SECOND PARTY OPINIONOSAKA GAS CO., LTD.
Daigas Group
GREEN/TRANSITION FINANCE FRAMEWORK
Prepared by: DNV Business Assurance Japan K.K.
Location: Kobe, Japan
Date: 8 May 2024
Ref. Nr.: PRJN-333926-2022-AST-JPN-1_Rev2

This report was updated as Revision 2 in May 2024 through an additional assessment of the "Daigas Group
Green/Transition Finance Framework" that was revised to add Transition-Linked Finance and the update of
the CTFH, GLP, GBGLs, and GLGLs.
If there is any inconsistency between Japanese (original) and English texts, the Japanese text shall prevail.

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Executive Summary
Osaka Gas Co., Ltd. (hereinafter, "Osaka Gas", including the Daigas Group) wasestablished in 1897. Currently, the Daigas Group consists of three major businesssegments: Domestic Energy business, Overseas Energy business, and Life & Business
Solutions business (LBS), mainly in the Kinki region.
The Daigas Group has formulated and published the “Daigas Group Carbon Neutral
Vision” and the “Daigas Group Energy Transition 2030” to achieve carbon neutrality by
2050. Aiming to achieve both a stable and secure energy supply and carbon neutrality inenergy, the Daigas Group aims to achieve carbon neutrality by 2050 by expanding theuse of natural gas, which contributes to reducing CO2 emissions in the entire society,decarbonizing gaseous energy through the introduction of e-methane*1 using renewableenergy and hydrogen, decarbonizing power sources through the introduction ofrenewable energy, and providing customers with solutions through these initiatives.
In addition, in the "Daigas Group Medium-Term Management Plan 2026" formulated in
2024, the Daigas Group positions the period covered by this plan (FY2025.3-2027.3) asa period to work to contribute to the transition period and to "embody its aspirations andbuild a bridge to the future," in which it establishes a foundation for the acceleration ofcarbon neutrality by 2050, utilizing both carbon neutrality and natural gas, and promotes
the efforts towards the goals for FY2031.3 and 2051.3.
In promoting these efforts, Osaka Gas has formulated a "Roadmap to Carbon Neutrality".
In order to achieve carbon neutrality, Osaka Gas will promote various research anddevelopment activities, demonstrations, and the introduction of technologies andfacilities, and will also promote the reduction of CO2 emissions through the use of lowcarbon technologies in the medium term until practical application, and these efforts arein line with the concept of Climate Transition. The "Roadmap to Carbon Neutrality" isconsistent with the Japan Gas Association's Carbon Neutral Challenge 2050 Action Plan
and with the roadmaps for the gas and electricity sectors developed by Ministry of
Economy, Trade and Industry in January 2022 to promote transition finance. In addition,
it includes representative green projects as presented in the widely recognised
international green finance framework.
Osaka Gas has revised the Daigas Group Green/Transition Finance Framework(hereinafter, the "Framework") to procure investment funds that contribute to therealization of the “Daigas Group Carbon Neutral Vision” and the “Daigas Group Energy
Transition 2030” to be carried out in a manner that conform to the additional TransitionLinked Finance and various latest international frameworks updated in 2023.
DNV Business Assurance Japan K.K. (hereinafter, "DNV"), as an external reviewer,
evaluated the eligibility of the framework.
Specifically, DNV provided the eligibility evaluation for frameworks against the following
handbook, principle and guidelines which are widely recognized:- Climate Transition Finance Handbook 2023 (International Capital Market Association,
hereinafter CTFH)- Basic Guidelines on Climate Transition Finance 2021 (Financial Services Agency,
Ministry of Economy, Trade and Industry, Ministry of the Environment, hereinafter,
CTFBG)

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- Green Bond Principles 2021 (International Capital Market Association, hereinafter
GBP)- Green Loan Principles 2023 (Loan Market Association and others, hereinafter GLP)
- Green Bond Guidelines 2022 (Ministry of the Environment, hereinafter GBGLs)- Green Loan Guidelines 2022 (Ministry of the Environment, hereinafter GLGLs)- Sustainability-Linked Bond Principles 2023 (International Capital Market Association,
hereinafter SLBP)- Sustainability-Linked Bond Guidelines 2022 (Ministry of the Environment, hereinafter
SLBGLs)- Sustainability-Linked Loan Principles 2023 (Loan Market Association and others,
hereinafter SLLP)- Sustainability-Linked Loan Guidelines 2022 (Ministry of the Environment, hereinafter
SLLGLs)

The following is a summary of the assessment results for each common element
indicated in the above framework.

<CTF Eligibility assessment results>
CTF-1. Fundraiser’s Climate Transition Strategy and Governance:
The transition strategy of the issuer Osaka Gas sets carbon neutrality by 2050 as along-term goal consistent with the goals of the Paris Agreement set forth in the“Daigas Group Carbon Neutral Vision”. This is in line with the pathway of the Japan
Gas Association's Carbon Neutral Challenge 2050 Action Plan and the Ministry of
Economy, Trade and Industry's roadmap for the gas and electricity sectors. Osaka
Gas has set short- and medium-term goals towards the realization of the long-termgoal. In addition, Osaka Gas's Transition Strategy will contribute to the realizationof supply-side and demand-side carbon neutrality as a key initiative presented invarious plans and strategies for decarbonization in Japan. In terms of governanceand disclosure related to implementation of the finance, an internal structure andinformation disclosure process based on TCFD*1 have been established.
Furthermore, the fact that the study is not limited to the domestic market but also
includes overseas in terms of technological innovation and the establishment of new
supply chains etc. shows consideration for just transition, ensuring that substantial
benefits are widely shared. These are disclosed in the Framework and otherdocuments, and meet the disclosure elements of CTF-1. *1: Task Force on Climate-related
Financial Disclosures

CTF-2. Business model environmental materiality:
The environmental materiality of Osaka Gas's business model is closely related tothree initiatives related to the materiality identified as "climate change" under the
Osaka Gas Charter of Business Conduct, "Contributing to the Sustainability of theEnvironment and Society": 1) achieving carbon neutrality, 2) the provision of clean
energy and the expansion of the renewable energy value chain, and 3) theadvanced use of natural gas and the promotion of environmental products.

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Materiality is identified by using the GRI Standards*1, ISO 26000, TCFD, etc., andscoring the materiality of the two aspects of social and environmental impact andthe future financial impact of the Group, of which "climate change" is shown to be ifhigh materiality. In addition, efforts to address environmental materiality include
not only the reduction of CO2 emissions from the company's own business activities,
but also activities that contribute to Scope 3 and avoided emissions of othercompanies. In addition, the contribution to the SDGs (see below) is also taken into
account. These are disclosed in the Framework and other documents, and meet thedisclosure elements of CTF-2.
*1: Global Reporting Initiative (an international standard providing ESG-related reporting, management andanalysis tools)

CTF-3. Climate transition strategy to be ‘science-based’ including targets andpathways:
Osaka Gas' Transition Strategy is defined by science-based targets and pathways.
Specifically, it is consistent with the Carbon Neutral Challenge 2050 Action Plan of
the Japan Gas Association and roadmaps for the gas and power sectors establishedby the Ministry of Economy, Trade and Industry (METI) as described in CTF-1, and in
addition to reducing CO2 emissions from the company's own activities, long-term andshort- and medium-term goals that take into account Scope 3 and avoided emissions
are indexed and quantified, and the process of achieving these goals is clarified. The
consideration of utilizing CO2 capture technology is also indicated. These aredisclosed within the Framework, other documents and second party opinion, andmeet the disclosure elements of CTF-3.
CTF-4. Implementation transparency:
Osaka Gas plans to invest a cumulative total of 2 trillion yen from FY2018.3-2031.3
in quality improvement, growth and M&A, including the implementation of its
transition strategy. Osaka Gas plans to make carbon neutral investments of around220 billion yen in the cumulative total for the period FY2025.3-2031.3, and in thethree-year period FY2025.3-2027.3, it plans to invest approximately 100 billion yen
in carbon neutrality areas and approximately 460 billion yen in priority growth areas
such as thermal power sources, shale gas development, life and business solutions
business, etc., which include projects implemented with green/transition finance.
DNV has confirmed that the overall and individual investment plans to achieve thecarbon neutral vision in the future will be implemented in accordance with theappropriate timeline, based on the internal management system and processes,
taking into account CTF-1 to CTF-3, for the investments required to implement thetransition strategy. Furthermore, Osaka Gas has been trying since FY2022.3 tounderstand the carbon impact of projects that have already invested by utilizing
internal carbon prices, and has also been utilizing since FY2024.3 as a decisionmaking tool for new investment decisions in business areas with a large carbon
impact. These are disclosed in the Framework and other documents and this second
party opinion and meet the disclosure elements of CTF-4.

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<GBP/GLP Eligibility assessment results>
GBP/GLP-1. Use of Proceeds:
Osaka Gas defines the eligible criteria for the use of proceeds as projects(green/transition projects) that contribute directly or indirectly to the realization oftransition strategies and goals. Specifically, the eligible criteria are indicated by theeligible project categories classified into the initiatives 1) to 3) shown in Table-I, andthe proceeds will be allocated to finance or refinance existing expenditures for one ormore research and development, business development, construction, operation,
refurbishment and other related expenditures. DNV has confirmed that thesegreen/transition projects are consistent with the elements of CTF-1 to 4. Transition
projects have been evaluated by Osaka Gas as having a clear environmental benefit
on the transition strategy and are expected to contribute directly and indirectly to the
SDGs. These processes are in line with GBP-1.
Table-I Osaka Gas Green/Transition Finance Eligibility Criteria and Project Overview(Please see text for details)
Eligible Criteria

1)

2)

3)

Decarbonizationof gas energy

Decarbonizationof power
generation

Lowcarbonization

Eligible Criteria & Project Overview

Hydrogen utilization- Methanation, direct use (chemical looping combustion
technology), etc.

Biogas, biomethane- On-site utilization of biogas and biomethane indomestic/global scale

Renewable power
generation- Solar power plants, onshore wind farm, offshore wind
farm, biomass power plants, etc.

Thermal power
generation- Use of carbon neutral fuels such as synthetic methane,hydrogen and ammonia, CCUS (Carbon Capture,
Utilization and Storage), etc.

Fuel Cell- Enhancing efficiency and downsizing, etc.

Advanced utilizationof natural gas and
CHP- Support for converting fuel from oil and coal to naturalgas- Demonstration of building micro grid
- Use of carbon neutral LNG

Advanced energyuse- VPP, smart energy systems, EVs, etc.

Other
(Reduction of CO2
emission associatedwith own activities)- Cryogenic power generation in the city gas production
process, Cryogenic power generation facilities, energy
efficiency renovation work of buildings, etc.

GBP/GLP-2. Process for Project Evaluation and Selection:
Osaka Gas will confirm that the transition project meets the GBP-1 eligibility project
categories, and that potentially negative environmental and social considerations aretaken into account, and the procedures such as facility certification, permits, andenvironmental assessments are appropriate in the region where the project is to be
implemented. Specifically, eligible projects are made list by the Finance Department
and finalized by the Finance Director after consultation with the Business Unit andPlanning Department. These processes are in line with GBP-2.
GBP/GLP-3. Management of Proceeds:
The proceeds are managed by the Finance Department on an annual, project-byproject basis, using an internal system and dedicated ledgers. The proceeds are
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managed in cash or cash equivalents in an amount equal to the unallocated proceeds
until the full amount of the proceeds has been allocated.
GBP/GLP-4. Reporting:
Until the full amount of the proceeds is allocated to eligible projects, Osaka Gas will
disclose the status of the allocation (allocated/unallocated amount, new/refinanced)
on the Osaka Gas website. In addition, the overview of the projects that have been
allocated and the environmental benefits will be disclosed on the Osaka Gas website
to the extent practicable (for projects under construction, the progress and expectedenvironmental benefits will be included). Furthermore, any changes to the transition
strategy or pathway, or significant changes to the allocation plan or actual results will
be reported in a timely manner or in reporting.

<SLBP/SLLP Eligibility assessment results>
SLBP/SLLP-1 to 5 are findings and opinions of DNV against the five requirements of SLBP,
SLLP, SLBGLs, and SLLGLs for sustainable finance (Transition-Linked Finance) with general
corporate purpose.
SLBP/SLLP-1. Selection of Key Performance Indicators (KPIs):
The KPIs for transitions defined by Osaka Gas (CO2 emissions in the domestic supply
chain of the Daigas Group (Scope 1, 2, and 3)) shown in Table-II are important
indicators in achieving zero emissions by 2050, which is promoted as an innovative
energy and service company. DNV has concluded that the selection of KPIs followed arational process and that the KPIs are clearly defined, measurable, and verifiable, andare robust and reliable in accordance with the SLBP/SLLP.
SLBP/SLLP-2. Calibration of Sustainability Performance Targets (SPTs):
The SPTs of Osaka Gas shown in Table-II (5 million tonnes reduction in CO2 emissions in
the Daigas Group's domestic supply chain in FY2031.3 (compared to FY2018.3)) ismeaningful and closely linked to Osaka Gas' broader sustainability (transitions) andbusiness strategies and shows significant improvements according to a pre-defined
timeline.
In contrast to the Ministry of Economy, Trade and Industry's Transition Roadmap in Gas
Sector, which depicts a pathway where the gas industry will see an increase in the
demand for natural gas as a result of society-wide fuel conversion, which will increasegas companies' CO2 emissions (Scope 3) in the short term, Osaka Gas has set a target
to reduce the absolute value of the domestic supply chain CO2 emissions (Scope 1, 2,
and 3) for 5 million tonnes by 2030, and the decarbonization awaiting the establishmentof innovative technologies would be difficult to achieve with conventional approaches,
due to the uncertainty of technological establishment and the significant costs that would
be incurred in the transition to decarbonization even if it were achieved. Therefore, DNV
has concluded that it is ambitious. DNV has also confirmed that the SPT level is broadly
in line with the linear interpolation level from the baseline FY2018.3 results to 2050
carbon neutrality, taking into account the equivalent increase in domestic CO2 emissionsof the Daigas Group due to these efforts to avoid emissions.
DNV has confirmed that Osaka Gas decided not to set annual SPTs, but to promote
medium- and long-term initiatives to achieve the FY2031.3 target as CO2 emissions(Scope 1, 2, and 3) may fluctuate from year to year due to the significant influence ofdomestic energy demand and the status of individual projects, and that progress

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towards this target will be verified annually by an external organization. Similarly, DNV
has confirmed that milestone SPTs may be set separately from these SPTs, taking into
account the financing period etc., and that in such cases they will be disclosed in thebond disclosure documents, the loan agreement documents, etc. each time of theimplementation of finance.
Based on the respective documents provided by Osaka Gas, DNV has concluded that the
SPTs were realistic, the plan was feasible, and the SPT targets outlined in the
Framework were likely to be met.
SLBP/SLLP-3. Finance Characteristics:
The transition-linked finance with general corporate purpose implemented under the
Framework will have financial and structural characteristics that change in line with theachievement of SPTs. Osaka Gas has an internal procedure to ensure that the trigger
events and their scope of impact, with specific SPT measurement timing andperformance requirements, are linked to the achievement of targets and changes infinancial and structural characteristics each time of the implementation of finance. The
details, including conditions, will be disclosed in the bond disclosure documents, the loan
agreement documents, etc.
SLBP/SLLP-4. Reporting:
The progress of the SPTs against the KPIs required by the SLBP/SLLP will be disclosed
on an annual basis on the website.
SLBP/SLLP-5. Verification:
Osaka Gas plans to have annual verifications by an external evaluation body etc. on the
progress of the SPTs against the KPIs.
Table-Ⅱ Osaka Gas' KPIs and SPTs for green/transition finance
KPI
Definition
of KPISPTDefinitionof SPT

CO2 emissions in the Daigas Group's domestic supply chain (Scope 1, 2, and 3)
Total CO2 emissions in Scope 1, 2, and 3 calculated in accordance with the GHG Protocol,
covering the Daigas Group’s domestic supply chain
Reduce CO2 emissions in the Daigas Group's domestic supply chain by 5 million
tonnes in FY2031.3 (compared to FY2018.3)
Difference between the Daigas Group's domestic supply chain (Scope 1, 2, and 3) CO 2
emissions of 32.01 million tonnes in FY2018.3 and the Daigas Group’s total domestic supply
chain (Scope 1, 2, and 3) CO2 emissions in FY2031.3

Based on an assessment of the framework and other relevant documents and information
provided by Osaka Gas, DNV has confirmed that the Framework established by Osaka Gas
meets the criteria required by the relevant framework CTFH, CTFBG, GBP, GLP, GBGLs,
GLGLs, SLBP/SLBGLs, and SLLP/SLLGLs and is eligible. It was also confirmed that thetransition finance to be implemented this time would be appropriately planned andimplemented in accordance with the Framework.

