loans,asset management and asset administration.
In the field of investment and loans, we will make contributions through positive impact finance, and impact equity investments in which we invest our own money to attract investors’ funds.
We invested in a forestry fund and launched a comprehensive domestic infrastructure fund in 2023. The forestry fundcreates carbon credits through appropriate management and administration of forests, aiming to realize carbon neutralityof the whole society. Through the infrastructure fund, we will provide risk money to solve social issues including renewableenergy and decarbonization.
Investment opportunities with returns are indispensable for persistently responding to enormous needs for funds tocreate a green society. Our group will grow by providing investment opportunities that secure both contribution to a decarbonized society and returns to investors.
As for asset management, two subsidiary asset managers have joined the Net Zero Asset Managers initiative (NZAMI)
and devote themselves to reducing GHG emissions through distinctive engagement of each company.
Sumitomo Mitsui Trust Asset Management is playing a leading role in an international initiative and promoting collaborative engagement including offering opinions to not only investee companies but also governments and authorities. For
example, it is exchanging opinions with the government of Brazil on the preservation of the Amazonian Forest.
Nikko Asset Management is one of a few signatories of the UK Stewardship Code in Asia. It is globally striving to advanceclimate change responses, with the ESG general body started in its Singapore office in 2022 playing a key role.
We formulated a carbon neutral transition plan in October toward steady implementation and progress of carbon neutrality. We aim at not only realizing net zero GHG emissions in our group, but also contributing to decarbonization of ourclients to achieve carbon neutrality, while visualizing the issues of clients and the whole society, through various surveys
including our group’s governance survey.
Implementation has unveiled new challenges. Difficult problems listed below cannot be addressed by our group alone:
deforestation/environmental contamination revealed during transition toward decarbonization, human rights issues suchas health hazards, and a rise in construction costs of renewable energy power plants caused by inflation. We will co-create
greater value and contribute to solving such issues through cooperation with the government and municipalities as well as
partnership with advanced top players sharing the common aspiration with us.
Sumitomo Mitsui TRUST Group will face climate change issues and, with the power of trusts, let the future lots of stakeholders entrust to us bloom affluently.
Thank you for your continuous cooperation.

Director & President
Sumitomo Mitsui Trust Holdings

CONTENTS
Message from the President
CONTENTS
Introduction

1
2

Chapter 1 Governance
Climate Change Policy
Governance Related to Climate Change
Executive Compensation

5
6
8

Chapter 2 Strategy
Our Approach to Climate Change
Transition Plan toward Carbon Neutrality
Awareness of Climate Change Opportunities
SuMi TRUST Bank’s Initiatives for Carbon Neutrality
Initiatives to Reduce OWN GROUP’s Emissions
Awareness of Climate Change Risks
Initiatives of Sumitomo Mitsui Trust Asset Management
Initiatives of Nikko Asset Management

9
10
18
20
33
34
40
49

Chapter 3 Risk Management
Climate Change Risks in Enterprise Risk Management
Credit Risk Management Concerning Climate Change

56
58

Chapter 4 Metrics and Targets
List of Key Metrics, Targets and Results
GHG Emissions in OWN GROUP
GHG Emissions in Investment and Loan Portfolios
GHG Emissions in Asset Management Portfolios
Total Amount of Cumulative Sustainable Finance
Loan Balance for Coal-Fired Power Generation
Exposure of Carbon-Related Assets

65
66
69
74
75
76
76

Postscript
Appendix.

78
79

Brand slogan

2023/2024 TCFD Report

1

Climate ChangeIntroduction
Prior to becoming a signatory to the Principles for Responsible Investment (PRI) in 2006,
SuMi TRUST Group had already been pursuing initiatives for climate change and other ESG
issues through ESG investing as part of our overall investment business, including Nikko AssetManagement’s Eco Fund (1999) and SuMi TRUST Bank’s first SRI fund for pensions (2003). SuMi
TRUST Bank also actively engages in project finance initiatives targeting renewable energy andaddresses climate change issues from the perspective of investments and loans, including clarifying its coal-fired power generation policy in March 2018 as one of the first Japanese banks.
In 2023, in line with the framework of the Net-Zero Banking Alliance (NZBA), which SuMi
TRUST Holdings joined in 2021, we set new 2030 intermediate reduction targets of greenhousegas (GHG) emissions in its investment and loan portfolios in the oil & gas, real estate, andshipping sectors, and formulated a transition plan to make steady progress towards carbon
neutrality. Sumitomo Mitsui Trust Asset Management and Nikko Asset Management set intermediate GHG emissions reduction targets in their asset management portfolios in 2022 and are
pursuing reduction activities through engagement.
Regarding its own GHG emissions (Scope 1, 2), our Group is steadily reducing them, forexample by converting energy used in SuMi TRUST Bank’s offices in Japan to 100% renewablein 2022, and is also working to expand the scope and disclosure of its measured emissions.
Moreover, SuMi TRUST Bank increased its cumulative target in sustainable finance by FY2030
from ¥10 trillion to ¥15 trillion (including ¥2.5 trillion of impact equity) in 2023, and provided
finance to help clients decarbonize their businesses and to realize a decarbonized society.

Initiatives Related to Climate Change
Details

1999

Launch of Nikko Eco Fund2003

Full-scale entry into ESG investing (development of SRI funds)

2004

Start of initiatives on environmental finance2006

Signatory to the Principles for Responsible Investment (PRI)

2016

Signatory to the Equator Principles

2018

Express approval for the TCFD recommendations and announce the policy on coalfired power generation

2019

Signatory to the Principles for Responsible Banking (PRB)

2020

2021

2022

2023

Review of the policy concerning environmental and social considerations for loans,and signatory to the Poseidon Principles
SuMi TRUST Group Carbon Neutral Commitment
Join the Net-Zero Banking Alliance (NZBA) (SuMi TRUST Holdings)
Join the Net Zero Asset Managers initiative (NZAMI) (Sumitomo Mitsui Trust AssetManagement, Nikko Asset Management)
Disclosure of 2030 intermediate reduction targets in line with the NZBA (power generation sector) and NZAMI frameworks
Add corporate finance (new/expansion) to our target of reducing a loan balance tozero for coal-fired power generation by 2040
Disclosure of 2030 intermediate reduction targets in line with the NZBA framework(oil & gas, real estate, and shipping sectors)
Disclosure of transition plan toward carbon neutrality

2023/2024 TCFD Report

2

Climate Change

Main Updates in 2023
Chapter 1:
Governance

Chapter 2:
Strategy

Chapter 3:
RiskManagement

Chapter 4:
Metrics andTargets

DetailsPages•
Established the Sustainability Committee and the Corporate Communications
P5
Committee as advisory bodies to the Executive Committee (reorganization)
P10• Formulated a transition plan to achieve carbon neutrality
Carbon neutrality approach and overview
Engagement strategy and number of engagements
Sector strategies for power generation and oil & gas• Expanded examples of decarbonization-related efforts (including green loans, transi- P20
tion loans, and investments in comprehensive infrastructure funds and forestry funds)
P34• Expanded climate change scenario analysis
Added overseas corporations to analysis of transition risks
Analyzed physical risks of solar power generation project financing in Japan• Established climate change-related risk appetite indicators and integrated them into P56
the risk appetite framework• Revised sector policies based on social demands in response to social and environ- P58
mental issues• Updated the climate change transition risk sector heat map
P61• Obtained third-party certification for part of OWN GROUP’s GHG emissions (Scope P66
1, 2)• Measured GHG emissions at SuMi TRUST Bank’s offices in Japan (Scope 3 upstream) P68• Set intermediate reduction targets in the oil & gas, real estate, and shipping sectors P69• Measured most recent results for SuMi TRUST Bank (power generation and oil & gas P71
sectors) and SuMi TRUST AM/Nikko AM (asset management portfolios)
P75• Increased cumulative targets in sustainable finance (from ¥10 trillion to ¥15 trillion)

Response to the TCFD Recommendations

Governance

Strategy

RiskManagement

Details• The Executive Committee decided on important responses based on deliberation by the
Sustainability Committee and the Corporate Communications Committee.
• Reported climate change responses and response policies to the Board of Directors as wellas the Risk Committee, an advisory body to the Board of Directors• Added the Climate Change Risk Management Policy to the Risk Management Rules at theBoard of Directors to clarify the roles and responsibilities of the Board of Directors, Executive
Committee, and directors and officers as well as the three-lines-of-defense system and therisk management policies, etc. based on climate change considerations specific to each risk
category• Climate change and other ESG items were applied to performance evaluations in terms of
the stock compensation of the executive compensation• Identified transition and physical risks as climate change related risks. Conducted a scenario
analysis based on portfolio characteristics to understand climate change related risks• Identified the demand for funds stemming from changes in social and industrial structures forcarbon neutrality as opportunities and promoted transition support and impact evaluations• Created a plan for transition to carbon neutrality and promoted initiatives aimed at achieving
net zero GHG emissions in OWN GROUP and its investment and loan and asset management
portfolios. Developed sector strategies for the power generation and oil & gas sectors• Positioned climate change risks as top-priority risks and integrated them into our Group-widerisk appetite framework (RAF). As risk appetite indicators related to climate change, set intermediate reduction targets for GHG emissions at SuMi TRUST Bank’s offices in Japan and theGroup’s investment and loan portfolios and asset management portfolios and managed theprogress toward achieving them. Disclosed the monitoring process• Identified climate change as a “risk driver” with cross-sectional influence on each risk category and stipulated risk management policies specific to climate change in each risk category• Clarified approaches based on existing risk in sector policies• Created and periodically reviewed a sector-specific climate change transition risk heat map
to identify sectors important for our strategy

2023/2024 TCFD Report3

Climate ChangeResponse to the TCFD Recommendations (Continued)
Negative numbers are represented using parentheses.

Metrics

TargetResultGHG emissions in OWN GROUP
Scope 1

5,411t-CO2e (FY2022)

2030: net zero

Scope 2
GHG emissions in our investment
and loan portfolios

4,586t-CO2e (FY2022)

2050: net zero—

Power generation sector(emission intensity)

FY2030138 to 173g-CO2e/kWh243g-CO2e/kWh(FY2021)

Oil & Gas sector(emission reduction rate)

FY2030(13)% to (31)%(compared to March 2021)(3.6)% (FY2021)

Real estate sector(emission intensity)

FY203034 to 41kg-CO2e/m2

64kg-CO2e/m2(FY2021)

Shipping sector(Portfolio Climate Alignment)

FY2030Not more than 0%(0.4)% (FY2021)

GHG emissions in our asset management portfolios
Sumitomo Mitsui Trust AssetManagement

2030: halves the emission intensity
compared to 2019 for 50% of all
assets under management*1
2050: net zero

(8.7)%(compared to June 2021)(as of June 2023)

Nikko Asset Management

2030: halves the emission intensity
compared to 2019 for 43% of all
assets under management*2
2050: net zero

(22.8)%(compared to the end of
December 2019)(as of December 2022)

Cumulative addressing amount ofsustainable financing

Cumulative amount from FY2021 toFY2030: ¥15 trillion

Approx. ¥2 trillion(as of the end of FY2022)

Loan balance for coal-fired power
generation

FY2040: zero

Approx. ¥154 billion(as of the end of FY2022)

Exposure of carbon-related assets—¥16.3 trillion(as of the end of FY2022)*1 Equal to approximately ¥43 trillion, or 50% of assets under management of ¥85 trillion as of the end of June 2021
*2 Equal to approximately ¥13 trillion, or 43% of assets under management of ¥31 trillion as of the end of December 2021

2023/2024 TCFD Report

4

Climate Change

Chapter1
Climate Change Policy

Governance

1. Policies Related to Sustainability
The Board of Directors of SuMi TRUST Holdings has established and published the “Basic Policy on the Social Responsibilityof Sumitomo Mitsui Trust Group (Sustainability Policy)” along with Group priorities and specific action guidelines related
to the policy.
Policies related to sustainability
PolicyBasic Policy on the Social Responsibility of
Sumitomo Mitsui Trust Group (Sustainability Policy)
Environmental Policy

Human Rights Policy

Action Guidelines for Mitigating Climate Change
Action Guidelines for Preserving Biodiversity
Please refer to SuMi TRUST Holdings website
for further details about the above policies.

1

Contribute to Solving Social and Environmental
Problems through Business

2Serve Clients with Sincerity

3

Earn the Trust of Society

4Address Environmental Issues

5

Respect the Individual

6

Participate in, and Contribute to, the Community

We have developed the following Environmental Policy as part of the Sustainability Policy, and we have established
Action Guidelines for Mitigating Climate Change and Action Guidelines for Preserving Biodiversity under our Environmental
Policy, and we are making all directors, officers, and employees aware of this.

Sumitomo Mitsui Trust Holdings Environmental Policy
1. Provision of Products and Services
We will strive to reduce environmental risks and enhanceenvironmental value for the society as a whole by providing financial products and services that contribute to thepreservation of the global environment and the realizationof a sustainable society.
2. Environmental Burden Reduction
We will strive to preserve the environment and realize asustainable society through efforts toward energy conservation, resource conservation, and resource recycling
based on the recognition of the burden imposed on theenvironment by the consumption of resources and the discharge of wastes involved in our business activities.
3. Pollution Prevention
We will strive to ensure continuous verification and improvement of our environmental activities and make efforts to prevent pollution.

2023/2024 TCFD Report

4. Regulatory Compliance
We will comply with the laws, regulations, rules, and agreements concerning the preservation of the environment.
5. Monitoring
We will strive to ensure the continuous improvement of ourenvironmental activities by setting and periodically reviewing and revising environmental objectives and targets.
6. Education & Training
We strive to ensure group-wide awareness of compliancewith the Environmental Policy and to provide appropriate
environmental education.
7. Information Disclosure
We will strive to promote activities to preserve the environment through communications with external organizations
by publicly disclosing the Environmental Policy.

5

Climate Change

Executive Compensation

SuMi TRUST Group has defined our “Purpose” as “creating new value with the power of trusts and let prosperous futurefor our clients and society bloom.” We have also placed at the core of management the notion of “balanced creation ofboth social value and economic value.”
Recognizing that we have a social responsibility to actively contribute to the creation of a sustainable society, in addition
to practicing sound management based on a high degree of self-discipline with the background of fiduciary spirit, we will
give due consideration to the impact of our business activities on society and provide unique value through our core business to help solve social and environmental issues faced by our clients and other stakeholders.

Governance Related to
Climate Change

Climate Change Policy

Climate Change Policy

Action Guidelines for Mitigating Climate Change

4. Education and Training
We will ensure that these guidelines are fully implemented
at Group companies, and will actively conduct educationand training to mitigate climate change.
5. Information Disclosure
We will actively disclose information related to our efforts
to mitigate climate change.

Governance Related to Climate Change
SuMi TRUST Holdings recognizes climate change as a factor of risk and opportunity that significantly impacts on financial
markets and has established a governance system of supervision and execution centering on the Board of Directors. The
Board of Directors, which is a supervisory body, has established the Risk Committee as its advisory body and checks theexecution status of the Company’s climate change countermeasures and conducts flexible and in-depth discussions on
climate change for appropriate supervision. The Executive Committee, which is an executive body, has established theSustainability Committee and the Corporate Communications Committee as advisory bodies to discuss policies and disclosures on climate change issues. Also, the Carbon Neutrality Planning and Management Department, which oversees
Company-wide efforts to respond to climate change, collaborates with individual businesses and Group companies toimplement Group and business initiatives in a cross-sectional manner.
Climate Change-Related Promotion Framework

Supervisory body

Board of Directors

Executive body

Executive Committee

Consultation

Risk Committee

Consultation

Sustainability Committee
Corporate Communications Committee

Carbon Neutrality Planning and
Risk Management-related Departments

Management Department
Sustainability Management Department

Respective businesses of SuMi TRUST Bank
Sumitomo Mitsui Trust Asset Management Co., Ltd.
Nikko Asset Management Co., Ltd.
Other Group companies

2023/2024 TCFD Report

6

Climate Change

Executive Compensation

2. Provision of Products and Services
We are working on developing and providing products andservices that help mitigate climate change. Our financial
functions are being leveraged to promote energy conservation and encourage the use of renewable energy.

3. Collaboration with Stakeholders
We engage in dialogue and cooperation with our stakeholders as we work to mitigate climate change.

Governance Related to
Climate Change

1. Implementation of Measures and Support to Help Mitigate Climate Change
In addition to actively taking measures to reduce greenhouse gas emissions in our own business operations, weare making efforts, as a corporate citizen, to support activities that mitigate and adapt to climate change.

Climate Change Policy

1. Supervision
Board of Directors (chairperson: external director)

Governance Related to
Climate Change

The Board of Directors establishes the Basic Policy on Social Responsibility (Sustainability Policy) and the Environmental
Policy to be implemented by each Group company and dispatches information on the Group’s climate change and sustainability course both within and outside of the Group. In addition, based on these policies, the Board of Directors receives
reports from the execution side on the situation of initiatives related to climate change issues and utilizes the Risk Committee
and other advisory bodies to the Board of Directors to supervise the situation. In FY2023, as of the time of publication ofthis report, the Board of Directors had three discussions based on climate change reports.

Risk Committee (chairperson: external expert)

2. Execution
Executive Committee (chairperson: director and president)
The Executive Committee formulates various policies related to our response to climate change, develops business execution systems, and promotes our climate change response. During each term, the committee also confirms the status of our
response, provides instructions to review measures, and takes other steps to ensure an appropriate response. In FY2023, theExecutive Committee reported on the progress made in promoting climate change action, set GHG-emission intermediate
reduction targets for investment and loan portfolios in our real estate and shipping sectors in line with the NZBA framework,and discussed the establishment and revision of regulations for managing climate change risks.

Sustainability Committee (chairperson: officer in charge of the Sustainability Management Department)
As an advisory body to the Executive Committee, the Sustainability Committee deliberates on matters related to theGroup’s sustainability initiatives, the Group’s personnel affairs, and the operation of the personnel system. In terms ofaddressing climate change, the committee discusses the Group’s climate change targets and its plans to transition tocarbon neutrality. The Committee deliberates climate change as a risk that impacts financial value and non-financial value,
from the perspective of risk management, and regularly receives reports on and monitors the status of the Group’s response
to climate change which was compiled by the Carbon Neutrality Planning and Management Department. In addition, theCommittee discusses matters to be decided at and or reported to the Executive Committee in advance.

Corporate Communications Committee(chairperson: officer in charge of the Planning and Coordination Department)
As an advisory body to the Executive Committee, the Corporate Communications Committee deliberates on internal andexternal communications and centered on the Group’s corporate publicity and advertisement and corporate branding. It
also discusses other important matters including the appropriateness of the system development and operation of information disclosure and the necessity of disclosure of management-related and possibly management-related informationand the appropriateness of the disclosed contents. In terms of addressing climate change, the committee deliberates
on matters related to the development of the Group’s information disclosure system, the necessity of disclosure, and theappropriateness of the disclosed contents.

2023/2024 TCFD Report

7

Climate Change

Executive Compensation

As an advisory body to the Board of Directors, the Risk Committee carries out risk management related to climate change
and reports to the Board of Directors on the Group’s policies and strategies for addressing climate change. The Risk
Committee also checks the status of the Group’s response to climate change and conducts flexible and in-depth discussions on it with outside experts.

Climate Change Policy

Executive Compensation

Type ofperformancelinked
compensation

Indicators (KPIs) for
performance-linked
compensation

Short-term/
medium-term

Target*1

Actual*1

Evaluation weight310 bn yen

324.6 bn yen

66.7%

190 bn yen

191.0 bn yen

33.3%

310 bn yen

324.6 bn yen

Calculation method• Directors’ bonus
Performancelinked bonus(1) Consolidated net businessprofit(2) Net income attributable toowners of the parent

Linked toshort-term
earnings

Calculated based on aweighted average witha 2:1 weighting on theachievement rates for(1) and (2), respectively• Stock compensation*2(1) Consolidated net businessprofit(2) Consolidated net profit
attributable to owners of
the parent

Linked toshort-term
earnings(3) Consolidated shareholder’sequity and ROE

Share deliverytrust(4) Consolidated CET1 ratio(common equity tier 1
capital ratio)*3

Linked to
medium-term
financial
metrics(5) C onsolidated overheadratio (OHR)

22.2%
33.3%

190 bn yen

191.0 bn yen

11.1%

Approx. 7%

6.93%

11.1%

Lower 10%
range

9.5%

Lower 60%
range

60.1%

(6) ESG overall assessment(categories: climate change,
FD & CS,
employee engagement,
Linked to ESG
DE&I (empowerment of
women, etc.), and ESG
assessment organizations’assessment*4)

—

—

33.3%

11.1%

11.1%

33.3%

33.3%

Achievement rate totargetEvaluation score
calculated based on
qualitative assessmentof the achievement andprogress of each indicator of the Medium-Term
Management plan
Evaluation score calculated based on overall
assessment comprisingboth quantitative andqualitative evaluationof activities in each
assessment category*1 (1) and (2) are fiscal 2022 actual results versus fiscal 2022 forecasts. (3) through (5) are fiscal 2022 results versus fiscal 2022 targets established under the MediumTerm Management Plan.
*2 Compensation with the use of a trust scheme. Points are awarded every fiscal year based on the achievement rates for the KPIs above and delivered in the form ofshares upon retirement. Malus (reduction/cancellation before delivery of shares) and clawback (recovery after delivery of shares) provisions apply.
*3 Based on finalized Basel III base
*4 “ESG assessment organizations’ assessment” are MSCI, FTSE, and Sustainalytics

2023/2024 TCFD Report

8

Climate Change

Executive Compensation

Indicators (KPIs) for performance-linked compensation

Governance Related to
Climate Change

In principle, compensation is paid with a combination of monthly compensation (comprising fixed compensation and individual performance compensation), bonuses for directors and executive officers (performance-linked bonuses), and stock
based remuneration (share delivery trust).
With respect to executive bonuses (performance-linked bonuses) and stock-based remuneration (share delivery trust),
the Company has introduced a system whereby each item listed in the table below is set as an indicator (KPI) and reflectedin the compensation amount. In fiscal 2022, we changed the rating system for stock-based compensation to better reflect
ESG-related contributions. Specifically, the ratio of “Short-term Performance: Medium-term Performance: ESG Overall
Rating = 1:1:1” is reflected in the performance evaluation of stock compensation. ESG assessment categories have beenreviewed in light of materiality and now is comprised of the following five categories: climate change, fiduciary duties (FD)& client satisfaction (CS), employee engagement, DE&I (empowerment of women), and assessments obtained from ESG
assessment organizations. The results are evaluated from both quantitative and qualitative perspectives and reflected in
executive compensation.

Chapter2
Our Approach to Climate Change

Strategy
Climate change, which is becoming ever more extreme by the day and causing significant damage in many places, is
one of the most serious environmental issues that threaten the sustainability of the global economy and society, and its
impact is starting to materialize as a financial risk for traditional financial businesses such as loan and insurance services forcompanies and real estate. The Group regards climate change as a priority social issue. To resolve climate change issues,
it is important to steadily advance the transition to a carbon-neutral society while also dealing with complicated interests
associated with existing legal systems, life styles and corporate activities.

Transition Plan toward
Carbon Neutrality

Our Approach to Climate Change

1. Risks and opportunities

Collaboration

Changes in the global
economyAdvancements indigitalization

Post-COVID-19 changes tosocial norms

Bank / Trust / Real estate
Asset management

IndividualHouseholds

Aging society

Initiatives of companies toaddress ESG management

Towards the sustainable development of society

Tie-up• Engagement
Consulting• Impact evaluation• Funding(debt/equity)

Funds

2. Road Map toward Carbon Neutrality in 2050
2022

2023
Transition plan...

“Iron & steel” “Automotive” by Sep. 2024
Halve intensity of 50% of AUM*3
from 2019
Halve intensity of 43% of AUM*4
from 201915 trillion yen

Nikko Asset Management
0.83 trillion yen

Approx. 2 trillion yen

142.7 billion yen
20.1 billion yen
23,763t-CO2e

Approx. 140.0 billion yen
Approx. 14.0 billion yen

22,228t-CO2e

2040

138~173(13)%~(31)%
34~41
≤ 0%

SuMi Trust Asset Management

Total amount of cumulative sustainable financing
Loan balance for coal-burning power plants
For projects
For corporations (new / expansion)
Net Zero GHGEs from OWN GROUP (Scope1, 2)
SuMi TRUST Bank Group*5(branch offices in Japan)

2030

Halve from Mar. 2020

Zero
Zero

Net Zero
Partial introduction of RE in
branch offices

FY2025:
7,224t-CO2e*6*1 Sumitomo Mitsui Trust Holdings, Inc. is a member of NZBA
*2 Highly carbon-intensive sectors are defined by the NZBA as the following priority sectors: power generation, oil & gas, real estate, transport, iron & steel, coal, cement, aluminum, and agriculture*3 Equal to ¥43 trillion, or 50% of the total of ¥85 trillion in assets under management as of the end of June 2021. The assets under management that have been excluded from the target are assets for which there is no established method for
calculating GHG emissions at present, such as sovereign bonds. We will consider adding assets when they become amenable to calculation in the future*4 Equal to approximately ¥13 trillion, or 43% of the total of ¥31 trillion in assets under management as of the end of December 2021
*5 Consolidated basis with SuMi TRUST Bank at the top*6 Joined GX League in FY2023 and set an intermediate reduction target. Emissions from company-owned sales vehicles are excluded from the FY2025 target

2023/2024 TCFD Report

9

Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

FY
2020
2021
Policy toward carbon neutrality by 2050
Carbon Neutral Commitment
Net zero GHGEs Emissions in inv. & loan portfolio (NZBA)
Joined*1
Power generation(intensity, g-CO2e/kWh)249
243(3.6)%
3.6
Oil & Gas(reduction ratio, Mt-CO2e)64
Real estate (intensity, kg-CO2e/m2)(0.8)%(0.4)%
Shipping (Portfolio Climate Alignment)
Other highly carbon intensive sectors*2
Net zero GHGEs in Asset Management portfolio (NZAMI)
Joined*1

Initiatives to Reduce
OWN GROUP’s Emissions• Managing products• Asset administration• Creating investments

Social issues
Persistently ultra-low
interest rates

Companies / Local Communities

Initiatives
Industry Groups

Purpose (reason for existence)

Creating new value with the power of trusts and let prosperous futurefor our clients and society bloom

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Favorable cycle of funds,
assets and capital in decarbonization

Investors

Balanced creation of both social value and economic value

To contribute to the sustainable development of society whilst achieving growth for ourselves,
guided by our Group Purpose (reason for existence)

Awareness of
Climate Change Opportunities

Under the Group’s shared Action Guidelines for Mitigating Climate Change, we strive to maintain an appropriate awareness of risks and opportunities stemming from climate change, and we endeavor to minimize our negative impact while
maximizing our positive effects.
With regard to risks related to climate change, we conduct risk management and monitoring of investments and loans
through continuous process reviews and climate change scenario analysis from the viewpoint of improving our response to
climate change.
With regard to opportunities related to climate change, aggressive investment in decarbonization technology is expected,
with Japan’s Ministry of Economy, Trade and Industry estimating cumulative public and private investment in Japan of ¥150
trillion by FY2030. The Group will contribute to achieving a carbon-free society by leveraging our unique functions as a trustbank group to promote the virtuous circulation of funds between households, companies and investors.

 ontribute to achieving carbon neutrality in society by leveraging the trust banking group’s wide-ranging and flexible functions
CTarget net-zero GHG emissions in investment and loan portfolios by 2050
To achieve net-zero emissions by 2050, a milestone target for 2030 will be formulated in FY2022 in line with the framework of the NZBA
Achieve net-zero greenhouse gas emissions in SuMi TRUST Group by 2030

Awareness of
Climate Change Opportunities

Carbon Neutral Commitment (Oct. 2021)

Transition Plan toward
Carbon Neutrality

In October 2023, the Group formulated a transition plan toward carbon neutrality for steadily advancing its Carbon Neutral
Commitment announced in October 2021.
After establishing governance and infrastructure, and setting indicators and targets, we will take full advantage of valueadded functions such as surveys, expertise, and partnerships, and through dialogue with each stakeholder, we will identify
management issues and needs, and provide a wide range of solutions to resolve these issues. By advancing these initiatives,
we aim to achieve net zero GHG emissions for OWN GROUP, contribute to the decarbonization of our clients, and realize
a carbon neutral society.
Please also refer to the “Progress of Our Approach to Carbon Neutrality” disclosed on October 31, 2023.

Our Approach to Climate Change

Transition Plan toward Carbon Neutrality

Transition Plan toward Carbon Neutrality (Oct. 2023)

Goal

Achieve Our Net Zero

Decarbonization of clients

Loan & Inv.
(NZBA)

Bank·Trust·AM

AM(NZAMI)

Sources of Added Value
Engagement

Survey*Bank and AM independently dialogue witheach stakeholder and understand Issues & Needs

Clarify issues which help enhance a Corporate value
through gap analysis

AM

ESG Real Estate survey

Expertise & Partnership*2
Internal and external high expertise
TBF
Team

BreakthroughEnergyCatalyst

GHG
Measurement
Certification
Carbon Credit

Indicator & Target*1 SuMi TRUST Bank carried out fact-finding surveys on various corporate efforts. “Governance Survey®” is the largest fact-finding survey in Japan on corporate governance of domestic listed companies. (every year since 2017) “ESG Real Estate Survey” is a fact-finding survey on real estate owners’ ESG efforts
at investment and management (since 2022)*2 Technology Based Finance (TBF) team (->p. 22), Breakthrough Energy Catalyst (->p. 23), Energy Capital Partners (ECP) (->p. 23)

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10

Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Governance & Foundation

RE
Energy Saving

Initiatives to Reduce
OWN GROUP’s Emissions

Strategy

Solution
Develop and provide products and services forthe transition toward a decarbonized society
Trust

OWN GROUP

1

Governance Survey®

BankingOWN GROUP

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Realize a Decarbonized SocietyWith the GFANZ and NZBA frameworks as a guide, we are formulating transition plans for four segments: banking, management, trust, and OWN GROUP.