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Contents
Executive Summary

2

I. Introduction

9

Ⅱ. Scope and Objectives

27

Ⅲ. Responsibilities of Osaka Gas and DNV

29Ⅳ. Basis of DNV’s Opinion

30

V. Work Undertaken

33

Ⅵ. Findings and DNV’s Opinion

34

Ⅶ. Assessment Conclusion

54

Schedule-1 Daigas Group Green/Transition Finance Nominated Projects

56

Schedule-2

58

Key Performance Indicators (KPIs) and Sustainability Performance Targets (SPTs)

Schedule-3 Climate Transition Finance Eligibility Assessment Protocol

60

Schedule-4 Green Finance (Transition Finance with specific use of proceeds) Eligibility Assessment
Protocol71

Schedule-5 Sustainability-Linked Finance (with general corporate purpose) Eligibility Assessment
Protocol78

Revision history
Revision
number0

Date of issue

Remarks

10 February 2022

InitialThe initial version was prepared in the “Climate Transition Finance
Model Project in FY2022.3 (Investigation of ideal way of Transition
Finance),” which is a commissioned project by the Ministry of Economy,
Trade and Industry.

1

1 August 2022

2

8 May 2024

This version was updated as “Framework Master SPO,” setting apartcertain parts regarding eligibility assessment on the “44th Transition
Bond” (bond for May 2022) stated in the initial version (the result of
eligibility assessment on the framework remains unchanged).
This version was updated with the addition of Transition-Linked Financeto the existing framework and the assessment against the revised existing
framework, following the update of the CTFH, GLP, GBGLs, and GLGLs.

Disclaimer
Our assessment relies on the premise that the data and information provided by Issuer to us as part of our review procedures have been provided in good faith.
Because of the selected nature (sampling) and other inherent limitation of both procedures and systems of internal control, there remains the unavoidable riskthat errors or irregularities, possibly significant, may not have been detected. Limited depth of evidence gathering including inquiry and analytical procedures andlimited sampling at lower levels in the organization were applied as per Scope of work. DNV expressly disclaims any liability or co-responsibility for any decision aperson or an entity may make based on this Statement.

Statement of Competence and Independence
DNV applies its own management standards and compliance policies for quality control, in accordance with ISO/IEC 17021:2011 - Conformity Assessment
Requirements for bodies providing audit and certification of management systems, and accordingly maintains a comprehensive system of quality control, including
documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. We
have complied with the DNV Code of Conduct1 during the assessment and maintain independence where required by relevant ethical requirements. This
engagement work was carried out by an independent team of sustainability assurance professionals. DNV was not involved in the preparation of statements ordata included in the Framework except for this Statement. DNV maintains complete impartiality toward stakeholders interviewed during the assessment process.

1 DNV Code of Conduct is available from DNV website (www.DNV.com)

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I. Introductioni.

About the Fundraiser
Osaka Gas Co., Ltd. (hereinafter, "Osaka Gas," including the Daigas Group) wasestablished in 1897. Currently, the Daigas Group consists of three major
business segments: Domestic Energy business, International Energy business,and Life & Business Solutions business (LBS), mainly in the Kinki region (westJapan, around Osaka area).
Domestic Energy Business: Gas

Production, supply and sales of citygas, sales of gas appliances, gas
piping work, LNG sales, LPG sales,industrial gas sales: Electricity Power generation and sales ofelectricity
International Energy Business: Development and investment related tonatural gas and oil, energy supply, LNG
transportation

Life & Business Solutions Business : Development and leasing of real estate,
information processing services, sales offine materials and carbon productsii.

Fundraiser’s Initiatives for ESG/SDGs
The Daigas Group aims to be a corporate group that powers “continuous
advancement” in consumer life and business, and considers the creation of “Valuefor Customers" first and foremost, and the creation of “Value for Society,” “Valuefor Shareholders," and “Value for Employees" to be the guiding principles of its
business activities to fulfill its social responsibility. In addition, in the "MediumTerm Management Plan 2026," the Daigas Group has set the following threecommitments as key strategies: Co-create value for a sustainable future(achieving carbon neutrality in energy, improving the resilience of customers andsociety, co-creating advanced and diverse solutions), Support employees to shine
in their roles, and Evolve business foundation as a corporate group that “secure
peace of mind today, build sustainable lifestyles for tomorrow” to conduct ESGconscious management. These initiatives are linked to the materiality issues
shown in Table-1, and the Daigas Group also aims to make a broad contribution
to the achievement of the Sustainable Development Goals (SDGs) set by theUnited Nations.
Of these, the important issue (materiality) primarily relevant to Transition Financeis climate change (Value for a Sustainable Future: Achieving a Low
Carbon/Carbon Neutral Society), as set out in the Daigas Group Charter ofBusiness Conduct: "Contributing to the Sustainability of the Environment andSociety."

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Table-1: Relationship between the Daigas Group Charter of Business Conduct,
Materiality and Creating Value for a Sustainable Future and the SDGs
Charter of Business
Important issues
Value for aContribution to SDGs
Conduct(Materiality)
Sustainable Future

I

Creating value forcustomers

Maintain and expand
customer base
Improvement ofcustomer satisfaction
and quality of services
Customer health andsafetyStable supply ofservices

II

III
IV
V

VI

Contributing to
the sustainabilityof theenvironment andsociety
Engaging withand contributing
to society
Respecting
human rights
Complying withlaws andregulations
Providing work
environment that
supports
employees’
personal growth

Climate change

Establishing
lifestyles andbusinesses adjusted
to the new normal
Enhancingresilience ofcustomers andsociety
Achieving a low
carbon/carbon
neutral society

Coexistence with local
community
Supply chain
management
Compliance
Employee
Engagement
Development of
employee skills
Diversity and inclusion

Building
foundations that
support therealization of value
for a sustainable
futureiii. Fundraiser’s Environmental Initiatives
The Daigas Group has formulated the “Daigas Group Carbon Neutral Vision” in
2021 to demonstrate its efforts to achieve carbon neutrality by 2050. Under the“Daigas Group Carbon Neutral Vision”, the Daigas Group, as an innovative
energy services company, will provide solutions for the realization of asustainable society by decarbonizing the raw materials for city gas andintroducing renewable energy.
In addition, in the "Daigas Group Medium-Term Management Plan 2026"
formulated in 2023, the period covered by this plan (FY2025.3-2027.3) is
positioned as a “Connecting Ambitious Dreams” period to work on contributing
to the transition period and to build a foundation for the acceleration of carbon
neutrality in 2030 by both carbon neutrality and natural gas, promoting
initiatives towards the goals for FY2031.3 and 2051.3.
As technological innovation and the construction of new supply chains to achievecarbon neutrality will take a lot of time and incur social costs, it is important toensure a reliable low-carbonization until then. It is also important to select themost appropriate energy and supply system according to the customer's energy

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use characteristics, such as the balance between electricity and heat use,
location, etc. (see Figure-1)
These visions and plans approach not only the CO2 emission reduction of Scope
1 to 3 towards carbon neutrality in the Daigas Group's businesses, but also
avoided emissions contributing to the CO2 emission reduction for society as awhole (see Figure-2).
Figure-1 Daigas Group's CO2 reduction roadmap and specific initiatives

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Figure-2 Daigas Group's CO2 reduction roadmap and specific initiatives

Table-2 Daigas Group GHG emission results (Scope 1 to 3)
Source: Daigas Group website Environmental performance data (emissions to the atmosphere)
TargetResults for FY2021.3

Results for FY2022.3

Results for FY2023.3

Scope15,215,428 t-CO2e

4,526,038 t-CO2e

4,405,987 t-CO2e

17％

Scope2

297,386 t-CO2e

334,433 t-CO2e

323,790 t-CO2e

1%

Scope3

22,270,832 t-CO2e

21,924,919 t-CO2e

21,246,842 t-CO2e

82%(17,142,830 t-CO2e)（17,089,540 t-CO2e）（16,541,750 t-CO2e）

26,785,390 t-CO2e

25,976,619 t-CO2e

Scope(product use)

Total

27,783,646 t-CO2e(100%)<Osaka Gas' approach to Scope 1 to 3 emissions>
Scope 1:
Direct emissions from own operations (gas production, power generation, etc.)(e.g., combustion of gas for power generation)
Scope 2:
Indirect emissions from own operations (gas production, power generation, etc.)(use of electricity supplied by other companies, etc.)
Scope 3:
Indirect emissions from value chains other than Scope 1 and Scope 2 (e.g., fuelprocurement, combustion of gas at destination)

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In the "Daigas Group Medium-Term Business Plan 2026," the following targets were set
for FY2027.3 as milestones towards carbon neutrality in energy (see Figure-3).

Figure-3 Milestones towards carbon neutrality in energy
Table-3 Osaka Gas’s Participation in External Initiatives and Efforts
External initiatives

Osaka Gas’ Efforts

UN Global Compact

In 2007, Osaka Gas became the first Japanese public interest
company to join the UN Global Compact. Supporting theprinciples that we should work towards as a good member ofthe international community

Sustainable
Development Goals(See Table-1) Declaration of proactive efforts to contribute to
the achievement of the SDGs by promoting business activities
aimed at realizing "Value for a Sustainable Future".

(SDGs)
Task Force on Climaterelated Financial
Disclosures (TCFD)

Osaka Gas endorses the TCFD recommendations and will use
them as a benchmark for verifying its response to climatechange. Osaka Gas is also a member of the TCFD Consortium,
which is discussing efforts to disclose information on climatechange response in line with the TCFD recommendations.

Challenge Zero

Osaka Gas has decided to support “Challenge Zero (Challenge
Net Zero Carbon Innovation)” which is a new initiative of Nippon
Keidanren (Japan Business Federation) that strongly promotes
and encourages the innovation actions that companies andorganizations are taking on, both domestically andinternationally, with the aim of realizing a "decarbonizedsociety," which is the long-term goal of the Paris Agreement,
the international framework for combating climate change.
Osaka gas also participated in the "Companies Taking on the
Zero-Emission Challenge” in 2021.

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iv. About the Green/Transition Finance Framework
Upon promoting the environmental initiatives, Osaka Gas has established the Osaka
Gas Green/Transition Finance Framework (hereinafter, the "Framework") in order
to raise part of the funds necessary to realize the Carbon Neutral Challenge 2050*1
set out by the Japan Gas Association (JGA) and the sector-specific technology
roadmap*2*3 set out by the Ministry of Economy, Trade and Industry (METI)
through bonds or loans as transition finance with use of proceeds or transitionlinked finance with general corporate purpose that is linked to the achievement
status of KPIs/SPTs and financial and structural incentives or penalties, without
specifying the use of proceeds, have a dialogue with investors and a wide range ofmarket participants, and implement in a manner that conforms to theinternationally recognized frameworks.
The framework which this Framework specifically refers to is described in (3) ofSection II below.
*1: Japan Gas Association: Carbon Neutral Challenge 2050 on 24 November 2020 and Carbon
Neutral Challenge 2050 Action Plan on 10 June 2021
*2: Ministry of Economy, Trade and Industry (METI): Technology Roadmap for "Transition
Finance" in Gas Sector on February 2022
*3: Agency for Natural Resources and Energy, Electric Infrastructure Division: Transition
Roadmap for Power Sector on February 2022

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v.

Fundraiser’s Transition Strategy for Decarbonization(1)

Strategies by sector (industry) at the international/national/regional level

Figure-4 shows the scenarios for gas
carbon neutrality set out in the"Carbon Neutral Challenge 2050"
developed by the Japan Gas
Association in November 2020.
Figure-5 shows the technology
roadmap by sector (gas) of the
Ministry of Economy, Trade andIndustry (METI).
The Japan Gas Association's scenario(Figure-4)/the METI's technology
roadmap by sector (gas) (Figure-5.1
1/3) and Osaka Gas's roadmap (Figure-1)
are well aligned, and it is designed to reduce
CO2 emissions throughout the entire gas
supply chain, including demand-side, supplyside, CCUS and overseas contribution
initiatives.

Figure-4 Scenarios for achieving gas carbon neutral(Japan Gas Association)① Shift to natural gas and advanced use of natural gas(demand side)
Conversion from coal and oil to natural gas
Introducing cogeneration, fuel cell
Introducing high efficient equipment② Decarbonization of Gas (supply side)
Synthetic methane and hydrogen utlilization
Decarbonization of gas by innovation by supplier③ CCUS and overseas contribution
R&D and installation of CCUS.
Expand innovative gas technology and engineering to
global, use of carbon neutral LNG

Fuel conversion from coal and oil to natural
gas is one of the main ways avoiding CO2
emissions in society as a whole in the gas
sector, and is widely recognised as a typicaltransition project. According to METI's technology roadmap for the gas sector (Figure5.1 2/3), the progress of fuel conversion in society as a whole will lead to an increase ingas demand (consumption and sales) for gas utilities, which in turn will lead to anincrease in supply-side (gas utility) CO2 emissions (increase in Scope 3) in the short tomedium term.
In other words, while Osaka Gas is working to reduce CO2 emissions in its gas businessthrough the introduction of high-efficiency gas appliances and other measures (Figure5.1 3/3), its Scope 3 CO2 emissions are expected to increase due to the relatively large
amount of natural gas supplied for fuel conversion. Osaka Gas is committed to reduce
CO2 emissions (avoid emissions) for society as a whole through the supply of gas forfuel conversion, etc., and the voluntary reduction of CO2 emissions through theintroduction of high-efficiency gas appliances, etc. (the introduction of technologies andequipment that will contribute to the reduction of the supply of low-carbon gas in the
future) will also contribute to the reduction of Scope 3. In addition, fuel conversion is
not only being implemented in the Kansai region, but also expanded into wider areas of
the country and in Asia.

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Furthermore, in addition to the gas business, Osaka Gas is actively involved in theelectric power business as an innovative energy and service company. Osaka Gas
recognizes the importance of building a system for supplying electricity from renewableenergy sources until the technology necessary to achieve a decarbonized society isestablished, and is promoting the introduction of renewable energy sources, which is
the green power infrastructure necessary for the future supply of green gas bodyenergy through methanation, etc. (See Table-5 below and Figure-4.2 for details).
Osaka Gas's policy on renewable energy in its roadmap, as well as its contribution to
the dissemination of renewable energy (4 million kW in FY2027.3 and 5 million kW in
FY2031.3) and the renewable energy ratio (approximately 50% in FY2031.3*of thedomestic electricity business provided by Osaka Gas) as set out in its FY2027.3 and2031.3 targets, are considered to be closely related to the renewable energy of Ministryof Economy, Trade and Industry's transition roadmap for the electricity sector (Figure5.2). These are being addressed in conjunction with initiatives to utilize power system
storage batteries and VPPs, as well as the low- and decarbonization of thermal power
plants, which are needed as a regulating force.
In order to accelerate the realization of a decarbonized society, Osaka Gas isaccelerating its initiatives to decarbonize gaseous energy by introducing e-methane,
which is synthesized from hydrogen produced by renewable energy sources and CO2(final investment decision in supply chain projects in FY2027.3, 1% of gas sales volume
in FY2031.3), in addition to its renewable energy initiatives. The establishment of an
overseas supply chain as well as domestic supply chain is also considered to be one of
the most promising options for the full-scale introduction of e-methane from FY2031.3.
Aiming for stable procurement in the future, Osaka Gas is narrowing down suitableproduction sites by focusing on North America, South America, Australia, the Middle
East, and Southeast Asia, where existing natural gas and LNG facilities are available,
and is also aiming to use and spread e-methane in Asia as a new destination (seeFigure-6). Furthermore, e-methane is produced and supplied through methanation byreusing CO2 emitted into the atmosphere (CCU*1/see Figure-1 Daigas Group's CO2
reduction roadmap and specific initiatives). In addition, with a view to establishing a
CO2 value chain, joint studies on the capture, transport, and utilization of CO2 emitted
from domestic plants in the steel, cement, and chemical industries, where CO2
emissions are difficult to reduce, and storage (CCS*2/see Figure-1 Daigas Group's CO2
reduction roadmap and specific initiatives) in Japan and abroad.
*1: CCU: Carbon dioxide Capture and Utilization*2: CCS: Carbon dioxide Capture and Storage

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Figure-5.1 (1/3) Ministry of Economy, Trade and Industry Technology roadmap
in gas sector (city gas, LP gas, common technologies)
Technology Roadmap for "Transition Finance" in Gas Sector on February 2022,
Ministry of Economy, Trade and Industry

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Figure-5.1 (2/3) Ministry of Economy, Trade and Industry Technology Roadmap for"Transition Finance" in Gas Sector (avoided CO2 emission on demand-side)

Figure-5.1 (3/3) Ministry of Economy, Trade and Industry Technology roadmap in gas sector(development and diffusion of highly-efficiency gas cogeneration)
Technology Roadmap for "Transition Finance" in Gas Sector on February 2022,
Ministry of Economy, Trade and Industry

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RenewableenergyContinuous
introduction isrequired for theentire period up
to 2050 (solid
red line: practicalapplication andintroduction
phase)

Figure-5.2 Ministry of Economy, Trade and Industry Technology roadmap for theelectricity sector
Agency for Natural Resources and Energy, Electric Infrastructure Division
Transition Roadmap for Power Sector on February 2022

Figure-6 The four values provided by "e-methane"

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(2) Fundraiser’s transition strategy
Osaka Gas has positioned its transition strategy as a way to achieve its mid-termand long-term goals by embodying the transition initiatives outlined above by
the Japan Gas Association and the Ministry of Economy, Trade and Industry, inline with the goals of the Paris Agreement, as well as the efforts to achievecarbon neutrality by 2050 as outlined in the “Daigas Group Carbon Neutral
Vision” and Roadmap.
These targets will contribute to (and support) the achievement of supply-side
and demand-side carbon neutrality as a key initiative outlined in Japan's various
decarbonization plans and strategies.
Table-4 shows the Osaka Gas short- and medium-term transition targets,
Figure-7 and 8 shows transition strategy overview and, specific initiatives andtimelines for achieving medium-term targets and towards 2050, Figure-9 shows
the concept of avoided emission, and Figure-10 shows the avoided emission
results. In addition, Table-5 shows the main initiatives for achieving carbon
neutrality.
Although the transition strategies of the Japan Gas Association and the Ministryof Economy, Trade and Industry (METI) do not set clear interim targets (baseyear, specific quantified reduction targets, etc.), Osaka Gas has set the short-,
mid- and long-term targets required by the transition strategies from theperspective of its own activities and contribution to society, together with specificmanagement strategies and business plans.
Table-4 Osaka Gas Transition Targets
Short- andmedium-termtargets

FY2027.3
Renewable development contribution*1: 4 million kW
Avoided CO2 emissions: 7 million tonnes/year (baseline:
FY2017.3)
CO2 reduction rate in own offices and company vehicles: 67%(compared to FY2018.3)
FY2031.3
Renewable development contribution*1: 5 million kW
Power portfolio in Japan consisting of renewable energy*1:
Approximately 50%
Avoided CO2 emissions: 10 million tonnes/year*2 (baseline:
FY2017.3)
CO2 emission reduction: 5 million tonnes*3 (compared to
FY2018.3)
Introduction of e-methane: 1%*4
CO2 reduction rate in own offices and company vehicles: 100%

Long-term
targets

2050
Carbon neutrality

1: Including solar, wind, biomass power sources which are eligible for the feed-in tariff (FIT) scheme
2: Equivalent to one third of the CO2 emission currently produced in our business and by our customers (33 million
tonnes/year)
3: CO2 emissions in the Daigas Group’s domestic supply chain (Scope 1, 2, and 3)
4: 1% of gas sales volume

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FY2016

Osaka Gas Group(Scope1+2)

FY2030

Osaka Gas Group(Scope3)

Value chain emission from others(Power Plant, fussil fuel needs)

Figure-7 (repost of Figure-1) Daigas Group's CO2 reduction roadmap and specific initiatives

Figure-8 (repost of Figure-2) Daigas Group's CO2 reduction roadmap and specific initiatives

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Figure-9 The concept of avoided emissions*Actual values are calculated using
the stock-based method, based on
the calculation method and baseline
approach shown within the tablebelow, in accordance with the
Guidelines for Quantifying GHG
emission reductions of goods orservices through Global Value Chain(issued by the Ministry of Economy,
Trade and Industry on March 2018).
The calculation results have been received a third-party review by Bureau Veritas Japan Co., Ltd.

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Figure-10 Results of avoided emissions
Calculation method of avoided emissions
Reduction
point

Low- anddecarbonization
initiatives

Calculation method of reduction
results

Baseline approach

Reductionin ownbusiness
activities

Renewable energy
sources:Wind power plants, solar
power plants, biomass
power plants, etc.

Amount of electricity generated
or procured
× Average electricity emission
factor for thermal power*

Replace thermal power
generation

Highly efficient thermal
power generation

Amount of electricity generated
× Difference in CO2 emission
factors from existing thermal
power plants

Comparison with emission
factors of existing thermal
power

Cold power generation
facilities in the city gas
production process

Amount of electricity generated
× Average electricity emission
factor for thermal power

Replace thermal power
generation

Highly efficient
decentralized systems:
Household fuel cells,cogeneration

Household fuel cells:
Number of units installed ×
Reduction per unit

Replacement fromconventional water heaters(boilers) and purchased
electricity

Expansion and advanced
use of natural gas:
Fuel conversion, highefficiency water heaters,
gas air conditioning

Fuel conversion:
Amount developed × Difference
in CO2 emission factors

Comparison with emissions
from other fuelsGas air conditioning:Amount sold × Reduction percapacity

Replace conventional air
conditioners

High-efficiency water heaters:
Number of units installed ×
Reduction per unit

Replace conventional water
heaters

Amount of electricity generated
or saved
× Average electricity emission
factor for thermal power*

Replace thermal power
generation

Reductionat thecustomer'ssite

Energy saving proposals(solar power generationequipment, LED lighting)

Cogeneration:
Number of units installed ×
Reduction per capacity*Calculated using the average emission factor for thermal power: 0.65 kg-CO2/kWh (FY2014.3) in the Planfor Global Warming Countermeasures (approved by the Cabinet on 22 October 2021)

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Table-5 Daigas Group's key initiatives to achieve carbon neutrality(Green/transition finance candidate projects)
Eligible Criteria

1)

2)

3)

Decarbonization ofgas energy

Decarbonizationof power
generation

Lowcarbonization

Eligible Criteria & Project Overview

Hydrogen utilization

Methanation, direct use (chemical looping
combustion technology), etc.

Biogas, biomethane

On-site utilization of biogas and biomethane indomestic/global scale

Renewable power
generation

Solar power plants, onshore wind farm, offshore
wind farm, biomass power plants, etc.

Thermal power generation

Use of carbon neutral fuels such as synthetic
methane, hydrogen and ammonia, CCUS
(Carbon Capture, Utilization and Storage), etc.

Fuel Cell

Enhancing efficiency and downsizing, etc.

Advanced utilization ofnatural gas and CHP

Support for converting fuel from oil and coal tonatural gas
Demonstration of building micro gridUse of carbon neutral LNG

Advanced energy use

VPP, smart energy systems, EVs, etc.

Other
(Reduction of CO2
emission associated with
own activities)

Cryogenic power generation in the city gas
production process, Cryogenic power generation
facilities, energy efficiency renovation work ofbuildings, etc.

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(3) Governance of the Fundraiser (sustainability promotion system)
Figure-11 and Figure-12 show Osaka Gas'
sustainability promotion system and its
approach to sustainability promotion.
Osaka Gas considers the response to climatechange, including the implementation of theTransition Strategy, as one of the mostimportant management issues, and manages
various aspects of the response to climatechange as the Daigas Group through the
ESG Promotion Committee (Management
Corporate committee: ESG Committee
Committee) and ESG Promotion Committee
Chairman: Head of ESG Promotion
as shown in Figure-11. As part of thisprocess, the Daigas Group monitors the
Figure-11 Osaka Gas Climate Change
Governance Organization Chart
roadmap initiatives and important matters
are discussed and reported to the Board of
Board of Directors
Directors, so that the transition strategy is- 10 directors
managed as a Daigas Group. Performance(6 Internal Directors and 4 Outside
linked remuneration is being adopted for
directors)
directors other than external directors, using*Appoint external directors with expertiseand a wide range of insight, including
ESG indicator achievement factors, making
environmental accounting
climate change-related indices such as CO2
emissions as one of the performance
Executive Board (ESG Council)
indicators. Furthermore, after the conclusion- 1 President and Executive Officerof the Annual General Meeting of- 3 Vice Presidents (Executive Officers)
Shareholders scheduled to be held in June
- 8 Managing Officers*In principle, it is held three times per
2024, Osaka Gas plans to shift to a company
year
as “ESG Council”
with an audit committee system to separate
execution and supervision and strengthen the
ESG Committee
supervisory function. In addition, the Daigas- Vice President (Head of ESG Promotion)
Group's response to climate change is- Heads of related business units, etc.
incorporated in its corporate philosophy as a
key issue in its Charter of Business Conduct. In this context, activities are being
carried out in line with a roadmap based on the Daigas Group Carbon Neutral Visionand the Medium-Term Management Plan 2026 "Connecting Ambitious Dreams.”

Figure-12 The Daigas Group's Values*Climate change action is part of the Daigas
Group Charter of Business Conduct.

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Fundraiser Name: Osaka Gas Co., Ltd.
Framework Name: Osaka Gas Co. Ltd. Daigas Group Green/Transition Finance Framework
Review provider’s Name: DNV Business Assurance Japan K.K.
Date of report: 8 May 2024 (Rev2)

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Ⅱ. Scope and Objectives
DNV has been commissioned by Osaka Gas to provide an assessment on Osaka Gas’s
Green/Transition Finance Framework. Our objective has been to implement anassessment on whether the Osaka Gas meets the criteria established on CTFH/CTFBG,
GBP/GBGLs, GLP/GLGLs, SLBP/SLBGLs, and SLLP/SLLGLs to provide a second party
opinion on the eligibility of the Framework.
DNV, as an independent external reviewer, has identified no real or perceived conflict ofinterest associated with the delivery of this second party opinion for Osaka Gas.
In this report, no assurance is provided regarding the financial performance of the bondor loan executed under the Framework, the value of any investments in the bond or loan,or the long-term environmental benefits of the transaction.

Green finance and transition finance with specific use of proceeds*Stated around GBP but may be replaced with loan-specific items where appropriate.

(1) Scope of review
The review assessed the following elements and confirmed their alignment with the gist of GBP/GLP:☒.

Use of Proceeds☒.

Process for Project Evaluation and Selection☒.

Management of Proceeds☒.

Reporting*The scope of review is to be applied as a part of the evaluation of the transition finance with use ofproceeds*The four disclosure elements of CTFH and CTFBG are included in the scope of review(2) Role(s) of review provider☒

Second party opinion☐

Certification☐

Verification☐

Ratings☐

Other (please specify):

Transition finance with general corporate purpose*Based on SLBP checklist and replaced by loan-specific items as appropriate by DNV(1) Structure of the bond/loan at the time of bond issuance/loan execution☒

Stepping up of the structure☒

Changes in bond/loan structures*Any of the above or other (e.g., donations) is set individually based on the Fundraiser's internal process
at the time of finance implementation.

(2) Scope of review*
The review assessed the following elements and confirmed their alignment with the gist of SLBP/SLLP:

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☒Evaluate all the following elements(all elements review)☐

Evaluate only some elements (partial review)☒

Selection of KPIs☒

Bond/loan characteristics☒

Calibration of SPTs☒

Reporting☒

Verification☒

In addition, check consistency with
SLBP/SLLP*The scope of review is applied as the assessment part for transition finance with general corporate
purpose.
*The four disclosure elements of CTFH/CTFBG are also included in the scope of review.

(3) Role(s) of review provider☒

Second party opinion☐

Certification☐

Verification☐

Ratings(4) Standards/guidelines to be applied
No.
1.

Standards/guidelines

Scheme owner

Climate Transition Finance Handbook

International Capital Market Association (ICMA), 2023

(CTFH)*1

2.

Basic Guidelines on Climate Transition
Finance (CTFBG)*1

Financial Services Agency, Ministry of Economy, Tradeand Industry, Ministry of the Environment, 2021

3.

Green Bond Principles (GBP)*2*3

International Capital Market Association (ICMA), 2021

4.

Green Loan Principles (GLP)*2*3

Loan Market Association (LMA) and others, 2023

5.

Green Bond Guidelines (GBGLs)*2*3

Ministry of the Environment, 2022

6.

Green Loan Guidelines (GLGLs)*2*3

Ministry of the Environment, 2022

7.

Sustainability-Linked Bond Principles(SLBP)*4

International Capital Market Association (ICMA), 2023

8.

Sustainability-Linked Bond Guidelines(SLBGLs)*4

Ministry of the Environment, 2022

9.

Sustainability-Linked Loan Principles(SLLP)*4

Loan Market Association (LMA) and others, 2023

10.

Sustainability-Linked Loan Guidelines(SLLGLs)*4

Ministry of the Environment, 2022

*1
*2

*3
*4

Climate transition: The concept of climate transition focuses principally on the credibility of an issuer’s
climate change-related commitments and practices (quoted from CTFH/CTFBG).
It confirms compliance with the four core elements (use of proceeds, process for project evaluation andselection, management of proceeds, and reporting) that must be met when implementing as abond/loan that meets the four elements of transition and has a specific use of proceeds (quoted fromCTFBG).
Green projects were assessed for eligibility using the referable technical criteria of the Climate Bond
Initiative's Climate Bond Standard.
Sustainability linked loans are any types of loan instruments and/or contingent facilities (such as
bonding lines, guarantee lines or letters of credit) which incentivise the borrower’s achievement of
ambitious, predetermined sustainability performance objectives (quoted from SLLP *evaluate SLBP as
well with the same definition).