Segment

Bank (NZBA)AM (NZAMI)

Segment

Trust

Entity*1

SuMi TRUST Bank

SuMi TRUST AM
Nikko AM

Entity*1

SuMi TRUST Bank

TimingNow-2050

Now-2050

TimingNow-2050• Stewardship activity

Initiatives

Decarbonization Business• Sustainable finance• “Tech × Policy × Fin.” by TBF• Utilize Impact equity• Sectoral strategy• Engagement• Monitor and exercise voting rights• Providing ESG products

Strategy

GovernanceFoundation

GHG targets• 2030 Intermediate targets by Sector• 2050 Net Zero
Monetary target• 2030 Sustainable finance target• 2040 zero balance of loans for coal fired thermal power
plants (new / expanded)

GHG targets• 2030 Intermediate targets• 2050 Net Zero

• Reinforcement of governance system and executive compensation• Establishment of risk appetite indicators• Human resource development and awareness-raising activities

Segment

OWN GROUP

Entity*1

SuMi TRUST HD

TimingNow-2030

Strategy• RE and energy saving• Improve the measurement• Utilization of carbon credits

Targets

GHG targets• 2025 Intermediate target*2• 2030 Net Zero

Initiatives to Reduce
OWN GROUP’s Emissions*1 Consolidated basis with the company as the top*2 Submitted the intermediate targets of branch offices in Japan of SuMi TRUST Group for FY2025 to the GX League

Real estate business• Decarbonization support for thereal estate sector

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Indicators& targets

Process
sophistication• Processes• Scenario analysis

Strategy

Awareness of
Climate Change Opportunities

Engagement

Formulate & implement stakeholder-specific engagement
strategies

Investor business• Enhancement of ESG
investment businessTransition Plan toward
Carbon Neutrality

Overview of transition plan toward carbon neutrality

Our Approach to Climate Change

1. Overview of transition plan toward carbon neutrality

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

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11

Climate ChangeOur Approach to Climate Change

2. SuMi TRUST Bank Strategy(1) Engagement policy
We will contribute to reducing GHG emissions of clients by identifying issues for decarbonization through continuous
engagement (dialogue) with them and developing and supplying solutions.
We will engage with 50 companies by the end of FY2023 and 150 companies by FY2025, mainly clients in highemission sectors such as power generation, oil & gas, real estate, shipping, iron & steel, and automotive & components.
Engagement (50 companies, 2022-2023)

Transition Plan toward
Carbon Neutrality

Our Engagement Strategy for Clients

Achievements on our Engagements

SuMi TRUST Bank

Clients

Consulting

Green Tech

Impact Equity

Carbon Credit

TBF

Approx. 40/50 companies*1

Consulting*2

Approx. 50 cases*3(FY2022 to Sep. 2023)(FY2021 to Sep. 2023)*1 The number of companies that have already been engaged with by the end of FY2023, out of 50 target companies*2 Consulting related to decarbonization: TCFD disclosure, CDP responses, support for GHG measurement, ESG training, etc.
*3 Number of contracts with business partners through SuMi TRUST Bank. Including multiple contracts of the same firm. Total from FY2021, when the service was first provided

Awareness of
Climate Change Opportunities

Sustainable FinanceEngaged Companies

Relationship with Local Communities

Realization of a Decarbonized Society
Local community

SuMi TRUST Bank

Examples of initiatives in local communities (->p. 29)
Univ.
Research inst.

Providing a wide range of functions

Building local ecosystems
Decarbonization of industrial clusters

Relationship with initiatives

Initiatives to Reduce
OWN GROUP’s Emissions

Clients

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

In addition to decarbonization through our clients, by offering the Group’s wide array of functions to local communities, wewill accelerate decarbonization in both the corporate and community sectors.
We will support the social implementation of innovative technologies through the provision of the Group’s functions andjoint research with universities and other research institutions.

Joins collaborative engagement and rule-making through participation and discussions in initiatives

HLEG

High-Level Expert Group on the Net-Zero Emissions Commitments of non-state entities. The members were called by the secretary general of
the UN, and an officer of SuMi TRUST Bank has been elected as an only member from Japan. Presented a recommendation about definition andconcept of net zero declaration at COP27
A private-public initiative in Japan aiming to realize a decarbonized society. At the management promotion WG, SuMi TRUST Bank actively
engaged in the adjustment of contribution to reduction as a leading company

GFANZ

A global coalition of financial institutions committed to the decarbonization of the actual economy. SuMi TRUST HD, SuMi Trust AM and Nikko
AM have joined it. Participate in the Japan Chapter Core Working Group, a branch office in Japan

Other Stakeholders
Takes serious view of dialogues with stakeholders and joins domestic and global initiatives in order to settle difficult
social issues
Continuously exchanges opinions to share and solve issues with environmental NGOs, etc. Carried out inspections
on fuel procurement for biomass power generation, triggered by dialogues with NGOs in FY2023 (in North America
and Southeast Asia)
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12

Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Japan Climate Leaders’ Partnership (JCLP) is a partnership of companies aiming to achieve a sustainable and decarbonized society, launched in
2009, which collaborates on decarbonization businesses and makes proposals on policies to the government. A member of SuMi TRUST Bank
serves as a coleader and actively leads the organization

Our Approach to Climate Change(2) Promoting decarbonization business
SuMi TRUST Bank will promote the following measures to realize a carbon neutral society.

Transition Plan toward
Carbon Neutrality

Expansion of sustainable finance
We will respond to the funding needs of our clients by expanding sustainable finance.

Long-term target for cumulative amount (including investor funds)

15 trillion*

Approx. ¥2 trillion¥(By FY2030)(End of FY2022)“Technology × Policy × Finance” by TBF Team

Finance for Social Implementation
Unique capacity & deep knowledge(individual)

Creative ideas through discussion(team)

Environment
Management

Hydrogen
Fuel cells
Biomass

Batteries / EV

Inorganic
Synthesis

Power systems andCommunications

Environment /Petroleum andcoal chemistry

Organic
Materials /Sanitation

Agricultural
crops

MechanicalEngineering /Metal

Mechanical engineering
Precision instruments

Urban /
Transport /DigitalEnvironment /Industrial policy

Technology: Support the promotion of innovation
Laboratory stage

Finance: Impact management
Socialimplementation

Demonstration test

Popularization
SpreadContinuous
operation* As of December 2023

We aim to solve social issues by combining the TBF team’s deep knowledge of technology with a policy perspective andthe wide array of functions of a trust bank.
Deep knowledge oftechnology

Wide array oftrust bank functions

Policy perspective

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13

Climate Change

Solve social issues

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM• Analyze reasons that prevent social implementation and provide solutions,
including financial options• Coordinate collaboration among companies and research institutes• Monitor the ongoing occurrence of positive impact• Promote the introduction of innovative technologies that have provenpotential for social implementation through basic and empirical research• Utilize expertise in green tech

Initiatives to Reduce
OWN GROUP’s Emissions

Technology Based Finance (TBF) Team*

Proof of concept

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Innovative technologies, massive investments, and national policy initiatives are key to tackling climate change. In 2021—
to better understand the latest technologies, deepen our dialogues with clients, and actively work on finance based on
the scientific perspective—we established the Technology Based Finance (TBF) Team at our Sustainability Management
Department.
With a mission to “contribute to the realization of a sustainable society by integrating technology, finance, and policy,
and by solving social issues together with like-minded partners,” the TBF Team is made up of members with experience intechnology in the four themes of (1) decarbonization, (2) resource recycling, (3) biodiversity, and (4) health and longevity.

Awareness of
Climate Change Opportunities* The targets of sustainable finance are financing operations that contribute to resolving environmental andsocial issues. This includes loans, syndicated loans, fixed income investment services, fund investments, financial advisory services, trustee services, impact equity investments, etc.

Sectoral strategy(3) Sophistication of process
SuMi TRUST Bank is continuously reviewing the process to advance the responses to climate change.

Commenced operation of climate change response process

GHGEs control system

Risk evaluation, Risk mitigation measures

 ets GHGEs reduction targets
S
Controls portfolios to achieve targets
Measures GHGEs

Evaluates each company’s transition risk in the target sectors
Risk mitigation measures responding to the transition risk rank (engagement)

Policies for specific sectors

arious checks from the view point of climateVchange risks at the examination phase of credit

Regular review

Initiatives to Reduce
OWN GROUP’s Emissions

Credit examination

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Based on the climate change transition risk sector heatmap, we identify key sectors to set GHG emission reduction targets.
After setting the intermediate targets, we set and manage various standards related to policies for specific sectors, credit
examination, and risk evaluation and mitigation measures.

Awareness of
Climate Change Opportunities

For sectors with 2030 intermediate reduction targets, we will formulate a sectoral strategy based on the NZBA and advanceour efforts to decarbonize that sector.
(For the power generation sector and the oil & gas sector, see P. 26-28; for the real estate and shipping sectors, where targets were set in October 2023, strategies are scheduled to be formulated by October 2024)

Transition Plan toward
Carbon Neutrality

SuMi TRUST Bank provides funds for solving social issues through impact equity as well as solutions using the technologiesof the investee companies.
In the area of climate change, we are focusing on investing in domestic and global green tech funds, companies, andprojects that are driving innovative green tech-related businesses, as well as acquiring cutting-edge trends and knowledge
in this field, with a view to business matching and other activities that will contribute to the realization of our clients’ decarbonization strategies. (See examples of leveraging impact equity on P. 23)

Our Approach to Climate Change

Leverage impact equity

Expansion of scope of climate change scenario analysis

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Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

We are gradually expanding scenario analyses of the transition risk and physical risk to grasp impacts on credit risk.
In FY2023, we analyzed the transition risk of overseas companies and the physical risk of project finance for solar power
projects in Japan (->p. 34).

(1) Initiatives at Sumitomo Mitsui Trust Asset Management Co., Ltd.

Engagement

Monitoring engagement
results• For approx. 40 Japanese companies among them, manages the progress in four stages, andmonitors how they implement measures and how they solve issues

Dialogue withgovernment agencies[Example] Exchanges opinions with Japanese ministries and agencies on issues Japanese companies are facing and global trends regarding climate-related information disclosureand transition

Leadership in initiatives• Leads discussions and activities at initiatives.
[Example] N ZAMI: Takes a position in the Advisory Group
Climate Action 100+: Promotes collaborative engagement focusing on Asian companies as a lead manager

Active participation insustainability-related initiatives• Selected companies with a large influence in agricultural supply chains at FSDA*2 and begancollaborative engagement

Policy advocacy• Recommends governments to strengthen their responses to environmental issues and toestablish a framework[Example] Exchanged opinions with President Lula’s new administration in Brazil on conservation of the forests of the Amazon region through IPDD*3

Exercising voting rights
We tightened the standards for dealing with climate change in the revised proxy voting guidelines in January 2022.
We oppose proposals for the election of directors in principle, if their policy corresponds to any of the following withouta reasonable explanation.

other similar frameworks✔  No mid- and long-term target setting in accordance with the Paris Agreement, or no disclosure of concretemeasures to realize the targets✔  No progress seen in reducing GHG emissions

Outside evaluations
The stewardship activities of SuMi Trust AM were introduced as a case study for the second time since 2022 in the Investor
Climate Action Plans (ICAP), an evaluation framework for management companies formulated in the Investor Agenda*4.
*4 A coherent and inclusive common leadership agenda on the climate crisis, focusing on accelerating investor action towards an economy with net zero carbon emissions

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15

Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM✔  Insufficient disclosure of information under the Task Force on Climate-related Financial Disclosures (TCFD) or

Initiatives to Reduce
OWN GROUP’s Emissions*1 Approx. 40 Japanese companies and approx. 60 foreign companies. Estimate that they cover approx. 40% of the total GHGs of all stocks held
*2 Financial Sector Defense Action Initiative (FSDA) was established to prevent deforestation in the grain production supply chain and promotes collaborative
engagement*3 The Investors Policy Dialogue on Defense (IPDD) is an initiative aimed at promoting policy engagement in forest conservation for the country and government
officials

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Collaborative• To promote effective activities, SuMi Trust AM focuses on approx. 100 companies*1 that have
major impacts on GHGs reductions globally

Awareness of
Climate Change Opportunities

IndividualWith investee companies

Transition Plan toward
Carbon Neutrality

Sumitomo Mitsui Trust AM has identified climate change as one of the ESG materiality items and supports the transition toa carbon neutral society through engagement, initiative activities, and the exercise of voting rights based on the risks andopportunities related to climate change for investee companies.

Our Approach to Climate Change

3. Strategies of the asset management companies

Engagement

Individual• A total of 70 names were selected to prioritized companies to dialogue with, including the top 60 names*in the emission ratio to total balance of Japanese stocks of Nikko AM and the top 10 names with highimportance of Scope3

Monitoring
Engagement• Enhanced ESG integration functions by the Global Sustainable Investment Team, which was newly established in Aug. 2022 in Singapore as the core base•E valuates corporate initiatives in accordance with the framework recommended by NZAMI• Manages the milestones of engagement progress and uses it for exercising voting rights and formulating
engagement policies

Promotion ofcollaborative
engagement• Promotes collaborative engagement with investee companies through investor associations and initiatives
such as Climate Action 100+ and the Asia Investor Group on Climate Change (AIGCC)• Continuously planning to expand efforts to improve understanding of climate change issues, address themand disclose information of companies for dialogue* Covers approximately 72% of the total GHG emissions of all stocks held in Japan (as of December 2019)

Revised the guidelines for the exercise of voting rights in April 2023 and set voting rights guidelines on climate change tofacilitate engagement with investee companies.
Our policy is to encourage response to climate change by exercising voting rights when the companies we have selected
for dialogue do not make progress.

Product offerings

4. SuMi TRUST Group’s governance/strengthening foundation
We have established a governance structure for supervision and execution centered on the Board of Directors, and monitor
it using a risk appetite framework (->p. 56).
We are working to educate our employees by strengthening human resource development programs aimed at improving
employees’ environmental awareness and knowledge about decarbonization, and implementing employee-participation
sustainability activities at sales offices nationwide.
GX online learning

Understanding of climate change is required in a variety of fields, including banking, trust, and asset management. By proactively providing opportunities for
employees to learn, we aim to raise awareness andknowledge about climate change.

Training

Offer GX online videos provided by Aidemy to ourgroup employees, as a learning tool (since Sep 2023)
Promote the improvement of employees’ knowledge
through workshops, etc. on climate change at SuMi
TRUST Bank
Workshops: approx. 30 times ,News release : approx. 20 times (in the 1st half of FY2023)“With You” activities (sustainability activities)
SuMi TRUST Bank implements “With You” sustainability activities in which nationwide
branch offices engage with local communities.
From August to September 2023, the “With You Eco Festival” was held with employee
participation.
The festival took on familiar themes such as the visualization of plastic waste reduction
and participation in Mission Uchimizu (water sprinkling) in cooperation with local communities around the branch.

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16

Climate Change

SuMi TRUST Bank Seeks
to Achieve the 17 SDGs
with the “With You”
Activities!

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Human resources development

Initiatives to Reduce
OWN GROUP’s Emissions

We are promoting a product composition that takes advantage of our global network while taking into account ESG factors.
Through our product offerings, we support companies’ efforts to reduce GHG emissions and realize a carbon neutral society.

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Exercising voting rights

Awareness of
Climate Change Opportunities

Collaborative

With investee
companies

Transition Plan toward
Carbon Neutrality

As one of the few Asian firms to sign the UK Stewardship Code, Nikko AM is strengthening its ESG initiatives in investment,
both in terms of organizational structure and personnel. We will promote the provision of products utilizing our global network and support the transition to a carbon neutral society.

Our Approach to Climate Change(2) Initiatives at Nikko Asset Management Co., Ltd.

By leveraging the wider-ranging functions unique to a trust bank, SuMi TRUST Bank will not only achieve our net zero target
but also continuously contribute to the realization of a carbon neutral society through providing solutions to clients.
Approaching Policy
Investors(Asset Owners)

Investment

Economic/Social
ReturnAsset Managers(Incl. Engagement)

Provide Products

Real Estate Business - Decarbonization support for
the real estate sector

SuMi TRUST Bank

By providing our various functions and services to clients,from the starting point of visualizing the client’s position
through surveys, we will contribute to decarbonization of
not only entrusted property but also the real estate sector
as a whole through our business (->p. 31).

GovernanceConsultation

Investee Companies

Contribute to sustainable development of the Japanese economy as a wholethrough promoting ESG investments

We aim to achieve net zero GHG emissions from OWN GROUP (Scope 1, 2) by 2030.
We are committed to expanding our measurement scope for GHG emissions, promoting the shift to renewable energy
and energy saving, as well as expanding adoption of recycled materials and low emission products through dialogue with
suppliers.
OWN GROUP’s GHGEs (Scope 1, 2): Record*1 and Target

We set a target to achieve net zero by 2030, and aresteadily reducing GHG emissions.

(thousand t-CO2e)

32.2
23.8

*1 Internal use of commercial vehicles was not included in the results until
FY2021. It is included in the measurement starting from FY2022

FY2020

FY2021

10.0

CarbonNeutralFY2022

2030

SuMi TRUST Bank, whose emissions account for more than 90% of OWN GROUP’s Scope 1, 2 emissions, joined the GX
League and set intermediate targets for FY2025*2.
*2 We set a target of 7,224t-CO2e ((83)% from FY2013) for Scope 1, 2 in total for SuMi TRUST Bank branch offices in Japan, but GHG emissions from internal commercial vehicles are excluded from the target

Future policy
Expanding ourmeasurement scope

We are expanding the scope of Scope 3 measurement to include Group companies and actively
adopting recycled materials and low emission products.

Third party certification

To ensure the reliability of our environmental data, we are considering expanding the scope of third-party
certification of our GHG emissions.

Carbon credits

We will make efforts to reduce emissions to the maximum extent possible through our own efforts, and wewill also consider the use of high-quality carbon credits for areas where reduction is difficult.

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17

Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Joined GX league

Initiatives to Reduce
OWN GROUP’s Emissions

Target for 2030 and current progress

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

6. Initiatives in OWN GROUP

Awareness of
Climate Change Opportunities

Monitoring(incl. Reporting)

Stewardship
Activities

ESG Investment
Consultation

Economic/Social Return

Provide ESG
Functions

Investment, Engagement/
Voting Rights

We will contribute to the sustainable development of theJapanese economy through our ESG investment business, which provides ESG functions such as consulting,monitoring, and products to investor clients, asset managers and investee companies.

ESG
Products

Transition Plan toward
Carbon Neutrality

Investment Business - Strengthen ESG investment
business

Our Approach to Climate Change

5. Strategies in the trust business(in round numbers)¥150 trillion*1(Cumulative total through FY2030)

Energy demand side

¥50 trillion –¥100 trillion*2 –• Renewable energy• Housing and buildings¥20 trillion –*1 Of the ¥150 trillion, GX Economy Transition Bonds account for ¥20 trillion*2 Some duplication exist
Source: Prepared by SuMi TRUST Bank based on materials disclosed by the Cabinet Secretariat

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Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM¥11 trillion –• Next-generation innovative reactor¥1 trillion –• Hydrogen and ammonia¥7 trillion –• Recycled carbon fuel¥3 trillion –• CCS¥4 trillion –etc.

Initiatives to Reduce
OWN GROUP’s Emissions¥14 trillion –• Automotive and storage batteries¥34 trillion –• Iron & steel, chemistry, cement, paper pulp
¥8 trillion• Zero-emission ships¥3 trillion –• Digital investment¥12 trillionetc.

• Next-generation network(Grid and balancing capacity)

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Energy supply side

Awareness of
Climate Change Opportunities

Public and private investment amounts in Japan based on “For the Realization of Green Transformation in Japan” prepared by the Ministry of Economy, Trade and Industry

Transition Plan toward
Carbon Neutrality

As social and industrial structures start to radically transform to achieve a decarbonized society, a huge amount of funds
has become necessary for green technological development and capital investment. According to trial calculations by theJapanese government, Japan alone will require ¥150 trillion in funds by 2030. In the United States, under the enacted Inflation
Reduction Act, the U.S. government plans to extend approximately US$ 369 billion (approximately ¥52 trillion) in ten years,
which will be used to provide tax credits and subsidies for renewable energy, electric vehicle (EV), and other climate changerelated industries. The European Union (EU) has also followed suit by announcing the Green Deal Industrial Plan, forming partof a worldwide trend in which countries are introducing policies to promote Green Transformation (GX) investments.
Meeting such substantial funding needs requires blended finance that mobilizes contributions from the public and private sectors. The company will aim to fulfill its role as a financial institution without missing such opportunities, and achievebalanced creation of both social value and economic value.

Our Approach to Climate Change

Awareness of Climate Change Opportunities

Resource efficiency• Increased demand for eco-friendly products and expansion of chemistry recycling businesses
due to transition to a resource recycling society

Energy source• Increased demand for renewable energy (wind power) and low carbon energy•S upplying zero emission energy such as green hydrogen, ammonia, synthetic fuel and biofuel,and building its supply chains

Product service
and market•E xpansion of businesses for e-mobility-related services driven by client behavioral changes,
and for new services, such as car-sharing•E xpansion of CO2 emissions reduction businesses fueled by progress in CCUS technologies• Increased demand for good carbon credit

Resource efficiency• Increased demand for eco-friendly products due to transition to a resource recycling society(low carbon cement, wood construction, recycled building materials, etc.)

Energy source• Increased demand for renewable energy (energy creation, electricity wheeled for self-use,
CPPA, etc.)• Increased demand for energy conservation, energy creation, and energy storage system

Product service
and market•E xpansion of businesses for EV-related services driven by client behavioral changes, and for
new services, such as car-sharing•E xpanded development and introduction of systems for visualization and management of
GHG emissions during building construction, operation, and demolition•M ore sophisticated certification systems and evaluation indicators for environment-friendly
real estate

Resource efficiency• Increased demand for eco-friendly products due to transition to a resource recycling society(low carbon steel, recycled materials, etc.)

Energy source•S upplying zero emission energy such as green hydrogen, ammonia, synthetic fuel and biofuel,and building its supply chains•C ommercialization and expansion of electric carriers

Product service
and market• Increased demand for zero-emission transport service driven by client behavioral changes• Increased demand for good carbon credit

Real Estate
sectorShipping sector

SuMi TRUST Bank will properly seize these fund mobilization opportunities and provide wide-ranging solutions thatfully leverage the unique capabilities of the trust group, thereby supporting clients’ transition to decarbonization
both financially and non-financially.
1. Engagement promotion (->p. 12)•C ollaborative decarbonization engagement strategy for clients•R elationship with local communities•E ngagements with initiatives and other stakeholders

2. Decarbonization businesspromotion (->p. 13)•E xpand sustainable finance•S olve social issues by integrating the TBF Team’s “Technology × Policy × Finance” insights•U tilize impact equity•S ectoral strategy

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Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM(2) Strategies to acquire opportunities

Initiatives to Reduce
OWN GROUP’s Emissions•E xpansion of electrification and increased demand for electricity in society as a whole due tothe decarbonization tide (spread and expansion of EVs and storage batteries, etc.)•V irtual power plant projects, demand response, etc. that contribute to the effective use of
distributed resources

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Product service
and market

Awareness of
Climate Change Opportunities

Oil & Gas
sectorEnergy source

Transition Plan toward
Carbon Neutrality

Power
Generation
sector•E
 xpansion of renewable energy (solar/wind power generation, etc.)•R ealization of non-fossil fuel backup power sources for green hydrogen, ammonia, etc.
•E
 nhanced advantage of nuclear power generation•R einforcement of the power grid system

Our Approach to Climate Change(1) Opportunity awareness by sector

Our Approach to Climate Change

SuMi TRUST Bank’s Initiatives for Carbon Neutrality
1. Expansion of sustainable financeTransition Plan toward
Carbon Neutrality

SuMi TRUST Bank is expanding sustainable finance with the aim of stimulating financial support for the resolution of social
issues. We target a cumulative total of ¥15 trillion by FY2030 for it. By providing sustainability solutions, we will continue tosupport the business activities of clients that contribute to the achievement of the SDGs, and to help enhance our clients’
medium- to long-term corporate value.

(1) Green Loan Sumitomo Metal Mining Co., Ltd. (Sep. 2023)

Arranger

Use of funds

Sumitomo Mitsui Banking Corporation,
SuMi TRUST Bank
Iyo Bank
Sumitomo Mitsui Banking Corporation
26 financial institutions¥25 billion
Facility expansion and construction of a newplant for increasing the production of cathodematerial for automotive secondary batteries

A plant under construction in the Besshi
area (Niihama City, Ehime Prefecture)

Lithium Nickel-Cobalt-Aluminum Oxide(NCA) used mainly in battery material(cathode material) for electric vehicles

Provided by Sumitomo Metal Mining Co., Ltd.

Initiatives to Reduce
OWN GROUP’s Emissions

Co-arranger
Agent
Loaner
Set up amount

September 27, 2023

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Date ofagreement

Awareness of
Climate Change Opportunities

SuMi TRUST Bank concluded a syndicated green loan agreement with Sumitomo Metal Mining Co., Ltd. (SMM). This agreement is in line with the Green Loan Principles released by the Loan Market Association (LMA)* and others and the Green
Loan and Sustainability-Linked Loan Guidelines released by the Ministry of the Environment.
SMM has also set a long-term vision of tackling management issues that contribute to society’s sustainable development, achieving continuous growth in its business and improving its corporate value, and becoming the “world leader in
the non-ferrous metals industry.” In its “2021 Medium-term Business Plan” from fiscal 2022 to 2024, SMM vows to continue
to work toward achieving its long-term vision, as well as continue to take on the challenge of appropriately responding tochanges in the social environment, such as accelerating trend of carbon neutrality, and digital transformation, under thetheme of “renewed challenge for change.”
SMM will allocate the funds procured under this agreement to facility expansion and a new plant construction for increasing the production of cathode material for automotive secondary batteries. The lithium-ion batteries using nickel-based
cathode materials produced and sold by SMM have high energy density and enhanceable capacity, and are seeing theirincreasing demand for use in electric vehicles for long-distance travel. Through facility expansion and the construction ofa new plant, SMM will increase the supply of high-performance battery materials that contribute to decarbonization andtackle climate change, including GHG reduction and stable supply of low carbon footprint products.

* Loan Market Association (LMA): Its objective is to improve liquidity, efficiency, and transparency in the syndicated loan markets in Europe, the Middle East, andAfrica. Its membership covers more than 700 organizations from over 60 countries

SuMi TRUST Bank concluded a Green Loan Agreement with INPEX CORPORATION (INPEX) in line with the Green Loan
Principles released by LMA and others.
INPEX will allocate the funds procured under this agreement to new investments and refinancing for projects meeting theeligibility criteria* of the Green Finance Framework released by INPEX in March 2023.
INPEX proactively engages in energy structure reforms toward the realization of a net zero carbon society by 2050, while
responding to the growing energy demands of Japan and the world and fulfilling its responsibility for the development andstable supply of energy over the long term. By doing so, INPEX will contribute to a brighter future for society and sustainably increase its corporate value. As a pioneer in Energy Transformation (EX), INPEX will provide a stable supply of diverseand clean energy sources from oil and natural gas to hydrogen and renewable energy, as its “basic policy towards a Net
Zero Carbon Society by 2050.” Its vision is to transform “net zero carbon” from an ideal to reality by around 2030.
* Renewable energy related business (business related to the development, construction, operation, and improvement of renewable energy such as wind, geothermal,
and solar power)

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Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM(2) Green Loan INPEX CORPORATION (Mar. 2023)

Our Approach to Climate Change

Basic policy towards a net zero carbon society by 2050

Oil & Gas business

Expand each business at an accelerated pace and become recognized as acredible key player

Maintain a stable energy supply on
the basis of thoroughly making thebusiness cleaner

2050
Challenge for net zero

Be a company rich in vitality,
creativity and diversity,
capable of sustainable development*1	(1) Hydrogen/ammonia, (2) Reducing CO2 emissions from oil & gas operations (CCUS*2),(3) Renewable energy, (4) Carbon recycling/new business, (5) Forest conservation*2 Carbon dioxide Capture, Utilization and Storage

January 16, 2023

Execution amount¥10 billion

Use of funds

Himeji Natural Gas Power Plant(4) Positive Impact Finance (PIF) initiatives
PIF is a lending product that encourages impact creation in environmental and social fields by not only evaluating theclient’s environmental and social initiatives in SuMi TRUST Bank’s positive impact evaluation, but also conducting ongoingengagement (dialogue) with the client for the duration of the contract period.
SuMi TRUST Bank has actively provided PIF ever since executing its first groundbreaking PIF in March 2019.
Through PIF, we will continue to support initiatives that have impact on the environmental and social fields of clients.

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Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

For details on individual PIF initiatives, see SuMi TRUST Bank’s website. (Japanese only)
https://www.smth.jp/sustainability/Initiatives_achievements/pif/portfoliolist

Initiatives to Reduce
OWN GROUP’s Emissions

Loan execution date

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

SuMi TRUST Bank concluded a transition loan agreement with Osaka Gas Co., Ltd. (Osaka Gas). This agreement is in linewith the “Daigas Group Green/Transition Finance Framework” formulated by Osaka Gas and the “Climate Transition FinanceHandbook” released by the International Capital Market Association.
Osaka Gas will allocate the funds procured under this agreement to a high-efficiency gas-fired power generation project(Himeji Natural Gas Power Plant). This power plant is equipped with a high-efficiency gas turbine with an inlet temperatureof 1,650°C class using liquefied natural gas (LNG) and a heat recovery steam generator, aiming to achieve a CO2 emission
factor of 0.307 kg-CO2/kW.
The Daigas Group is not only continuing its sustained efforts to achieve more widespread use of natural gas. It is also
decarbonizing its city gas materials by introducing methanation with renewable energy and hydrogen, and decarbonizing
power source by introducing renewable energy, with the aim to achieve carbon neutral by 2050. The transition loan agreement is part of the transition to achieve this goal.

Awareness of
Climate Change Opportunities(3) Transition Loan Osaka Gas Co., Ltd. (Jan. 2023)

Transition Plan toward
Carbon Neutrality

5 net zero businesses*1

A preventive maintenance finance scheme for reducing local governments’ lifecycle costs by infrastructure maintenance was adopted as an MLIT commissioned project.
Preventive maintenancenot conducted

Breakdown maintenancepayment

Preventive maintenanceconducted

Breakdown maintenancepayment

Preventive
maintenance costs¥1 million × 7 bridges= ¥7 million

Breakdown maintenancepayment¥10 million × 3 bridges= ¥30 million

No preventive
maintenance
Total¥70 million

Battery cascade utilization
schemeThe health of battery packs for energy storage isanalyzed using algorithms. By creating a system forsecondary uses of battery packs based on their degradation levels, the initial investment and cost of energy storage is reduced.
Standard battery
Primary use

Standard battery
Secondary use

Standard battery
Tertiary use

Used for batteryswappable EV trucks

Stationary uses, e.g.,large-scale solar
power generation,
residential use

Used foremergency
power supply

Cost reduction
With
preventive
maintenanceTotal¥37 million

MOE

Large-scale renewable energy
and hydrogen supply chain in
Tomakomai City

Participated in the “FY2023 Project to Construct
and Demonstrate a Model for Reducing the Costof Hydrogen Supply Using Existing Infrastructure”
implemented by SPARX Green Energy & Technology
Co., Ltd.

Initiatives to Reduce
OWN GROUP’s Emissions

Preventive
maintenance costs= ¥0Breakdown maintenancepayment¥10 million × 7 bridges= ¥70 million

MOE

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Infrastructure PPP Model
Project (unsolicited proposal)

MLIT

Awareness of
Climate Change Opportunities

Participation in demonstration projects

Transition Plan toward
Carbon Neutrality

The TBF Team aims to solve social issues by combining its deep knowledge of technology with a political perspective anda trust bank’s wide array of functions.
To date, the team has participated in demonstration projects of ministries and agencies, engaged in impact businesses
and more.
Among the demonstration projects was one for the Infrastructure Public-Private Partnership (PPP) Model Project (unsolicited proposal) commissioned by the Ministry of Land, Infrastructure, Transport and Tourism (MLIT). The team proposed a
preventive maintenance finance scheme for reducing local governments’ lifecycle costs by infrastructure maintenance, andthe proposal was adopted as an MLIT commissioned project for FY2023.
In one of the impact businesses, the team and Hashimoto City, Wakayama Prefecture created an impact report for
Panasonic Corporation’s demonstration experiment to develop a waste disposal system for a super-aging society.
Hashimoto City and Panasonic concluded a partnership agreement in 2021 on enhancing municipal services, focused on
resolving waste disposal issues in the community, and are carrying out a demonstration experiment for developing a newwaste disposal system. SuMi TRUST Bank has supported the impact evaluation for this demonstration experiment.
Through these activities, including launching new businesses, we will continue to support the social implementation of
innovative technologies and contribute to achieving a decarbonized society.

Our Approach to Climate Change

2. Initiatives of our Technology-based Finance (TBF) Team

Material
recyclingStandard battery leasing
Batteries are provided to users while retaining ownership.
Battery uses are altered based on battery health.
Data center
The residual value of batteries is made clear by the use ofbattery health evaluation algorithms.

Regional ecosystem initiatives
Kyoto Zero Carbon
Framework

Established a sustainable finance framework applying the emissions reduction planning program, etc.
of Kyoto Prefecture.

Impact evaluation support
Hashimoto“Hashimoto City Impact
City
Report”
Created the “Hashimoto City Impact Report” forPanasonic’s demonstration experiment to develop a
waste disposal system for a super-aging society.

Companies
in Kyoto
Loan
(SLL)

(1) CO2 visualization
Report(2) Reduction progress
disclosed

Financial
institutions

Kyoto Pref.

Report evaluation/disclosure2023/2024 TCFD Report

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Climate Change

OdawaraCity

Support for impact evaluationof local energy production for
local consumption of energy

To visualize the impact of the local energy production for local consumption of energy in Odawara City,
concluded a partnership agreement with Odawara
City, the Bank of Yokohama, and Hamagin ResearchInstitute, Ltd. and supported the impact evaluation.

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Kyoto
Pref.

(1) Participation in Breakthrough Energy Catalyst (Released in Nov. 2022)
SuMi TRUST Bank participates in Breakthrough Energy Catalyst (“Catalyst”), a program founded by Bill Gates to promote
the social implementation of innovative carbon neutral technology. We aim to acquire advanced knowledge in green techpossessed by Catalyst and create business matching and other opportunities that contribute to decarbonization of clients.

Clean Hydrogen

Long Duration
Energy Storage

Sustainable
Aviation Fuel
(SAF)

Direct Air Capture(DAC)

Manufacturing(decarbonized cement,
steel, plastics)• SuMi TRUST Bank

• Bank of America• General Motors• Mitsubishi Corporation• BlackRock Foundation• HSBC• American Airlines• Boston Consulting Group• Microsoft• ArcelorMittal• Citigroup• Shell, etc.

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Participation of global advanced companies (2 Japanese companies)

Awareness of
Climate Change Opportunities

Access to innovative technologies

Transition Plan toward
Carbon Neutrality

SuMi TRUST Bank will leverage impact equity to provide financing to companies, projects, and funds aspiring to solve
social issues, including climate change. In addition, we will develop solutions using the technologies, etc. of the investee
companies and provide them to clients.

Our Approach to Climate Change

3. Leverage impact equity(2) Collaboration with Energy Capital Partners (ECP) (Released in Jan. 2023)

One of the largest power generation capacity in the US*1

29GW

Investee Companies’
Renewable Power
Generation Capacity

2.8GW

Broad range of knowledge and investment

Investment
Performanceover
30 years*2

Hydroelectric power generation
Large-scale solar power generation
Electricity storage businessDecommissioning of nuclear power plants
Waste-to-energy
Solar power generation with storage batteries

2011

2018

2007

P ower generation(natural gas, etc.)

2013

E nvironmental infrastructureExhaust gas purification*1 Figures are based on the combined total of investee companies. Largest in the U.S. PE market*2 Including investment performance by its senior partners prior to the establishment of ECP (2005)

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Climate ChangeS torage batteries for vehicles
Support for efficiency ofrecycled energy

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Investee Companies’
Power Generation
Capacity

Initiatives to Reduce
OWN GROUP’s Emissions

SuMi TRUST Bank entered into a business alliance with Energy Capital Partners (ECP), one of the leading U.S. private equity(PE) managers specializing in the electric energy and environmental infrastructure sectors, and made investments in the firmto establish a joint fund for decarbonization. We will leverage ECP’s expertise and network to help clients solve management issues related to decarbonization and transition.

Provide and expand investment opportunities
in the infrastructure market

Decarbonization

All Japanese institutional investors

Limited partners
Infrastructure
fund

Investment advice

Socialinfrastructure

Mercuria Holdings Co., Ltd.

Name of fund
Assets under management

Eastwood Climate Smart Forestry Fund I
Approximately ¥60 billion or approximately US$ 415 million(calculated at the exchange rate of US$ 1 = ¥144.46 as of July 3, 2023)

Assets in which fund will be invested

Primarily, forest properties in North America

Period over which fund will be invested

15 years

Fund manager

Eastwood Forests and SFC Asset Management(both members of Sumitomo Forestry Group)

When fund was set up

June 2023

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Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

SuMi TRUST Bank, along with nine other Japanese companies, invested in a forestry fund formed by Sumitomo Forestry
Group.
The fund takes advantage of the expertise, know-how, and network of Sumitomo Forestry Group. With capital from participating companies, the fund will acquire and manage approximately 130,000 ha of forestland mainly in North America
by 2027, in addition to selling timber and generating and selling carbon credits in the U.S. By its very mechanism, the fundwill significantly increase the area of properly managed forest and contribute to delivering global climate change countermeasures and biodiversity.
SuMi TRUST Bank has invested in forestry funds like this one and developed a forestry trust. We will continue to contribute to the SDGs through a unique approach as a trust bank group.

Initiatives to Reduce
OWN GROUP’s Emissions(4) Investment in a forestry fund formed by Sumitomo Forestry Group (Released in Jul. 2023)

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Digitalinfrastructure

Awareness of
Climate Change Opportunities

Solve social issues which the domestic
infrastructure market is facing

Transition Plan toward
Carbon Neutrality

SuMi TRUST Bank made a limited partnership investment in Japan Infrastructure I, Limited Partnership, a comprehensive infrastructure fund receiving investment advice from Japan Extensive Infrastructure, Limited (JEXI).
JEXI is an investment advisory company with stakes held by SuMi TRUST Bank and Mercuria Holdings Co., Ltd.
The infrastructure that supports Japanese industries and society will require a large amount of funds in the coming
years to address challenges, such as decarbonization, development of digital infrastructure, and maintaining and reinforcing the social infrastructure. On the other hand, the investment market is immature, with limited opportunities forinvestors to invest in a wide range of infrastructure projects in line with their investment needs.
Under these circumstances, we aim to contribute to the resolution of social issues, the Japanese infrastructure market is facing, through the creation and provision of investment opportunities by leveraging SuMi TRUST Bank’s diverse
functions and capital, and acting as a joint between demand for funds and investment needs.

Our Approach to Climate Change(3) Circulation of funds in the domestic infrastructure sector by a comprehensive infrastructure fund(Released in Sep. 2023)

Overland Capital Partners, L.P.
(Limited partnership in Delaware, U.S.)First close

June 23, 2023

Investment target

Renewable energy-related assets, etc. in the U.S. and Canada

Fund offering period

To be one year from first close

General partner

Overland Capital Partners (GP), LLC(Invested and founded by Tyr Energy, Inc.)

First close investors*1 Investing through a limited partnership in the Cayman Islands*2 Investing via its U.S. local subsidiary, Tokyu Land US Corporation(6) Investment in renewable energy-related fund, Copenhagen Infrastructure V (Released in Jul. 2023)

Copenhagen Infrastructure V SCSp

First close

June 30, 2023

Country of incorporation

Luxembourg

General partner (GP)Copenhagen Infrastructure V GP S.à r.l.

Target fund size

12 billion euros (hard cap 16 billion euros)

Investment target

Renewable energy-related projects in OECD countries

Date of our investment

June 30, 2023

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Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Name

Initiatives to Reduce
OWN GROUP’s Emissions

SuMi TRUST Bank invested as a limited partner in a renewable energy fund managed by Copenhagen Infrastructure Partners(CIP), a Danish fund manager with one of the world’s largest assets under management in the field of renewable energy.
The fund will invest in renewable energy-related businesses in OECD countries, including floating and fixed-bottom wind
power, solar power, and other categories (storage batteries and power transmission lines), aiming total assets under management of 12 billion euros. CIP is planning and promoting floating offshore wind power projects in Scotland, Italy, South
Korea, the U.S., and other areas of the world. In April 2022, SuMi TRUST Bank invested in Copenhagen Infrastructure Energy
Transition Fund I for decarbonization technologies, such as green ammonia. The latest investment is the company’s second
investment in CIP managed funds.
In order to realize a sustainable society, SuMi TRUST Bank will broadly strengthen and promote collaboration with global
financial institutions such as CIP. We will also contribute to resolving issues in the ESG/SDGs field by utilizing our diverse
expertise, including project finance structuring know-how that we have gained from our international business experience.

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Tyr Energy, Inc. (consolidated subsidiary of ITOCHU)
SuMi TRUST Bank*1
Fuyo General Lease Co., Ltd.
Tokyu Land Corporation*2

Awareness of
Climate Change Opportunities

Name

Transition Plan toward
Carbon Neutrality

SuMi TRUST Bank entered into a contract to invest in a fund for renewable energy generation assets in the U.S. and Canada,
which was established through a subsidiary by ITOCHU Corporation (ITOCHU).
The fund was jointly conceived by SuMi TRUST Bank and ITOCHU, which has a leading track record in the North Americanarea. The fund will make investments of around US$ 2 billion in total in renewable energy-related assets, etc. in their latter
phase of development, mid-construction, and operational stages, while simultaneously utilizing the businesses and assetsthat the ITOCHU Group administers in North America as one of the means.
By leveraging the wide-ranging functions of the trust bank, SuMi TRUST Bank will provide to investors investment opportunities that contribute to solving social issues.

Our Approach to Climate Change(5) Investment in a renewable energy fund in North America (Released in Jul. 2023)

(1) Power generation sector
About the power generation sector
ImpactCurrent Situation* (Source) IEA World Energy Outlook 2022

Future trend/Worldview on decarbonization
Future trend

IEA NZE Scenario

Sector’s position and our stance
Attitude for Clients

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality• In Japan, importance is attached to the coexistence of the accel- • Net zero GHGEs from the power generation sector is essential ineration of decarbonization and the stable supply of electricity. advanced countries by 2035 and globally by 2040, to achieve thePlanning the “transition of thermal power plants utilizing hydrogen Paris Agreement’s 1.5°C target
and ammonia” and “strengthening power grid and increasing thecapacity of storage batteries” in addition to accelerating the introduction of RE• In the world, the introduction of RE will be accelerated in emerging countries. Transition to wind and solar power as a main powersource will be gradually promoted rather than the introduction of
new thermal power plants

Awareness of
Climate Change Opportunities• Its GHGEs account for approx. 40% in the global and Japan*, and it • In Japan, highly depends on coal and gas-fired thermal power,
has a significant impact on other sectors.
affected by stopped nuclear power plants. Japan has neither suffi• Approx. 11% of financed emission comes from the sector in SuMi cient energy grids nor enough places fit for RE facilities• In the world, the introduction of RE is promoted mainly in the West.
TRUST BankOn the other hand, emerging countries depend on thermal power
generation because of stability and costs

Transition Plan toward
Carbon Neutrality

SuMi TRUST Bank has formulated the following sectoral strategies for sectors that have set GHG intermediate reduction
targets. (For the real estate and shipping sectors for which targets were set in October 2023, strategies are to be formulated
by October 2024.)

Our Approach to Climate Change

4. Sectoral strategy

Risk & Opportunity

Conceivable risk for clients and SuMi TRUST Bank’s risk management

Initiatives to Reduce
OWN GROUP’s Emissions• Aims at “collaborative decarbonization engagement” through dia- • Based on clients’ risks and opportunities, creates their businesslogues with clients
opportunities, while properly managing the risks• Supports clients’ efforts in the power generation sector toward
decarbonization and stable supply of electricity, in collaboration
with the Japanese government on the GX and energy policies

Conceivable risk for clients

Technology

 ther energy sources caused by RE and energy saving
OInvestments toward decarbonization technologies

MarketDemand caused by EVs and storage batteries, etc.

Reputation

 ocial receptiveness of nuclear power generation
SReputational risk for clients due to carbon emissions and aggravated factors

Acute• Impacts on power generation, transmission and distribution facilities associated with intensified
abnormal weather

Chronic• Deteriorated working ratio of hydroelectric power plants associated with changed precipitationand snowfall

Physical Risk

SuMi TRUST Bank’s risk management
Intermediate Target• Sets intermediate targets• Sets risk appetite indicators

Sectoral Policy, etc.

• The sectoral policy for coal-burning thermal power plants“No finance for new and expansion projects, but finance for transition toward decarbonization”• Loan balance for coal-burning power plants (new/expansion) (Zero by FY2040)

In addition, carry out risk management in line with the processes responding to climate change (->p. 14)2023/2024 TCFD Report

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Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Transition Risk

Policy ompetitiveness of thermal power by carbon pricing
CCosts of measures against carbon emission regulations

Conceivable opportunity for clients

Product Service/Market

 lectrification and demand for electricity throughout the society by the decarbonization tide (spread &Eexpansion of EVs and storage batteries etc.)

SuMi TRUST Bank’s business opportunity and record
Sustainable finances

TBF Team

Support of social implementation of decarbonization technology utilizing expertise• Odawara city: Impact evaluation and support• Tomakomai city: Hydrogen supply chain

EquitySupply of risk money/development of RE business• Formed domestic general type infrastructure fund• Collaborated with Energy Capital Partners in the US• Invested in Japan Renewable Energy Corp., a company for renewable energy, with ENEOS Corp. (Feb. 2022)• Invested in North American renewable energy fundSocial implementation of Innovative Green Tech/matching with clients• Joined Breakthrough Energy Catalyst in the US

About the oil & gas sector
ImpactCurrent Situation• Its GHGEs account for as much as approx. 50%* (30% for oil and • Currently oil & gas are essential energy sources for daily life
20% for gas) of the world by energy source.
•T he importance of stable supply of energy is globally recognized• Approx. 20% of financed emission comes from the sector in SuMi again, facing the energy crisis caused by the Russian invasion of
TRUST Bank
Ukraine

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality(2) Oil & Gas sector

Awareness of
Climate Change Opportunities

Finance

Transition Plan toward
Carbon Neutrality

Energy Source

 dvantage of nuclear power generation
AEmerging new businesses related to RE and hydrogen/ammonia

Our Approach to Climate Change

Conceivable opportunity for clients and SuMi TRUST Bank’s business opportunity and record* (Source) IEA World Energy Outlook 2022

Future trend

IEA NZE Scenario• The demand for oil & gas is expected to decrease for a long term, • The rapid expansion of new energy and the technological innovation is required in the oil & gas sector to achieve the Paris
caused by the progress of decarbonization• Clients in the oil & gas sector are tackling to introduce new technol- Agreement’s 1.5°C target
ogies (CCS, CCUS, etc.) and shift to low carbon/decarbonized fuel • It is said that the reduction of GHGEs by approx. 30% by 2030, and(biogas, green hydrogen, synthetic fuel, etc.), and participate in RE approx. 90% by 2050 from the 2020 level is required
and mobility businesses

Attitude for Clients

Risk & Opportunity• Aims at “collaborative engagement” through dialogues with clients • Based on clients’ risks and opportunities, creates their business• Actively supports the orderly transition of our clients in the oil & gas opportunities, while properly managing the risks
sector, as recognizes the importance of coexistence of accelerating
the reduction of GHGEs and securing the stable supply of energy

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Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Sector’s position and our stance

Initiatives to Reduce
OWN GROUP’s Emissions

Future trend/Worldview on decarbonization

Conceivable risk for clients
 roduction costs by carbon pricing etc.
P
Costs for emission trading and energy-saving facilities caused by tightened regulations

Technology/Market

 emand for petroleum products caused by using non-fossil fuel trend (EVs, alternative fuel)DRE prices due to the shift to low-carbon power source

Reputation

 orporate value from delayed decarbonizationCAcceleration of divestment for oil businessesAcute osts for shutdown or malfunction caused by typhoons and abnormal weather (wind and floodCdamage)Chronic

 APEX for preventive measures against disasters such as rise in mean temperature, change inCprecipitation patterns and rise in sea levels

Physical Risk

Intermediate Target• Sets intermediate targets• Sets risk appetite indicators

Sectoral Policy• The sectoral policy for oil & gas drilling businesses“Makes financing decision, considering the impact on the environment and the conflicts with indigenous people and local communities. Especially deliberately examines oil sand mining, shale oil / gas businesses, drilling in the Arctic Circle and pipeline construction, focusing on impacts on the environment and the society”

Conceivable opportunity for clients and SuMi TRUST Bank’s business opportunity and record
Conceivable opportunity for clients

Energy Source emand for RE (wind power) and low carbon energyDSupply zero emission energy and build supply chains of hydrogen, ammonia, synthetic fuel and biofuel, etc.

Product Service/Market

 usinesses for EV related services and new services such as car-sharing, caused by behavior change of clientsBCO2 emissions reduction businesses caused by progress in CCUS technologies

SuMi TRUST Bank’s business opportunity and record
Sustainable finances

TBF Team

Tackling the next-generation energy by TBF• Developed a business model for low-cost hydrogen production• Invested in Tsubame BHB (ammonia)• Tomakomai city: hydrogen supply chain

EquityTackling renewable energy• Invested in Japan Renewable Energy Corporation• Formed domestic general type infrastructure fund• Collaborated with Energy Capital Partners
Social implementation of Innovative Green Tech/matching with clients• Joined Breakthrough Energy Catalyst in the US
Providing carbon credit (under consideration)• Funded a forestry fund formed by Sumitomo Forestry

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Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Finance

Initiatives to Reduce
OWN GROUP’s Emissions

Resource Efficiency

 emand for eco-friendly products and chemistry recycling businesses due to transition to a resource recyD
cling society

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

In addition, carry out risk management in line with the processes responding to climate change (->p. 14)

Awareness of
Climate Change Opportunities

SuMi TRUST Bank’s risk management

Transition Plan toward
Carbon Neutrality

Transition Risk

PolicyOur Approach to Climate Change

Conceivable risk for clients and SuMi TRUST Bank’s risk management

SuMi TRUST Bank will support the decarbonization of local communities by offering the trust group’s wide-ranging functions.

We will contribute to the establishment of sustainable local
communities, including decarbonization of regions, byleveraging the trust group’s wide-ranging functions, humanresources, and connections with economic agents and providing funds, including investors’ money, in cooperation
with community stakeholders.

Branch Offices

Total solutions by Bank, Trust and Industry
Corporate Clients: Large to Growing Companies		+

Diverse networks via
nationwide branches

Investor Clients:	Financial institutions Approx. 540
Approx. 1,000 NPOs

Transition Plan toward
Carbon Neutrality(1) Building a regional ecosystem

Our Approach to Climate Change

5. Local community initiatives

Image of business process
Networking(Origination)

Join a local network

Business concepts, POC, Joint PJ

Business operations

Support for PJ value chains development

Support for operations and scale-up

Creation of demand for funds/Scale-up
Expand business partners

Expand Investors

Fund formation based on “tips of AM”& “local financial institution networks”

Provide total solutions

Long term

ExamplesLocal
governments

Kyoto Pref.
(Nov. 2022)

Entrusted with the “Operations of the Consortium to Promote Decarbonization of Regional Financial
Institutions,” supports the establishment of the “Kyoto Zero Carbon Framework” system andpromotes the decarbonization of SMEs in cooperation with regional financial institutions

Tomakomai City,
Hokkaido(Jul. 2023)

Participates in a demonstration project in Tomakomai. Planning to build a system to stably
manufacture and supply renewable energy oriented hydrogen from the waste power plant owned by
Tomakomai City and electricity generated by a photovoltaic power plant on the site

Kanazawa University(Nov. 2021)

Participates in the “Co-creation Platform for Circular Economical System Supported by Completely
Recyclable Plant-derived Polysaccharide Plastics” led by Kanazawa University, and exploring
contribution through impact finance

University of Tokyo(Sep. 2022)

Participates in “Co-JUNKAN” platform, which aims “Beyond Zero Carbon.” Commences joint researchon the sharing, distribution, recycling structure, etc. of fund providers

Hiroshima University(Feb. 2023)

Participates in the Smart City Co-Creation Consortium of Hiroshima University. Supports solving
regional issues through industry-government-university collaboration, and providing funds and social
implementation for development(2) Decarbonization of industrial clusters
In Japan, many GHG emitting industries are located in ports and coastal areas and import most of their iron ore, coal, crudeoil, LNG, and other energy sources via ports. The government has been developing measures for decarbonizing ports andcoastal areas, including production of hydrogen and ammonia and development of programs for their use in the power
generation sector. Decarbonizing industrial complexes and harbors, which are industrial clusters, requires comprehensive
capabilities to collaborate with a diverse range of stakeholders. SuMi Trust Bank will support decarbonization of regions byproviding solutions through its technical expertise and networks.
• Possesses expertise and knowledge on
the technologies necessary for the decarbonization of clusters

Technical
expertise

Networks• Has networks with government agencies and academia that have influence on the decarbonization ofindustrial clusters• Has networks with regional financial institutions andcollaborates with them on numerous project• Provides finance irrespective of on/off
balance sheet and debt/equity

Solution• Aside from finance, has solutions for realestate and other areas

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Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

To visualize the impact of the local energy production for local consumption of energy in Odawara City
on the regional economy, society, and the environment, supports the development of a logic model toderive integrated impacts of individual companies’ efforts

Initiatives to Reduce
OWN GROUP’s Emissions

Universities

Odawara City,
Kanagawa Pref.
(Nov. 2021)

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Medium term

Awareness of
Climate Change Opportunities• Engagement and support from the upstream side with a view to building a business value chain

Our Approach to Climate Change

6. Investor business initiatives(1) Provision of sustainable balanced asset management

Overview of ESG Green Trust® <Mars.23>

Initiatives to Reduce
OWN GROUP’s Emissions

JCR Green Finance Framework Evaluation

Borrower(Limited liability
company)

Real estate nonrecourse loan
(Guarantee
applies)

SuMi
TRUST Bank
(Bank account)

Loan
Interest andrepayment

2023/2024 TCFD Report

Trust money

ESG Green Trust®
<Mars.23>
Jointly operated designatedmoney trust(Trustee: SuMi TRUST Bank)

30

Climate Change

Dividend andredemption

Investor

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Interest andrepayment

Debt guarantee
Guarantee fee

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

SuMi TRUST Bank formed a jointly operated designated money trust with Green Finance Framework Evaluation (productname: “ESG Green Trust® <Mars.23>”), which is backed by real estate non-recourse loans held by the Bank.
The framework adhered to by the ESG Green Trust® <Mars.23> underwent the JCR Green Finance Framework Evaluation(evaluation of green finance policy), the green finance evaluation method of the Japan Credit Rating Agency, Ltd. (JCR). The
evaluation found that the framework meets the relevant criteria of the Green Bond Principles and Green Bond Guidelines,
and awarded the highest comprehensive rating of “Green 1 (F).”Through the ESG Green Trust® <Mars.23>, SuMi TRUST Bank will establish new connections between broad-ranging
investor clients, who are inclined toward sustainability investment, and business clients, who are engaged in the development, acquisition, and operation of green buildings, and contribute to a positive cycle of funds, assets, and capital for
resolving social issues.

Awareness of
Climate Change Opportunities(2) Jointly operated designated money trust with Green Finance Framework Evaluation “ESG Green
Trust® <Mars.23>”

Transition Plan toward
Carbon Neutrality

SuMi TRUST Bank offers balanced asset management for corporate funds that integrates sustainability and ESG considerations and includes private assets (illiquid assets) as investment targets. While balanced asset management involves grouping
together multiple products from the traditional four asset (may include alternatives) categories, this asset management comprises only products that meet the Bank’s ESG investment criteria. The strategy is to pursue social returns contributing to theresolution of ESG issues, alongside economic returns focusing on downside protection and profit pursuit.
Coupled with the expansion of the ESG investment market, this fund is promoted by not only the corporate pension side
but also parent companies. The balance has exceeded ¥150 billion as of the end of October, one and a half years after thefund’s establishment. It is being adopted by broad-ranging corporate pension funds.

(1) 2023 ESG Real Estate Survey Survey

0%

10%

(i) Reflected quantitatively

20%

30%

40%

10.3%

(ii) Reflected qualitatively

31.5%(iii) Not reflected (under consideration)

29.1%(iv) Not reflected (not considered)(v) Other

32.1%
3.0%

CASBEE for Real Estate

39%

Consulting by
SuMi TRUST Bank

592 cases (total 1,489 cases)* As of Sep. 30, 2023

(3) Carbon neutrality support services for real estate under management Trustee
SuMi TRUST Bank provides beneficiary services, such as GHG emission calculation support and a non-fossil certificate purchasing service for real estate in trust, and supports clients’ efforts to achieve carbon neutrality.

Trustee
Systemoperator

Non-fossil certificate trustee purchasing service

Systemutilization(2) Making
a bid

Beneficiary

Japan
Electric Power(3) Non-fossil
Exchange

Usage of electricity,gas, etc.

SuMi
TRUST Bankcertificate
issuance

Trustee(1) Instructions

Beneficiary
SuMi
TRUST Bank

Data entry (visualization of GHG emissions)(4) GRESB real estate investor member Investor
In May 2023, SuMi TRUST Bank joined GRESB as a real estate investor member, in its role as a gatekeeper entrusted withreal estate investment management by clients.
GRESB is an organization that conducts an annual benchmark assessment for measuring the ESG initiatives of real estate firms and funds. We
will promote ESG investments in real estate by leveraging the data andassessments GRESB possesses to make investment selections and carryout engagement.
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Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

GHG emission calculation support

Initiatives to Reduce
OWN GROUP’s Emissions

SuMi TRUST Bank has participated in environmental certifications since their development phase, including CASBEE
for Real Estate, which evaluates the overall environmental
performance of buildings, and CASBEE-Wellness Office,which specializes in the health and comfort of office users.
In addition to supporting the visualization of the environmental performance of real estate through certificationacquisition consulting, we also help identify challenges
and make recommendations for improving environmental
performance.

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality(2) Support for CASBEE certification
application Solution

Awareness of
Climate Change Opportunities

Question example from the 2023 ESG Real Estate Survey
Q. How is ESG information reflected in your decisionmaking criteria for real estate investment?
(multiple answers allowed)

SuMi TRUST Bank and Sumitomo Mitsui Trust ResearchInstitute conduct a survey on ESG initiatives in real estate
investment and management. The surveyed include realestate management companies, real estate companies,and construction companies.
Through this survey, we will help participating companies
and other clients carry out even more initiatives.

Transition Plan toward
Carbon Neutrality

Approximately 40% of the CO2 emissions in Japan are said to be attributed to the construction and operation of buildings.
Additionally, as humans spend a significant amount of time indoors, the environmental conditions of buildings influence
human health and well-being. Real estate, therefore, has an impact in many environmental and social aspects.
The Group will leverage its characteristics as a trust group with diverse roles related to real estate, including providerof solutions for increasing real estate value, trustee, investor, and lender, to contribute to achieving carbon neutrality
with real estate as the starting point.

Our Approach to Climate Change

7. Initiatives based on real estateTransition Plan toward
Carbon Neutrality

SuMi TRUST Bank executed a loan for “Paradise,” which is a six-story timber office building now under construction in
London by the UK real estate developer Bywater Properties and the Sumitomo Forestry Group.
Due to the use of timber and other materials, embodied carbon emissions in the construction lifecycle of this property are
significantly less than those of conventional reinforced concrete structures. According to design phase calculations, the carbon emission reduction exceeds the 2030 goals set by the Greater London Authority (GLA). Additionally, the timbers used
for this property are sourced from sustainable forests and have removed 1,884 tons of carbon by the time they are grown.
This construction project received the 2021 World Architecture Festival Awards in the Climate, Energy and Carbon
Category and the 2020 New London Awards in the Working Category.
SuMi TRUST Bank will continue to contribute to the decarbonization of the real estate industry through loans for sustainable structures.

Our Approach to Climate Change(5) Loan for timber office building in London Lender

Awareness of
Climate Change Opportunities

Interior (before occupancy)

8. Initiatives by subsidiaries
Acceptance of JCM Eco Lease project in Vietnam

Reports andcorresponding adjustments

Japan

Promotion of excellent
decarbonization technologies
and implementation of
mitigation activities
Managed and operated by the jointcommittee consisting of representatives
from both countries

Utilization for achieving
Japan’s reduction goals

Credits

DC
AC
Communication line

Reports andcorresponding adjustments(5) Weather
observation device

Partner country
JCM
project
Measurement, Reporting,
Verification(9) Monitoring system(6) Power meter

Greenhouse gas emission
reduction andabsorption amount
Existing distribution board(8) AC powercollection board

Source: Ministry of the Environment, “JCM Model Project/Co-Innovation Project Call for
Proposals Briefing”

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32

Climate Change(2) Inverter(4) Data logger

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Solar power generation system(1) Solar cell module   (3) Rack (7) Cables

Implemented based on Article 6 of the Paris Agreement

Initiatives to Reduce
OWN GROUP’s Emissions

Sumitomo Mitsui Trust Panasonic Finance, together with BIDV-SuMi TRUST Leasing Company, Ltd (BSL), a joint leasing
venture of SuMi TRUST Bank and the Bank for Investment and Development of Vietnam, applied for the Joint Crediting
Mechanism (JCM) Eco Lease Scheme of the Financing Programme for JCM Model Projects in FY2022. The application was
submitted for a rooftop solar power generation system at an aluminum wheel factory in Vietnam, and our proposal was
accepted in Vietnam for the first time.
This scheme is designed to reduce GHG emissions in developing countries, etc. by utilizing superb decarbonization
technologies, and it is carried out by a Japanese leasing company, as the representative operator of the international consortium. The reduction amount is measured, reported, and verified (MRV).
This scheme is being implemented through the cooperation of the Vietnamese and Japanese governments. Throughthis scheme, Sumitomo Mitsui Trust Panasonic Finance will continue to help achieve a carbon-free society both at home
and abroad.

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Exterior

Transition Plan toward
Carbon Neutrality

In SuMi TRUST Group Carbon Neutral Commitment announced in October 2021, we set a target of achieving net zero GHG
emissions (Scope 1, 2) by 2030.
In addition to reducing energy consumption, we will accelerate the shift to renewable energy, mainly for electricity, andaim to achieve net-zero GHG emissions for the entire Group, including major offices in Japan, as well as overseas offices
and domestic and overseas Group companies, as early as possible. To ensure the reliability of environmental data, SuMi
TRUST Bank (branch offices in Japan)—the core of the Group—acquired third-party certification for a portion of its GHG
emissions starting this fiscal year (->p. 66).