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Ⅲ. Responsibilities of Osaka Gas and DNVOsaka Gas has provided the information and data used by DNV during the delivery of thisreview. DNV’s second party opinion represents an independent opinion and is intended to
inform Osaka Gas and other interested stakeholders in the Osaka Gas’s Transition Finance as
to whether the established criteria have been met, based on the information provided to us.
In our work we have relied on the information and the facts presented to us by Osaka Gas.
DNV is not responsible for any aspect of the nominated projects and assets referred to inthis opinion and cannot be held liable if estimates, findings, opinions, or conclusions areincorrect. Thus, DNV shall not be held liable if any of the information or data provided by
Osaka Gas’s management and used as a basis for this assessment were not correct orcomplete.

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Ⅳ. Basis of DNV’s Opinion
To provide as much flexibility for the Fundraiser, Osaka Gas as possible, we have adapted ourOsaka Gas Green/Transition Finance assessment methodologies, which incorporates therequirements of the CTFH/CTFBG, GBP/GBGLs, GLP/GLGLs, SLBP/SLBGLs, and SLLP/SLLGLs,
to create an Osaka Gas Green/Transition Finance Eligibility Assessment Protocol (hereinafter,“Protocol”). Please refer to Schedule-3 to 5. The Protocol is applicable to Osaka Gas
Transition Finance under the CTFH/CTFBG, GBP/GBGLs, GLP/GLGLs, SLBP/SLBGLs, and
SLLP/SLLGLs.
DNV, as an independent external reviewer, provides second party opinion according to theprotocol.
Our Protocol includes a set of suitable criteria that can be used to underpin DNV’s opinion.
The overarching principle behind the Green/Transition Finance and Transition-Linked Financeas the basis for the opinion are as follows:“provide an investment opportunity with transparent sustainability credentials”“enable capital-raising and investment for new and existing projects with environmental
benefits"“encourage, through KPIs and SPTs, the achievement of the borrower's ESGs (with regard
to climate transition) that are important (as climate transition), material, quantifiable, predetermined, ambitious, regularly monitored and externally verifiable”
As per our Protocol, the criteria against which the Osaka Gas Transition Finance has beenreviewed are grouped into common elements bellow, represented by the CTFH/CTFBG,
GBP/GBGLs, GLP/GLGLs, SLBP/SLBGLs, and SLLP/SLLGLs.

(1) Four elements of CTFH/CTFBG (disclosure elements)
Principle One: Issuer’s climate transition strategy and governance
The financing purpose should be for enabling an issuer’s climate change
strategy.
Principle Two: Business model environmental materiality
The planned climate transition trajectory should be relevant to theenvironmentally-material parts of the issuer’s business model.
Principle Three: Transition is science-based including targets and pathway
Issuer’s climate strategy should reference science-based targets and transition
pathways.
Principle Four: Implementation transparency
Market communication in connection with the offer of a financing instrument
which has the aim of funding the issuer’s climate transition strategy should
also provide transparency of the underlying investment program.

(2) Four elements of GBP/GBGLs and GLP/GLGLs
Principle One: Use of Proceeds

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The Use of Proceeds criteria are guided by the requirement that an issuer ofa transition finance with specific use of proceeds must use the funds raised
to bond eligible activities. The eligible activities should produce clear
environmental benefits.
Principle Two: Process for Project Evaluation and Selection
The Project Evaluation and Selection criteria are guided by the requirementsthat an issuer of a transition finance should outline the process it follows
when determining eligibility of an investment using the proceeds fromtransition finance, and outline any impact objectives it will consider.
Principle Three: Management of Proceeds
The Management of Proceeds criteria are guided by the requirements that atransition finance should be tracked within the issuing organization, that
separate portfolios should be created when necessary and that a declarationof how unallocated funds will be handled should be made.
Principle Four: Reporting
The Reporting criteria are guided by the recommendation that at least
Sustainability Reporting to the bond investors should be made of the use ofbond proceeds and that quantitative and/or qualitative performanceindicators should be used, where feasible.

(3) Five elements of SLBP/SLBGLs and SLLP/SLLGLs*1 *Sustainability is read as transitions,where necessary.

Principle One: Selection of Key Performance Indicators (KPIs)
The fundraiser of sustainability-linked finance should clearly communicate its
overall sustainability objectives, as set out in its sustainability strategy, and how
these relate to its proposed SPTs. The KPI should be reliable, material to thefundraiser’s core sustainability and business strategy, address relevant ESG
challenges of the industry sector and be under management control.
Principle Two: Calibration of Sustainability Performance Targets (SPTs)
The SPTs should be ambitious, meaningful and realistic. The target setting should
be done in good faith and based on a sustainability improvement in relation to apredetermined performance target benchmark.
Principle Three: Finance Characteristics
The loan will need to include a financial and/or structural impact depending onwhether the selected KPIs reach (or not) the predefined SPTs. The financedocumentation needs to require the definitions of the KPI(s) and SPT(s) and thepotential variation of the SLL’s financial and/or structural characteristics. Any
fallback mechanisms in case the SPTs cannot be calculated or observed in asatisfactory manner, should be explained.
Principle Four: Reporting
The fundraiser should publish and keep readily available and easily accessible up to

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date information on the performance of the selected KPI(s), as well as averification assurance report (see Principle Five) outlining the performance against
the SPTs and the related impact and timing of such impact on the finance’s
financial and/or structural characteristics, with such information to be provided toinvestors or lenders during the period of participating in the finance at least once
per annum.
Principle Five: Verification
The fundraiser should have its performance against its SPTs independently verified
by a qualified external reviewer with relevant expertise, at least once per annum.
The verification of the performance against the SPTs should be made publicly
available.

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V. Work Undertaken
Our work constituted a comprehensive review of the available information, based on theunderstanding that this information was provided to us by the Fundraiser in good faith.
We have not performed an audit or other tests to check the veracity of the information
provided to us. The work undertaken to form our opinion included:i. Pre-funding assessment (Green/Transition Finance Framework)•

Creation of a Daigas Group-specific Protocol, adapted to the purpose of the Daigas
Group Green/Transition Finance, as described above and in Schedule-3 to 5 to thisassessment;•

Assessment of documentary evidence provided by Osaka Gas on the Daigas Group
Green/Transition Finance and supplemented assessment by a comprehensive desktop
research. These checks refer to current assessment best practice and standards
methodologies;•

Discussions with Osaka Gas, and review of relevant documentation;•

Documentation of findings against each element of the criteria.

ii. Post-funding assessment (*not included in this report)•

Interviews with fundraisers' managers, and review of the relevant documentation;•

Field research and inspection (if necessary);•

Document creation of post-issuance assessment results.

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Ⅵ. Findings and DNV’s Opinion
DNV’s findings and opinion are as described in (1), (2), and (3) below.
From the CTF-1 to 4 in (1) below are the findings and opinions of DNV against thedisclosure elements of the CTFH and CTFBG.
Please see Schedule-3 for details.
From the GBP 1 to 4 in (2) below are the findings and opinions of DNV against therequirement of the four common elements of GBP/GBGLs and GLP/GLGLs.
Please see Schedule-4 for details.
From the SLBP/SLBGLs and SLLP/SLLGLs 1 to 5 in (3) below are the findings and opinionsof DNV against the requirement of the five common elements of SLBP/SLBGLs and
SLLP/SLLGLs in Transition-Linked Finance*1.
Please see Schedule-2 and 5 for details.
*1: Bonds or loans with potential financial and structural changes linked to the achievement status of
future transition targets(1) Findings and opinions of DNV against the four common elements (disclosure
elements) of CTFH and CTFBG
CTF-1.

Fundraiser’s Climate Transition Strategy and Governance-

Osaka Gas has formulated the "Daigas Group Carbon Neutral Vision" andthe "Daigas Group Energy Transition 2030," in which it presents a roadmap
for achieving carbon neutrality. In the vision, Osaka Gas sets the long-termgoal of achieving carbon neutrality by 2050, which is consistent with thegoals of the Paris Agreement, and the short- and medium-term goals forachieving this goal, which are "avoided CO2 emissions in the entire societyof 7 million tonnes / renewable energy diffusion contribution of 4 million
kW by 2026," "introduction of e-methane of 1% by 2030 / avoided CO2
emissions in the entire society of 10 million tonnes / CO2 emission
reduction in the domestic supply chain (scope 1, 2, and 3) by 5 million
tonnes compared to FY2018.3 / renewable energy diffusion contribution of
5 million kW / renewable energy ratio of domestic power projects
approximately 50%,” etc. The roadmap discloses the strategic plan toachieve the transition to carbon neutrality.

-

DNV has reviewed and confirmed that Osaka Gas's targets are equivalent
to meeting the targets of the Paris Agreement, based on a plan of action toachieve carbon neutrality by 2050, a science-based long-term target
quantified by Osaka Gas. Osaka Gas sets environmental corporate
strategies that are important to its business model, assuming the IEA(World Energy Outlook 2021) multilinear scenario (1.5°C scenario(NZE2050) and 2.6°C scenario (STEPS)) that targets energy projects(domestic and overseas gas and electricity projects etc.) that are expected
to be significantly affected by risks and opportunities identification using
TCFD guidance and climate change, and considers the degree of progressin energy saving, transitions in the composition of power sources, etc.

-

Specifically, Osaka Gas's Transition Strategy incorporates theenvironmental targets of the Japan Gas Association and the Ministry ofPage 34 of 88

Economy, Trade and Industry (METI), as well as its action plan to achieve atarget of limiting the increase in average temperature below 2°C using
TCFD guidance. If it becomes necessary to review Osaka Gas’s efforts inorder to achieve continuous emission reductions in the future, Osaka Gas
plans to implement them as appropriate according to the timeline.
-

Osaka Gas considers the response to climate change, including theimplementation of the Transition Strategy, to be one of the most importantmanagement issues, and has established a system and framework topromote the initiatives specified in the Daigas Group Carbon Neutral Vision
and Roadmap at the management level. Performance-linked remuneration
is being adopted for directors other than external directors, using ESG
indicator achievement factors, making climate change-related indices suchas CO2 emissions as one of the performance indicators. Furthermore, after
the conclusion of the Annual General Meeting of Shareholders scheduled tobe held in June 2024, Osaka Gas plans to shift to a company with an audit
committee system to separate execution and supervision and strengthen
the supervisory function.

-

Osaka Gas's approach to promoting sustainability, both for the Daigas
Group and for society as a whole, is to provide solutions for the realizationof a sustainable society as an innovative energy service company bydecarbonizing city gas feedstock and introducing renewable energy. In
addition, in the "Medium-Term Management Plan 2026," the Daigas Group
has set the following three commitments as key strategies: Co-create value
for a sustainable future (achieving carbon neutrality in energy, improving
the resilience of customers and society, co-creating advanced and diverse
solutions), Support employees to shine in their roles, and Evolve businessfoundation as a corporate group that “secure peace of mind today, build
sustainable lifestyles for tomorrow” to conduct its business activities andmake a broad contribution to the achievement of the Sustainable
Development Goals (SDGs) set by the United Nations. Of these, the key
materiality issue to which Green/Transition Finance is primarily concernedis climate change (achieving a low- and decarbonized society) as set out in
the Daigas Group's Charter of Business Conduct "Contributing to the
Sustainability of the Environment and Society."-

Based on an assessment of the implementation plan provided by Osaka
Gas under the Framework, the "Daigas Group Carbon Neutral Vision" andthe Osaka Gas Roadmap, DNV has confirmed that it is well aligned with
Osaka Gas's Transition Strategy. Through the assessment, DNV has
confirmed that the implementation plan based on the Transition Strategy,
such as the decarbonization of town gas feedstock centered onmethanation utilizing renewable energy and hydrogen and thedecarbonization of power sources centered on the introduction ofrenewable energy, is credible, ambitious, and achievable.

-

DNV judged that Osaka Gas ensures that substantial benefits will be sharedwidely and shows consideration for just transition as it has been
implementing fuel conversion from coal and oil to natural gas with low CO2
emissions not only in the Kansai region but also in wide areas of Japan andAsia, and has been conducted multiple feasibility studies and basic designs
for the overseas supply chain building in cooperation with domestic andoverseas operators, viewing overseas supply chain building as well as
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domestic supply chain building is one of the most promising options for the
full-scale introduction of e-methane from FY2031.3.
Osaka Gas does not envisage any large-scale closure of facilities or plants
related to existing businesses, and even in the cases of closure, Osaka Gas
envisages the implementation of measures that take employment into
consideration through personnel transfers within the company's businesses
etc.
CTF-2.

Business model environmental materiality-

Osaka Gas's Transition efforts include not only CO2 emission reductions
from its own business activities (Scope 1 and 2), but also Scope 3 andactivities that contribute to the avoided emissions of other companies. This
will contribute to the implementation of supply-side and demand-side
carbon neutrality as an important initiative indicated in the various plans
and strategies for decarbonisation in Japan. In other words, Osaka Gas's
transition initiatives directly support the transition of society as a whole,including its own company, as an energy service company taking on thechallenge of achieving carbon neutrality by 2050.

-

The Osaka Gas’s roadmap is well aligned with the Action Plan of the Japan
Gas Association and gas and electricity sector roadmaps of the Ministry of
Economy, Trade and Industry, and its specific implementation plans andtargets are set and quantified in the absolute sense that they must be theoptimization to achieve them and the possibility of further improvement.

-

DNV has confirmed that Osaka Gas's plan to implement its Transition
Strategy is closely linked to the activities of its core business and toactivities that contribute to the CO2 emissions reduction of in society as awhole, thus contributing to the environmental aspects of society as a wholeand supporting the promotion of Osaka Gas's business. Osaka Gas's
planned transition strategy and transition pathway are associated with themateriality that Osaka Gas has achieved through GRI standards*1, ISO
26000, TCFD, etc., and will contribute to significant environmental
improvements (impact) in both qualitative and quantitative terms.
*1: Global Reporting Initiative (an international standard providing ESG-related

reporting, management and analysis methods)

Page 36 of 88

Table-2 (reposted) Daigas Group GHG emission results (Scope 1 to 3)
Source: Daigas Group website Environmental performance data (emissions to the atmosphere)
TargetResults for FY2021.3

Results for FY2022.3

Results for FY2023.3

Scope 15,215,428 t-CO2e

4,526,038 t-CO2e

4,405,987 t-CO2e

17％

Scope 2

297,386 t-CO2e

334,433 t-CO2e

323,790 t-CO2e

1%

Scope 3

22,270,832 t-CO2e

21,924,919 t-CO2e

21,246,842 t-CO2e

82%(17,142,830 t-CO2e)（17,089,540 t-CO2e）（16,541,750 t-CO2e）

26,785,390 t-CO2e

25,976,619 t-CO2e

Scope(product use)

Total

27,783,646 t-CO2e(100%)<Osaka Gas' approach to Scope 1 to 3 emissions>
Scope 1: Direct emissions from own operations (gas production, power generation, etc.) (e.g.,combustion of gas for power generation)
Scope 2: Indirect emissions from own operations (gas production, power generation, etc.) (use ofelectricity supplied by other companies, etc.)
Scope 3: Indirect emissions from value chains other than Scope 1 and Scope 2 (e.g., fuelprocurement, combustion of gas at destination)

CTF-3.
-

Climate transition strategy to be ‘science-based’ including targets andpathways:
Osaka Gas has set a transition plan that is consistent with the Paris
Agreement based on science-based evidence, and a transition trajectorythat is consistent with the goals of the Japan Gas Association and theMinistry of Economy, Trade and Industry. (In contrast to the Ministry of
Economy, Trade and Industry's Transition Roadmap in Gas Sector, which
depicts a pathway where the gas industry will see an increase in the
demand for natural gas as a result of society-wide fuel conversion, which
will increase gas companies' CO2 emissions (Scope 3) in the short term,
Osaka Gas has set a target to reduce the absolute value of the domestic
supply chain CO2 emissions (Scope 1, 2, and 3) for 5 million tonnes as of2030.)
DNV has confirmed that Osaka Gas's Transition Strategy is quantified interms of emissions intensity and absolute values or ratios based on aconsistent measurement methodology with prescribed assumptions.
Transition targets are set voluntarily based on the use of TCFD and otherinitiatives to achieve sustainable CO2 emission reductions, and they are
consistent with the policies of the benchmarking Japan Gas Association and
the Ministry of Economy, Trade and Industry.