Our Approach to Climate Change

Initiatives to Reduce OWN GROUP’s Emissions

Expanding the introduction of renewable energy

Applicable offices
Domestic offices, London office (Europe, Middle East and Africa Division)
Domestic offices
UK subsidiary (NAM Europe)

Scope 3 (upstream) GHG emissions measurement

Joined the GX League
The GX League began full-fledged activities in FY2023 as a place where industry, government, academia, and finance cometogether to take on the challenge of GX, and to engage in discussion and implementation of transforming the entire economic and social system and creating new markets. SuMi TRUST Bank, whose emissions account for more than 90% of OWN
GROUP’s Scope 1, 2 emissions, joined the GX League in June 2023 and set intermediate reduction target*3 for FY2025.

In recent years, online sales activities have rapidly become more common, and the use case and usage frequency of company cars as a mode of transportation has changed. Accordingly, SuMi TRUST Bank started optimizing its fleet and reduced
its vehicle count by approximately 20% year on year in FY2022.
Regarding company cars that will continue to be used as well, the Bank is considering the lease contract periods ofexisting cars as well as trends in social infrastructure development, including charging equipment, to gradually shift tolow-emission cars, thereby promoting the reduction of GHG emissions through lower gasoline use.

Carbon credits
In March 2023, we purchased 500 tons of J-Credits issued by Nishiawakura village in Okayama prefecture. This is equivalent
to about three years of CO2 emissions by SuMi TRUST Bank in Okayama Prefecture. We plan to use the purchased J-credits
to offset OWN GROUP’s future CO2 emissions. We will make efforts to reduce emissions to the maximum extent possible
through our own efforts, and we will also consider the use of high-quality carbon credits for areas where reduction is difficult.
*1 Corporate PPA: An agreement by a consumer to purchase renewable-energy power from a power producer (a power purchase agreement). Offsite corporate PPAs
use a model that involves the establishment of power generation facilities at a location distant from the demand location to supply power to the final consumer
through a power retailer.
*2 A certificate showing that environmental value has been achieved by generating electricity from sources that do not emit CO2. SuMi TRUST Bank obtains non-fossil
certificates based on the tracking of power-source information for power generation facilities, which brings environmental value.
*3 Set a target of 7,224t-CO2e ((83)% compared to FY2013) for Scope 1, 2 in total for the branch offices in Japan of SuMi TRUST Bank. Note that emissions from company cars are excluded from the calculation of the FY2025 target.

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Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Reducing company cars and shifting to low-emission cars

Initiatives to Reduce
OWN GROUP’s Emissions

In April 2019, we formulated SuMi TRUST Group Zero Plastic Waste Declaration to help reduce plastic use, which canadversely affect climate change and the ecosystem, as part of our efforts to address environmental issues.
This is the first time we measured a portion of Scope 3 (upstream) emissions in FY2022. By accurately tracking GHG emissions in our supply chain, we will actively promote the use of recycled materials and low emission products when purchasingmaterials going forward.

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

100% renewable energy offices
Company name
SuMi TRUST Bank
Sumitomo Mitsui Trust Panasonic FinanceNikko Asset Management

Awareness of
Climate Change Opportunities

To reduce GHG emissions from electricity consumption at our Group’s office buildings and branches, we aim to achieve
net-zero electricity consumption by combining electricity procurement from renewable energy sources through corporate
PPAs*1 with offsets from electricity procurement using non-fossil certificate*2. In addition to shifting to 100% renewableenergy at each office, we began procuring solar power at the Shiba Building and Fuchu Building in Tokyo as well as attwo branches (the Kyoto Branch and Himeji Branch) in the Kansai area in FY2021, making use of an off-site corporate PPA
system. We will continue to work on switching to renewable electricity and procuring certificates based on the situation ineach country and company, and further clarify measures to achieve net-zero emissions.

Our Approach to Climate Change

Awareness of Climate Change Risks
Scenario analysis

Risk type

SectorTransition risks

2020

Physical risks

Housing loans

2020¥7 billion increase in credit-related costs compared to 2019

Transition risks

Shipping sector

2021

There is a huge difference in financial impacts depending on the assumed
scenarios in terms of the carbon price, increase in costs due to the shift toalternative fuel, etc. We exchanged opinions with clients.

Physical risks

Real estate sector(non-recourse loans)

2022

Limited effect on credit rating. Issues include the need to refine the estimated amount of damage in the city center as well as potential risks that
include damage to underground infrastructure and the prolonged effectsof such damage.

Transition risks

Domestic
corporations

2022

Compared to the Current Policies (3.0°C scenario), in Net Zero 2050 (1.4°C
scenario) credit-related costs increase by ¥9.2 billion on a cumulative basis
through 2050, while in Below 2.0 (1.6°C scenario) decrease by ¥1.2 billion.

Physical risks

Real estate sector(J-REIT)2022

The impact of generated credit-related costs would be about ¥20 million
even if all properties simultaneously suffered a 500-year disaster.

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Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

In this transition risk analysis, we included overseas corporations and analyzed the impact on credit-related costs after
conducting simulations of changes in credit ratings up to the year 2050 for each climate change scenario specified by theCentral Banks and Supervisors Network for Greening the Financial System (NGFS). As for as analysis method, like in theprevious year, in addition to a sector-level top-down analysis covering all sectors, we conducted a credit rating simulation
analysis by combining an individual company-level financial simulation (bottom-up approach) for sectors identified as having high transition risks in the transition risk heat map.
As a result of estimation, compared to the Current Policies (3.0°C scenario), the Net Zero 2050 (1.4°C scenario) results ina ¥90.3 billion increase in credit-related costs on a cumulative basis through 2050, and the Below 2.0 (1.6°C scenario) results
in a ¥52 billion increase in credit-related costs.
In the physical risk analysis, we analyzed the damage to equipment and materials resulting from landslides and snowfall(acute risk) for solar power generation projects, which are among the domestic renewable energy-related project financetransactions that have been growing in recent years.
The results show that the impact on credit costs resulting from landslides on solar power projects is limited to about ¥400
million cumulatively through the year 2100 under the 4°C scenario. In addition, by quantifying the risk of damage fromlandslides and snowfall for each project, we are able to evaluate insurance coverage adequacy, as well as to understandregional diversification and regional differences in the impact of climate change, which will be used to enhance credit andrisk management operations going forward.

Initiatives to Reduce
OWN GROUP’s Emissions

Main analysis results
If power generation companies do not invest in renewable energy, their
credit ratings will be downgraded by two to three notches on average.

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Fiscal year

Power generation
sectorAwareness of
Climate Change Opportunities

SuMi TRUST Bank’s initiatives of scenario analysis to date

Transition Plan toward
Carbon Neutrality

Regarding direct climate change-related risks associated with its operations, SuMi TRUST Group is aware of disaster risks tohead and branch offices, such as damaged buildings, flood by tsunamis and fires as well as resulting risks including impacts
on business continuity and restoration costs. To prepare for these situations, we have devised measures such as various
drills to ensure business continuity and formulated the Business Continuity Plan (BCP).
In addition to examining the direct impact of transition and physical risks on operations and how to respond to them, we
conduct scenario analyses to understand the future impacts on our portfolio. SuMi TRUST Bank considers such initiatives to
be tools for confirming the sustainability of our business model and strategy, confirming effects on our management plan,and dialogue and engagement on climate change with borrowers and investees, and we have expanded the scope of ouranalysis based on the characteristics of our portfolio.

Risk typeTransition risks

Physical risks

Scenarios

NGFS Scenarios• Current Policies• Below 2.0• Net Zero 2050
•D
 elayed Transition

IPCC*1 RCP*2 2.6 (2°C scenario)
RCP 8.5 (4°C scenario)

Analysistargets

All sectors
Domestic and overseas corporations

Domestic solar power generation projects

Analysis period

Up through 2050

Up through 2100

Analysisindicators

Impact on total credit-related costs

Risk exposure of individual projects, and impact on creditrelated costs across entire portfolio

Analysis results

Cumulative impact compared to Current Policies
Below 2.0: +¥52.0 billion
Net Zero 2050: +¥90.3 billion
Delayed Transition: +¥79.7 billion

Cumulative credit costs resulting from landslides and snow
damage up through 2100: Approximately ¥400 million
Confirmed sufficiency of measures such as geographic
diversification of high-risk projects and insurance coverage

Scenario
Orderly

Assumptions, etc.
A scenario that limits global warming to 1.5°C throughstringent regulations and advanced innovation, reaching
net zero CO2 emissions by around 2050
A scenario that gradually increases the stringency ofregulations, giving a 67% chance of limiting global
warming to below 2°C

Net Zero 2050

Below 2.0˚C

Delayed Transition

A scenario that assumes that GHG emissions do notdecrease until 2030, which means strong policies would
then be needed to limit global warming to below 2°C

Hot House World

Current Policies

A scenario that assumes that only currently implemented
policies are maintained, leading to high physical risks

RCP8.5 scenario

A scenario with the maximum GHG emissions for theyear 2100. Under this scenario, the global temperature
is predicted to rise by 2.6 to 4.8°C by 2100 (compared tobefore industrialization).

*1 The Intergovernmental Panel on Climate Change (IPCC): Established by the United Nations Environment Programme (UNEP) and World MeteorologicalOrganization (WMO), this organization comprehensively evaluates and analyzes anthropogenic climate change, its effects, and policies to adapt to and mitigate itfrom a scientific, technical, and socioeconomic perspective and then recommends measures based on the results.
*2 R epresentative Concentration Pathways. The numbers, such as 2.6 and 8.5, indicate the global warming effect (called radiative forcing).

Projected carbon price (carbon tax) assumptions for each NGFS scenario(USD(2010)/tCO2)
500
Net Zero 2050 (1.4°C scenario)
Delayed Transition (1.6°C scenario)

400

Below 2.0 (1.6°C scenario)
Current Policies (3.0°C scenario)

300

200

100

(Source) N GFS Climate Scenario Database,
REMIND model

0

2020

2025

2030

2035

2040

2045

2023/2024 TCFD Report

2050 (Year)

35

Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

RCP2.6 scenario

A stringent scenario aimed at limiting the future global
temperature rise to below 2°C. Under this scenario, theglobal temperature is predicted to rise by 0.3 to 1.7°C by
2100 (compared to before industrialization).

Initiatives to Reduce
OWN GROUP’s Emissions

IPCC scenarios

Disorderly

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

NGFS
Scenarios

Awareness of
Climate Change Opportunities(Acute risk) Flood (landslide), snow damage(Chronic risk) Changes in solar radiation and snowfall

Transition Plan toward
Carbon Neutrality

Risk details

Policy and regulatory changes
Supply and demand changes

Our Approach to Climate Change

Scenario analysis overview

Our Approach to Climate Change(1) Transition risk
Process

Transition Plan toward
Carbon Neutrality

Changes in policies, regulations, and the industrial structure caused by the transition to a decarbonized society are assumed
to change the carbon price and supply and demand, thereby affecting the business of borrowers. For our recent scenario
analysis, we assumed that our exposure as of the end of September 2023 will remain unchanged up through 2050, and we
simulated the effects on the credit ratings of borrowers in each climate change scenario.
For this simulation, we used a method of estimating changes in ratings for the entire exposure based on calculations
using financial data and emissions forecast data for a sample of borrowers, and did not include individual factors such as
expected future changes in business models or investment plans for decarbonization and the impact of such plans.
Transition risk analysis process
Current Policy/Below 2.0/Net Zero 2050/Delayed Transition

Main applied factors

Increased carbon tax burden

Increased emission reduction
costs

Changes in supply and demand
and market shares

Impact on corporate
finance

Income

Costs

Debt

Credit rating fluctuations

Credit-rating transition ratio by sector

Increased total credit costs

Analysis results

36

Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

2023/2024 TCFD Report

Initiatives to Reduce
OWN GROUP’s Emissions

Compared to the Current Policies (3.0°C scenario), our results indicated a cumulative increase in total credit costs by 2050
of ¥90.3 billion in the Net Zero 2050 (1.4°C scenario). Similarly, our results indicated a cumulative increase of ¥52.0 billion in
the Below 2.0°C (1.6°C scenario) and an increase of ¥79.7 billion in the Delayed Transition (1.6°C scenario)—which assumes
delays in promoting decarbonization initiatives and a rapid rise in the carbon tax—yielding major differences between the
different scenarios.
By sector, the carbon tax levels varied widely between the NGFS scenarios, confirming the tendency for credit costs to
be calculated higher in sectors with higher GHG emissions (e.g., power generation, oil & gas, shipping, and materials) due
to the heavy burden in these sectors.
As for overseas borrowers, we saw a relatively strong impact in the air transport sector, which has significant exposure.
Based on the above, while there are differences in impact by sector and region, overall, the financial impact projected in
the current simulation results is minimal.

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Financial impact on
SuMi TRUST Bank

Awareness of
Climate Change Opportunities

Climate change scenarios

Process

Physical risk analysis process
IPCC RCP2.6/RCP8.5

Estimation of disaster damage
probability

Frequency of occurrence
Estimates cumulative probability of damage during the transaction period
according to precipitation and topography based on the location information of the
project in collaboration with Weathernews Inc.

Estimates total credit costs attributable
to disaster damage
Verifies insurance coverage and regional
concentration based on cumulative
probability of damage for each property.

Application to finance operations

Analysis results

Probability of landslide damage (5-year average) for SuMi TRUST Bank’s solar power generation project finance projects
over time(%/year)
1.4
2°C scenario

1.3

4°C scenario

1.2
1.1
1.0
0.9
0.8

2025

2030

2035

2040

2045

2050

2055

2060

2065

2070

2023/2024 TCFD Report

2075

2080

2085

2090

37

Climate Change

2095

2100

(Year)

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

The risk from landslides is estimated to peak around 2050 under the 2°C scenario and around 2080 under the 4°C scenario,
as changes in precipitation patterns due to climate change lead to increasingly severe flood damage.
Although there are regional variations in the risk of equipment damage due to snowfall, there is a general decrease insnowfall due to global warming when viewed over time. However, when viewed on an individual project basis, some projects showed snow weight in excess of the load-bearing capacity.

Initiatives to Reduce
OWN GROUP’s Emissions

Analysis of effects on
borrower creditworthiness

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Climate change scenarios

Awareness of
Climate Change Opportunities

In this analysis, based on the location data of solar power generation projects financed by SuMi TRUST Bank, we analyzed
the time-series changes in future disaster risk for each project using a long-term forecast model of landslides and snowfall,and simulated credit costs using credit ratings. For project finance, the probability of damage during the transaction period
is calculated based on a simplified modeling method that reflects the duration of the project and the repayment schedule.
For the analysis, we collaborated with Weathernews Inc. For landslide disasters, we calculate estimates up to the year
2100, using the landslide model of the National Aeronautics and Space Administration (NASA) and precipitation data fromthe National Institute for Environmental Studies (NIES2020). For snowfall, we applied the Meteorological Research InstituteAtmospheric General Circulation Model (MRI-AGCM3.2/NHRCM) and analyzed the physical risk up to the year 2100 using
the snowfall depth and snow water equivalent in all layers of the snow under the 2°C and 4°C scenarios in the Database for
Policy Decision Making for Future Climate Change (d4PDF), an ensemble climate projection database that helps address
global warming.

Transition Plan toward
Carbon Neutrality

In asset finance, which includes project finance, cash flows are directly affected by damage to the financed assets caused
by natural disasters. In this analysis, we took the approach of estimating credit costs by focusing on changes in creditworthiness caused by a certain period of downtime resulting from disaster damage.

Our Approach to Climate Change(2) Physical riskWe will work on the following issues.

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Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Physical risk
One of the characteristics of SuMi TRUST Bank’s portfolio is its relatively large exposure to corporate finance for large corporations and asset finance such as real estate finance and project finance. Going forward, in addition to considering the
expansion of physical risk analysis to overseas projects, we will work to refine our credit cost estimation methodology bycollaborating with external data and research organizations.
Furthermore, we will also focus on the relationship between the physical risk and transition risk associated with climatechange, and will closely monitor the progress of macro-model scenario development and physical risk analysis models todetermine a consistent scenario analysis approach between the two risks.
With regard to direct climate change-related risks in operations, we will look into conducting not only qualitative but also
quantitative scenario analysis going forward.

Initiatives to Reduce
OWN GROUP’s Emissions

Transition risk
We will continue to engage with clients based on the results of the scenario analysis to appropriately identify risks andsupport the transition to a decarbonized society, and will continue to advance scenarios and analysis methods as a risk
management approach.
To date, SuMi TRUST Bank has been engaged in a long-term time horizon analysis with a fixed balance sheet for the
purpose of understanding sectoral climate change risk and using this information to formulate strategies centered on
engagement. Going forward, since the importance of short-term scenario analysis has also been pointed out, we will also
explore short-term scenario analysis methods for three- to five-year periods based on scenarios with higher probability.

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality(3) Future issues

Awareness of
Climate Change Opportunities

Based on the results of this analysis, we identified projects with high risk of landslides and snowfall, and confirmed that
insurance coverage (including compensation for lost time) and structural provisions were adequate for each individual project. Furthermore, we recognized the need to fully consider measures to mitigate these physical risks in areas adjacent toprojects where the risk of damage to equipment due to landslides and snowfall was determined to be high in this analysis
when undertaking future projects.

Transition Plan toward
Carbon Neutrality

Application to financial practices

Our Approach to Climate Change

In estimating credit costs, since there is not enough data accumulated on the assumed loss ratio in the event of a disaster,
we estimated the credit costs that would be generated through a decline in credit ratings due to a decrease in efficiency,such as suspended operations for a certain period of time, in the event of a disaster.
For landslides, we estimated the change in the probability of damage resulting from climate change and analyzed thecumulative probability of occurrence by considering the risk of damage in each year as an independently occurring event.
We estimated that credit costs would be only about ¥400 million cumulatively up to 2100 under the 4°C scenario.
Regarding snowfall, we identified projects located in areas with heavy snowfall, and made estimation by assuming thatdamage to equipment would occur and affect cash flow if snowfall exceeded a certain level. As a result, we confirmed that
only two projects were at risk of snowfall that would exceed the load capacity of equipment (the cumulative credit cost
would only be about ¥190 million).
In addition, since solar power project financing is affected by changes in solar radiation and power generation efficiency
caused by snowfall, we conducted a time-series analysis for each climate change scenario to determine what changes are
expected in terms of annual solar radiation and fluctuations in the number of operational days due to climate change.
As a result, we confirmed that solar radiation tends to increase over time for all climate scenarios, although there is somevariation by region. However, we also learned that (1) even if the amount of solar radiation increases, it is necessary to take
into account the impact of lower power generation efficiency due to higher temperatures, and (2) the risk of a downward
swing in cash flow is magnified for some projects owing to larger fluctuations in annual solar radiation.

Our Approach to Climate Change<Column> Physical Risk Analysis of Corporate Exposure2023/2024 TCFD Report

nu

m) d

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Ste
el
Au
t
o
co m
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on ive
en &
ts
Pa
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dF
o
& M od
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Fo
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t P aprod er
uc &
ts
Ch
em
ist
ry
Me
(ex talspe &ct M
Alu Stee inin
mi l a g
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nu d
m)

Japan: 2050 4°C scenario
Overseas: 2050 4°C scenario

n&
Ste
el
Au
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co m
mp ot
on ive
en &
ts
Pa
cke
dF
o
& M od
ea s
t
Fo
res P
t P aprod er
uc &
ts
Ch
em
ist
ry
Me
(ex talspe &ct M
Alu Stee inin
mi l a g
n

Iro

ing
Re
al
es
tat
e

ipp
Sh

Ga
s
l&

Climate Change

Japan: 2050 4°C scenario
Overseas: 2050 4°C scenario

nu d
m)

sta
te
sta
te

Wildfire

80
70
60
50
40
30
20
10
0

39

Japan: 2050 4°C scenario
Overseas: 2050 4°C scenario

n&
Ste
el
Au
t
o
co m
mp ot
on ive
en &
ts
Pa
cke
dF
o
& M od
ea s
t
Fo
res P
t P aprod er
uc &
ts
Ch
em
ist
ry
Me
(ex talspe &ct M
Alu Stee inin
mi l a g
n

Iro

Re
al
e

ipp
ing
Sh

s
Ga
Oi
l&

rat
ion

Iro

s

ing

Re
al
e

ipp

Ga
l&

Sh

n

Oi

era
tio
en
er
g
Po
w
ge
ne
Po
we
r

Physical risk score

Oi

Source: Created by SuMi TRUST Bank based on S&P Global Sustainable1 and
S&P Global Physical Risk Exposure Scores and Financial Impact dataset [December, 2023]

Heat wave

80
70
60
50
40
30
20
10
0

rat
ion

H: High risk, M: Medium risk, L: Low risk

Physical risk score

en
e

H
H
H
M
H
M
H
M
L
H
M
L
H
H
L
M
H
M
L
L
M
L

Flood

80
70
60
50
40
30
20
10
0

rg

H
H
H
H
H
H
H
H
H
M
M
M
M
M
M
M
M
L
L
L
L
L

Physical risk score

Po
we

Chronic

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Paper & Forest Products
Power generation
Iron & Steel
Packed Foods & Meat
Chemistry
Agriculture
Metals & Mining (expect Steel and Aluminum)
Trucking Services
Real estate
Coal
Oil & Gas
Capital goods
Construction materials (expect Cement)
Beverage
Service (Capital Goods)
Railways
CementAutomotive & components
Shipping
Passenger Airplane
Air cargo
Finance

Acute

Initiatives to Reduce
OWN GROUP’s Emissions

Physical risk category

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Domestic and overseas physical risks comparison(floods, heat waves, wildfires) by sector

Awareness of
Climate Change Opportunities

Physical risk heat map by sector

Transition Plan toward
Carbon Neutrality

Physical risks are classified into acute risks (e.g., floods, storm surges, landslides, wildfires) and chronic risks (e.g., heatwaves, droughts, water stress).
Of these, impacts on the macro economy through reduced labor productivity and land productivity caused by climatechange are reflected in scenario/macro models mainly as chronic risks in NGFS, etc.
On the other hand, the analysis for understanding the financial impact of acute risks requires an understanding of theprobability of damage from various hazards, the loss ratio, and their change resulting from climate change, based on thelocation information of the business assets of individual companies.
One of the characteristics of SuMi TRUST Bank’s portfolio is its high ratio of corporate finance for large corporation andasset finance.
In the past, we have taken an analytical approach based on location information of assets for asset finance such asmortgage, real estate finance, and project finance, but corporations have restrictions on information disclosure, and thereflection of acute risks in scenarios of NGFS, etc. and in macro models is still under development.
In light of such difficulty of simulating these financial impacts (location information, positioning in the supply chain, andimpact on corporate finances), SuMi TRUST Bank decided that it was necessary to use external data and models to understand the impact level of each hazard for corporate clients whose business assets’ location information is disclosed, andstarted with a relative comparison analysis of impact based on external data, first, for sectors and hazard as a starting point.
Specifically, we created a sector heat map using S&P Global’s physical risk score, which is estimated based on the location of business assets of individual company. The score reflects the sensitivity of each company to the risk level of eachhazard, expressed as a relative score from 1 to 100.
Since the development of scenarios and models is constantly evolving, we will continue our efforts to sophisticate ouranalysis while paying attention to future trends in the expansion of corporate disclosure on holdings.
In addition, based on the results of each company’s asset-based analysis, we will promote dialogue with clients regarding their response to risks, and will support their physical risk countermeasures while helping them enhance their climatechange risk management.

Our Approach to Climate Change

Initiatives of Sumitomo Mitsui Trust Asset Management
1. Climate change actions

SMTAM’s climate change risks
Risk category

Specific risk factor

High

Short- tomedium-term

Value impairment of investee companies through the impairment of business assets
Physicaldue to inadequate response to physical risksHigh

Medium- tolong-term

Decline in profitability due to the diversification, increasing complexity, and rising costs
Transitionof climate-related data and indices

MiddleShort- tomedium-term

Defection of existing clients due to inability to appropriately address climate-related risks*1 TransitionHigh

Short- tomedium-term

Missed opportunities to acquire potential clients due to inability to appropriately
address climate-related risks

Transition

MiddleShort- tomedium-term

Difficulty recruiting and higher employee turnover due to inadequate response to
climate change

TransitionHigh

Short- tomedium-term

Compliance risk arising from inability to adapt to regulations (greenwash)

TransitionHigh

Short- tomedium-term

Shortage of personnel and resources due to more sophisticated climate actions

Transition

MiddleShort- tomedium-term

Decreased business continuity of partners and vendors

Transition/
physicalMiddleMedium- tolong-term

Server and circuit impairment, decreased employee safety

PhysicalHigh

Medium- tolong-term

Financial market drawdown due to increasing credit risk of companies and markets
arising from climate change issues

Transition/
physicalHigh

Medium- tolong-term

Lower survivability due to decline in creditworthiness of SMTAM arising from climatechange issues(Defection of existing clients and missed opportunities to acquire potential clients)

TransitionHigh

Short- tomedium-term

Value impairment of investee companies due to inadequate response to transition risksMarket risk

Reputational risk
(Strategy risk)

Operational risk

Credit risk

Transition*1 Shortage in SMTAM’s product lineup, obsolescence of investment decisions and strategies, inappropriate response to regulations for information disclosure, etc.
*2 High: Impact anticipated to affect the survivability of SMTAM; Middle: Impact anticipated to affect the finances of SMTAM.
*3 Short- to medium-term: Around the next 10 years; Medium- to long-term: The next 10 to 30 years.

2023/2024 TCFD Report

40

Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Time horizon*3
Initiatives to Reduce
OWN GROUP’s Emissions

Impact*2

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

SMTAM believes that climate change risks must be addressed appropriately in order to fulfill fiduciary responsibilities.
SMTAM identifies climate change risks as not merely risks of additional new risk category, but as risk drivers that canincrease or decrease the risks of existing risk categories stemming from climate change-related changes. Furthermore, thecompany perceives that climate change risks affect its business management through three pathways, namely, impairmentof the value of assets under management (AUM), cancellation of AUM or loss of new fiduciary opportunities, and decline ofbusiness continuity, which ultimately leads to deteriorating its finances and diminishing its survivability.
Such risk impacts on business management are categorized as “middle” if they affect finances, such as periodic profit andloss, and as “high” if they have the potential to undermine survivability. While the time horizons for risk manifestation varydepending on each risk factor, it is assumed that risk factors related to transition risks will manifest in around the next 10
years (short- to medium-term) and those related to physical risks in around the next 10 to 30 years (medium- to long-term).

Awareness of
Climate Change Opportunities

Climate change risks

Transition Plan toward
Carbon Neutrality

As a member of SuMi TRUST Group, Sumitomo Mitsui Trust Asset Management (SMTAM) formulated a basic policy that
promotes sustainability-related measures covering climate change issues for “Realizing opportunities today to ensure sustainable prosperity for tomorrow,” as enshrined in SMTAM’s vision based on the Group’s sustainability basic philosophy
and sustainability policy. Under this basic policy, the company makes continuous efforts to improve its relevant structuresand systems. Additionally, SMTAM’s approach and processes regarding engagement, exercise of voting rights, and consideration of climate change issues in ESG investments are spelled out in its investment management business rules andrelated rules.
Based on the TCFD Recommendations, SMTAM grasps climate change risks and opportunities, such as the following, andleverages them in investment decisions and business management. For details, please refer to SMTAM’s STEWARDSHIPREPORT 2023/2024.

Strategy

Example• Focus on companies with high GHG emissions• Scaling-out of successful cases• More frequent adoption as an agenda

Engagement• Engagement with government offices, industry bodies, NGOs,
academia, etc.

• Indirect promotion of (investee) companies’
behavioral changes• Increase in SMTAM’s value through acquisition andutilization of up-to-date information

Exercise of voting
rights• Strengthening of criteria on climate change issues in the guidelines
for the exercise of voting rights• Reflection of global trends and insights

Elevation of
investment decisions
and strategies• Factoring in climate change according to the style of individual funds• ESG monitoring (fund governance)• Consideration of climate change factors in investment decisions of•E xpansion of target assets
individual securities

Enhancement of
product lineup• Support for addressing climate change issues through provision of
investment opportunities• Development of indices contributing to climatechange issues• Development of investment products contributing
to climate change issues

Strengthening of
information disclosure• Heightening client awareness regarding climate change issues andoutreach to potential investors• E xternal communication and identification of
investors

The following are “opportunities” in the broadest sense of the word as essential to establish a growth foundationand gain opportunities for growth.
• A ppropriate measures for climate-related regulations• Compliance with disclosure regulations such as• Training of personnel and enhancement of resources for climateSFDR
related measures (improving retention, maintaining creditworthiness) • Investment in employees (human capital)

Engagement• Engagement with the value chain

2023/2024 TCFD Report• Dialogue for maintaining and improving thesurvivability and quality of data and index vendors,
and for more advanced responses to climate change
issues41

Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Strengthening of thecompany’s structure
for climate action

Initiatives to Reduce
OWN GROUP’s Emissions• Engagement with investee companies

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Engagement

Awareness of
Climate Change Opportunities

Opportunity

Transition Plan toward
Carbon Neutrality

SMTAM identifies six opportunities for transforming climate change risks into business growth: engagement, exercise of
voting rights, sophistication of investment decisions and strategies, enhancement of product lineup, strengthening of information disclosure, and upgrading of the company’s response to climate change.
SMTAM recognizes two “opportunities” in the broadest sense of the word as essential to acquiring such opportunities.
One is the strengthening of the company’s structure for climate action, and the other is the strengthening of engagementwith the value chain.
Specific actions for strengthening the structure for climate action include developing schemes that can appropriately
fulfill standards and regulations on climate-related disclosures, such as TCFD and SFDR, as well as enhancing human capitalthrough recruiting and training to improve business execution capabilities.
For strengthening engagement with the value chain, specific actions include commencing dialogues with data and index
vendors handling ESG data on maintaining and improving the quality of climate-related data.

Our Approach to Climate Change

Climate change opportunities

Strategy

TargetInitiatives

Engagement with government offices
and other stakeholders

Government offices,
industry bodies, NGOs,
academia, etc.

• Dialogue with the Ministry of Economy, Trade and Industry for introducing thecarbon pricing system• Dialogue with the Ministry of the Environment to promote decarbonization(explain requests from companies and understanding of the issues)• E xchange of views with the Central Research Institute of Power generation
Industry• Provision of feedback on GFANZ’s Consultation Report, “Financing theManaged Phaseout of Coal-Fired Power Plants in Asia Pacific”

Strengthening of criteria on climatechange issues in the guidelines for the
exercise of voting rights

Investee companies• Introduction of specific criteria for climate change issues, already supported inshareholder proposals

Factoring in climate change according
to the style of individual funds andconsidering climate change factors
in investment decisions of individual
securities

SMTAM or clients• Reporting of the results of quarterly ESG monitoring of each fund at internal
committees• Consideration of climate change factors not only in stock investments but also
in corporate bond and J-REIT investments• E stablishment of the S&P/JPX Carbon Efficient Index-linked strategy (domestic
stocks)• E stablishment of the Bloomberg MSCI Global-Aggregate Sustainability A+
Strategy (global bonds)

Heightening client awarenessregarding climate change issues andoutreach to potential investors• Publishing of web columns• Promotion of financial visiting lectures• Provision of content for the Nikkei MOOK “Introduction to Decarbonization
Investment”• Dialogues with asset owners as a member of the NZAMI Advisory Group

Clients(including potential clients)

The following are “opportunities” in the broadest sense of the word as essential to establish a growth foundationand gain opportunities for growth.
SMTAM• Information disclosure on climate-related risk in accordance with SFDR
disclosure regulations• TCFD information disclosure

Training of climate-related personnel
and enhancement of resources

SMTAM• Employee attendance of PRI Academy’s courses• Internal e-learning• Internal study sessions on TCFD disclosure

Data vendors
Index vendors, etc.

• Dialogues with Bloomberg on expanding ESG data
• Dialogues with ISS to clarify the guidelines for the exercise of voting rights
related to climate change and the recommendations for the exercise• Dialogues with MSCI about changes in the ESG score calculation process• Dialogues with S&P to enhance climate change information disclosures in the
Carbon Efficient Index

Engagement with the value chain

Initiatives to Reduce
OWN GROUP’s Emissions

Appropriate measures for climaterelated regulations

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Support for addressing climate change
issues through provision of investment Clients
opportunities

Awareness of
Climate Change Opportunities• Promotion of top-down engagement with high GHG companies• Scaling-out of successful cases with investee companies• Active utilization as an agenda in bottom-up engagement

Transition Plan toward
Carbon Neutrality

Investee companies

Engagement with investee companies

Our Approach to Climate Change

SMTAM’s strategy in light of climate risks and opportunities

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

2023/2024 TCFD Report

42

Climate ChangeTransition Plan toward
Carbon Neutrality

SMTAM evaluates risks of portfolios*4 related to climate change by asset class, and then integrates the asset classes andevaluates its owned assets. SMTAM uses three assessment methods based on information disclosed by companies in theportfolios as well as actual data: (1) fixed-point analysis, (2) transition path analysis based on future climate change scenarios, and (3) analysis of the portfolio’s resilience to climate change. An overview of the results of analyzing the domestic andforeign stocks and bonds managed by SMTAM is provided below. Note that an external organization’s*5 data and analysis
methods were used for this analysis (reference date: June 30, 2023).

Our Approach to Climate Change

2. Climate-related portfolio analysis by Sumitomo Mitsui Trust Asset Management(1) Fixed-point analysis (GHG emissions, etc.)

Domestic
stocks11.8

Benchmark (2023)

12.8

Portfolio (2022)

11.3

Benchmark (2022)

12.3

Portfolio (2023)

4.3

Foreignstocks

6.9
5.2

1.6
3.1

8.5

Portfolio (2023)

7.6

Benchmark (2023)

7.8

Portfolio (2022)

8.1

Benchmark (2022)

8.4

58.4
58.6
51.9
52.4
0.3
0.6

Benchmark (2023)

0.3

Portfolio (2022)

0.6

Portfolio (2023)

20.9

Portfolio (2022)

21.3

Scope 1, 2

1.7

Scope 3

3.6
1.3
3.1

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Benchmark (2022)
Entireportfolio

119.7
2.5

Benchmark (2023)

Portfolio (2023)
Foreign
bonds

140.0
112.9

1.3

Portfolio (2022)
Benchmark (2022)

132.7

197.0
171.2

0

50

100

150

200

Domestic stocks

Domestic bonds

Foreign stocks

Foreign bonds

Entire portfolio
0%10%
Utilities

Initiatives to Reduce
OWN GROUP’s Emissions

Domestic
bonds

Portfolio (2023)(Unit: million tCO2e)

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

GHG emissions in each asset class*7 *9 *10

Awareness of
Climate Change Opportunities

The status of GHG emissions and other conditions at a fixed point in time is ascertained based on investee companies’
disclosure data and other information. For example, the GHG emissions by asset class (domestic and foreign stocks andbonds) reveal that the Scope 1, 2 total for each asset was below the benchmark. Compared to the previous year,*6 whileemissions increased for domestic stocks, the decreases for domestic bonds and foreign stocks exceeded that increase. As
a result, emissions for the entire portfolio decreased from 21.3 million tCO2e in the previous year to 20.9 million tCO2e. On
the other hand, while Scope 3 emissions were below the benchmark for all asset classes, there were year-on-year increases
for three asset classes excluding domestic bonds. As a result, emissions increased significantly for the entire portfolio, risingfrom 171.2 million tCO2e in the previous year to 197.0 million tCO2e. In the case of domestic stocks, which experienced thelargest increase, the reasons may include discontinuous rises due to changes in the measurement scope, with some companies observing a sharp rise in Scope 3 emissions after expanding the measurement scope from the previous year. As foremissions by industry, the utilities and materials sectors accounted for a large portion of the total in each asset class, which
was consistent with the previous year’s trend.

Materials

20%
30%
2023/2024
TCFD
ReportInformation technology

40%
43

50% Change60%
ClimateCapital goods

Finance

Energy70%
Daily necessities

80%

90%

General consumer goods

100%
Other

0.6

Benchmark (2022)
Entireportfolio

Portfolio (2023)

20.9

Portfolio (2022)

21.3

3.1
197.0
171.2

Domestic stocks

50

100

150

200

Our Approach to Climate Change

0
Domestic bonds

Foreign stocks

Foreign bonds

Composition of GHG emissions by sector in each asset class*8 *10
Entire portfolio
Domestic stocks

0%

20%

30%

Materials

Information technology

10%

20%

Materials

Information technology

40%

50%

60%

70%

Finance

EnergyDaily necessities

50%

60%

70%

Finance

EnergyDaily necessities

Capital goods

80%

90%

100%

General consumer goods

Other

80%

100%

Foreign stocks

Foreign bonds

Transition Plan toward
Carbon Neutrality

Utilities

Domestic bonds

10%

Entire portfolio
0%40%Capital goods

90%

General consumer goods

Other

Weighted average carbon intensity (WACI) in each asset class (emissions per unit of sales)*8 *9 *10(Unit: million tCO2e)
Domestic
stocksPortfolio (2023)

84.9

Benchmark (2023)

88.5

Portfolio (2022)

93.5

Benchmark (2022)

95.5

Portfolio (2023)

224.4

Benchmark (2023)

472.4

Portfolio (2022)

201.1

Benchmark (2022)

439.3

Portfolio (2023)
ForeignstocksDomestic
stocksForeignbonds

Benchmark (2023)

142.1

Portfolio (2022)(2023)
Benchmark (2022)(2023)

93.5
68.0

95.5
170.9

Portfolio (2022)(2023)

77.2

224.4

Benchmark (2022)(2023)
Portfolio (2022)
Portfolio (2023)
Benchmark (2022)
Portfolio (2022)
Benchmark (2023)

201.1
112.2

439.3
137.0
138.5

0

100

142.1

200

300

400

500

180.7

Portfolio (2022)

187.3

Benchmark (2022)
Portfolio (2023)

472.4

197.5

Portfolio (2023)
Foreignstocks

187.3

88.5

Portfolio (2022)
Portfolio (2023)
Benchmark (2022)
Benchmark (2023)(Unit: million tCO2e)

180.7

84.9

68.0

170.9
Benchmark (2023)
Foreign(2)
Transition
path analysis and 77.2
resilience analysis
bonds
Portfolio (2022)

Benchmark (2022)
A methodology
called transition path analysis is used to assess how the portfolio’s climate change risks will change forPortfolio(2023)
112.2
Entirefuture climate change scenarios. Specifically, theestimates of the portfolio’s future GHG emissions are compared with theportfolio
Portfolio (2022)
137.0
carbon budgets for the climate change scenarios, and the portfolio’s alignment with the scenarios is assessed. Three sce0
200
300
400
500
narios of the International
Energy Agency100(IEA) were used: theSustainable Development
Scenario (SDS),
the Announced
Pledges Scenario (APS), and the Stated Policies Scenario (STEPS).
First, the transition path analysis found that SMTAM’s portfolio emissions are likely to reach the upper limit permitted under
the SDS scenario in 2038 for the passive investment strategy and 2042 for the active investment strategy. Improvementsfrom the previous year*6 were also observed. For example, the upper limit is expected to be reached around two years later
for the passive investment strategy (2036 in the previous year) and around six years later for the active investment strategy(2036 in the previous year). In relative terms, emissions are projected to exceed the permissible level for the active investment strategy later than for the passive strategy. The reason may be the low ownership of assets in the energy sector, whichis expected to significantly exceed its carbon budget.

Initiatives to Reduce
OWN GROUP’s Emissions

Domesticbonds
Entireportfolio

138.5

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Domesticbonds

Awareness of
Climate Change Opportunities

Utilities

30%

197.5

44

Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

2023/2024 TCFD ReportOur Approach to Climate Change

120%

100%

Comparison of projected pathways of GHG emissions for the portfolio and carbon budgets for each climate change scenario
80%

Projected transition pathways for each investment strategy*10 *11
60%

Transition Plan toward
Carbon Neutrality• Passive investment strategy
120%
40%
100%
20%

Portfolio

40%

SDS: Sustainable Development Scenario

APS: Announced Pledges Scenario

2050

2049

2048

2047

2046

2045

2044

2043

2042

2041

2040

2039

2038

2037

2036

2035

2034

2033

2032

2031

2030

2029

2028

2027

2026

2025

2024

60%

2023

80%

STEPS: Stated Policies Scenario

SDS: Sustainable Development Scenario

APS: Announced Pledges Scenario

2050

2049

2048

2047

2046

2045

2044

2043

2042

2041

2040

2039

2038

2037

2036

2035

2034

2033

2032

2031

2030

2029

2028

2027

2026

2025

2024

2023

Portfolio

STEPS: Stated Policies Scenario

Awareness of
Climate Change Opportunities

20%• Active investment strategy
SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

120%

100%

80%

60%
120%
40%

Portfolio

40%

SDS: Sustainable Development Scenario

APS: Announced Pledges Scenario

2050

2049

2048

2047

2046

2045

2044

2043

2042

2041

2040

2039

2038

2037

2036

2035

2034

2033

2032

2031

2030

2029

2028

2027

2026

2025

2024

60%

2023

80%

STEPS: Stated Policies Scenario

Initiatives to Reduce
OWN GROUP’s Emissions

100%
20%

20%

Sustainable
Development
Scenario
AnnouncedAPS:
Pledges
Scenario
Portfolio
SDS: Sustainable
Development Scenario
Announced
Pledges Scenario
A normative scenario aligned with the goalof the Paris Agreement to stay well below+2 degrees Celsius and limit global warming to +1.5 degrees Celsius.

An exploratory scenario that assumes
that various countries fulfill the ambitious
targets they have declared (NDC) (+2.1
degrees Celsius at the end of this century).

2050

Stated Policies Scenario

2049

2048

2047

2046

STEPS
2045

2044

2043

2042

2041

Announced Pledges Scenario

2040

2039

2038

2037

APS
2036

2035

2034

2033

2032

2031

2030

2029

2028

2027

2026

2025

2024

SDS

Sustainable Development Scenario

StatedScenario
STEPS:
StatedPolicies
Policies Scenario
An exploratory scenario for achieving thegoals stated by the government (+2.6
degrees Celsius at the end of this century).

Source: World Energy Outlook 2022

2023/2024 TCFD Report

45

Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

2023

Scenarios used in the analysis

Power supply composition in each asset class*9 *10

Domestic bonds
Domestic bonds(Unit: %)(Unit: %)Portfolio
Portfolio

83.9
83.9

5.3
5.3

10.8
10.8

BenchmarkBenchmark

84.0
84.0

5.1
5.1

11.0
11.0

Portfolio
Portfolio

84.0
84.0

4.5
4.5

11.5
11.5

BenchmarkBenchmarkForeign stocks
Foreign stocks

6.2
6.2

12.3
12.3

Portfolio
Portfolio

52.6
52.6

25.0
25.0

22.4
22.4

BenchmarkBenchmark

53.0
53.0

24.6
24.6

22.4
22.4

Portfolio
Portfolio

42.0
42.0

27.6
27.6

30.4
30.4

BenchmarkBenchmark

41.2
41.2

28.7
28.7

30.2
30.2

Entire portfolio
Entire portfolio

15.8
15.8

66.8
66.8

Power supply composition under the SDS scenario
Power supply composition under the SDS scenario
in 2030
in 2030

10.0
10.0

37.0
37.0

Power supply composition under the SDS scenario
Power supply composition under the SDS scenario
in 2050
in 2050
0
0

84.0
84.0

10
10

20
20

30
30

Nuclear power
Nuclear power

40
40

50
50

60
60

70
70

80
80

90
90

100
100

(The composition ratios may not sum up to 100% due to rounding.)(The composition ratios may not sum up to 100% due to rounding.)

Renewable energy
Renewable energy

Composition of transition VaR by sector in each asset class*10(Unit: %)(Unit: %)Initiatives to Reduce
OWN GROUP’s Emissions

Fossil fuels
Fossil fuels

17.4
17.4

53.0
53.0

9.0
9.0

7.0
7.0

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Foreign bonds
Foreign bonds

81.5
81.5

Awareness of
Climate Change Opportunities

Domestic stocks
Domestic stocks

Transition Plan toward
Carbon Neutrality

One of the indicators for assessing the portfolio’s transition risk is the power supply composition ratio based on the amountof power generated by the portfolio. Here, the power supply composition ratio of each asset class is compared with thebenchmark. In addition, the ratios for the entire portfolio under the SDS scenario in 2030 and 2050 were estimated. The
values are presented in the figure, “Power supply composition in each asset class.” It shows that the power supply composition ratio for each asset class is comparable to the benchmark. It was also revealed that, at this time, approximately
two-thirds of the entire portfolio relies on fossil fuels, and to align with the SDS scenario, the composition ratio of fossil fuelsmust be reduced to approximately one-third by 2030 and 7% by 2050.

Our Approach to Climate Change(3) Analysis of the portfolio’s resilience to climate change

Domestic stocks
Domestic stocks

Foreign stocks
Foreign stocks

Foreign bonds
Foreign bonds

Entire portfolio
Entire portfolio

0
0

10
10
Materials
Materials

20
20

50
50

60
60

Public works
Public works

Information technology
Information technology

Real estate
Real estate

General consumer goods
General consumer goods

Communication service
Communication service

Capital goods
Capital goods

Daily necessities
Daily necessities

30
30

40
40

2023/2024 TCFD Report46

Climate Change

70
70
Healthcare
Healthcare

80
80
FinanceFinance90
90EnergyEnergy100
100

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Domestic bonds
Domestic bonds

Our Approach to Climate Change

Composition of physical VaR by sector in each asset class*10(Unit: %)Transition Plan toward
Carbon Neutrality

Domestic stocks

Domestic bonds
Domestic stocks
Foreign stocks
Domestic bonds
Foreign bonds
Foreign stocks

Foreign bonds
0

10
Capital goods
Daily necessities

20

30

40

General consumer goods
Real estate

50

60

Information technology
Materials
Entire portfolio

70

80

Public works

Healthcare

90
Finance

100
EnergyCommunication service
0

10

20

30

40

50

(Unit: %)(4) Survey of climate-related targets
Domestic assets

37

31

38
Findings fromsurveyof climate-related targets in each asset class*10
33
38

32

(Unit: %)Domestic assets
SBT
Foreign assets
accreditation
Entire portfolio

37

31

38

33

38

32

Domestic assets
SBT
Foreign assets
commitment
Entire portfolio

Targets
areambitious

Domestic assets
Foreign assets
Entire portfolio

2023

23

30
No
targets

Domestic assets

2022

Foreign assets
Entire portfolio
35
40
Domestic assets

18
11

Foreign assets
Entire portfolio
0

5

10

15
14

15

2023

23

2022
19

20

25

30

35

40

*4 On the basis of excluding domestic and foreign bonds, etc. from investment assets*5 ISS (Institutional Shareholder Services)*6	The values for the previous year (as of June 30, 2022) have been recalculated using updated carbon emissions and other data. Therefore, the values do not match those in last year’s
Stewardship Report.
*7 Based on Scope 1, 2, and 3*8 Based on Scope 1, 2
*9	The benchmarks are as follows:	Domestic stocks: TOPIX; Domestic bonds: NOMURA-BPI Overall (corporate bonds only); Foreign stocks: MSCI-ACWI (ex-Japan); Foreign bonds: Bloomberg Global-Aggregate(excluding Japan) (corporate bonds only)*10 Calculated on the basis of assets owned by SMTAM against the adjusted corporate value for each asset*11 All industries except fossil fuel producing industries: Scope 1, 2; Fossil fuel producing industries: Scope 3; Power generation: Scope 1*12	SBT (Science Based Targets). SBT refers to GHG emission reduction targets set by companies for the next 5 to 15 years, according to the standards specified by the Paris Agreement.
The numbers must be consistent with the indicators required by the latest weather science. SBT is implemented as one of the WMB (We Mean Business) initiatives, and is establishedand operated by WMB organizations such as the World Resources Institute (WRI) and CDP. SBT accreditation refers to having targets accredited by the organization mentioned
above. Even after accreditation, the amount of emissions and the progress made on the measures must be disclosed every year, and the adequacy of the targets must be checked
periodically. In addition, SBT commitment means committing to setting SBT targets within two years.

2023/2024 TCFD Report

47

Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Targets
are not
ambitious
25

Public wo

Initiatives to Reduce
OWN GROUP’s Emissions

SBT
SMTAM
has
consistently
found that a certain
Foreignassetsaccreditation
portfolio
number ofEntire
investeecompanies in its portfolio are notDomestic
activelyassetsaddressing climate change
SBT
Foreign assets
issues.
SMTAM
therefore considers it importcommitment
Entire portfolio
ant to increase
the number of investee companies thathaveassets
set ambitious targets and are
Domestic
Targets
Foreignassets SBT or have obtained SBT
arecommitted
to theambitious
Entire portfolio
12
and is actively approachingaccreditation,*
investeecompanies
Domestic assets to do so. The percentTargets
Foreign assets with SBT accreditation inare notageof companies
ambitious
Entire portfolio
each asset class compared with the previous
18
Domestic
assetsthe percentage for domesthat
year’s*6 showsNo
11
Foreign assets
15
tictargets
assets increased from 31% to 37% 14and for
Entire portfolio
19
foreign assets from 33% to 38%. At the sametime, the percentage0 of companies
5
10 with
15 no tar20
gets decreased from 23% to 18% for domestic
assets and from 15% to 11% for foreign assets,suggesting suitable overall results. SMTAM willcontinue working to keep this trend going.

60

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

In summary, the analysis results reveal that to effectively reduce GHG emissions from SMTAM’s portfolio, it is crucial to
Capital goods
General consumer goods
technology
Materials
target domestic and foreign stocks in terms of asset class and, from a sectoral
perspective,
not only the utilities
and Informationmaterials
Daily
necessities
RealestateCommunication
servicesectors but also, from the standpoint of mitigating transition risks, the capital goods sector. SMTAM will further step up its
climate change initiatives through engagement and exercise of voting rights with a focus on investee companies in thesepriority asset classes and sectors.

Awareness of
Climate Change Opportunities

Entire portfolio

CASE
A.P. Moller-Maersk• Cross-shareholdings• Climate change actions(Denmark/Shipping)• Climate change issues• Information disclosure

Engagement staff’s perspective
In 2018, the company became one of the first major European shipping companies
to set the goal of reaching carbon neutrality by 2050. Subsequently, in January 2022,
the company raised its target to achieving net-zero emissions by 2040. It is proactively
setting targets in response to climate change issues.
However, the disclosure of progress on specific efforts, including quantitative targets,remained insufficient. Therefore, Engagement staff believed that as a leading company
in the global shipping industry, the company need to promote further initiatives.

SMTAM’s opinion

SMTAM’s opinion

Some GHG reduction goals are limited
to intensity-based targets, and it is unclear to what extent they will contributeto overall reduction. It may be necessary
to set intermediate targets for 2030 thatare understandable for outsiders.

To increase the certainty of achieving its ambitious targets, the company may needto establish more tangible measures and actively disclose information on outreach tothe supply chain.
The company intends to change 25% of its fuel to green fuel by 2030 to achieve its targets. However, minimal progress has been made, and we hope the company discloses
information on measures for increasing the certainty of achieving its targets.

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Cross-shareholdings should ideally be
zero. It may be necessary to set a final
goal and present a reduction plan forachieving that goal. Also, from the perspective of improving capital efficiency,
it may be necessary to redirect finishedshareholdings toward business investments. Despite a slowdown in the reduction pace compared to the previous
year, the market expects an accelerated
reduction. It is reasonable to measurecross-shareholding risk at market value.
Reduction targets should also be set atmarket value.

Company’s response

Company’s response

We are making efforts with business
partners in high-emission sectors first,
believing that it is important to set targets in line with actual business operations. Setting goals through a top-down
approach will not produce meaningfultargets. We will set meaningful targets
and indicators in the course of advancing our initiatives.

We took measures to enhance the credibility of our plans. To expand the use of green
fuels, which is key to reducing GHG that are emitted during shipping, we concluded
supply contracts with eight energy companies. Furthermore, we presented stage management for price pass-throughs for each supplier. However, concrete investment plans
for the expansion of green fuels are still under consideration. As there are various typesof green fuels, we need to make investment decisions taking into account the futuretechnology and supply-demand trends.

Company’s actions

The company announced gradually
address reductions by industry, aiming
to cover approximately 70% of its emissions by the end of FY2023.

To enhance the feasibility of its ambitious commitments, information was disclosed on
the stage management of the status of the company’s responses to price pass-throughswith each supplier, as well as projects with energy companies for securing green fuels.

SMTAM’s assessment and future policy

SMTAM’s assessment and future policy• SMTAM will monitor the progress of the raised reduction targets. Furthermore,
for reductions beyond the company’s medium-term management plan,
SMTAM will encourage the company to set zero balance as the ultimate goal.
• Regarding climate change actions, SMTAM will follow the progress of the reduction targets set by the company, and encourage to set total emissions andoverall reduction targets as the 2030 intermediate targets.

• Since 2019, SMTAM has been actively emailing and holding online and inperson dialogues with the company, which is one of the 100 companies we arefocusing on for climate change actions.

2023/2024 TCFD Report• The company is anticipated to promote more specific efforts going forward, andwill enter a phase in which its progress will be thoroughly checked.
• SMTAM will continue holding dialogues and ensure that the company continues its active initiatives as an industry-leading company.

48

Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Company’s actions
In its May 2023 financial results presentation, the company announced it was
raising its cross-shareholding reduction
targets. It also presented a plan for lowering the ratio of it to net assets to under 20% based on market value, as well
as a policy for subsequent reductions.

Initiatives to Reduce
OWN GROUP’s Emissions

Although we acknowledge the points
raised, we cannot simply say we will
aim for zero cross-shareholdings. The
intension of the companies with which
we have cross holdings need to be taken
into account. Honestly, we would like toreduce cross-shareholdings if possible.
However, we have to be cautious considering that some of the companies havebanned us from entry or stopped doing
business with us in the past.

Awareness of
Climate Change Opportunities

Analyst’s perspective
The company is reducing its cross-shareholdings, but the pace is slow and the efforts
are inadequate. There are market expectations for accelerated reduction. In addition,
while the company has presented a policy on climate change action, there is significant exposure and no intermediate targets have been set for the entire group. The
analyst assumed that this approach contributes to the company’s underperformancein corporate value.

Transition Plan toward
Carbon Neutrality

CASE
Non-manufacturing company A

Our Approach to Climate Change

3. Engagement initiatives of Sumitomo Mitsui Trust Asset Management

Our Approach to Climate Change

Initiatives of Nikko Asset Management
1. Nikko Asset Management’s climate-related portfolio analysis
In accordance with the Recommendations by the TCFD, Nikko Asset Management (Nikko AM) has assessed its portfolios for both transition and physical risk under multiple climate scenarios using industry-recognised third-party models toensure transparency and interpretability.

Analysis Method/Scope

Transition Risk

We have assessed our portfolios under the following scenarios:

Transition Risk–NAM JP
0.0
Climate Value-at-Risk (%)

Figure 1. Transition Risk – NAM JP

Figure 2. Transition Risk – NAM ex-JP

Transition Risk–NAM JP

Transition Risk–NAM ex-JP
0.0
Climate Value-at-Risk (%)

Climate Value-at-Risk (%)

0.0
(5.0)
(10.0)(15.0)(20.0)(25.0)(30.0)(35.0)(40.0)(45.0)(5.0)(10.0)(15.0)(20.0)(25.0)(30.0)(35.0)(40.0)(45.0)

1.5°C ORDERLY

2°C ORDERLY

1.5°C DISORDERLY 2°C DISORDERLY

3C° NDC

2023/2024 TCFD Report

1.5°C ORDERLY

49

Climate Change

2°C ORDERLY

1.5°C DISORDERLY 2°C DISORDERLY

3C° NDC

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Transition risk represents the largest risk to our holdings, with the 1.5°C Disorderly scenario posing the most severe risk
to our portfolios, given that it is the most disruptive scenario.
Under the 1.5°C Disorderly scenario, we see a potential CvaR of over 40% for our NAM JP assets, and over 20% for ourNAM ex-JP assets, as seen in Figure 1. Under a more orderly scenario (1.5°C Orderly), the potential risk diminishes substantially, to 10% for NAM JP, and 5% for NAM ex-JP, as seen in Figure 2.
Further splitting the figures by sector reflects that the bulk of our risk is attributable to carbon intensive sectors, such as
Energy, Materials and Utilities. As jurisdictions start to increase carbon prices in a bid to bring down carbon emissions, thecost to companies in these sectors is anticipated to increase should their emissions profile not come down. As a global
asset manager with both active and passive strategies, Nikko AM is highly likely to maintain some exposure to these sectors, however it will continue to monitor the risk, as well as continue applying mitigation techniques as described further inthe report.

Initiatives to Reduce
OWN GROUP’s Emissions

1.5°C and 2°C(10.0)• Orderly – Climate policies introduced early with gradual intensification.
Transition risk is relatively subdued.
(15.0)(20.0)• Disorderly – Delayed or divergent climate policies. Higher transition
risk from more stringent and stricter mea(25.0)
sures that are delayed and/or divergent across countries and(30.0)
sectors, leading to higher carbon pricing.
(35.0)
Nationally Determined Contributions (NDCs)(40.0)• Climate policies are implemented only in some jurisdictions,but globally insufficient to halt global warming.
(45.0)
1.5°C ORDERLY
Implies temperature rise of 3°C by 2100, which leads to higher physicalrisk. 2°C ORDERLY 1.5°C DISORDERLY 2°C DISORDERLY 3C° NDC(5.0)

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

MSCI’s transition risk methodology assesses companies’ CvaR under various Network for Greening the Financial System(NGFS) climate scenarios.

Awareness of
Climate Change Opportunities

We leverage the MSCI’s Climate Value-at-Risk (CVaR) module as the analysis method, basing it on owned assets as of 31
December 2022.
Further, our analysis is conducted on our public listed equity and corporate bonds exposure. Analyses on our in-scope
portfolios cover 67.5% of Nikko AM’s total AUM (as of 31 Dec 2022), which are managed by our Japan Equity, Japan Fixed
Income, Japan Investment Technology, Asia ex-Japan Equity, Asia Fixed Income, Global Equity and Global Fixed Income
investment teams. Our in-scope Japanese-domiciled holdings are aggregated as “NAM JP” and our in-scope companies
domiciled out of Japan are aggregated as “NAM ex-JP.” The analysis takes into consideration both active and passive
portfolios managed by Nikko AM.

Transition Plan toward
Carbon Neutrality(1) Scenario Analysis

Climate Value-at-Risk (%)

Climate Value-at-Risk (%)

We(20.0)
assessed our portfolios under the following scenarios:(25.0)(30.0)(10.0)• Average scenario: The expected value of the cost distribution (15.0)• Aggressive scenario: The 95th percentile of the cost distribution; explores the severe downside risk within the(45.0)(20.0)
1.5°C ORDERLY tail
2°C–ORDERLY
1.5°C DISORDERLYDISORDERLY
3C° NDC
distribution
i.e. “worst
case 2°C
scenario.”
Average
Aggressive(35.0)(40.0)

Figure 4. Physical Risk – NAM ex-JP

Physical Risk–NAM JP

Physical Risk–NAM ex-JP
Climate Value-at-Risk (%)

0.0

(5.0)

(10.0)(15.0)(20.0)(5.0)(10.0)(15.0)(20.0)
Average

Aggressive

Average

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Physical Risk–NAM ex-JP
Climate Value-at-Risk (%)

0.0

(5.0)

(10.0)(15.0)(20.0)
Average

Aggressive

2023/2024 TCFD Report

Aggressive

Initiatives to Reduce
OWN GROUP’s Emissions

Climate Value-at-Risk (%)

0.0

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Figure 3. Physical Risk – NAM JP

Awareness of
Climate Change Opportunities

Under the aggressive scenario, our NAM JP assets see a potential climate-value-at-risk of about 18% (Figure 3) and about
8% for our NAM ex-JP assets (Figure 4).
Meanwhile, under the average scenario, the potential climate-value-at-risk is significantly lower, at about 10% for NAM
JP (Figure 3) and about 4% for NAM ex-JP (Figure 4). Given that NAM JP is fully invested in Japanese assets, physical risk
is concentrated in Japan, which has high physical risk due to its location, whereas the physical risk of NAM ex-JP assets ismore diversified globally.
Further analysis on the data reflects that climate-value-at-risk is more pronounced in geographical locations with highacute risk (i.e. event-driven). These events tend to occur suddenly, disallowing ample time for risk adaptation or mitigation
efforts. Additionally, the severity of these events cannot be predicted, which can result in the insufficiency of implemented
risk mitigation or adaptation efforts. As such, geographical locations with the highest acute risks may result in the greatest
asset damage and operational disruption.

Transition Plan toward
Carbon Neutrality

Transition
Risk–NAM
Physicalto
Risk–NAM
JP
The0.0potential CvaR fromphysicalriskex-JP
on Nikko AM funds is significantly lower as comparedtransition
risk in both the
0.0
(5.0)
averageand aggressive scenarios. Unlike transition risk, where climate-value-at-risk is largely a function of the sector our(10.0)
companies
are in, the geographic location of our companies’ assets(5.0)
is key for physical risk.
(15.0)

Our Approach to Climate Change

Physical Risk

50

Climate Change

Scope of the Metrics and Targets
The below metrics capture our carbon emissions for CY2021 and CY2022, years ending 31 December 2021 and 31 December
2022, respectively, for listed equity and fixed income holding companies including Nikko AM’s in-scope portfolios.