Page 37 of 88

Table-4 (reposted) Osaka Gas Transition Targets
Short- andmedium-termtargets

FY2027.3
Renewable development contribution*1: 4 million kW
Avoided CO2 emissions: 7 million tonnes/year (baseline:
FY2017.3)
CO2 reduction rate in own offices and company vehicles: 67%(compared to FY2018.3)
FY2031.3
Renewable development contribution*1: 5 million kW
Power portfolio in Japan consisting of renewable energy*1:
Approximately 50%
Avoided CO2 emissions: 10 million tonnes/year*2 (baseline:
FY2017.3)
CO2 emission reduction: 5 million tonnes*3 (compared to
FY2018.3)
Introduction of e-methane: 1%*4
CO2 reduction rate in own offices and company vehicles: 100%

Long-term
targets

2050
Carbon neutrality*1: Including solar, wind, biomass power sources which are eligible for the feed-in tariff (FIT) scheme*2: Equivalent to one third of the CO2 emission currently produced in our business and by our customers (33million tonnes/year)*3: CO2 emissions in the Daigas Group’s domestic supply chain (Scope 1, 2, and 3)*4: 1% of gas sales volume

Figure-2 (reposted) Daigas Group's CO2 reduction roadmap and specific initiatives

Page 38 of 88

-CTF-4.

Osaka Gas's Transition efforts include not only CO2 emission reductions fromits own business activities (Scope 1 and 2), but also Scope 3 and activities
that contribute to the avoided emissions of other companies. This willcontribute to the implementation of supply-side and demand-side carbon
neutrality as an important initiative indicated in the various plans andstrategies for decarbonisation in Japan. In other words, Osaka Gas's
transition initiatives directly support the transition of society as a whole,including its own company, as an energy service company taking on thechallenge of achieving carbon neutrality by 2050.
In addition to recycling CO2 emitted into the atmosphere and producing andsupplying e-methane through methanation, Osaka Gas has also started joint
studies etc. on the capture, transport, use, and storage of CO2 emitted fromdomestic plants in the steel, cement, and chemical industries, where CO2
emissions are difficult to reduce, towards the development of a CO2 value
chain. In addition, with regard to the utilization of carbon credits, Osaka Gas
has announced a joint investment in the Eastwood Climate Smart Forestry
Fund, a forestry fund set up by the Sumitomo Forestry Group together with
10 Japanese companies. The fund plans to generate approximately 1 million
tonnes of new CO2 absorption every year and will contribute to the realizationof a decarbonized society through the creation and return of high-quality
carbon credits.
Implementation transparency-

DNV has confirmed that the investment and development plans related to
Osaka Gas's Transition Strategy include agreement on future investment
and expenditure. Specifically, Osaka Gas plans to invest a cumulative totalof 2 trillion yen by FY2031.3 from FY2018.3 in quality improvement,
growth and M&A, including the activities outlined in the Daigas Group
Carbon Neutral Vision and Roadmap. In addition, the Daigas Group's"Medium-Term Management Plan 2026" aims to achieve a 1% introductionof e-methane by 2030, avoided CO2 emissions in the entire society of 10
million tonnes, and renewable energy sources diffusion contribution of 5
million kW. Osaka Gas plans to make carbon neutral investments of around220 billion yen in the cumulative total for the period FY2025.3-2031.3, andin the three year period FY2025.3-2027.3, it plans to invest approximately
100 billion yen in carbon neutrality areas (e.g., conversion to renewableenergy sources in domestic power business, e-methane) to build future
earnings, and approximately 460 billion yen in priority growth areas suchas thermal power sources, shale gas development, and life & businesssolutions. This includes projects to be implemented with green/transition
finance. The introduction of and transition to e-methane etc. is alsoplanned as a measure to avoid lock-in of coal and oil use.

-

DNV has confirmed that Osaka Gas has been trying since FY2022.3 tounderstand the carbon impact of projects that have already invested byutilizing internal carbon prices, and has also been utilizing since FY2024.3

Page 39 of 88

as a decision-making tool for new investment decisions in business areas
with a large carbon impact.
-

DNV has confirmed that the overall investment plan (investment amount)for the future considers CTF-1 to CTF-3 for the investment required to
implement the transition strategy and also confirmed plans to be
implemented according to the appropriate timelines, based on internalmanagement system and process.

(2) Findings and opinions of DNV against the four common elements of GBP/GBGLs
and GLP/GLGLs*The four elements are used as criteria for transition finance to specify the use of proceeds, andsome green bonds/loans below can be read as transition finance (bond/loan).

GBP/GLP-1. Use of Proceeds
Osaka Gas has defined the criteria applied to eligible projects as transition projects
which meet Transition Strategy and related handbook, principle and guidelines(CTFH/CTFBG).
Table-5 shows the eligible project categories for transition finance.
Table-5 (reposted) Daigas Group's key initiatives to achieve carbon neutrality(Green/transition finance candidate projects)
Eligible Criteria

4)

5)

6)

Decarbonization ofgas energy

Decarbonizationof power
generation

Lowcarbonization

Eligible Criteria & Project Overview

Hydrogen utilization

Methanation, direct use (chemical looping
combustion technology), etc.

Biogas, biomethane

On-site utilization of biogas and biomethane indomestic/global scale

Renewable power
generation

Solar power plants, onshore wind farm, offshore
wind farm, biomass power plants, etc.

Thermal power generation

Use of carbon neutral fuels such as synthetic
methane, hydrogen and ammonia, CCUS
(Carbon Capture, Utilization and Storage), etc.

Fuel Cell

Enhancing efficiency and downsizing, etc.

Advanced utilization ofnatural gas and CHP

Support for converting fuel from oil and coal tonatural gas
Demonstration of building micro gridUse of carbon neutral LNG

Advanced energy use

VPP, smart energy systems, EVs, etc.

Other
(Reduction of CO2
emission associated with
own activities)

Cryogenic power generation in the city gas
production process, Cryogenic power generation
facilities, energy efficiency renovation work ofbuildings, etc.

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DNV has confirmed that Osaka Gas plans to allocate the net proceeds fromgreen/transition finance, excluding expenses, as new investment and refinancing for
capital investment, operating expenses, equity investment and R&D-related
expenses for green/transition-eligible projects that meet Osaka Gas's investment
plan for implementing its transition strategy.
These are projects that contribute to business transformation projects as exemplified
by CTFH/CTFBG, GBP/GBGLs, GLP/GLGLs, SLBP/SLBGLs, and SLLP/SLLGLs that
directly or indirectly support fuel conversion, and that contribute to achieving thegoals of the Japan Gas Association and METI. These projects have been evaluated ashaving a clear environmental benefit on the Transition Strategy, and are expected tocontribute to the SDGs. These processes are in line with the GBP/GLP-1.

Table-6 Green/Transitional Finance Eligibility Criteria and Project Overview
Eligible Criteria

Project overview (main expenditure)

Methanation

Expenditure on building the hydrogen
supply chain (equipment manufacturing,hydrogen production, transport, supply,etc.)

Hydrogenutilization
1)

2)

3)

Decarbonizationof gas energy

Decarbonizationof power
generation

Lowcarbonization

Expenditure on capital expenditure andresearch and development towards social
implementation of e-methane andestablishment of methanation technology(e.g., SOEC co-electrolysis)

Direct use

Expenditure on research and development
investment in a process for simultaneous
production of hydrogen, electricity and CO2
using chemical looping combustion
technology

Biogas, biomethane

Expenditure on capital expenditure to
expand the use of biogas and biomethanefor domestic and international on-siteutilization

Renewable power generation

Expenditure on the development,
construction, operation and refurbishmentof renewable energy, such as biomass,solar, onshore wind and offshore wind

Carbon-neutral
Fuel utilization

Expenditure on investment, research anddevelopment in the procurement, supply
and use of synthetic methane, hydrogenand ammonia

CO2 capture andstorage(CCUS)

Expenditure on participation in CCUS
demonstrations (e.g., consortia)

Fuel Cells

The fuel cell highefficiency andminiaturization

Expenditure on research, development andcapital investment in small SOFCs with highpower generation efficiency

Advancedutilizationof natural

Fuel conversion
from oil and coal tonatural gas

Expenditure on capital expenditure (e.g., on
the construction of LNG satellite terminals,
LNG bunkering vessels, and the provision of

Thermalpower
generation

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gas and
CHP

Advancedenergyutilization

Other(Reductionof CO2emissionassociatedwith own
activities)

related equipment) to support customers'
fuel conversion
Micro grid

Expenditure on the construction anddemonstration of microgrids

Carbon-neutral LNG

Expenditure on the procurement and supplyof carbon neutral LNG**
LNG with GHG emissions offset by credits

VPP and smart
energy systems

Expenditure on research and development
and capital investment in VPP, storage
battery business, projects to demonstrate
the establishment of smart energy systems,
etc.

EVs

Expenditure on EV charging infrastructurebusiness, demonstration projects andservice provision, etc. that contribute to the
diffusion and expansion of EVs

Reduce CO2
emissions from
activities other than
the above, such as
manufacturing,
power generation,and office
operations

Expenditure on cold power generationequipment and cold heat utilisationequipment in the city gas production
process, and on energy-saving renovation
work in buildings

GBP/GLP-2. Process for Project Evaluation and Selection
Osaka Gas confirms that green/transition projects contribute to the achievement of
the transition strategy and confirms the following (<confirmations>), which are set
out in the framework in advance. Specifically, the Finance Team of the Finance
Department consolidates and selects the project candidates based on the eligibility
criteria, and then the ESG Promotion Office of the Planning Department evaluates andconfirms their compliance with the various frameworks. In addition, the Finance Teamof the Finance Department confirms, when necessary, with the business unit in chargeof the project in question, and after drafting the required approval, the President
makes the final decision in accordance with internal regulations.
DNV has confirmed that these processes had been established as internal documentsof Osaka Gas and the plan will be implemented in accordance with the appropriate
processes.
DNV has also confirmed that the green/transition project implemented by Osaka Gas
is consistent with the issuer's management and environmental policies, as well as its
transition strategy, goals and pathways.
<Confirmation>
In assessing the eligibility of each project, it is confirmed that the project takes into
account the potential negative environmental and social impacts and that thefacility certification, licensing, and environmental assessment procedures requiredby the country, region, or municipality where the facility or project is to be installed
are appropriate.

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Evaluation and selection☒

Conforms to the Fundraiser’s achievement☒of environmental contribution goals☒

Documented process to determine that projects
fit within defined categories

The project is eligible for use of proceeds☒

by green bond and transparency isDocumented process to identify and manage
potential ESG risks associated with the project

ensured.
☐The project is evaluated and selected☐

Other (please specify):

based on the published standard summary

Information on responsibilities and accountability☒

Evaluation / Selection criteria subject to☒external advice or verification☐

Other (please specify):

Page 43 of 88

In-house assessmentGBP/GLP-3. Management of Proceeds
The proceeds will be deposited into Osaka Gas’s common account, and the Finance
Department will then manage the allocation of proceeds for each project by allocatingthem to affiliated companies, subsidiaries, and investments, using the accounting
management rules, the integrated accounting system, and specially prepared ledgers.
The accounting management rules and the integrated accounting system allow for
tracking over the period of redemption or repayment, and a review of the allocation
will be carried out at least once a year on the basis of books prepared exclusively by
the Finance Department. Vouchers relating to the management of the proceeds will be
kept in accordance with the document management rules.
The net proceeds will be allocated within two years of the issue. If the proceeds are to
be used to refinance existing expenditure, it is planned to be allocated withinapproximately three years from the time of the financing, and the projects that are
determined to be eligible as transition projects at the time of allocation are eligible inaccordance with the process set out in GBP/GLP-2. However, if the project execution(planning, construction, etc.) takes a long time, the period of appropriation andrefinancing may be flexibly adjusted in consideration of the green/transition
characteristics of the project.
The amount of proceeds will be managed in cash or cash equivalents in the sameamount as the unallocated proceeds until the allocation.
If green/transition finance is to be implemented under this framework in the future,
the method of managing the proceeds will be explained prior to implementation of theloan through disclosure in legal documents and loan agreement documentation.

Tracking of proceeds:☒

Some or all of the proceeds by green bonds that are planned to be allocated aresystematically distinguished or tracked by the Fundraiser.

☐

Disclosure of intended types of temporary investment instruments for unallocated proceeds☒

Other (please specify): Unallocated proceeds are managed in cash or cash equivalents

Additional disclosure:☐

Allocations to future investments only☐

Allocations to both existing and future
investments☒

Allocation to individual disbursements☐

Allocation to a portfolio of disbursements☐

Disclosure of portfolio balance of☒

Other (please specify): Includes

unallocated proceeds

allocations and investments made throughaffiliates and subsidiaries.

GBP/GLP-4. Reporting
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DNV confirms that the Fundraiser will report on the transition finance until the proceeds
are allocated, and disclose information on the status of the allocation, the projects towhich the proceeds have been allocated or the environmental benefits. DNV has also
confirmed that environmental benefits will be reported until the completion of theredemption or repayment of the transition financing.
DNV has confirmed that, even after the allocation plan or allocation have been completed,
Osaka Gas plans to report any changes in transition strategy or pathways, or any majorchanges in the allocation plan or project implementation status, in a timely manner or in
Osaka Gas’s reporting.
The report will be disclosed on the Fundraiser’s website.
<Allocation status>
Allocated amount to be allocated per eligible criteriaBalance of unallocated amount

Estimated amount of the portion of the proceeds allocated to refinancing<Environmental benefits>Environmental impacts are disclosed within the scope of confidentiality, to theextent practicable, and in consideration of the characteristics of the project,including an overview of the project (including progress, completion, operation,etc.) and the expected environmental benefits (e.g., t-CO2/year).

<Others>

Efforts to achieve carbon neutrality by 2050 will be reviewed as necessary inlight of policy and technological trends, and will be disclosed where necessary.

Use of Proceeds reporting:☐

Project-by-project☒

On a project portfolio basis☐

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

GB refinanced share of total investment☐

Semi-annual

Information reported:☒

Allocated amounts☐

Other (please specify):

Frequency:☒

Annual☐Other (please specify):

Impact reporting (environmental impact):☐

Project-by-project☒

On a project portfolio basis

Page 45 of 88

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

Frequency:☒

Every year☐

Other (please specify):☐

Every six months☐

Energy savings

Information reported (expected or ex-post):☒

GHG Emissions / Savings☒

Other ESG indicators (please
specify): Equipment completion of
installation, size, year of operation,
etc.