Transition Plan toward
Carbon Neutrality

In working towards our goal of aligning our portfolios to net zero by 2050, Nikko AM utilises a range of metrics to track andmonitor its progress, but also to reduce climate-related risks and capture opportunities. As part of being a signatory to the
NZAMI, Nikko AM disclosed its reduction targets*1 in 2022, and for 43% of total Group assets (or US$115.68 bn), announced
to aim to reduce carbon footprint in 2030 by 50% compared to our 2019 baseline (84.7 tCO2e/$m invested).

Our Approach to Climate Change(2) Metrics & Targets*1 Nikko AM NZAMi Disclosures:https://www.netzeroassetmanagers.org/signatories/nikko-asset-management-co-ltd/

The following metrics are reported as of 31 December 2022, for Nikko AM’s in-scope portfolios. We have included, in thetable, aggregated carbon metrics as of 31 December 2021.
Asset Class($100 mil)Absolute
Emissions(Million tCO2e)

Carbon Footprint

WACI

Coverage*3(tCO e/$m invested)(tCO e/$m revenue)(%AUM)

2

2

6.1

61.1

84.1

99.9%

Fixed Income

1.3

0.3

243.7

369.7

89.7%

Equity

10.8

0.6

53.4

148.8

99.6%

Fixed Income

6.5

0.2

63.1

135.6

43.1% *4

Total (as of 31 Dec 2022)*5

118.9

7.2

62.4

94.4

—

Total (as of 31 Dec 2021)*6

146.0

7.8

54.9

92.4

—

NAM ex-JP

2023/2024 TCFD Report

51

Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM*2 AUM that is in scope and has data availability*3 Based on carbon data availability. The output is represented as a ratio of AUM that is in scope*4 Lower coverage is caused by a wide range of issues, including third-party classification methods*5 Carbon metrics for 31 December 2022 were measured in June 2023. Nikko AM is using MSCI data points that were produced in 2021
*6 Carbon metrics for 31 December 2021 were measured in June 2023. Nikko AM is using MSCI data points that were produced in 2020

Initiatives to Reduce
OWN GROUP’s Emissions

In 2022, absolute emissions have reduced to 7.2 MtCO2e, from 7.8 MtCO2e in 2021. However, both our carbon footprint
and WACI have increased slightly. Movements in carbon metrics are not always attributable to a single factor such ascompany emissions. They have to do with a wide array of factors, including portfolio positioning, changes in revenue, EVIC
(which can also change due to market movements) and data coverage, among others. Therefore, it is important to evaluatevarious data metrics to get a full picture of the progress made in the reduction of GHG emissions.
As expected, coverage for equities is substantially higher than that for fixed income for both NAM JP and NAM ex-JP,
and more apparent for NAM ex-JP. Nikko AM’s NAM ex-JP assets are largely invested in Asia excluding Japan, where data
disclosure is still relatively low in the region.
We have seen progress made in terms of ESG data disclosures over the years, with ESG-related regulations mandating
disclosure of key ESG metrics, such as GHG emissions. As investors, we will continue to engage with our investee companies to enhance disclosures of key ESG metrics, including GHG emissions.

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

100.3

NAM JP

Equity

AUM*2

Awareness of
Climate Change Opportunities

Reported Metrics

• one-to-one company dialogues, including on-site visits,• management calls and roadshows,• written communications, and• collaborative engagements.

Over 2,000 investee companies

70 companies
60 companies

10 companies

Account for 72% of
GHG emissions (Scope 1, 2) acrossNikko AM’s Japan Equity AUM

Important companies
with regard to Scope
3 emissions

2023/2024 TCFD Report

52

Climate Change

Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

Evaluating corporate initiatives of each company(in reference to NZAMI’s recommended framework)

Initiatives to Reduce
OWN GROUP’s Emissions

Climate change-related engagement in-scope companies

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Japan Sustainable Investment Department’s engagement policy

Awareness of
Climate Change Opportunities

For its NZAMI commitment, Nikko AM takes on an active ownership approach. Its Japan Sustainable Investment
Department, part of the Global Sustainable Investment Team, have narrowed down companies in the climate focused
engagement list, from over 2,000 companies to 70. Of these companies, 60 companies chosen account for 72% of theoverall GHG emissions (Scope 1, 2) across Japan Equity, which makes up the largest portion of Nikko AM’s AUM balance.
The remaining 10 were chosen as they are important companies with regard to their Scope 3 emissions. As part of theengagement plan, the team evaluates investee companies’ corporate initiatives against NZAMI’s recommended framework.
Beyond Japan, we have also been incorporating climate-related considerations. From a top-down angle, several investment strategies have committed to portfolio-level GHG emissions reduction targets. For instance, Nikko AM’s Global
Equity strategy has a commitment to maintain its portfolio’s GHG emissions at 20% below their benchmark.

Transition Plan toward
Carbon Neutrality

In 2022, across all regions, 37% of Nikko AM’s ESG-related engagements focused on the environmental pillar, on topics
such as climate change.
Our engagement methods vary, depending on the situation. These methods include:

Our Approach to Climate Change

2. Engagement initiatives of Nikko Asset Management

Perusahaan Listrik Negara

Perusahaan Listrik Negara (PLN) is the only company with vertically integrated electricity utility in Indonesia. In addicountry, accounting for more than 70% of electricity power production. PLN is also the sole buyer for Indonesia’s
independent power producers.
In 2022, Nikko AM’s Asia Fixed Income team participated in the Asian Utilities Engagement Program (AUEP), oneof the working groups of the Asia Investor Group on Climate Change* (AIGCC), as well as participating in collabo-

Transition Plan toward
Carbon Neutralitytion, the state-owned company is the dominant power generation, transmission and distribution provider in the

Our Approach to Climate Change

Example of collaborative engagement (AIGCC)

rative engagement together with PLN.
AUEP aims to increase the effectiveness of climate-related engagement through collaborative engagement withsystemically important electricity suppliers in Asia having a shared awareness of issues.

With a total installed capacity of around 45.9 GW, close to 90% of PLN’s production is powered by thermal sources,
exposing PLN to high risk in the transition to zero carbon. Not surprisingly, the company scores poorly among
Asia/Pacific utilities for both absolute and relative carbon emissions. In addition, PLN’s governance continues tolag global peers. The Indonesian government appoints half of the directors of the board, severely limiting its
independence.

In light of these environmental and governance issues, the AUEP is aiming to engage with the board and senior
management at PLN to secure several commitments, which are as follows:
1. To strengthen the governance framework to ensure the board’s accountability and oversight for climatechange risks and opportunities. Specifically, to clarify the role and responsibility of the Sustainability

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality<Engagement objectives>

Awareness of
Climate Change Opportunities<Awareness of issues>Committee in the implementation of PLN’s decarbonisation strategies.
at the UN’s 2015 Climate Change Conference. This covers decarbonisation strategies, requiring a timetableto phase out coal-based GHG emissions in less-developed economies at the latest by 2040, with similarcommitments for natural gas.
3. To provide enhanced corporate disclosure in line with the final recommendations of the Task Force on
Climate Related Financial Disclosures (TCFD).

Initiatives to Reduce
OWN GROUP’s Emissions

2. To formulate action plans to reduce greenhouse gas emissions in line with the Paris Agreement agreed upon

4. To outline the physical risks the company faces by climate change and what strategies it is adopting to mitigate these risks.
mitigate climate-related risks and facilitate low carbon investments in line with achieving net zero emissions
by 2050 or sooner.

<Status of engagement>
In September 2022, Nikko AM participated in its first collaborative engagement call together with other membersof the AIGCC who are engaging with PLN as part of the AUEP. The call was held with PLN’s climate change team.
The team presented five possible routes that the company’s decarbonisation pathways might follow. Based on theaccelerated scenario, it outlined in more detail the company’s roadmap to net zero by 2060, which would see its
emissions peak in 2030, in line with Indonesia’s national target. As part of these plans, the company has committed
itself to building no new coal-, oil-, or unabated gas-based power plants after 2030, making hydropower the dominant energy source in its renewables mix.
From PLN’s perspective, four key issues need to be addressed for the company to accelerate its net zero emissions target. These are:2023/2024 TCFD Report

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5. To engage with public policy makers and other stakeholders to support cost-effective policy measures to• maintaining favourable finance channels;
scale in Indonesia;• increasing support from public policy, such as incentives for electric vehicle adoption.
Over 2023, Nikko AM continued to collaboratively engage with PLN through the AIGCC and continued to actively

Transition Plan toward
Carbon Neutrality• deploying new technologies, such as carbon capture, utilisation and storage, and hydrogen power, on a large

Our Approach to Climate Change• ensuring electricity pricing that supports the achievement of targets;monitor its compliance with decarbonisation strategies over the short-, medium-, and long-term, and notably thetimetable to phase out coal-based GHG emissions in line with 1.5°C temperature scenarios.

Example of collaborative engagement (CA100+)

UltraTech Cement

Awareness of
Climate Change Opportunities* About the Asia Investor Group on Climate Change (AIGCC)
An industry association that raises awareness and encourages action on climate change-related risks and opportunities among asset owners and asset
managers in Asia. Active in 11 Asian markets, the AIGCC is comprised of over 70 members, whose global AUM is US$33 trillion.

In 2022, Nikko AM’s Asia Ex-Japan Equity team participated in collaborative engagement with UltraTech Cement<Awareness of issues>
UltraTech operates in a hard-to-abate sector in India whose electricity supplies are dominated by coal-fired power. As
a result, its carbon intensity is one of the highest, both in Asia and amongst its peers. Over the years, there had been
little material improvement in the company’s carbon intensity, and it had yet to announce a strategy to move towards
a lower carbon future.

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality(UltraTech), India’s biggest cement company, as part of its Climate Action 100+* (CA100+) activities.

In 2021, the company’s high emissions had caused Nikko AM to sell the shares held in its Asia Ex-Japan Equity strattiple Indian equity strategy portfolios, where benchmark emission intensities are relatively high and where UltraTech
stock is part of the index. Having already engaged directly with the company itself with little noticeable effect, Nikko
AM participated in collaborative engagement through CA100+.
<Engagement objective>

Initiatives to Reduce
OWN GROUP’s Emissions

egy portfolios, where emission intensity benchmarks are relatively tight. However, it continued to hold them in mul-

In Nikko AM’s previous direct engagements with UltraTech, its focus had been on getting the company to improve
Disclosure Framework Indicators established by CA100+.
<Status of engagement>
As a result of this engagement, our priority targets for UltraTech in 2022 and 2023 are as follows:• to reduce GHG emissions on a clearly defined path to 2025;• to lay out a decarbonisation strategy that explains how it intends to meet its medium- and long-term greenhouse gas reduction targets;• to make a commitment to aligning its capital expenditure plans with its long-term GHG emissions reduction
targets, and to phasing out planned capital expenditure in unabated carbon-intensive assets and products;• to introduce an executive remuneration scheme that includes climate change performance elements;• to acknowledge that it has responsibility for helping achieve a just transition to a net zero economy; and• to make a commitment to implementing the Recommendations of the TCFD.

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its current carbon emissions. The focus of this collaborative engagement was more on the strategy based on theto what participants had said, and had since incorporated some recommendations in its latest sustainability
report, including:• having the legitimacy of its carbon emission reduction targets verified by the UN-backed Science Based
Targets (SBT) initiative, with the aim of reducing greenhouse gas emissions by 27% by 2032 – in line with theglobal target to restrain climate warming to 2°C; andTransition Plan toward
Carbon Neutrality• adopting TCFD disclosures and conducting physical and transition risk analyses;

Our Approach to Climate Change

We were encouraged by the latest CA100+ investor group meeting, noting that UltraTech had been receptive• committing itself to achieving net zero carbon emissions by 2050.

monitor the company’s progress in implementing its transition strategy in accordance with its intermediate andlong-term targets.
* About Climate Action 100+
CA100+ is an investor-led initiative seeking to collaboratively engage with the world’s largest greenhouse gas emitters to reduce their emissions. The initiative comprises over 700 investors with assets of US$68 trillion, and is engaging with 170 companies, 75% of which are committed to achieving net-zero.

Company A is a Japanese prime-listed logistics company engaged in transport and other businesses. Nikko AM
has been individually engaging with the company since 2022, believing that the company must further improve its
climate change-related information disclosure and initiatives, as addressing climate change in the logistics industry
is an urgent issue.

SuMi TRUST Bank’s Initiatives
for Carbon Neutrality

Company A in the Japanese transport sector

Example of individual engagement

Awareness of
Climate Change Opportunities

Nikko AM will continue to engage with UltraTech, both directly and collaboratively as part of CA100+, and<Status of engagement>
specific CO2 reduction plan. Therefore, Nikko AM encouraged the company to identify its CO2 emissions for eachscope, formulate medium- and long-term reduction targets, and disclose KPIs.
During dialogue in 2023, Nikko AM encouraged initiatives to resolve the above issues and held discussions
based on comparative analyses between Company A and companies that were positively implementing information disclosure and initiatives. At that time, Nikko AM expressed its expectations for the formulation and publica-

Initiatives to Reduce
OWN GROUP’s Emissions

At initial engagement with Company A in 2022, it was neither disclosing its CO2 emissions, nor had it formulated ation of a reduction roadmap and the enhancement of its disclosure in line with TCFD Recommendations, given that
Following this, Company A gave an ESG briefing where it announced its initiatives to achieve carbon neutrality. These included disclosing CO2 emissions by scope and intermediate reduction targets for 2030, as well as
implementing measures such as the introduction of EVs and environmentally friendly trucks and the purchase ofgreen power by 2050.
While Nikko AM has seen some progress in the company’s efforts to address climate change and is looking
positively at the change in attitude of Company A’s management, it will continue to monitor the progress of more
specific initiatives, as they are only just getting underway.

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Awareness of Climate Change Risks Initiatives of SMTAM and Nikko AM

specific initiatives were insufficient.

Chapter3

1. Positioning of climate change risks
For enterprise risk management, we regularly identify the risks faced by our subsidiaries and other Group companies sothey can be managed in light of their size and characteristics. Of these, the risks that are particularly important are labeled
as “significant risks” and each significant risk is managed after being classified according to its drivers and categories.
When managing significant risks, we evaluate the importance of each risk from the perspective of business managementand decide whether they fall under the category of “top risks” or “emerging risks.” The former are risks that have thepotential to have a significant impact within the space of one year and warrant the attention of management, while thelatter are risks that are unlikely to have a significant impact within one year, but have the potential to do so over the medium
to long term (more than one year).
In 2021, we moved “climate change risks” into the top risks category (previously in emerging risks). In addition, we haveestablished the following risk appetite indicators and integrated them into our Group-wide risk appetite framework.
Climate change risk appetite indicators
SuMi TRUST Group (SuMi TRUST Bank)GHG emissions at domestic offices (Scope 1, 2)

Investment and loan portfolios (SuMi TRUST Bank)

Progress on 2030 intermediate reduction targets(for power generation and oil & gas sectors)

Asset management portfolios (SMTAM and Nikko AM)

Progress on 2030 intermediate reduction targets

To monitor these risk appetite indicators, in principle, each business in the Group regularly conducts self-assessments,
which are then checked by the Corporate Planning Department. The Risk Management Department periodically reports
the results of factor analyses to mainly the Board of Directors and the Executive Committee.
If any of the indicators deviate significantly from the level specified, a self-assessment on the first line of defense and an
independent evaluation on the second line are carried out to analyze the factors behind the deviation. Then, if required, areview of the measures is then implemented.
Three lines of defense for managing climate change risks
Third lineof defense

Second lineof defense

First lineof defense

Departments that conduct internal audits• Evaluating the effectiveness of the risk management framework

Enterprise Risk Management
Department• Performing integrated monitoring of climate change risks by fulfilling acheck and balance function and appropriately sharing information withthe control departments related to each risk category

Control departments related toeach risk category• Supporting and keeping check on the first line of defense regarding therisk management of each risk category for climate change risks

Carbon Neutrality Planning andManagement Department• Devising the Group’s net-zero strategy• Unifying the first line of defense activities related to climate changeGroup company businesses andfront offices• Identifying, evaluating, and controlling climate change risks• Promoting engagement for the climate change actions of clients

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Credit Risk Management
Concerning Climate Change

Climate Change Risks in Enterprise Risk Management

Climate Change Risks inEnterprise Risk Management

Risk Management

Climate Change Risks inEnterprise Risk Management

2. Climate Change Risk Management Policy

Identifying and evaluating climate change-related risks
Climate change-related risks
As a high-priority issue in the environmental field, climate change risks are defined as the negative impacts on the Group, itsclients, the markets, financial infrastructure, and society as a result of physical damage to, for example, social infrastructureand nature, from medium- to long-term climate change and abnormal weather (physical risks), as well as the rapid transition
to a low-carbon society owing mainly to changes in climate change policies, changes in financial market preferences andsocial norms regarding climate change, and technological innovation (transition risks).

Managing climate change as a risk driver and the effects on each risk category
Based on the assumption that climate change is a risk driver that has an impact across all risk categories, we are actualizing
climate change risk management with a climate change-specific risk management policy for each risk category.
Climate change-specific risk management policy

Risk horizon*

Credit risk

Borrower monitoring in relation to climate change (monitoring the GHG emissions, stranded assets, storm and flood
damage risks, and other risks of borrowers)

Short, medium,and long termMarket risk

Monitoring the risk of price fluctuations in securities issued byinvestees based on their climate change action (monitoring
the correlation between GHG emissions and stock price, andcomparative analysis in the sector)

Short/medium
termAdministrative risk(outsourcing)Continuity of outsourced work due to storm and flood damage at the contractor

Short/medium
term

Event risk (storm andflood damages)

Addressing the negative impacts of greater storm and flood
damage caused by climate change on real estate owned by
the Group

Short, medium,and long term

Compliance risk

Compliance with climate change-related regulations

Short/medium
term

Conduct risk

Addressing the negative impacts mainly on clients, markets,
financial infrastructure, and society because our measures toaddress climate change have not met the expectations andtrust of our stakeholders

Short/medium
term

Addressing the negative impacts on the Group and our stakeholders owing to our failure of the execution (or achievement)of our 2050 net-zero GHG emissions commitment

Short, medium,and long term

Operational risk

Enterprise risk management* Short term: One year or less; Medium term: More than one year but less than ten years; Long term: Ten years or more

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Credit Risk Management
Concerning Climate Change

Pursuant to a resolution of the Board of Director, we have formulated the Action Guidelines for Mitigating Climate Change
as a basic policy on addressing climate change issues. We have also established the Management Policy of Sustainabilityrelated Risks within the framework of our Risk Management Rules for the purpose of managing climate change risks. It
clearly articulates our basic approach to sustainability-related risks, including climate change risks, the roles and responsibilities of the Board of Directors, the Executive Committee, and directors and executive officers, the three lines of defense
system, and our basic policy on risk management in consideration of climate change according to each risk category.

1. Managing environmental and social (ES) risks in SuMi TRUST Bank’s credit business(1) Cross-sector

funds for the manufacturing of nuclear weapons, chemical weapons, biological weapons, or other weapons ofmass destruction, or for the manufacturing of inhumane
weapons such as anti-personnel landmines.

(a) We will not provide financing to the following businesses because they are restricted under international law or because they are thought to be a significant risk to or have a negative impact on biodiversity,
human rights, or other aspects of the environmentand society.
• Businesses that negatively impact wetlands designated under the Ramsar Convention• Businesses that negatively impact UNESCO World
Heritage Sites• Businesses that contravene the Washington Convention•Businesses that use child labor, forced labor, or
engage in human trafficking(b) Mainly by confirming whether environmental andsocial considerations have been taken into account,
we will adopt a cautious approach to the following
businesses because of the strong possibility thatthey pose a risk to or negatively impact biodiversity,
human rights, or other aspects of the environmentand society.
•Businesses that negatively impact indigenous
communities• Businesses that negatively impact high conservation
value areas•Businesses involved in the expropriation of land
leading to the forced removal of residents• Businesses that instigate or contribute to violationsof human rights in conflict regions, or businesses
directly associated with human rights violations(c) As part of our commitment to respecting humanrights, if unsavory information suggests the possibilityof negative impacts on human rights at our business
partners or in their supply chains, we will engage indialogue with these partners in an effort to preventand mitigate the negative impacts.

<Policy>
Given our public mission and social responsibilities as abanking business, we will not provide financing to companies, in Japan or overseas, engaged in the manufacturing of cluster munitions.
Similarly, we will not provide financing in which thefunds are to be used for manufacturing nuclear weapons, chemical weapons, biological weapons, or otherweapons of mass destruction, or for manufacturing inhumane weapons such as anti-personnel landmines.

(b) Coal-fired power generation<Risk awareness>
Coal-fired power generation produces higher greenhouse gas emissions than other power generation methods, which means it has a heavier impact on the environment and carries the risk of negatively impacting climatechange and air pollution.
<Policy>
We will not finance the construction or expansion ofcoal-fired power plants. However, we will support initiatives aimed at transitioning to a decarbonized society.
We will not provide financing to companies whose
main business is coal-fired power generation if they do
not already have existing loan transactions with SuMi
TRUST Bank.

(c) Coal mining<Risk awareness>
Unless managed appropriately, the extraction of coalfrom the ground carries the risk of negatively impacting
the environment and society, mainly owing to the impactthat hazardous waste from coal mines has on the ecosystem, occurrence of casualties as a result of cave-ins, andviolations of human rights. Coal mining can also contribute to higher GHG emissions, which in turn is driving climate change.
<Policy>
We will not finance the new or expansion of coal
extraction projects (thermal coal) or the new or expansion of coal mining businesses that use the mountaintop
removal method. Nor will we finance the new or expansion of infrastructure projects tied to these businesses.
We will not provide financing to companies whose(2) Specific sectors(a) Weapons<Risk awareness>
In Japan, the handling of cluster munitions—weapons recognized to be of significant humanitarian concern—is governed by the Act on the Prohibition of the
Manufacture and the Regulation of the Possession ofCluster Munitions. This law prohibits the manufacturing
and, in principle, the possession of these weapons.
Also, as with cluster munitions, on humanitarian
grounds, we are strongly requested to avoid supplying

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Concerning Climate Change

In view of the need to prohibit, limit, or adopt a cautious approach to credit that may have a negative impact on society,
SuMi TRUST Bank has established the sectoral policies and periodically reviews them at the Executive Committee, etc.
Also, the sectoral policies are taken into full account at the process of deciding on investments and loans.

Climate Change Risks inEnterprise Risk Management

Credit Risk Management Concerning Climate Change

Climate Change Risks inEnterprise Risk Management(d) Oil & gas<Risk awareness>
Oil & gas mining projects carry the risk of negatively
impacting ecosystems, biodiversity, the living conditionsof residents, and the natural environment.
• Oil sands extraction projects
Oil sands extraction consumes large amounts of waterand energy and carries the risk of having a considerable impact on the environment owing to the generation of GHGs, as well as negatively impacting biodiversity and the social environment of indigenous peoples.
• Shale oil & gas projects
The extraction of shale gas carries the risk of watercontamination and earthquakes, as well as negative
impacts on water resources because of the large
amounts of water used in the extraction process.
• Mining projects in the Arctic Circle
The Arctic Circle (66° 33’ N) is a region that requires aconsiderable amount of consideration for the protection of rare species and the livelihoods of indigenous
communities. Mining activities carry the risk of negatively impacting biodiversity and the social environment of indigenous peoples.
• Pipeline projects
Pipeline projects carry the risk of negatively impacting
the natural environment and the social environment ofindigenous peoples mainly as a result of oil leaks anddeforestation not only during the construction phase,
but even after the pipeline is completed.
<Policy>
We will carefully decide on engaging with such projects
after fully considering the impacts on the environment
and the existence of any problems involving indigenous
peoples and local communities.
In particular, we will adopt a cautious approach to oilsands extraction, shale oil & gas projects, mining in the
Arctic Circle, and pipeline laying, after appropriately
evaluating the project’s environmental and social considerations in light of the risks it poses to the environmentand society.

(f) Forestry<Risk awareness>
Rapid deforestation in many parts of the world carries
the risk of causing numerous problems, including theloss of biodiversity, less stable ecosystems, impaired
watershed protection functions, and degraded carbon
fixation.
<Policy>
We will carefully decide on engaging with timber manufacturers and manufacturers using timber as a raw
material after checking their international forest certification status and taking into full account the existenceof any problems involving indigenous peoples and local
communities.
In particular, we will adopt a cautious approach to logging projects in countries other than high-income OECDmember countries, mainly by requesting the acquisitionof an internationally recognized certification, such as
the Forest Stewardship Council (FSC) or the Programme
for the Endorsement of Forest Certification Schemes(PEFC), and by taking into full account the existence ofany problems involving indigenous peoples and local
communities. In cases where certification has not beenobtained, we will require the submission of plans to do
so. In addition, we will request the formulation of a policy that respects the free, prior, and informed consent(FPIC) of local residents. During the transaction period, if
a business counterparty does not suitably address environmental and social issues, we will request corrective
actions for improvement. If the improvement measures
are insufficient, we will not provide any new financing to
the business counterparty. We will also request to seeenhanced supply chain management and improved
traceability so that similar initiatives are implemented
throughout the business counterparty’s supply chain.

(g) Palm oil<Risk awareness>
While demand for palm oil has surged thanks mainly to
its ease of use as a cooking oil and a growing preference for health food products, reckless plantation development carries the risk of tropical rainforest destruction
and biodiversity loss.
<Policy>
We will carefully decide on engaging with palm oil producers and manufacturers using palm oil as a raw material after checking their international or local sustainable(e) Hydroelectric power generation<Risk awareness>
Large-scale hydroelectric power projects carry the risk ofnegatively impacting ecosystems, biodiversity, the living
conditions of residents, and the natural environment.
<Policy>
We will carefully decide on engaging with such projects
after fully considering the impacts on the environment
and the existence of any problems involving indigenous

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Concerning Climate Change

peoples and local communities.
In particular, we will adopt a cautious approach tolarge-scale hydroelectric power generation projects(with an output of at least 25MW) that involve the construction of dams, mainly by confirming whether environmental and social considerations have been taken into
account.

main business is thermal coal mining, or to companies
whose main business is infrastructure projects tied tomining operations if they do not already have existing
loan transactions with SuMi TRUST Bank.

2. Managing climate change transition risks of borrowers
SuMi TRUST Bank has developed a transition risk management framework for its investment and loan portfolios for the
purpose of keeping the GHG emissions of the portfolios in each high-carbon sector in line with the goals of the Paris
Agreement.
The framework contains the departments related to the first and second lines of defense in the aforementioned threelines of defense system, team roles and responsibilities, how policies for specific sectors should be applied, the businessprocesses for managing the transition risks of borrowers on the first line of defense, including evaluations of borrowertransition risk categories in consideration of our climate change transition risk sector heat map, discussions aimed at risk
reduction through engagement, and monitoring, and lastly, how the check and balance function on the second line ofdefense should be employed. These risk management processes are implemented in an integrated manner alongside themanagement of progress on GHG emission reduction targets in each sector and reputational risk management.

Policy for addressing climate change transition risks
With efforts aimed at reducing GHG emissions continuing to gain momentum worldwide, we aim to achieve net-zero
GHG emissions in our investment and loan portfolios by 2050 as part of SuMi TRUST Group Carbon Neutral Commitment
announced in October 2021. We will work hand-in-hand with our clients on cutting GHG emissions and emphasize a process of continual dialogue to address the impacts of, and countermeasures to, the medium- to long-term climate changetransition risks of clients.

Approach to managing climate change transition risks
In working towards achieving net-zero GHG emissions in our investment and loan portfolios, we will use our climate changetransition risk sector heat map to identify sectors that are important in terms of our strategy for setting GHG emission
reduction targets. For the identified sectors, we will set GHG emission reduction targets and establish various benchmarks
and sector policies for monitoring and managing our progress.

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Concerning Climate Change<Risk awareness>
The development of large-scale plantations carries therisk of deforestation, violations of human rights, andnegatively impacting ecosystems, biodiversity, the living
conditions of residents, and the natural environment.
<Policy>
We will carefully decide on engaging with such projects
after fully considering the impacts on the environment
and the existence of any problems involving indigenous
peoples and local communities.
In particular, we will adopt a cautious approach todevelopments in forests and peatlands, mainly byrequesting the formulation of policies that respect the
FPIC of local residents and uphold NDPE commitments.
We will also request to see enhanced supply chain management and improved traceability so that similar initiatives are implemented throughout the business counterparty’s supply chain.

Climate Change Risks inEnterprise Risk Management(h) Large-scale plantations

palm oil certification status and taking into full accountthe existence of any problems involving indigenous peoples and local communities.
In particular, we will adopt a cautious approach topalm oil plantation development projects, mainly byrequesting the acquisition of RSPO (Roundtable on
Sustainable Palm Oil) certification or a local certification,and by taking into full account the existence of any problems involving indigenous peoples and local communities. In cases where certification has not been obtained,
we will require the submission of plans to do so. Also, wewill request the formulation of policies that respect the
FPIC of local residents and uphold no deforestation, nopeat, and no exploitation (NDPE) commitments. During
the transaction period, if a business counterparty does
not suitably address environmental and social issues, wewill request corrective actions for improvement. If the
improvement measures are insufficient, we will not provide any new financing to the business counterparty. We
will also request to see enhanced supply chain management and improved traceability so that similar initiatives
are implemented throughout the business counterparty’s supply chain.

Sector-specific climate change transition risk heat map
We have formulated a climate change transition risk sector heat map for the purpose of identifying the sectors that areimportant in terms of managing climate change transition risks. For this heat map, we considered GHG emissions, GHG
emission intensity, and other factors to categorize the transition risk level of each sector according to four rankings: very
high, high, middle, and low. We also categorized the exposure of each sector as large, medium, or small.
The sectors are based on the definitions of carbon-related assets (18 sectors in total) in the supplemental guidance for
the TCFD Recommendations, and we also took into account the high carbon-intensity sectors*1 for which targets should be
set according to the NZBA, to come up with a total of 21 sectors*2.
We take this heat map into consideration as part of the process of identifying the sectors that are strategically importantin terms of setting GHG emission reduction targets. We then establish our GHG emission reduction targets for those sectors, along with management benchmarks and sector-specific policies.
In addition, we will continue to review our sector evaluations in line with climate change policies and technologies, market and other environmental changes, and advancements in quantifications methods.
Note that due to the change in sector classification criteria to a consolidated basis for apex companies, the exposure rankof Transport (Automotive, Components) sector has changed from medium to large.
Going forward, we are considering the development of a framework to assess a transition risk rank for each client in aneffort to enhance our analyses aimed at understanding actual conditions.
Climate change transition risk sector heat map
Exposure rank

Sector heat map risk rank

Small

MediumLarge

Very High

Coal

Iron & SteelPower generation
Oil & GasHigh

CementChemistry
Passenger Airplane

Automotive & components
Shipping

MiddleMetals & Mining(expect Steel and Aluminum)
AluminumLow

Air cargo
Agriculture
Construction materials(expect Cement)

Capital goods
Paper & Forest Products
Packed Foods & Meat
Beverage
Trucking Services

Railways
Real estate*1 High carbon-intensity sectors are the following nine sectors in the NZBA guidelines for which setting targets is considered a priority: agriculture, aluminum, cement,
coal, commercial and residential real estate, iron & steel, oil & gas, power generation, and transport.
*2 We added three sectors by extracting “iron & steel” and “aluminum” from “metal & mining” and by extracting “cement” from “building materials” in the supplemental guidance for the TCFD Recommendations.

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Concerning Climate Change

In the sectors for which GHG emission reduction targets have been set, we make decisions on investments and loans after
conducting due diligence on transition risks for both new and existing borrowers.
In particular, if the balance of a loan exceeds a certain amount, we take risk materiality into consideration when categorizing climate change transition risks. These climate change transition risk categories are regularly reviewed, and if necessary,
we consider the adoption of additional risk reduction measures according to each category.

Climate Change Risks inEnterprise Risk Management

Climate change transition risk management processClimate Change Risks inEnterprise Risk Management

3. Risk management in project financeApplication of the Equator Principles
ESG/sustainable management is a high-priority sustainability issue (materiality) for the Group, and as a key topic
related to this issue of materiality, we take into account how borrowers and investees impact society and the environment. SuMi TRUST Bank incorporates risk management procedures based on the Equator Principles into its project
finance decision-making process to ensure that due consideration is given to each project’s impact on the naturalenvironment and the local community. In FY2022 (April 1, 2022 to March 31, 2023) there were 25 projects to which
we applied the Equator Principles.
The fourth revision (EP4) calls for greater efforts to strengthen commitments to indigenous peoples in developed
countries, expand some transactions applicable for refinancing, and address climate change risks. For projects withannual GHG emissions in excess of 100,000t-CO2, the requirement of a transition risk analysis under TCFD alongside
the consideration of alternative proposals, as well as a physical risk analysis for projects expected to generate significant impacts, were added to the items of due diligence.
SuMi TRUST Bank has in place internal operational rules that set out the procedures for evaluating environmental and social impacts based on the framework of the Equator Principles. The Financial Products Administration
Department (Social & Environmental Risk Assessment Team) undertakes the assessment of environmental and social
impacts for each project.

Systems and Processes for Evaluating Environmental and Social Considerations
Information on projects subject toEquator Principles

ClientCovenants

Screening Form
Categorization

Sales departments

Environmental Impact Assessment etc.
Environmental and Social Impact Review

Monitoring

Financial Products
Administration
Department(Social & Environmental
Risk Assessment Team)

Screening department

Application process:In accordance with internal operational rules that set out the procedures for evaluating social and environmental considerations, theEquator Principles overseeing department carries out assessments of environmental and social impacts for each project.
Implementing environmental and social impact reviews:
A comprehensive risk assessment is made after reviewing whether the actions on environmental and social considerations taken by
the project developer meet the standards called for by the Equator Principles, depending on the industry and the country in which
the project is located.
Monitoring compliance:
Compliance with important items is reflected in loan agreements and the compliance thereof is regularly confirmed with the use of
project compliance status reports.
Company training programs:
Regular training sessions are provided for employees in departments and sections engaged in sales, assessments, and screening in aneffort to foster a thorough understanding of internal operations and raise awareness about environmental and social considerations.

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Concerning Climate Change

SuMi TRUST Bank is cognizant of the fact that financing large-scale development projects may indirectly have a negative
impact on the natural environment and local communities. Based on this awareness and in order to introduce a risk management framework, in February 2016 we signed on to the Equator Principles, a set of international private sector guidelines for environmental and social considerations in mainly project finance.
SuMi TRUST Bank currently applies EP4—the fourth revision of the Equator Principles adopted in November 2019—toprojects for which it acquired a client mandate after October 1, 2020. With EP4, SuMi TRUST Bank will continue to contribute to the achievement of a sustainable environment and society by making sure that projects take environmental andsocial considerations into account based on the Equator Principles.

Climate Change Risks inEnterprise Risk Management

Application of the Equator Principles

Project Finance Cases

Project-Related Corporate Loans

Sector

FY2022

A

B

C

Total

A

B

C

3

11

1

15

7

2

1

10

A

B

C

Total

A

B

C

Total

Sector

Total

Mining0000Mining1

0

0

1

Infrastructure

1

2

0

3

Infrastructure

1

1

0

2

Oil & Gas

0

0

0

0

Oil & Gas

0

0

0

0

Power generation

2

9

1

12

Power generation

3

1

0

4

Others00

00Others2013Region

A

B

C

Total

Region

A

B

C

Total

Americas

2

2

0

4

Americas

3

1

0

4

Europe/Middle East/Africa

1

1

0

2

Europe/Middle East/Africa

2

0

0

2

Asia/Oceania

0

8

1

9

Asia/Oceania

2

1

1

4

Designated Countries and
Non-Designated Countries

A

B

C

Total

Designated Countries and
Non-Designated Countries

A

B

C

Total

Designated Country

2

11

1

14

Designated Country

1

2

1

4

Non-Designated Country

1

0

0

1

Non-Designated Country

6

0

0

6
Total

Independent Review

A

B

C

Total

Independent Review

A

B

C

Yes

3

10

0

13

Yes

7

2

0

9

No

0

1

1

2

No

0

0

1

1

A: Projects for which there is at least one item that is considered to have a significant impact
B: Projects for which there are no items that are considered to have a significant impact and at least one item that is considered to have a limited impact
C: Projects for which the impact of all items is minor/none

4. Ship finance initiatives
SuMi TRUST Bank has given top priority to meet the varied needs of clients in the shipping industry and steadily provided
ship finance for more than 50 years. The shipping market is heavily influenced by mainly global economic fundamentals andsupply and demand for vessels, but efforts aimed at decarbonization in the shipping industry have become pressing issues
and will most likely alter the future direction of the sector and significantly affect shipping market trends up ahead. The
Poseidon Principles has been established by the financial industry for the purpose of supporting decarbonization efforts inthe shipping industry. In March 2020, SuMi TRUST Bank has become the first financial institution in Asia to sign on to theprinciples. As a signatory financial institution to the Poseidon Principles, SuMi TRUST Bank will quantitatively assess global
shipping GHG emission reduction efforts in its own ship finance portfolio in line with the GHG emission reduction targets of
the International Maritime Organization (IMO)*1 and publish the results as an annual portfolio climate alignment*2 report.
As outlined below, the trajectories of the Poseidon Principles were updated in September 2023 in line with the July 2023
revised targets of the IMO and have been applied from the report as of the end of December 2022. As a temporary measureduring the transition phase, signatory financial institutions will also report the results as of the end of December 2022 basedon the previous trajectories.
*1 The IMO is a United Nations’ specialized agency responsible for promoting international cooperation on marine affairs including shipping safety and preventing
marine pollution by ships*2 Portfolio Climate Alignment is based on the trajectory that should be met as a minimum, as defined by the Poseidon Principles

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63

Climate Change

Credit Risk Management
Concerning Climate Change

FY2022

Climate Change Risks inEnterprise Risk Management

As an initiative spearheaded by private financial institutions to align with the GHG reduction strategy* adopted by the
IMO, which comprehensively decide GHG reduction targets and the measures for global shipping, to achieve thosetargets, the Poseidon Principles were established in June 2019 by 11 major global financial institutions that provide ship
finance. There are four principles—Principle 1: Assessment of climate alignment; Principle 2: Accountability; Principle
3: Enforcement; and Principle 4: Transparency.
* GHG reduction strategy: This strategy was adopted by the IMO in April 2018 with a vision to reduce GHG emissions from international shipping to zero
as soon as possible in this century. Revised targets for the strategy were announced at MEPC 80 in July 2023. Included in the revised concrete reduction
targets are (1) targets based on a well-to-wake calculation of life cycle emissions, including those from fuel manufacturing and distribution stages, insteadof just the previously used tank-to-wake calculation, (2) the target of net-zero total GHG emissions annually by around 2050, and (3) the adoption of checkpoints to reduce total annual GHG emissions by 30% (at least 20%) by 2030 compared to 2008, and by 80% (at least 70%) by 2040.

IMO’s GHG reduction strategy

Revised July 2023

Total GHG emissions

Total GHG emissions

Total GHG emissions

Target: 80% reduction
Minimum: 70% reduction

Target: Net zero

Base year

Target: 30% reduction
Minimum: 20% reduction

2008

2030

2040

Around 2050

Portfolio climate alignment
In the Poseidon Principles, trajectory values of annual GHG emissions efficiency (GHG emissions per unit of transport) areprescribed for each ship type and size class based on the GHG emissions reduction targets of the IMO’s stated aim (adopted
in July 2023) of reducing total annual GHG emissions from international shipping to net zero by around 2050. SuMi TRUSTBank compares the annual GHG emission efficiency (actual value) of each ship which SuMi TRUST Bank extends a loan
for and is subject to calculation under the Poseidon Principles with the trajectory value in order to calculate the degree ofdivergence, which is referred to as the vessel climate alignment. We then calculate portfolio climate alignment as required
under the Poseidon Principles as a sum of the weighted average of the vessel climate alignment using the balance of loans
outstanding for each ship in the Bank’s ship finance portfolio. The portfolio climate alignment represents the degree ofcontribution the Bank is making towards the GHG emissions reduction target in its own ship finance portfolio. A negative orzero alignment score means the portfolio is aligned with the decarbonization trajectory of the Poseidon Principles, whereas
a positive score means the portfolio is misaligned.
Trends in portfolio climate alignment (as of end-December each year)

GHG reduction target level (vs. 2008)
Before July 2023 revisions
After July 2023 revisions

2020

2021

2022

50% reduction by 2050

(0.8)%(0.4)%(4.5)%

Target: 30% reduction by 2030——

+21.2%

Minimum*: 20% reduction by 2030——

+16.9%* GHG emissions reduction target level that should be met as a minimum, as defined by the Poseidon Principles

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64

Climate Change

Credit Risk Management
Concerning Climate Change

Overview of the Poseidon Principles

Chapter4
List of Key Metrics,
Targets and Results

Metrics and Targets

SuMi TRUST Group sets specific metrics and targets to manage according to our strategies related to climate change andthe basic policy on risk management in order to monitor the Group’s actions to tackle climate change.
The table below shows the key metrics, targets, and results as of the publication of this report.
Metrics

Targets

Results

GHG Emissions in OWN GROUP

List of Key Metrics, Targets and Results

GHG emissions in OWN GROUP
5,411t-CO2e (FY2022)

FY2030: Net zero

Scope 2
GHG emissions in investment andloan portfolios

4,586t-CO2e (FY2022)

2050: Net zero

Oil & Gas sector(emission reduction rate)

FY2030:(13)% – (31)% (compared to March 2021)(3.6)% (FY2021)

Real estate sector(emission intensity)

FY2030: 34 to 41kg-CO2e/m2

64kg-CO2e/m2(FY2021)

Shipping sector(Portfolio Climate Alignment)

FY2030: 0% or less(0.4)% (FY2021)

Sumitomo Mitsui Trust Asset Management

2030: Cut emission intensity inhalf compared to 2019 for 50% of
all assets under management*¹
2050: Net zero

(8.7)% (compared to June 2021)(as of June 2023)

Nikko Asset Management

2030: Cut emission intensity inhalf compared to 2019 for 43% of
all assets under management*²
2050: Net zero

(22.8)% (compared to the end of
December 2019)(as of December 2022)

Cumulative amount of sustainable financing

Cumulative amount from FY2021 toFY2030: ¥15 trillion

Approx. ¥2 trillion (end of FY2022)

Loan balance for coal-fired power generation

FY2040: Zero

Approx. ¥154.0 billion (end of FY2022)

GHG emissions in asset management portfolio

Exposure of carbon-related assets—¥16.3 trillion (end of FY2022)*1 Approximately ¥43 trillion, or 50% of the total of ¥85 trillion in assets under management as of the end of June 2021
*2 Approximately ¥13 trillion, or 43% of the total of ¥31 trillion in assets under management as of the end of December 2021

Loan Balance for
Coal-Fired Power Generation

243g-CO2e/kWh(FY2021)

Total Amount of
Cumulative Sustainable Finance

FY2030: 138 to 173g-CO2e/kWh

GHG Emissions in
Asset Management Portfolios

Power generation sector(emission intensity)

GHG Emissions in Investment and
Loan Portfolios

Scope 1

Exposure of Carbon-Related Assets

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65

Climate ChangeList of Key Metrics,
Targets and Results

GHG Emissions in OWN GROUP<SuMi TRUST Group Carbon Neutral Commitment>

GHG Emissions in OWN GROUP(reduction in OWN GROUP’s GHG emissions)

Achieve net-zero greenhouse gas (GHG) emissions in
SuMi TRUST Group by 2030.
1. Changes in OWN GROUP’s GHG emissions

Measurement items

FY2018FY2019FY2020

FY2021

FY2022t-CO2e35,70333,67532,191

23,763

9,997

Scope 1 (direct emissions)t-CO2e

4,376

4,432

4,307

4,225

5,411

Scope 2 (indirect emissions)t-CO2e31,23829,243

27,884

19,5384,586

GHG emissions

Calculation period: Generally April 2018 to March 2023
Calculation scope:	Domestic and foreign offices of Sumitomo Mitsui Trust Holdings, Inc. and the Group’s consolidated subsidiaries (excluding equity method affiliates)
Calculation method:	The calculations for SuMi TRUST Bank’s domestic offices were done in compliance with the Act on Rationalizing Energy Use. Regarding power,in Scope 2, the adjusted emission factor of each domestic and foreign business operator was generally used to calculate the emissions, and we
considered the GHG reduction effects by the corporate PPAs (long-term agreements to purchase renewable energy) introduced at SuMi TRUSTBank’s domestic offices as well as non-fossil certificate procurement. Note that GHG emissions from gasoline use are included in Scope 1 (directemissions) from FY2022.

2023/2024 TCFD Report

66

Climate Change

Exposure of Carbon-Related Assets

For SuMi TRUST Bank, which accounts for approximately 90% of OWN GROUP’s total Scope 1, 2 emissions, we use a common system to calculate energy consumption and GHG emissions at all domestic offices, in compliance with the Act on
Rationalizing Energy Use (“the Energy Conservation Act”) implemented in Japan.
The Bank’s annual emissions (based on the adjusted emission factor) in FY2022—considering the procurement of renewable energy—amounted to 7,352t-CO2e, approximately 65% reduction compared to 21,151t-CO2e in the previous fiscal
year. This was largely attributable to the fact that all electricity used at all branch offices in Japan now comes from renewableenergy sources through offsets by corporate PPAs and non-fossil certificate.
In addition, we are promoting energy-saving measures centered on those tailored to seasonal characteristics, and willcontinue to make proactive efforts to reduce total energy consumption (branch offices in Japan).

Loan Balance for
Coal-Fired Power Generation

2. SuMi TRUST Bank’s GHG emissions (branch offices in Japan)

Total Amount of
Cumulative Sustainable Finance

Unit

GHG Emissions in
Asset Management Portfolios

Changes in OWN GROUP’s GHG emissions

GHG Emissions in Investment and
Loan Portfolios

We are striving to reduce the environmental burden of both the power, gas, and other energy we use for our businessactivities, and the GHG emissions caused by our business activities. To achieve net-zero emissions, it is important tocomprehensively and accurately understand and analyze our input/output situation as much as possible and to conductongoing reviews.
In FY2022, OWN GROUP’s annual emissions amounted to 9,997t-CO2e, a reduction of approximately 57% from the previous fiscal year. This is largely attributable to reductions at SuMi TRUST Bank, which will be discussed later.
For this time TCFD disclosure, we measured and totaled OWN GROUP’s GHG emissions (Scope 1, 2) as well as a portionof Scope 3 emissions at branch offices in Japan of SuMi TRUST Bank. In addition, we measured and totaled emissions inaccordance with the GHG Protocol and obtained third-party certification for the first time for a portion of GHG emissions(Scope1, 2) for SuMi TRUST Bank (non-consolidated). Going forward, we will strive to improve the accuracy of our analysis
by using better qualitative and quantitative data and by improving our measurement methods.

List of Key Metrics,
Targets and Results

Changes in SuMi TRUST Bank’s GHG emissions (branch offices in Japan )FY2022FY2018FY2019FY2020

FY2021City gas

4,280

4,336

4,243

4,203

3,529

3,214

315

LP gas

0

0

0

0

0

0

0

Kerosene

0

0

0

0

0

0

0

Heavy oil (JIS Class A)

82

85

54

8

60

57

3

Total

consolidated)

Scope 1
(direct
emissions)t-CO2eLight oil
Gasoline
Total

Scope 2(indirect
emissions)

Emissionsbasedon basic
emissionfactor

0

0

0

0

0

—

—

1,418

1,418

—

—

—

—

—

27

27

—

4,362

4,421

4,297

4,211

5,034

4,716

318

26,716

24,52723,294

21,721

20,751

19,211

1,540

303

323

354

388

310

301

10

Cold water

1,701

1,621

1,629

1,548

1,544

1,493

51

0

0

0

0

0

0

0

423

436

455

482

463

453

10

29,142

26,90625,732

24,13923,06921,4581,611

28,502

26,41925,198

16,940

2,318

2,247

71

Steam

t-CO2eOtherst-CO2e33,50531,32730,03028,35028,103

26,174

1,929

Emissions based on
adjusted emission factor

t-CO2e32,86430,84029,495

21,151

7,352

6,963

389

Emissions based on
basic emission factor

t-CO2e/1,000 m2

91

86

82

78

77

78

62

t-CO2e/1,000 m2

89

84

81

58

20

21

13

(GHG emissions Emissions based on
per floor space) adjusted emission factor

Calculation scope: Domestic SuMi TRUST Bank facilities covered by the Energy Conservation Act
Calculation method:	In accordance with the GHG Protocol, SuMi TRUST Bank’s (non-consolidated) GHG emissions are measured and totaled, using the emissions ofGroup companies occupying SuMi TRUST Bank’s domestic facilities by classifying based on the floor space used

Changes in the amount of energy used by SuMi TRUST Bank (branch offices in Japan )Energy use

FY2018

Total floor space

Scope 1
(direct emissions)

FY2021

FY2022

1,000 m

370

365

366

363

365

1,000 m3

1,869

1,893

1,890

1,954

1,640

t

0

0

0

0

0

Kerosene

kl

0

0

0

0

0

Heavy oil (JIS Class A)

kl

30

31

20

2

22

Light oil

kl

0

0

0

0

0

Gasoline

kl

—

—

—

—

611

Electricity

1,000 kWh

56,00354,75353,94052,37051,859Warm water

GJ

5,622

5,934

6,443

7,070

5,731

GJ

32,50931,23531,81630,40132,284

GJ

2,611

2,758

2,947

3,211

3,148

Others

GJ

4,809

4,889

5,033

5,242

4,975

MWh

191,375

188,100

186,174

181,678

177,258

Calculation scope:	Domestic SuMi TRUST Bank facilities covered by the Energy Conservation Act. Some facilities are also occupied by Group companies including
Sumitomo Mitsui Trust Asset Management
Calculation method: Calculated in compliance with the calculation method in the Energy Conservation Act

2023/2024 TCFD Report

67

Climate Change

Exposure of Carbon-Related Assets

LP gasScope 2
Cold water(indirect emissions)
Steam
Total energy use

FY2020Loan Balance for
Coal-Fired Power Generation

City gas

FY20192

Total Amount of
Cumulative Sustainable Finance

Emissions based on
basic emission factor

GHG Emissions in
Asset Management Portfolios

Electricity

Total

Emission
intensity

0—Warm water

Emissions based on
adjusted emission factor
Scope 1, 2
total

0
—

GHG Emissions in Investment and
Loan Portfolios

Chlorofluorocarbons

Group
companies

GHG Emissions in OWN GROUP

GHG emissions

SuMi TRUSTBank (non-List of Key Metrics,
Targets and Results

Scope 3 measurement and totals (FY2022)

GHG emissions

Calculation method

1

Purchased products andservices

20 items including products andservices

Average consumption method(amount)

86,0262

Capital goods

Capital investment(building equipment, software, etc.)

Average consumption method(amount)

180,6413

Fuel and energy activities
not included in
Scope 1, 2Electricity usage, city gas, etc.

Average data method

4,701

5

Waste generated frombusiness*1

Amount of waste generated (kg)

Waste type-specific method(waste volume)252

Business trips*2

Transportation, domestic andoverseas accommodation fees

Consumption-based method(amount)

3,671

Travel expenses for
assignments*3

Domestic and overseas assignments,
training and study abroad programs

Consumption-based method(amount)

2,792

Employee commute*4

Commuting expenses

Amount base

3,352

6

7

(t-CO2e)Total Amount of
Cumulative Sustainable FinanceCalculation scope: Covers SuMi TRUST Bank’s business activities in Japan.
Calculation method:	Based on the Ministry of the Environment’s “Emission Intensity Database for Calculating Greenhouse Gas Emissions, etc. of Organizations in
Their Supply Chain.”*1 Emissions were calculated by multiplying the amount of waste generated by SuMi TRUST Bank’s seven offices by an emission factor from the Ministry of theEnvironment’s emissions intensity database. Total emissions were calculated by dividing the emissions by the number of employees at the seven offices and multiplying by the number of SuMi TRUST Bank employees.
*2 Calculated from domestic and overseas business travel expenses of domestic offices. For transportation expenses, emissions are calculated by classifying businesstrip transportation expenses by mode of transportation used and multiplying by the emission factor from the Ministry of the Environment’s emission intensity database. For accommodation expenses, emissions are calculated by using the number of days stayed based on the accommodation expenses and multiplying by theemission factor from the Ministry of the Environment’s emission intensity database.
*3 Using emission factors from the Ministry of the Environment’s emission intensity database, calculate the average emission factor from the emission factors of transportation and accommodation used for each of the following travel expense categories: (1) domestic assignment, (2) overseas assignment, and (3) training/study
abroad programs, and multiplying the travel expense for each assignment category by the corresponding average emission factor.
*4 All transportation used for commuting is assumed to be by rail, and emissions are calculated by multiplying commuting expenses by the emission factor from the
Ministry of the Environment’s emission intensity database.

GHG Emissions in
Asset Management Portfolios

Calculation item

GHG Emissions in Investment and
Loan Portfolios

Category

GHG Emissions in OWN GROUP

We measured and totaled GHG emissions for six categories of Scope 3 in order to understand GHG emissions across SuMi
TRUST Bank’s supply chain. Going forward, we will work to enhance our information disclosures by covering more categories and expanding the scope of our calculations to include Group companies.

Loan Balance for
Coal-Fired Power Generation
Exposure of Carbon-Related Assets

2023/2024 TCFD Report

68

Climate ChangeList of Key Metrics,
Targets and Results

GHG Emissions in Investment and Loan Portfolios<SuMi TRUST Group Carbon Neutral Commitment>

GHG Emissions in OWN GROUP

Achieve net-zero GHG emissions in investment
and loan portfolios by 2050.
<2030 intermediate reduction targets>
138 - 173g-CO2e/kWh

Emission intensity

Oil & Gas sector(13)% to (31)% compared to FY2021

Absolute emissions

Real estate sector

34 - 41kg-CO2e/m2

Emission intensity

Shipping sector

0% or less

Portfolio Climate Alignment

1. Selecting sectors for setting intermediate reduction targets

Flow of setting Target

Nine NZBA-specified sectors needing targets
Real estateTransport

Iron & Steel
Coal

CementAluminum

Agriculture

Evaluate sectors by “degree of transition risk” × “size of exposure”
Exposure rank
MediumLarge

Very High

Coal

Iron & SteelPower generation,
Oil & GasHigh

CementChemistry,
Passenger Airplane

Automotive & components,
Shipping

MiddleMetals & Mining (expect Steel andAluminum), AluminumLow

Air cargo, Agriculture, Construction
materials (expect Cement)

Capital goods
Paper & Forest Products,
Packed Foods & Meat, Beverage,
Trucking Services

Railways,

Real estate

Targets set
Power generation (Oct. 2022)
Oil & Gas (Feb. 2023)

Targets to be set

Real estate (Oct. 2023)
Shipping (Oct. 2023)

Iron & SteelA utomotive & components* Set in FY2022 to identify important sectors for transition risk management associated with climate change

2023/2024 TCFD Report

69

Climate Change

Ongoing discussionsT ransport (Air, Land)
Coal

CementA luminum
Agriculture

Exposure of Carbon-Related Assets

Select target sectors based on the climate change transition risk sector heat map* (->p. 61)

Loan Balance for
Coal-Fired Power Generation

Sector heat map risk rank

Small

Total Amount of
Cumulative Sustainable FinancePower generation
Oil & Gas

GHG Emissions in
Asset Management Portfolios

SuMi TRUST Group has selected the iron & steel and automotive & components sectors to set intermediate reduction targets based on the NZBA framework, in addition to the power generation, oil & gas, real estate, and shipping sectors, which
we had already set targets for. In terms of GHG emissions (financed emissions) of SuMi TRUST Bank’s investment and loan
portfolio, these sectors account for about 94% of the nine NZBA sectors.

GHG Emissions in Investment and
Loan Portfolios

Power generation sector

List of Key Metrics,
Targets and Results

Percentage of financed emissions in nine NZBA sectors in SuMi TRUST Bank by sector(total of Scope 1-3, as of March 31, 2023)

Total of Nine Sectors: 94.7%
Real estate 2.9%
Automotive & components
16.3%

Power generation
21.9%

Oil & Gas
40.4%

1.8%
1.2%
0.9%
0.8%
0.5%
0.2%

GHG Emissions in OWN GROUP

Land
CementAluminum
Agriculture
Air
Coal

Shipping Iron & Steel
7.2%
6.1%

GHG Emissions in Investment and
Loan Portfolios

2. Setting 2030 intermediate reduction targets
The NZBA calls for members to set GHG emission reduction targets by sector using science-based scenarios, such as those
provided by the International Energy Agency (IEA), and we plan to set targets in accordance with these scenarios. Based on
this policy, we set 2030 intermediate reduction targets for the power generation sector in 2022, followed by the oil & gas,real estate, and shipping sectors in 2023.

Power generation sector (set in October 2022)

Results in FY2021 (g-CO2e/kWh)Benchmark year

FY2020 (March 31, 2021)

250

Target investments
and loansL oan, acceptance and guarantee, corporate bonds, andstrategic shareholdings(including unused pledged lending)249

Target value chain /scopeS cope1 of power generating businesses which accounts for
電力
石油ガス
the
majority of emissions

Measuring indicator

Emission intensity (g-CO2e/kWh)Calculation method(benchmark scenario)

×

16.3%

7.2%

鉄鋼
6.1%

Balanceof investments and
目標設定セクター計
94.7%150
loans to a client

Intermediatetarget173
138

Balance of investments andloans to the sector
100

2030

138 – 173g-CO2e/kWh

FY2021

FY2030(IEA NZE*1) (IEA SDS*2)

20

40

60

80

100

Exposure of Carbon-Related Assets

2023/2024 TCFD Report

70

4.

3.

3.

2.

2.

FY2020*1 A scenario which limits the rise in global mean temperature to 1.5°C with 50%
or more probability, published by the IEA (International Energy Agency)*2 A scenario which limits the rise in global mean temperature to less than 2(or 1.8)°C with 66% or more probability, published by the IEA
0

不動産 2.9%

1.8%1.8%
1.2%1.2%
0.9%0.9%
0.8%0.8%
0.5%0.5%
0.2%0.2%

Loan Balance for
Coal-Fired Power Generation

Target value∑

243

From FY2020(6)/(3)%
自動車・コンポーネント
海運

21.9%

40.4%

Emission
intensityof a client

200

陸運
セメント
アルミ
農業
空運
石炭

Total Amount of
Cumulative Sustainable FinanceIntermediate Target for 2030

GHG Emissions in
Asset Management Portfolios• Since GHG emissions are relatively high and it is one of the key industries to promoting decarbonization, we used anemissions intensity (GHG emissions per unit of electricity generated) as the measuring indicator.
• We set intermediate reduction targets within the range set by the Paris Agreement to stay well below +2 degrees Celsius
and limit global warming to +1.5 degrees Celsius.

Climate ChangeList of Key Metrics,
Targets and Results

Oil & Gas sector (set in February 2023)

Intermediate Target for 2030
250

Benchmark year

FY2020 (March 31, 2021)

Target value chain /scopeScope 1, 2, 3 of upstream production businesses
173

Measuring indicator

Absolute emissions (Mt-CO2e)

Calculation method

Emissions
From a client ×

FY2020Targetvalue

3.5
From FY2020(3.6)%

3.0

Intermediatetarget2.5

Balance
138 of investments andloans to a client

(13)%
(31)%

Funds raised by a client
2.0

2030
FY2021

FY2030(13) – (31)% from FY2020

FY2020

FY2021

FY2030(IEA SDS) (IEA NZE)

Concept for Setting Target for 2030
Well below
2°C level“2°C target”

Referenced the CO2 (including CO2 equivalentof methane produced in the production process)reduction rate (13)% of the IEA SDS scenario asof 2030, with 2020 as the benchmark year.

1.5°C target

 fter achieving the IEA SDS scenario level onAthe left, support client transitions throughengagement, aiming for a reduction rate (31)%consistent with the IEA NZE scenario.

ClientGHG
emissions

Attribution factor

×Balance of investments and loans to a client
Funds raised by a client (interest-bearing debt + net assets)

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71

Climate Change

Exposure of Carbon-Related Assets

Market capitalization
Changed from market capitalization to net assets shown on financial statements

Loan Balance for
Coal-Fired Power Generation

For the purpose of evaluating and disclosing client GHG emission reduction activities and changes in investment
and loan portfolios as the main factors, regardless of changes in the client’s share price valuation, we revised thecalculation for funds raised by a client as part of the attribution factor to reflect the net asset value of the client’s
financial statements when calculating financed emissions. As a result, the oil & gas sector’s financed emissions results
for the benchmark year changed from 5.8Mt-CO2e to 3.6Mt-CO2e.
Note that the PCAF Standard, which defines methods for measuring financed emissions and other factors, generally uses the market capitalization. The reduction in financed emissions in 2021 resulting from this change in calculation method was (3.6)%, but when using the conventional calculation that incorporates the market capitalization, we
achieved an approximately 20% reduction from the 5.8Mt-CO2e of the benchmark year.

Total Amount of
Cumulative Sustainable Finance

Changes to the method of calculating financed emissions when absolute emission is used as the measuring indicator

GHG Emissions in
Asset Management Portfolios(benchmark scenario)

∑

3.6
3.5

GHG Emissions in Investment and
Loan Portfolios

200

100

4.0

L ending, acceptance and guarantee, corporate bonds, andstrategic shareholdings
243(including unused pledged lending)This calculation covers approximately 80% of the applicable investments and loans.

249
Target investments
and loans

150

Results in FY2021 (Mt-CO2e)

GHG Emissions in OWN GROUP• Since reducing fossil fuel-derived GHG emissions is essential to achieving carbon neutrality, we decided to use absoluteemissions as the measuring indicator.
• We set intermediate reduction targets within the range set by the Paris Agreement to stay well below +2 degrees Celsius
and limit global warming to +1.5 degrees Celsius.