Means of disclosure☐

Information published in financial report☐

Information published in sustainability report☒

Other (please specify): on Osaka Gas website(Integrated Report)☐

Information published in ad hoc documents☐

Reporting reviewed (if yes, please specify which parts of the reporting are subject to external
review)(3) Findings and opinions of DNV against the five common elements of SLBP/SLLP
SLBP/SLLP-1 to 5 are findings and opinions of DNV against the five elements of SLBP, SLLP, SLBGLs,
and SLLGLs for sustainable finance (Transition Linked Finance) with general corporate purpose.

SLBP/SLLP-1

Selection of Key Performance Indicators (KPIs)-

DNV reviewed the KPIs related to Osaka Gas's Transition-Linked Finance and has
confirmed that the selected KPIs are relevant and important to Osaka Gas's coretransition strategy and sustainability management. The selected KPIs are detailedin Schedule-2.

-

The CO2 emissions of the Daigas Group's domestic supply chain (Scope 1, 2, and
3) are important indicators for the transition strategy and sustainability
management of Osaka Gas, and are transparent KPIs that can be measured andevaluated annually. The KPIs contribute to both the transition strategy andsustainability management towards the realization of the "Daigas Group Carbon
Neutral Vision."-

DNV believes that the KPIs set by Osaka Gas are closely related to the "Daigas
Group Energy Transition 2030," which states “overall picture of transition to lowcarbon/carbon-neutral energy, specific initiatives and solutions for energy
transition towards 2030,” and are an important indicator of Osaka Gas’ initiatives
to achieve both stable energy supply and security and to achieve carbon
neutrality in energy.

Page 46 of 88-

DNV concluded that the CO2 emissions required for the assessment of the KPIs
are robust and reliable indicators, as they follow the global standard GHG protocol
and have been verified according to the requirements of ISO 14064-3 by an
external evaluation body.

List of selected KPIs
List of selected KPIs
✓ KPI: CO2 emissions in the Daigas Group’s domestic supply chain (Scope 1, 2, and 3)

Definition, scope, and parameters:☒

Clear definition of each selected KPI

☐

Other

☒

Clear calculation method

Relevance, robustness, and reliability of the selected KPIs:☒

Selected KPIs have proven to be☒

Evidence that KPIs are externally verifiable☒

Evidence that KPIs can be benchmarked

relevant, core, and important to theFundraiser's sustainability and businessstrategy.
☒

KPIs are proven to be measurable orquantifiable based on consistentmethods☐

Other

Page 47 of 88

SLBP/SLLP-2

Calibration of Sustainability Performance Targets (SPTs)-

In January 2021, Osaka Gas formulated the "Daigas Group Carbon Neutral
Vision," which presents a roadmap for achieving carbon neutrality and sets out
the long-term goal of achieving carbon neutrality by 2050, which is consistent
with the goals of the Paris Agreement. Osaka Gas has set and published theshort- and medium-term goals for achieving the long-term goal, which are"avoided CO2 emissions in the entire society of 7 million tonnes / renewableenergy diffusion contribution of 4 million kW by 2026," "introduction of e-methaneof 1% by 2030 / avoided CO2 emissions in the entire society of 10 million tonnes /CO2 emission reduction in the domestic supply chain (scope 1, 2, and 3) by 5
million tonnes compared to FY2018.3 / renewable energy diffusion contribution of
5 million kW / renewable energy ratio of domestic power projects approximately
50%,” etc.

-

While Osaka Gas has set a reduction of 5 million tonnes in FY2031.3 (comparedto FY2018.3) as its SPT, promoting the energy shift to natural gas in thetransition period, such as fuel conversion, will contribute to reducing CO2
emissions in the entire society, but will also increase Osaka Gas' CO2 emissions. In
this context, DNV has confirmed that this SPT is an ambitious and meaningful thataims to reduce total CO2 emissions by promoting energy efficiency andintroducing e-methane.

-

Osaka Gas plans to make carbon neutral investments of around 220 billion yen in
the cumulative total for the period FY2025.3-2031.3, and in the three-year period
FY2025.3-2027.3, it plans to make investments of approximately 100 billion yen
in carbon neutrality areas (e.g., conversion to renewable energy sources indomestic power business, e-methane) to build future earnings and approximately
460 billion yen in priority growth areas, as well as has presented the CO2
reduction roadmap and specific initiatives. Therefore, DNV judged that the SPT isrealistic and feasible, and is in line with Osaka Gas’ sustainability/transition
strategies.

-

DNV has confirmed that this SPT shows a significant improvement in KPIs and isbeyond the trajectory of "business as usual.” In contrast to the Ministry of
Economy, Trade and Industry's Transition Roadmap in Gas Sector, which depicts
a pathway where the gas industry will see an increase in the demand for natural
gas as a result of society-wide fuel conversion, which will increase gas companies'
CO2 emissions (Scope 3) in the short term, Osaka Gas has set a target to reduce
the absolute value of the domestic supply chain CO2 emissions (Scope 1, 2, and
3) for 5 million tonnes as of 2030, and the decarbonization awaiting theestablishment of innovative technologies would be difficult to achieve withconventional approaches, due to the uncertainty of technological establishment
and the significant costs that would be incurred in the transition to
decarbonization even if it were achieved. Therefore, DNV judged that it isambitious. DNV has also confirmed that the SPT level is broadly in line with thelinear interpolation level from the baseline FY2018.3 results to 2050 carbon
Page 48 of 88

neutrality, taking into account the equivalent increase in domestic CO2 emissionsof the Daigas Group due to these efforts to avoid emissions.
--

DNV has confirmed that the process for setting SPTs is based on an appropriate
combination of multiple benchmarking approaches.
Osaka Gas has disclosed the base year and previous years' results for theselected KPIs on its website etc., and targets are set until 2030 based onthese results.



Ahead of its competitors, Osaka Gas has set reduction targets for absolutevalue of domestic CO2 emissions, including Scope 3.

DNV has confirmed that the SPT target setting has been properly disclosed.
-

Through the Framework and the "Roadmap to Achieving Carbon Neutrality," itis explained how CO2 emission reductions will be achieved.

DNV has confirmed that Osaka Gas decided not to set annual SPTs, but topromote medium- and long-term initiatives to achieve the FY2031.3 target as CO2
emissions (Scope 1, 2, and 3) may fluctuate from year to year due to thesignificant influence of domestic energy demand and the status of individual
projects, and that progress towards this target will be verified annually by an
external organization. Similarly, DNV has confirmed that milestone SPTs may be
set separately from these SPTs, taking into account the financing period etc., andthat in such cases they will be disclosed in the bond disclosure documents, theloan agreement documents, etc. each time of the implementation of finance.

Table-Ⅱ (reposted) Osaka Gas' KPIs and SPTs for green/transition finance
KPI
Definition
of KPISPTDefinitionof SPT

CO2 emissions in the Daigas Group's domestic supply chain (Scope 1, 2, and 3)
Total CO2 emissions in Scope 1, 2, and 3 calculated in accordance with the GHG Protocol,
covering the Daigas Group’s domestic supply chain
Reduce CO2 emissions in the Daigas Group's domestic supply chain by 5 million
tonnes in FY2031.3 (compared to FY2018.3)
Difference between the Daigas Group's domestic supply chain (Scope 1, 2, and 3) CO 2
emissions of 32.01 million tonnes in FY2018.3 and the Daigas Group’s total domestic supply
chain (Scope 1, 2, and 3) CO2 emissions in FY2031.3(SPT's) rationale and degree of ambition:☒

Evidence that SPTs can bring☒significant improvements☒

Relevance and reliability of selectedbenchmarks and standards is proven.

Evidence that SPTs are aligned with
the Fundraiser's sustainability and☒

SPTs are proven to be set on a pre-defined
timeline.

business strategies
☐

Other

Page 49 of 88

Benchmarking method:☒

The Fundraiser's own performance☐(The Fundraiser's) competitors☐

Other (please specify):☒

Description of the Fundraiser's strategy for(e.g., past results)☒

Reference to scientific evidence

Additional disclosure:☒

Explanation of the possibility ofrecalculation or adjustment☒

achievement

Identification of key factors that may☐

Other (please specify):

influence the achievement of SPTs

Page 50 of 88

SLBP/SLLP-3

Finance Characteristics-

DNV has confirmed that the transition-linked finance (bond or loan) with general
corporate purpose implemented under the Framework will have financial andstructural characteristics that change in line with the achievement of SPTs. DNV
has also confirmed that Osaka Gas has an internal procedure to ensure that thetrigger events and their scope of impact, with specific SPT measurement timing
and performance requirements, are linked to the achievement of targets andchanges in financial and structural characteristics each time of the implementationof finance, and that the details, including conditions, will be disclosed in the bonddisclosure documents, the loan agreement documents, etc.

-

DNV has confirmed that if Osaka Gas is unable to confirm the achievement statusof the SPT on the judgment date, the SPT will be treated as not achieved.

-

Osaka Gas explains that if it is required to change the measurement method of
KPIs, the setting of SPTs, assumptions and scope of KPIs, etc. due to theoccurrence of circumstances that cannot be foreseen or controlled at the time theformulation of the Framework and that could have a significant impact (e.g.,changes in business structure due to M&A etc., changes in various laws, systems,
and regulations in each country, other extraordinary events), there is a possibility
to review the SPT figures for the Transition-Linked Finance already issued andthat the details will be disclosed on the website etc.

Financial impact:☒

Variation in interest rates☒

Other: Changes in financial or structural characteristics (e.g., stepping up or down ininterest rates, donations to organizations etc., aiming at environmental protection
activities)

Structural characteristics:☒

Other: The conditions of the trigger judgment (judgment date and SPT) will be set by
the term etc. of the individual bond or loan, and further details, including theconditions, will be disclosed in the bond disclosure document, the loan agreement
document, etc.

Page 51 of 88

SLBP/SLLP-4-

Reporting

DNV has confirmed that the required information will be disclosed in a timely
manner on the following details as required by the SLBP/SLLP:KPI performance against the SPT: Subject to verification by an external bodyetc., and disclosed on the website etc. at least once a year after the
implementation of the Transition-Linked Finance until the final judgment date

SPT achievement status: Subject to annual verification by an independent
third-party organization and used to determine financial and structuralcharacteristics

When change in the SPT is required: Osaka Gas will discuss with the relevant
parties, for example, the setting of an SPT with a level of ambition equal to or
higher than the existing evaluation criteria, taking into account the changes.

Reporting information:☒

Performance of selected KPIs☒

Verification report☒

SPTs' level of ambition☐

Other (please specify):☐

Semi-annual☒

Disclosed in publicly available sustainability

Frequency:☒

Annual☐Other (please specify):

Disclosure method:☐

Disclosed in publicly available financial
reports☐

reports

Disclosed in documents that are made☒Other: The Fundraiser's website☐

Reasonable assurance

publicly available in a timely manner☐

Reporting with external review

Level of assurance report:☒

Limited assurance☐

Other (please specify):

Page 52 of 88

SLBP/SLLP-5-

Verification

DNV has confirmed that Osaka Gas intends to undergo independent verificationof the data related to the KPIs at least once a year by a qualified external
evaluation body with relevant expertise in SPT trigger events.

Reporting information:☒

Limited assurance☐

Reasonable assurance☐

Other (please specify):☐

Semi-annual☒

Measurement method of KPIs

Frequency:☒

Annual☐Other (please specify):

Significant changes:☒

Boundary (scope)☒

Adjustment (change) of SPTs

Page 53 of 88

Ⅶ. Assessment Conclusion
On the basis of the information provided by Osaka Gas and the work undertaken, it is
DNV’s opinion that the Osaka Gas Green/Transition Finance Framework and theTransition-Linked Finance to be implemented this time meet the criteria established in
the Protocol, and are aligned with the definition or purpose of the CTFH/CTFBG,
GBP/GBGLs, GLP/GLGLs, SLBP/SLBGLs, and SLLP/SLLGLs.
“provide an investment opportunity with transparent sustainability credentials”“enable capital-raising and investment for new and existing projects with environmental
benefits"“encourage, through KPIs and SPTs, the achievement of the borrower's ESGs (withregard to climate transition) that are important (as climate transition), material,
quantifiable, pre-determined, ambitious, regularly monitored and externally verifiable”

DNV Business Assurance Japan K.K.
8 May 2024

Masato Kanedome

Naoki Maeda

Technical Reviewer

Managing Director/SCPA Vice President

DNV Business Assurance Japan K.K.

DNV Business Assurance Japan K.K.

Jun Chokai

Hiroyuki Mizoguchi

Project Leader

Assessor

DNV Business Assurance Japan K.K.

DNV Business Assurance Japan K.K.

Page 54 of 88

About DNVDriven by our purpose of safeguarding life, property and the environment, DNV enables organisations to advance thesafety and sustainability of their business. Combining leading technical and operational expertise, risk methodology andin-depth industry knowledge, we empower our customers’ decisions and actions with trust and confidence. We
continuously invest in research and collaborative innovation to provide customers and society with operational andtechnological foresight.
With our origins stretching back to 1864, our reach today is global. Operating in more than 100 countries, our 16,000
professionals are dedicated to helping customers make the world safer, smarter and greener.

Disclaimer
Responsibilities of the Management of the Issuer and the Second-Party Opinion Providers, DNV: The management ofIssuer has provided the information and data used by DNV during the delivery of this review. Our statement represents
an independent opinion and is intended to inform the Issuer management and other interested stakeholders in the Bond
as to whether the established criteria have been met, based on the information provided to us. In our work we haverelied on the information and the facts presented to us by the Issuer. DNV is not responsible for any aspect of thenominated assets referred to in this opinion and cannot be held liable if estimates, findings, opinions, or conclusions areincorrect. Thus, DNV shall not be held liable if any of the information or data provided by the Issuer’s management andused as a basis for this assessment were not correct or complete.

Page 55 of 88

Schedule-1 Daigas Group Green/Transition Finance Nominated Projects
The projects listed in the table are transition finance candidates that have been evaluated for eligibility at the time of the assessment of the framework (as ofApril 2024). In the future, green/transition bonds or loans issued under the Daigas Group Green/Transition Finance Framework will be selected from one ormore of the green/transition eligible project (Eligible Criteria) as per its labelling and reported in the pre-financing or post-financing reports. If additional
green/transition projects are included, eligibility will be evaluated in advance by Osaka Gas in accordance with the Daigas Group Green/Transition Finance
Framework and, if necessary, DNV will evaluate them in a timely manner.
Eligible Criteria

Project overview (main expenditure)
Methanation

1)

2)

Decarbonization ofgas energy

Decarbonizationof power
generation

Hydrogenutilization

Expenditure on building the hydrogen supply chain (equipment manufacturing,hydrogen production, transport, supply, etc.)
Direct use

Lowcarbonization

Expenditure on research and development investment in a process for simultaneous
production of hydrogen, electricity and CO2 using chemical looping combustion
technology

Biogas, biomethane

Expenditure on capital expenditure to expand the use of biogas and biomethane fordomestic and international on-site utilization

Renewable power generation

Expenditure on the development, construction, operation and refurbishment of
renewable energy, such as biomass, solar, onshore wind and offshore wind

Carbon-neutral
Thermal power
generation

Fuel utilisation
CO2 capture and storage(CCUS)

3)

Expenditure on research and development and capital expenditure for social
implementation of e-methane and establishment of methanation technology (e.g.,
SOEC co-electrolysis)

The fuel cells
Fuel Cells

High efficiency andminiaturisation

Expenditure on investment, research and development in the procurement, supply anduse of synthetic methane, hydrogen and ammonia
Expenditure on participation in CCUS demonstrations (e.g., consortia)
Expenditure on research, development and capital investment in small SOFCs withhigh power generation efficiency

Page 56 of 88

Advanced
utilization ofnatural gas andCHP

converting fuel from oiland coal to natural gas

Expenditure on capital expenditure (e.g., on the construction of LNG satellite
terminals, LNG bunkering vessels, and the provision of related equipment) to support
customers' fuel conversion

Micro grid

Expenditure on the construction and demonstration of microgrids

Carbon-neutral LNG

Advanced energy
utilization

Other (Reductionof CO2 emission
associated with
own activities)

Expenditure on the procurement and supply of carbon neutral LNG **LNG with GHG emissions offset by credits

VPP and smart energy
systems

Expenditure on research and development and capital investment in VPP, storage
battery business, projects to demonstrate the establishment of smart energy systems,
etc.

EVs

Expenditure on EV charging infrastructure business, demonstration projects andservice provision, etc. that contribute to the diffusion and expansion of EVs

Reduce CO2 emissions
from activities other than
the above, such as
manufacturing, power
generation, and office
operations.

Expenditure on cold power generation equipment and cold heat utilisation equipmentin the city gas production process, and on energy-saving renovation work in buildings

Page 57 of 88

Schedule-2 Key Performance Indicators (KPIs) and Sustainability Performance Targets (SPTs)
Key Performance Indicators (KPIs)
KPI
CO2 emissions in the Daigas Group’s
domestic supply chain (Scope 1, 2, and 3)

Explanation
Osaka Gas has set "CO2 emissions in the Daigas Group's domestic supply chain (Scope
1, 2, and 3)" as a KPI. CO2 emissions in the Daigas Group's domestic supply chain are ahighly important and quantifiable indicator for addressing climate change, which the
Daigas Group positions as one of its key management issues.

Sustainability Performance Targets (SPTs)
SPT

5 million tonnes reduction by FY2031.3(compared to FY2018.3)

Explanation
In contrast to the Ministry of Economy, Trade and Industry's Transition Roadmap in Gas
Sector, which depicts a pathway where the gas industry will see an increase in the
demand for natural gas as a result of society-wide fuel conversion, which will increasegas companies' CO2 emissions (Scope 3) in the short term, Osaka Gas has set a target
to reduce the absolute value of the domestic supply chain CO2 emissions (Scope 1, 2,
and 3) for 5 million tonnes as of 2030, and the decarbonization awaiting theestablishment of innovative technologies would be difficult to achieve with conventional
approaches, due to the uncertainty of technological establishment and the significant
costs that would be incurred in the transition to decarbonization even if it wereachieved. Therefore, DNV has concluded that it is ambitious. DNV has also confirmedthat the SPT level is broadly in line with the linear interpolation level from the baseline
FY2018.3 results to 2050 carbon neutrality, taking into account the equivalent increasein domestic CO2 emissions of the Daigas Group due to these efforts to avoid emissions.

Page 58 of 88

The specific trigger judgment for individual transition-linked finance will be set aroundthis SPT in an appropriate manner and disclosed prior to the finance implementation in
the bond disclosure documents, the loan agreement documents, etc.

Page 59 of 88

Schedule-3 Climate Transition Finance Eligibility Assessment Protocol
The checklists (1-4) below are DNV evaluation procedures created for Daigas Group Green/Transition Finance Framework Eligibility Evaluation based on thedisclosure requirements of CTFH and CTFBG.
The "confirmed documents" in the Work Undertaken include public or private documents (internal documents of the issuer or borrower), etc., and are provided by
Osaka Gas as evidence of eligibility judgment for DNV.
*Please replace “Issuer”, “Investor” to “Borrower/Fundraiser”, “Lender” in the context in the following requirements.

Ref.

Criteria

1

Issuer’s
ClimateTransition
Strategy andGovernanceRequirements
The green, sustainability orsustainability- linked financing should bedirected toward enabling an issuer’s
GHG emissions reduction strategy inalignment with the goals of the Paris
Agreement.
Recommended information and indicators:•••

a long-term, science-based target
to align with the goals of the Paris
Agreement;
relevant and credible interimscience- based targets in the shortand medium-term on the trajectory
towards the long-term goal, in linewith the relevant regional, sector,
or international climate change
scenarios;
disclosure on an issuer’s transition
plan or climate transition strategy.
This should include specificitemisation of the main levers
towards GHG emissions reduction,Work Undertaken

DNV Findings

Confirmed documents- Framework- Daigas Group MediumTerm Management Plan
2026
- Daigas Group Carbon
Neutral Vision- Daigas Group Energy
Transition 2030
- Carbon Neutral
Challenge 2050 Action
Plan of the Japan Gas
Association- Gas and Electricity
Sector Roadmap ofMinistry of Economy,
Trade and Industry- Daigas Group Integrated
Report 2023
- Daigas Group ESG data
- Project list & estimatedCO2 emission reduction

Osaka Gas has established a framework and has introduceda range of plans and initiatives to manage and enhance theenvironmental sustainability and related performance of theorganisation against Daigas Group’s wider environmental
strategy.

Page 60 of 88

DNV has reviewed and confirmed that Osaka Gas's targets
are equivalent to meeting the targets of the Paris
Agreement, based on a plan of action to achieve carbon
neutrality by 2050, a science-based long-term target
quantified by Osaka Gas. Osaka Gas sets environmental
corporate strategies that are important to its businessmodel, assuming the IEA (World Energy Outlook 2021)
multilinear scenario (1.5°C scenario (NZE2050) and 2.6°C
scenario (STEPS)) that targets energy projects (domestic
and overseas gas and electricity projects etc.) that are
expected to be significantly affected by risks andopportunities identification using TCFD guidance and climatechange, and considers the degree of progress in energy
saving, transitions in the composition of power sources, etc.
Osaka Gas has formulated the "Daigas Group Carbon Neutral
Vision" and the "Daigas Group Energy Transition 2030," inwhich it presents a roadmap for achieving carbon neutrality.

Ref.

Criteria

Requirements••

such as a detailed capital
expenditure (CapEx) plan andrelevant technological implications(i.e., amounts to be spent, what
carbon cost is considered for
implementing such CapEx
programme, operational impacts,
regulatory considerations, etc.);
clear oversight and governance ofan issuer’s climate transition
strategy, including
management/board levelaccountability; andevidence of a broader sustainability
strategy to mitigate relevant
environmental and social
externalities, including ‘justtransition’ considerations whereappropriate, and contributions to the
UN Sustainable Development Goals(UN SDGs).

Work Undertaken

DNV FindingsInterviews with stakeholders

In the vision, Osaka Gas sets the long-term goal of achievingcarbon neutrality by 2050, which is consistent with the goalsof the Paris Agreement, and the short- and medium-termgoals for achieving this goal, which are "avoided CO2
emissions in the entire society of 7 million tonnes /renewable energy diffusion contribution of 4 million kW by2026," "introduction of e-methane of 1% by 2030 / avoided
CO2 emissions in the entire society of 10 million tonnes / CO2
emission reduction in the domestic supply chain (scope 1, 2,
and 3) by 5 million tonnes compared to FY2018.3 /renewable energy diffusion contribution of 5 million kW /renewable energy ratio of domestic power projects
approximately 50%,” etc. The roadmap discloses thestrategic plan to achieve the transition to carbon neutrality.
Specifically, Osaka Gas's Transition Strategy incorporates theenvironmental targets of the Japan Gas Association and theMinistry of Economy, Trade and Industry (METI), as well as
action plan to achieve a target of limiting the increase inaverage temperature below 2°C using the TCFD. In addition,
if it becomes necessary to review Osaka Gas’s efforts inorder to achieve continuous emission reductions in the
future, Osaka Gas plans to implement them as appropriate
according to the timeline.
Osaka Gas considers the response to climate change,
including the implementation of the Transition Strategy, tobe one of the most important management issues, and has
established a system and framework to promote theinitiatives specified in the Daigas Group Carbon Neutral
Vision and Roadmap at the management level. Performancelinked remuneration is being adopted for directors other than
external directors, using ESG indicator achievement factors,

Page 61 of 88

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
making climate change-related indices such as CO2
emissions as one of the performance indicators.
Furthermore, after the conclusion of the Annual General
Meeting of Shareholders scheduled to be held in June 2024,
Osaka Gas plans to shift to a company with an audit
committee system to separate execution and supervisionand strengthen the supervisory function.
Osaka Gas's approach to promoting sustainability, both for
the Daigas Group and for society as a whole, is to provide
solutions for the realization of a sustainable society as aninnovative energy service company by decarbonizing city gas
feedstock and introducing renewable energy. In addition, in
the "Medium-Term Management Plan 2026," the Daigas
Group has set the following three commitments as key
strategies: Co-create value for a sustainable future(achieving carbon neutrality in energy, improving theresilience of customers and society, co-creating advanced
and diverse solutions), Support employees to shine in theirroles, and Evolve business foundation as a corporate groupthat “secure peace of mind today, build sustainable lifestyles
for tomorrow” to conduct its business activities and make abroad contribution to the achievement of the Sustainable
Development Goals (SDGs) set by the United Nations. Of
these, the key materiality issue to which Green/Transition
Finance is primarily concerned is climate change (achieving alow- and decarbonized society) as set out in the Daigas
Group's Charter of Business Conduct "Contributing to the
Sustainability of the Environment and Society."
Based on an assessment of the implementation plan
provided by Osaka Gas under the Framework, the "Daigas
Group Carbon Neutral Vision" and the Osaka Gas Roadmap,

Page 62 of 88

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
DNV has confirmed that it is well aligned with Osaka Gas's
Transition Strategy. Through the assessment, DNV has
confirmed that the implementation plan based on theTransition Strategy, such as the decarbonization of town gas
feedstock centered on methanation utilizing renewableenergy and hydrogen and the decarbonization of powersources centered on the introduction of renewable energy, iscredible, ambitious, and achievable.
DNV judged that Osaka Gas ensures that substantial benefits
will be shared widely and shows consideration for justtransition as it has been implementing fuel conversion fromcoal and oil to natural gas with low CO2 emissions not only in
the Kansai region but also in wide areas of Japan and Asia,and has been conducted multiple feasibility studies and basic
designs for the overseas supply chain building in cooperation
with domestic and overseas operators, viewing overseas
supply chain building as well as domestic supply chainbuilding is one of the most promising options for the fullscale introduction of e-methane from FY2031.3.
Osaka Gas does not envisage any large-scale closure offacilities or plants related to existing businesses, and even in
the cases of closure, Osaka Gas envisages theimplementation of measures that take employment into
consideration through personnel transfers within thecompany's businesses etc.

2

Business model
environmental
materiality

The climate transition strategy should be
relevant to the environmentally material
parts of an issuer’s business model,
taking into account potential futurescenarios which may impact current

Confirmed documents- Framework- Daigas Group MediumTerm Management Plan
2026

Page 63 of 88

DNV evaluated whether the key activities associated with
Osaka Gas's business activities correspond to the Osaka
Gas’s Transition Strategy, which was evaluated ascontributing to the environment.

Ref.

Criteria

Requirements
determinations concerning materiality.
Recommended information and indicators:
Discussion on the materiality of theplanned climate transition strategy may:•••

be disclosed in the form of amateriality matrix made publicly
available by an issuer or be coveredin an issuer’s annual reports; andaddress the materiality of climaterelated eligible projects and/or
KPI(s) on the overall emissions
profile of an issuer.
Where Scope 3 emissions are
expected to be material but are notyet identified or measured, atimeline for reporting should be
disclosed.

Work Undertaken---

Daigas Group Carbon
Neutral Vision
Daigas Group Energy
Transition 2030
Carbon Neutral
Challenge 2050 Action
Plan of the Japan Gas
Association
Gas and Electricity
Sector Roadmap ofMinistry of Economy,
Trade and Industry
Daigas Group Integrated
Report 2023
Daigas Group ESG data
Project list & estimatedCO2 emission reduction

Interviews with stakeholders

DNV Findings
The Daigas Group's GHG emissions (Unit: t-CO2e /FY2021.3-2023.3) are as follows:
TargetResults forResults for

Scope

FY2021.3

FY2022.3

Results for FY2023.3

Scope15,215,428

4,526,038

4,405,987

17％

Scope2

297,386

334,433

323,7901%

Scope3

22,270,832

21,924,919

21,246,842

82%

Total

27,783,646

26,785,390

25,976,619(100%)<Osaka Gas' approach to Scope 1 to 3 emissions>
Scope 1: Direct emissions from own operations (gas production, power
generation, etc.) (e.g., combustion of gas for power generation)
Scope 2: Indirect emissions from own operations (gas production, power
generation, etc.) (use of electricity supplied by other companies,
etc.)
Scope 3: Indirect emissions from value chains other than Scope 1 and Scope
2 (e.g., fuel procurement, combustion of gas at destination)

Osaka Gas's Transition efforts include not only CO2emission reductions from its own business activities(Scope 1 and 2), but also Scope 3 and activities that
contribute to the avoided emissions of other companies.
This will contribute to the implementation of supply-side
and demand-side carbon neutrality as an important
initiative indicated in the various plans and strategies for
decarbonisation in Japan. In other words, Osaka Gas's
transition initiatives directly support the transition ofsociety as a whole, including its own company, as anPage 64 of 88

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
energy service company taking on the challenge ofachieving carbon neutrality by 2050.
The Osaka Gas’s roadmap is well aligned with the gas andelectricity roadmaps of the Japan Gas Association and theMinistry of Economy, Trade and Industry, and its specificimplementation plans and targets are set and quantified in
the absolute sense that they must be the optimization toachieve them and the possibility of further improvement.
DNV has confirmed that Osaka Gas's plan to implement its
Transition Strategy is closely linked to the activities of its
core business and to activities that contribute to the CO2
emissions reduction of in society as a whole, thus
contributing to the environmental aspects of society as awhole and supporting the promotion of Osaka Gas's
business.
Osaka Gas's planned transition strategy and transition
pathway are associated with the materiality that Osaka
Gas has achieved through GRI standards*1, ISO 26000,
TCFD, etc., and will contribute to significant
environmental improvements (impact) in both qualitativeand quantitative terms.
*1: Global Reporting Initiative (an international standard
providing ESG-related reporting, management and analysis
methods)

3

Climatetransition
strategy andtargets to bescience-based

An issuer’s climate transition strategy
should reference science-based targets
and transition pathways. There isscientific guidance around the required
rate of GHG emission reductions (theConfirmed documents- Framework- Daigas Group MediumTerm Management Plan
2026

Page 65 of 88

Osaka Gas has set a transition plan that is consistent with
the Paris Agreement based on science-based evidence, and atransition trajectory that is consistent with the goals of theJapan Gas Association and the Ministry of Economy, Tradeand Industry. (In contrast to the Ministry of Economy, TradeRef.

Criteria

Requirements“GHG emissions reduction trajectory”) toalign the global economy with the goalsof the Paris Agreement.
The planned transition trajectory should:
•

•

•

•

be quantitatively measurable andaligned with the latest available
methodology;
be aligned with, benchmarked, orotherwise referenced to recognised
third-party, science-based
trajectories, where such trajectories
exist; when third-party trajectories
are not available, consider industry
peer comparison and/or internal
methodologies/historicalperformance;
be publicly disclosed (ideally inmainstream financial filings),
including interim targets; andbe supported by independent
assurance or verification.