PC

(

(

List of Key Metrics,
Targets and Results

Real estate sector (set in October 2023)

Intermediate Target for 2030

Concept for Setting Target for 2030

kg-CO2e/m (%: rate compared to the benchmark year)

Well below 2°C level“2°C target”

R efer to 2°C scenario (41kg-CO2e/m2) of CRREM*1 as of2030 from FY2021 as a baseline*2

1.5°C targetA chieve 2°C scenario, and furthermore support clients intransition through engagements and aim to achieve thelevel (34kg-CO2e/m2) which fit the CREEM 1.5°C scenario

2

Benchmark year (FY2021)

64

2°C target

(36)%

41

34

CRREM
1.5°C Scenario Level

Target Value Chain

Use own real property for commercial use including rental

Target scopeScope1, 2, 3 category13 (assets for lease)

Target investments
and loansL oan, acceptance and guarantee, corporate bonds andstrategic shareholdings (including unused pledged
lending)Cover ratio: approx. 80%

Calculation Method∑

Emission
intensityof a client×

Balance of investments andloans to a client
Balance of investments andloans to the sector*1 Carbon Risk Real Estate Monitor (CRREM) is a project set to support evaluation and management of climate change related risks in the real estate sector, which provides a pathway which aligns with 1.5 and 2°C targets of the Paris agreement*2 The latest version of CRREM scenarios (v2) published in January 2023 does not include a 2°C scenario. Accordingly, we estimated the 2°C scenario in v2 by calculating the deviation between the 1.5°C and 2°C scenarios based on v1, and multiplying it by the 1.5°C scenario in v2.

GHG Emissions in
Asset Management Portfolios

1.5°C target

(47)%

CRREM
2°C Scenario Level

GHG Emissions in Investment and
Loan Portfolios

Major Premise of Calculating Emission Intensity

GHG Emissions in OWN GROUP• For emissions from property use, we set an emission intensity (kg-CO2e/m2) target, which indicates the emission efficiency(Scope 1, 2, and 3-13) of owned properties, including leased properties.
• Targets commercial real estate. For residential real estate (housing loans), we will continue to ensure the availability andquality of GHG emissions data and look into adding a target.

Shipping sector (set in October 2023)

Intermediate Target for 2030

Concept for Setting Target for 2030

PCA
0.5%

0.0%

T he principles refer to the scenario*1 which aims to reduce
the total amount of GHGEs by 50% by 2050 from 2008, andwe aim to achieve the emission efficiency to fit itWe changed the reference scenario, according to the changeof the reference scenario of the principles to achieve netzero by around 2050

Major Premise of Calculating Emission Intensity(0.5)%(1.0)%(0.4)%

PCA ≤ 0%(0.8)%FY2021

Shipping services in the shipping industry

Target scopeScope1, fuel consumption by ships during voyage (TtW*3)

Target investments
and loansL oans secured with completed 5,000 t or heavier ships foroverseas voyage under the IMO management
Cover ratio (collection ratio of emission data): approx. 85%

FY2030

PCA

Balance of loans to each ship

Calculation method

Each ship’s*1 The IMO adopted “Net-Zero by around 2050” in July, 2023*2. In September(Portfolio Climate ∑VCA (%)
Total balance of loans to target shipsof the same year, the Poseidon Principles adopted the IMO’s revised tarAlignment)
gets, but the reference scenario has not yet been published. When it isEach year’s result of CO2
Each year’s baseline of CO2
published, we will update the reference scenario for the reduction targets
VCA*4–emission efficiency per ship
emission efficiency per ship
*2 At the 80th Marine Environment Protection Committee meeting held in(Vessel Climate
Alignment)
London in early July 2023, the IMO GHG Reduction Strategy adopted in 2018
Each year’s baseline of CO2 emission efficiency per ship
was revised and the GHG emissions reduction target from international marinetransportation was further enhanced to Zero GHG emissions by around 2050
*3 Tank-to-Wake (TtW): CO2 emission from a ship during operation*4 The baseline of annual CO2 emission efficiency (CO2 emission per unit transport) by ship class and by ship size is set based on the IMO’s reference scenario. VCA
shows the deviation ratio (%) of the results of annual CO2 emission efficiency of each target ship to which we extend loans from the baseline
2023/2024 TCFD Report

72

Climate Change×

Exposure of Carbon-Related Assets

FY2020Target value chain

Loan Balance for
Coal-Fired Power Generation

Evaluate
Alignmentwith Poseidon
Principles

Total Amount of
Cumulative Sustainable Finance• We set emissions intensity (g-CO2/ton-mile), which indicates the emission efficiency of fuel consumption (Scope 1), as
the indicator for emissions from ship operations in the marine transportation business, following the guidance of the
Poseidon Principles, which we are a signatory of.
• The target reference scenario will be updated to reflect the revision of the Poseidon Principles.

List of Key Metrics,
Targets and Results

3. GHG Emissions in Investment and Loan Portfolios

Condition item

Condition details
Loans, acceptances and guarantees, corporate bonds, and strategic shareholdings

AssetsInvestments in and loans to domestic corporations, investments in and loans to overseas corporations, project
finance, ship finance, real estate non-recourse loans, housing loans, and sovereign bonds

Sectors

Classified into 21 carbon-related asset sectors based on sectors for which the NZBA requires disclosure of emissions as well as items for which disclosure is recommended in the TCFD Recommendations, non-carbon-related
assets, housing loans, and sovereign bonds*3

Reference dates

Investment and loan balance: As of the end of March 2023
Borrower and investee sales and financial data: In principle, the latest financial period of each of SuMi TRUSTBank’s borrowers and investees up to the end of March 2023

*1 PCAF: The Partnership for Carbon Accounting Financials is an international initiative established in 2015, primarily comprised of European financial institutions. The
organization develops GHG emissions measurement methodologies for all asset classes, including investments and loans, and provides support for data preparation*2 PCAF Standard: The Global GHG Accounting and Reporting Standard for the Financial Industry is a standard for measuring emissions of 15 categories in Scope 3
by asset class, published by PCAF in 2020. The 2nd Edition was announced in 2022
*3 Classification is based on GICS codes (Global Industry Classification Standards). For borrowers and investees whose GICS codes cannot be identified by externalvendors, SuMi TRUST Bank identified the classification using the Japan Standard Industrial Classification maintained in-house as a reference

As a result of the measurement, the total value of financed emissions was 180.6 million t-CO2e, and the coverage rate inmonetary terms*1 was 94%.
Financed Emission (FE) Results
Sectors

12.7
8.8
0.1
0.1
0.2
4.5
0.4
0.3
0.4

6.7
27.0
0.1
0.1
0.1
1.9
0.7
0.2
14.1

FE measurementbalance(trillions of yen)
2.2
0.8
0.1
0.1
0.1
1.3
0.9
0.1
1.1

1.2

0.7

0.1
3.4

Data quality score*2 Data quality score
Scope1, 2
Scope 3
2.7
2.4
4.0
2.8
2.0
1.5
2.6
4.0
1.6

0.1

2.9

3.4

0.6
1.9

0.1
0.3

1.4
1.7

1.4
2.3

0.1

0.1

0.1

4.0

4.0

2.0
0.9
1.6
0.2
0.1
0.5
1.4
0.5
1.4
5.4
2.1
48.3

3.3
0.1
60.0
0.9
0.4
0.2
2.3
0.5
—
—
10.3
132.3

0.6
0.1
2.7
3.4
0.1
0.1
0.2
0.1
10.3
3.3
6.0
33.6

1.9
1.6
1.9
2.8
2.3
4.0
2.5
2.0
4.0
1.1
2.4
—

1.9
1.7
2.2
2.5
2.3
4.0
2.7
2.5
—
—
2.6
—

*1 Coverage rate: calculated by using the total investments and loans related to all covered assets as the denominator and the total investments and loans related to
all measured financed emissions with a PCAF data quality score of 4 or higher as the numerator*2 For details on how financed emissions were measured as well as PCAF data quality scores, see the Appendix

2023/2024 TCFD Report73

Climate Change

Exposure of Carbon-Related Assets

2.6
2.3
4.0
2.5
2.0
1.6
2.3
3.6
1.5

Loan Balance for
Coal-Fired Power Generation

FE Scope 3(million t-CO2e)

Total Amount of
Cumulative Sustainable FinancePower generation
Oil & Gas
Coal
Air cargo
Passenger Airplane
Shipping
Railways
Trucking Services
Automotive & components
Metals & Mining(expect Steel and Aluminum)
Aluminum
Iron & Steel
Construction materials(expect Cement)
Chemistry
CementCapital goods
Real estate
Beverage
Agriculture
Packed Foods & Meat
Paper & Forest Products
Housing loans
Sovereign bonds
Non-carbon related
Total

FE*2 Scope1, 2(million t-CO2e)

GHG Emissions in
Asset Management Portfolios(1) Measurement results

GHG Emissions in Investment and
Loan Portfolios

Exposure

GHG Emissions in OWN GROUP

Based on the PCAF Standard*1*2 recommended in the TCFD recommendations, the measurement of financed emissions
as of March 31, 2023 was conducted according to the policy in the table below. Note that Scope 1 for sovereign bonds has
been added from this time onward in accordance with the revision of the PCAF Standard.

List of Key Metrics,
Targets and Results(2) Measurement-related assumptions and points to note

GHG Emissions in OWN GROUP
GHG Emissions in Investment and
Loan Portfolios
GHG Emissions in
Asset Management Portfolios• We are aware that the current situation regarding the disclosure status of borrowers and investees varies widely, withdisclosures unavailable for some companies, others providing only partial disclosures and others still in the process ofdeveloping more sophisticated measurement methods. Accordingly, emission values may change substantially in the
future as disclosures become more sophisticated.
• In cases where we cannot obtain disclosures from borrowers and investees, we make estimates based on emission factors
provided by the PCAF, IEA, etc., in accordance with the PCAF Standard. Note that the emission factors provided by PCAF
were updated in March 2023, and the estimates are based on the updated emission factors beginning with the current
measurement. As such, the emissions tend to be higher than before the update.
• The emission factor used is subject to change in order to achieve the most appropriate method of measurement in lightof the business characteristics. In such cases, we will clearly state the changes and publish our measurement results.
• In this measurement, the number of borrowers and investees with disclosure data available for collection increased
thanks to the progress in the sophistication of GHG emissions disclosure by the borrowers and investees, as well as the
expanded scope of data utilized by external vendors at SuMi TRUST Bank. In particular, with regard to Scope 3, the estimates were limited to only the upstream portion utilizing emission factors from the PCAF database in last year’s measurement for many borrowers and investees, but as we were able to obtain upstream and downstream disclosure data from
more borrowers and investees, Scope 3 emissions increased (50.5 million t-CO2e in the last fiscal year, 132.3 million t-CO2ein this fiscal year). Since emissions are recorded in duplicate for Scope 3, emissions may change significantly in the future
as Scope 3 disclosures continue to evolve.
• Starting from this measurement, we have changed the method of determining sectors based on a consolidated parent
company basis as a general rule.
• Currently, comparisons with previous years need to be made with caution, as the results of financed emissions measurements can vary significantly owing to developments in the information disclosed by borrowers and investees, changes inthe emission factors used for estimation, changes in measurement methods, and other factors.

GHG Emissions in Asset Management Portfolios

Reduction rate

Sumitomo Mitsui Trust Asset Management*1

112.2*3(8.7)%

Nikko Asset Management*2

65.4*4(22.8)%*1 Emission intensity as of June 2023. Reduction rate compared to June 2021
*2 Emission intensity as of December 2022. Reduction rate compared to December 2019
*3 Calculated using the following formulaiMarket value of investment i
Market value of portfolio*4 Calculated using the following formulainMarket value of investment i
EVIC of investees i

×GHG emissions of investees i
Sales of investees i
Exposure of Carbon-Related Assetsn

EVIC: Enterprise Value Including Cash×

Loan Balance for
Coal-Fired Power Generation

Emission intensity(t-CO2e/million USD)

Total Amount of
Cumulative Sustainable Finance

Sumitomo Mitsui Trust Asset Management and Nikko Asset Management participate in the NZAMI, an international
initiative of asset management companies aimed at the achievement of net-zero GHG emissions by investee companies
by 2050.
To achieve this 2050 target, both companies set 2030 intermediate reduction targets in FY2022. We will continue to
conduct engagement activities while striving to increase the sophistication of our operations to help achieve a decarbonized society.

GHG emissions of investees iMarket value of portfolio

2023/2024 TCFD Report

74

Climate ChangeList of Key Metrics,
Targets and Results

Total Amount of Cumulative Sustainable Finance

Cumulative amount (FY2022)

Sustainable financeApprox. ¥2 trillion

Positive Impact Finance¥15 trillion

Approx. ¥354.5 billion

Impact equity investments

Approx. ¥28 billion

CategoryType

Examples of sustainable financeSocial finance mployment creation, poverty reduction, nurturing of startup firms, regional revitalizaEtion, basic infrastructure like public transport and water supply, and essential services
such as hospitals and schools

Positive Impact Finance(PIF)

L oans with unspecified use of funds to comprehensively analyze and evaluate theimpact of corporate activities on the environment, society, and the economy, and toprovide ongoing support for such activities. Characterized by leveraging the degreeof contribution to the achievement of sustainable development goals as an evaluation
indicator, and supporting activities through monitoring and engagement based on
disclosed information.

Sustainability-linked loans(SLLs)

L oans with unspecified use of funds that provide incentives to achieve sustainability
performance targets (SPTs) by setting KPIs and SPTs that are aligned with sustainability
goals as defined in the borrower’s management strategy, and linking loan terms to theborrower’s performance against the SPTs.

Transition financeBusinesses that help transition to a decarbonized society

Impact equity investment

Businesses that help solve environmental problems and social issues

OtherOther businesses that help solve environmental problems and social issues

Loan Balance for
Coal-Fired Power Generation

 usinesses that adapt to, or mitigate, climate change. For example, renewable energy,
Benergy efficiency improvement, and green buildings

Total Amount of
Cumulative Sustainable Finance

Sustainable financeGreen finance

GHG Emissions in
Asset Management Portfolios

The scope of sustainable finance covers financing for businesses and clients that contribute to resolving environmental
and social issues based on international standards such as the Green Bond Principles and the Social Bond Principles. This
includes loans, syndicated loans, fixed income investment services, fund investments, financial advisory services, trustee
services, impact equity investments, etc.

GHG Emissions in Investment and
Loan Portfolios

FY2030 target

GHG Emissions in OWN GROUP

Sustainability is an integral part of the Group’s management and is increasingly emphasized in all aspects of our business.
Accordingly, in each of our business areas, we are incorporating it into our strategy with an ESG and SDGs perspective asa growth strategy.
In FY2021, SuMi TRUST Bank set a long-term sustainable finance target of total ¥5 trillion (including ¥3 trillion in theenvironmental field) covering the ten-year period from FY2021 to FY2030. With the accelerating expansion of need forfunds related to sustainable finance and environmental/climate change, we revised our target to total ¥10 trillion in FY2022,
including ¥2.5 trillion from impact equity investments, and further expanded it to a cumulative total of ¥15 trillion in FY2023.
As a result of active efforts related to project finance for renewable energy and Positive Impact Finance, etc., our result at
the end of March 2023 was about ¥2 trillion (¥3 trillion as of September 2023). By actively supplying funds for the environmental and social fields, we will continue solving climate change and other environmental and social issues as we work withour clients to contribute to the achievement of a sustainable society.

Exposure of Carbon-Related Assets

2023/2024 TCFD Report75

Climate ChangeList of Key Metrics,
Targets and Results

Loan Balance for Coal-Fired Power Generation

Loan balance forcoal-fired power generation
Project financeCorporate finance (new/expansion)

FY2019FY2021

FY2022

FY2030 (target)

FY2040 (target)¥133.8 billion¥142.7 billion

Approx.
¥140 billion

Half comparedto FY2019

Zero—¥20.1 billion

Approx.
¥14 billion

—

Zero

* Exposure to carbon-related assets: We define it as our credit exposure to sectors classified as carbon-related assets (although this excludes independent power producers of renewable-energy). The calculation scope includes loans, acceptances and guarantees, commitment lines, etc. of SuMi TRUST Bank and Sumitomo Mitsui
Trust Bank (Thai) PCL

Total Amount of
Cumulative Sustainable Finance

SuMi TRUST Group monitors exposure to carbon-related assets* as a metric for understanding climate change risk basedon the TCFD Recommendations.
Our exposure to carbon-related assets as of the end of March 2023 amounted to ¥16.3 trillion, which was 41.6% of ourcredit exposure in all sectors. In line with the NZBA framework, we have established intermediate reduction targets for the
power generation, oil & gas, real estate, and shipping sectors, and plan to set targets for the iron & steel and automotive
sectors by September 2024. In addition, we have also created specific transition plans for the power generation and oil &gas sectors. In addition to the above intermediate reduction targets and specific transition plans, we will incorporate ourrecently established sector-specific climate change transition risk heat map (->p. 61), etc. to promote actions aimed atachieving net-zero GHG emissions from our investment and loan portfolios while also continuing to monitor our exposureand appropriately manage our exposure concentration risk.

GHG Emissions in
Asset Management Portfolios

Exposure of Carbon-Related Assets

GHG Emissions in Investment and
Loan Portfolios

Results and targets of balance of loans for coal-fired power generation (total credit basis)

GHG Emissions in OWN GROUPIn March 2018, SuMi TRUST Bank adopted a general policy of no longer providing project loans for new coal-fired power
generation projects while also announcing the intention to reduce the project loan balance to 50% compared to the fiscal
year ended in March 2020 by FY2030 and to reduce the balance to zero by FY2040.
Later, in October 2022, SuMi TRUST Bank also adopted a general policy of no longer providing corporate loans forcoal-fired power generation if the funds are used for new equipment installation or expansion, and set a target to reducethe balance to zero for both project and corporate loans (if the funds are used for new equipment installation or expansion) by FY2040.
However, to make progress towards the realization of a decarbonized society, we will continue to support the fundingneeds of borrowers related to their transition to decarbonization.

Loan Balance for
Coal-Fired Power Generation
Exposure of Carbon-Related Assets

2023/2024 TCFD Report76

Climate ChangeList of Key Metrics,
Targets and Results

Carbon-related asset exposure as of the end of March 2023
Sectors

Renewable energy
Oil & Gas

Exposure (trillions of yen)

Concentration ratio

2.4

6.2%

1.0

2.5%

1.3

3.3%

0.1

0.1%

Energy subtotal

3.7

9.5%

Air cargo

0.1

0.1%

Passenger Airplane

0.5

1.2%

Shipping

1.5

3.8%

Railways

1.0

2.4%

Trucking Services

0.2

0.4%

1.3

3.3%

Transport subtotal

4.4

11.2%

Metals & Mining (expect Steel and Aluminum)

0.2

0.4%

Aluminum

0.1

0.2%

Chemistry

0.6

1.5%

Construction materials (expect Cement)

0.1

0.1%

Capital goods

3.2

8.1%

Real estate

4.3

10.9%

Iron & Steel

0.3

0.8%
0.1%

8.7

22.1%

Beverage

0.1

0.3%

Agriculture

0.1

0.1%

Packed Foods & Meat

0.2

0.5%

Paper & Forest Products

0.1

0.3%

Agriculture, food, and forest products subtotal

0.5

1.2%

Total for the above sectors

17.2

44.1%

Carbon-related asset exposure*1

16.3

41.6%

Total for all sectors*2

39.1

100.0%*1 Total for the above sectors excluding amounts related to renewable energy*2 Total amounts of loans, acceptances and guarantees, commitment lines, etc. of SuMi TRUST Bank and Sumitomo Mitsui Trust Bank (Thai) PCL

Loan Balance for
Coal-Fired Power Generation

0.1

Materials and buildings subtotal

Total Amount of
Cumulative Sustainable Finance

Cement

GHG Emissions in
Asset Management Portfolios

Automotive & components

GHG Emissions in Investment and
Loan Portfolios

Coal

GHG Emissions in OWN GROUP

Power generation

Exposure to Carbon-Related Assets

2023/2024 TCFD Report

77

Climate ChangePostscript
Climate change is one of the most significant environmental problems that threaten the persistence of the global economy and society, and our group have faced it as a prioritized social
issue to address.
We announced the Carbon Neutral Commitment in October 2021 and has promoted various
efforts to fulfill it this fiscal year, as shown in this report.
The significance to tackle climate change and the necessity to accelerate such efforts was recognized again in COP28 in November 2023, while unprecedented natural disasters occurred,and prolonged energy shortage caused by the Ukrainian crisis is getting more serious.
Our Group will continue to engage in sincere discussions with stakeholders and contributeto the realization of a decarbonized society for the next 100 years by leveraging the “Powerof Trust.”
As for information disclosure in line with the TCFD recommendation, we recognize the levelof the best practices is further elevating. We will receive feedback from stakeholders, accelerate our approach to climate change issues and sophisticate information disclosure.
Thank you for your continuous cooperation.

Future Action Plan
Governance• Strengthen efforts in line with the TCFD and the transition plan, report to theboard of directors, etc. and discuss

Strategy• Strengthen and accelerate engagement and solution provision, by fully utilizing
trust group’s functions. Improve our group’s HR training to realize it• Bolster climate change related risk and chance analyses tailored to each sector,
and expand the targets• Further reduce GHGEs from OWN GROUP

Risk
management• Improve the climate change risk control method (transition risk control per firm,case study processes, etc.)• Sophisticate the GHGE measurement, and the plan/control of investment andloan portfolios• Continuously review sector policies based on environmental and social trends

Indicator/target•
Set intermediate GHGEs reduction targets for investment/loan portfolios(automotive and iron & steel, etc.) and monitor the progress in the investment/
loan and operational portfolios• Expand the measurement range and disclosure of Scope3 of OWN GROUP’s
GHGEs

Sumitomo Mitsui Trust Holdings, Inc.
Carbon Neutrality Planning and Management Department
Corporate Planning Department
1-4-1 Marunouchi, Chiyoda-ku, Tokyo 100-8233, Japan
URL: https://www.smth.jp/english/sustainability

2023/2024 TCFD Report78

Climate Change

Appendix. — GHG emissions from investment and loan portfolios
1. Basic policy on measuring financed emissions
Our policy on financed emissions is to continuously measure and periodically disclose them in such report and other documents. When measuring financed emissions, we will do so in accordance with GHG emission measuring standards widelyadopted internationally, such as the PCAF Standard (2nd Edition) that was released in 2022 by the PCAF.
In the PCAF Standard, data quality scores have been established, so measurement methods with high data quality
scores need to be employed in order to accurately ascertain the GHG emissions generated by the activities of borrowers
and investees. For this reason, we will endeavor to improve the way we collect disclosed information concerning the GHG
emissions of borrowers and investees and data related to their various business activities and carry out measurements withhigh data quality scores.

2. Approach to measuring financed emissions(1) Considering basic measurement conditions
Our basic policy on measuring target assets, sectors, and the like is as follows.
Overview of our approach to measuring financed emissions
Condition item

Description

Exposure

Loans, acceptances and guarantees, corporate bonds, and strategic shareholdings

AssetsInvestments in, and loans to, domestic and overseas corporations, project finance, ship finance, realestate non-recourse loans, housing loans, and sovereign loans

Sectors

Sectors for which the NZBA requires the emission disclosure, 21 carbon-related asset sectors basedon the items for which disclosure is recommended in the TCFD Recommendations, as well as non-carbon-related assets, housing loans, and sovereign loans

Sector criteria

In principle, the sector is determined on a consolidated basis. However, if financial data of the parent
company cannot be obtained, the sector is determined on a non-consolidated basis

Basic equation

Financed emissions = attribution factor × company emissions

Reference date

Investment and loan balance: end of March 2023

Emissions data sources

GHG emissions data of borrowers and investees is obtained from the information disclosed via external vendors (Bloomberg) and company websites, as well as from the disclosed GHG emissions dataobtained directly by SuMi TRUST Bank
In cases where the above data cannot be obtained, we multiple the power output, oil & gas production
volume, real estate and residential floor space, or revenue (in other cases) by the corresponding per-unit
emission factor in accordance with the PCAF Standard

Sector classifications
Target sectors
Power
generation

Railways

Shipping

Metals & Mining(expect Steel andAluminum)

Real estate

Chemistry

Agriculture

Coal

Automotive &components

Air cargo

Iron & Steel

Construction
materials(expect Cement)

Capital goods

Packed Foods &Meat

Oil & Gas

Trucking Services

Passenger
Airplane

Aluminum

CementBeverage

Paper & Forest
Products

2023/2024 TCFD Report

79

Climate Change

(2) Method for measuring financed emissions based on the PCAF Standard
A. Data quality scores of borrower and investee GHG emissions
As data quality scores have been established in the PCAF Standard, it is recommended that data with the highest possible
score be used when measuring financed emissions. In principle, we prioritize measurements that use GHG emissions data
based on the disclosed information of borrowers and investees in line with this data quality score approach. In cases where
GHG emissions data based on the disclosed information of borrowers and investees cannot be obtained, we follow the
PCAF Standard to estimate emissions using the sector-specific emission factor provided by the PCAF.*1, 2
Please note that all the measurements of the selected assets have a data quality score of 4 or higher. Also, when calculating the data quality score for each sector, we use the weighted average derived from the investment and loan amount ineach sector based on the methodology of the PCAF Standard.
*1 Estimation methods and scores used by SuMi TRUST Bank
Estimate based on power output (emission factor source: IEA) equivalent to score 3
Estimate based on oil & gas production volume (emission factor source: IEA) equivalent to score 3
Estimate based on real estate and floor space (emission factor source: CRREM) equivalent to score 4
Estimate based on sales figures (emission factor source: PCAF) equivalent to score 4*2 Currently, only Scope 3 upstream emission factors have been provided by the PCAF for sector-specific emission factors. As no downstream emission factors havebeen provided, only Scope 3 upstream emissions are estimated, if estimated using the sector-specific emission factors provided by the PCAF. In the future, estimates that include Scope 3 downstream emissions may vary considerably.

Data quality score table
High

Data quality

Score 1

Method to estimate emissions

Overview

1aVerified emissions data of the company is available.

1b

Unverified emissions data of the company is available.

2a

Emissions are estimated using primary business activity data of the company’s energy consumption and emission factors related to the energy
used. Relevant process corresponding emission are also added.

Score 32bEmissions are estimated using primary business activity data of the company’s production and emission factors.

Score 43aEmissions are estimated using the company’s sales figures and emission
factors per sectoral sales figures.

3b

Emissions are estimated using the company’s investment and loan balanceand emission factors per sectoral asset unit.

3c

Emissions are estimated using the company’s investment and loan balance, emission factors per sectoral sales figures, and the sectoral asset
turnover ratios.

Reported by companies

Score 2
Data quality

Business activity-based
emissions

Score 5

Economic activity-based
emissions

Low

B. Equations
In measuring financed emissions, we use a methodology based on the PCAF Standard*3 referenced in the sector-specificguidance of the TCFD Recommendations. This PCAF Standard methodology has been recognized to be in line with the
GHG Protocol, the global standard for measuring GHG emissions.
The specific steps to calculate emissions in investment and loan portfolios according to the PCAF Standard are as follows.
Financed emissions are measured by multiplying the attribution factor—the financial interests, or the share of the investment and loan amounts to the total financing amounts of borrowers and investees—by the GHG emissions of borrowers
and investees.
Financed emissions =Attribution factor of borrowers and investees × Emissions of borrowers and investees

Attribution factor of borrowers and investees =Amount of investments and loans to borrowers and investees
Total financing amounts of borrowers and investees

Financed emission equations (source: PCAF Standard)*3 For ship finance estimates, we refer to project finance measurement methods because no detailed guidance exists in the PCAF Standard

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Climate Change

(3) Collecting measurement-related data
We collect the following data in order to carry out measurements based on the PCAF Standard.

A. Collecting disclosed data on GHG emissions
We collect disclosed data on GHG emissions pertaining to borrowers and investees (companies or projects) from externalvendor information and ESG-related data disclosed by companies. Score 1 is assigned to data if a third-party certification
can be confirmed, but if not, score 2 is assigned. We make every effort to align the disclosed data on GHG emissions withthe base date of exposure data, but if there is a discrepancy owing to the fact that more recent data or other appropriate
data are used, such a discrepancy shall be permitted.

B. Collecting data for estimating GHG emissions
In cases where data cannot be obtained with aforementioned methods, we collect power output, production volume, sales
figures, and other kinds of data from financial reports and other disclosed information obtained by SuMi TRUST Bank andthen use the emission factors per sectoral sales figures provided by the PCAF or the IEA’s emission factors per power output
and other information to estimate emissions.

C. Collecting financial data
For the financing amount needed to calculate the attribution factor, we collect internal financial data or data from financial
reports obtained by SuMi TRUST Bank. We make every effort to align the financial data with the base date of exposure data,
but if there is a discrepancy owing to the fact that more recent data or other appropriate data are used, such a discrepancy
shall be permitted.

3. Policy going forward
There are still a number of outstanding issues regarding measurements, including further improvement of data quality,
and we recognize that we need to further enhance our approach. Specific examples of these issues are provided below.
It should also be noted that we have started to establish internal controls this fiscal year with a view to obtaining thirdparty assurance in the future.

(1) Improving data quality
We collect disclosed data (equivalent to score 1, 2) on GHG emissions of borrowers and investees as much as possible,
but for cases where borrowers and investees do not disclose such data, we estimate their GHG emissions (equivalent toscore 4) by using the sectoral emission factors per sales figures provided by the PCAF, and other information. Including
estimated GHG emissions in our measurements enables us to measure GHG emissions of borrowers and investees who do
not disclose them, which offers the advantage in terms of comprehensiveness, but in order to more accurately understandthe actual situation around GHG emissions and manage reduction targets, we need to measure GHG emissions with theuse of higher quality data.

(2) Expanding assets for measurement
As calculation methods have not yet been established, aircraft finance, fund investments, and other areas have been
excluded from our most recent measurements, but we need to continue to examine measurement methods and expand
our coverage given the importance of the breadth of our exposure, for example.

(3) Establishing a measurement process
We need to examine and develop an internal framework, including databases and systems, in order to efficiently and accurately measure GHG emissions.

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Climate ChangeThis document includes notes on future earnings, plans, and other forward-looking statements. Such descriptions are not in any way guaranteeing future earnings and are inclusive of risks and uncertainties. Please be mindful that future earnings may differ against targets due
to changes in the business environment and others. Please refer to the most recent relevant materials including financial results (“Kessan
Tanshin”) (including attached explanatory materials), the securities report and other presentations disclosed by Sumitomo Mitsui TrustHoldings and its Group companies, for further information that could significantly influence its financial position and operating results aswell as investment decisions by investors.
Further, information relating to companies etc. other than SuMi TRUST Holdings or the SuMi TRUST Group are citations from publicly
available information etc. and have not undergone any verification on our part in its accuracy / appropriateness etc. and does not guarantee such factors.