Work Undertaken---

Daigas Group Carbon
Neutral Vision
Daigas Group Energy
Transition 2030
Carbon Neutral
Challenge 2050 Action
Plan of the Japan Gas
Association
Gas and Electricity
Sector Roadmap ofMinistry of Economy,
Trade and Industry
Daigas Group Integrated
Report 2023
Daigas Group ESG data
Project list & estimatedCO2 emission reduction

Interviews with stakeholders•

and Industry's Transition Roadmap in Gas Sector, which
depicts a pathway where the gas industry will see anincrease in the demand for natural gas as a result of societywide fuel conversion, which will increase gas companies' CO2
emissions (Scope 3) in the short term, Osaka Gas has set atarget to reduce the absolute value of the domestic supply
chain CO2 emissions (Scope 1, 2, and 3) for 5 million tonnes
as of 2030.)
The plan sets out realistic targets and pathways for reducing
CO2 emissions in absolute terms, and plans to reduce
absolute (total) CO2 emissions to maintain defined levels in
the future.
DNV has confirmed that Osaka Gas's Transition Strategy isquantified in terms of emissions intensity and absolutevalues or ratios based on a consistent measurement
methodology with prescribed assumptions.
Transition targets are set voluntarily based on the use of
TCFD and other initiatives to achieve sustainable CO2
emission reductions, and they are consistent with thepolicies of the benchmarking Japan Gas Association and theMinistry of Economy, Trade and Industry.
Specifically, Osaka Gas has set the following targets forTransition

Strongly recommended information andindicators:•

DNV Findings

Table Osaka Gas Transition Targets

short, medium, and long-term GHG
emission reduction targets alignedwith the Paris Agreement;
baseline year and historic emissions(including absolute emissions, where
intensity metrics are the main

Short- andmediumterm targets

Page 66 of 88

FY2027.3• Renewable development contribution*1:
4 million kW• Avoided CO2 emissions: 7 million
tonnes/year (baseline: FY2017.3)

Ref.

Criteria

Requirements

•

•

•

•

Work Undertaken

indicator);
scenario utilised and methodology
applied (e.g., ACT, SBTi, IEA etc.).
When third-party trajectories are notavailable, industry peer comparison
and/or internal
methodologies/historicalperformance;
GHG emission objectives covering all
scopes and most relevant subcategories (Scopes 1, 2 and 3);
targets formulated in either intensity
or absolute terms, noting, that where
intensity targets are used, projections
on the change to absolute emissions
should also be provided; andwhere applicable, use of carbon
capture technology as well as of highquality and high-integrity carbon
credits, and their relative contribution
to the GHG emissions reduction
trajectory in line with best industry
practices (e.g., SBTi, VCMI andICVCM).

DNV Findings• CO2 reduction rate in own offices andcompany vehicles: 67% (compared to
FY2018.3)
FY2031.3• Renewable development contribution*1:
5 million kW• Power portfolio in Japan consisting of
renewable energy*1: Approximately
50%• Avoided CO2 emissions: 10 million
tonnes/year*2 (baseline: FY2017.3)• CO2 emission reduction: 5 million
tonnes*3 (compared to FY2018.3)• Introduction of e-methane: 1%*4
• CO2 reduction rate in own offices andcompany vehicles: 100%
Long2050
term• Carbon neutrality
targets*1: Including solar, wind, biomass power sources which are eligible
for the feed-in tariff (FIT) scheme*2: Equivalent to one third of the CO2 emission currently producedin our business and by our customers (33 million tonnes/year)*3: CO2 emissions in the Daigas Group’s domestic supply chain(Scope 1, 2, and 3)*4: 1% of gas sales

Osaka Gas's Transition efforts include not only CO2 emission
reductions from its own business activities (Scope 1 and 2),
but also Scope 3 and activities that contribute to the avoided
emissions of other companies. This will contribute to the

Page 67 of 88

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
implementation of supply-side and demand-side carbon
neutrality as an important initiative indicated in the various
plans and strategies for decarbonization in Japan. In otherwords, Osaka Gas's transition initiatives directly support thetransition of society as a whole, including its own company,as an energy service company taking on the challenge ofachieving carbon neutrality by 2050.
In addition to recycling CO2 emitted into the atmosphere andproducing and supplying e-methane through methanation,
Osaka Gas has also started joint studies etc. on the capture,transport, use, and storage of CO2 emitted from domestic
plants in the steel, cement, and chemical industries, where
CO2 emissions are difficult to reduce, towards thedevelopment of a CO2 value chain. In addition, with regard
to the utilization of carbon credits, Osaka Gas has announced
a joint investment in the Eastwood Climate Smart Forestry
Fund, a forestry fund set up by the Sumitomo Forestry
Group together with 10 Japanese companies. The fund plansto generate approximately 1 million tonnes of new CO2
absorption every year and will contribute to the realization ofa decarbonized society through the creation and return of
high-quality carbon credits.
Transition initiatives and the respective scope emissions aredisclosed in the “Daigas Group Carbon Neutral Vision,”“Daigas Group Environmental Performance Data,” etc.

4

Implementationtransparency

Market communication regarding theoffer of a GSS financing instrument
intended to fund an issuer’s climatetransition strategy should also betransparent, to the extent practicable,

Confirmed documents- Framework- Daigas Group MediumTerm Management Plan
2026

Page 68 of 88

DNV has confirmed that the investment and development
plans related to Osaka Gas's Transition Strategy include
agreement on future investment and expenditure.
Specifically, Osaka Gas plans to invest a cumulative total of 2
trillion yen by FY2031.3 from FY2018.3 in quality

Ref.

Criteria

Requirementson the underlying investment program
including capital and operational
expenditures (CapEx and OpEx).
Recommended information and indicators:
•

•

•

•

•

CapEx roll-out plan consistent withthe overall climate transition
strategy and climate science anddiscussion of how it informs CapEx
decision- making within theorganisation;phase-out plan regarding
activities/products incompatible
with the climate transition strategy(when such activities or products
are significantly harmful or display
levels of performance inconsistent
with science-based GHG emission
reduction trajectories);
green CapEx, for example thosereferenced under the eligible
green project categories in theGreen Bond Principles, as apercentage of total CapEx andhow the ratio may be expected to
evolve over time;
disclosure on the percentage ofassets/revenues/
expenditures/divestments aligned
to the various levers;
a qualitative and/or quantitative
assessment of the potential lockedin GHG emission from an issuer’s

Work Undertaken---

Daigas Group Carbon
Neutral Vision
Daigas Group Energy
Transition 2030
Carbon Neutral
Challenge 2050 Action
Plan of the Japan Gas
Association
Gas and Electricity
Sector Roadmap ofMinistry of Economy,
Trade and Industry
Daigas Group Integrated
Report 2023
Daigas Group ESG data
Project list & estimatedCO2 emission reduction

Interviews with stakeholders

DNV Findings
improvement, growth and M&A, including the activities
outlined in the Daigas Group Carbon Neutral Vision andRoadmap. In addition, the Daigas Group's "Medium-Term
Management Plan 2026" aims to achieve a 1% introductionof e-methane by 2030, avoided CO2 emissions in the entire
society of 10 million tonnes, and renewable energy sources
diffusion contribution of 5 million kW. Osaka Gas plans tomake carbon neutral investments of around 220 billion yen
in the cumulative total for the period FY2025.3-2031.3, andin the three year period FY2025.3-2027.3, it plans to invest
approximately 100 billion yen in carbon neutrality areas(e.g., conversion to renewable energy sources in domestic
power business, e-methane) to build future earnings, andapproximately 460 billion yen in priority growth areas suchas thermal power sources, shale gas development, and life &business solutions business. This includes projects to be
implemented with green/transition finance. The introductionof and transition to e-methane etc. is also planned as ameasure to avoid lock-in of coal and oil use.
DNV has confirmed that Osaka Gas has been trying since
FY2022.3 to understand the carbon impact of projects thathave already invested by utilizing internal carbon prices, andhas also been utilizing since FY2024.3 as a decision-making
tool for new investment decisions in business areas with alarge carbon impact.
DNV has confirmed that the overall investment plan
(investment amount) for the future considers CTF-1 to CTF3 for the investment required to implement the transition
strategy and also confirmed plans to be implemented
according to the appropriate timelines, based on internalmanagement system and process.

Page 69 of 88

Ref.

Criteria

Requirements••

Work Undertaken

key assets and products;
assumptions on the internal costof carbon; anddisclosure on adverse impacts on
the workforce, community andsurrounding environment, andrelated strategies used tomitigate those negative impacts.

Page 70 of 88

DNV Findings

Schedule-4 Green Finance (Transition Finance with specific use of proceeds) Eligibility
Assessment Protocol
The checklist below (GBP/GLP-1 to GBP/GLP-4) is a DNV evaluation procedure created for Daigas Group Green/Transition Finance (Bond & Loan) Eligibility
Assessment (Bond & Loan with specific use of proceeds) based on the requirements of GBP/GBGLs and GLP/GLGLs. "Confirmed documents" in the “Work
Undertaken” includes documents inside the issuer and is provided by Osaka Gas as evidence of eligibility judgment for DNV.
In Schedule-4, it is referred to as GBP or GLP according to the practice, but this is the standard to be referred to in the case of financing that specifies the use ofproceeds such as transition projects in transition finance (bonds and loan) that specifies the use of proceeds based on CTFH and CTFBG, so please read as themeaning of the transition as appropriate.

GBP/GLP-1 Use of Proceeds
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

1aTypes of funds

The types of green bonds are classified
into one of the following types defined by
GBP.
· (Standard) Green/transition Bond・ Green/transition Revenue Finance・ Green/transition Project Finance・ Other

Confirmed documents

Through the evaluation work, DNV has confirmed that Osaka Gas
Green/Transition Finance (bond/loan) fall into the following
categories.

The key to a green/transition bond is thatthe proceeds will be used for a green
project, which should be properly statedin the legal documents relating to thesecurity.

Confirmed documents

1b

Green/transition
Project
Classification- Framework
Interview withstakeholders- Framework
Interview withstakeholders· (Standard) Green/transition BondDNV has confirmed that the Daigas Group Green/Transition
Finance is intended to finance a wide range of green/transition
projects focused on Osaka Gas's environmental targets andtransition strategy, as described in the Framework and Schedule1. The Group confirmed that the purpose of the financing is toallocate funds to a wide range of green/transition projects
focusing on Osaka Gas' environmental objectives and transition
strategy as described in the Framework and Schedule-1.
Specifically, all Green/Transition Finance Eligible Project
Candidates listed in Schedule-1 are evaluated as conforming toPage 71 of 88

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
the Transition Strategy, and the proceeds throughGreen/Transition Finance are planned to be financed one or moreof the Green/Transition Finance Eligible Project Candidates. If atransition project is pre-selected before the financing is
implemented, this will be disclosed in legal documents.
Through the assessment, DNV concludes that theGreen/Transition eligible projects candidates will bring concrete
and actual environmental benefits.

Table Daigas Group Key initiatives to achieve carbon neutrality(Green/transition finance candidate projects)
Eligible Criteria
Hydrogen
Decarboniz utilization
1) ation of gas
Biogas,energybiomethane
Renewable
power
Decarboniz
generation
ation of2)
power
Thermalgeneration power
generation
Fuel Cells
Advancedutilization ofnatural gas
Low3) carbonizatio and CHPnAdvancedenergyutilization
Other(Reduction

Page 72 of 88

Eligible Criteria & Project Overview
Methanation, direct use (chemicallooping combustion technology), etc.
On-site utilization of biogas andbiomethane in domestic/global scale
Solar power plants, onshore wind farm,offshore wind farm, biomass power
plants, etc.
Use of carbon neutral fuels such assynthetic methane, hydrogen andammonia, CCUS (Carbon Capture,
Utilization and Storage), etc.
Enhancing efficiency and downsizing,etc.
Support for converting fuel from oil andcoal to natural gas
Demonstration of building micro gridUse of carbon neutral LNG
VPP, smart energy systems, EVs, etc.
Cryogenic power generation in the city
gas production process, Cryogenic

Ref.

Criteria

Requirements

Work Undertaken

DNV Findingsof CO2emissionassociatedwith own
activities)

1c

Environmental
benefits

All green projects to which the funds areused should have clear environmental
benefits, the effects of which should beassessed by the issuer and, where
possible, quantitatively demonstrated.

Confirmed documents- Framework
Interview withstakeholders

power generation facilities, energy
efficiency renovation work of buildings,
etc.

Green/Transition projects will contribute to goals based on Osaka
Gas’s Transition Strategy, and contribute to low-carbon or
decarbonization that classified into the three eligibility criteria
listed in 1b. The environmental benefit is the reduction of CO2
emissions, which has been quantitatively or qualitatively
evaluated by Osaka Gas.
DNV has confirmed that, prior to the implementation ofgreen/transition finance, the project's environmental benefit
evaluation method (calculation method) and the items to bedisclosed are planned to be evaluated and reported quantitatively
as indicators and CO2 emission reductions according to theproject's characteristics in the annual report. (If it is difficult toevaluate the quantitative CO2 emission reductions due to thecharacteristics of the project, Osaka Gas will report the project
outline and the status of R&D and demonstration to the extent
practicable.)

1d

Refinancing rate

If all or part of the proceeds are used or
may be used for refinancing, the issuer
will indicate the estimated ratio of theinitial investment to the refinancing and,if necessary. Therefore, it isrecommended to clarify whichinvestment or project portfolio is subject
to refinancing.

Confirmed documents- Framework
Interview withstakeholders

Page 73 of 88

Osaka Gas plans to allocate all of the proceeds to newinvestment, refinancing, or both, in one or more of the eligible
project candidates included in Schedule-1. If it is clear inadvance, prior to the finance implementation, whether thefinancing will be used for new investments or refinancing, this will
be disclosed in legal documents. If it is not yet clear, the issuer
plans to disclose the estimated amount (or percentage) of theproceeds used for refinancing through reporting (annual report).

GBP/GLP-2 Process for Project Evaluation and Selection
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

2aProject
selection
process

Green bond issuers should provide an overview
of the process of qualifying projects for whichgreen bond funding will be used. This includes(but is not limited to):・The process by which the issuer determinesthat the project in question is included in thebusiness category of a qualified green project.
・ Creation of criteria for eligibility of projects forwhich green bond funding will be used
・ Environmental sustainability goals
In addition to criteria and certifications, theinformation published by issuers regarding thegreen bond process also considers the quality of
performance of the issuer's framework andenvironmental sustainability.

Confirmed documents

DNV has confirmed that Osaka Gas has a process ofdetermining the eligibility of projects for which thegreen/transition finance, and that the outline is specified in the
Framework.

2b

Issuer's
Environment
al and Social
Governance
Framework- Framework
Interview withstakeholders

Confirmed documents- Framework
Interview withstakeholders

Osaka Gas complies with environment-related laws, ordinancesand regulations, and considers that the environmental benefits
such as CO2 reduction are clear in the entire life cycle or eachprocess when selecting green/transition projects to be
implemented.
In the operation and implementation of the project, each of
the departments involved is committed to the preservation of
the surrounding environment.
DNV has confirmed that the green/transition projects
implemented by Osaka Gas are consistent with its
management and environmental policies, as well as with thetransition strategy, goals and pathways.

Page 74 of 88

GBP/GLP-3 Management of Proceeds
Ref.

Criteria

3a

Tracking
procedure-1

3b

3c

Tracking
procedure-2

Temporaryholding

Requirements

Work Undertaken

DNV Findings

The net proceeds from of Green bonds should bemanaged in sub-accounts, included in subportfolio, or otherwise tracked. It should also be
certified by the issuer in a formal internal process
related to the issuer's investment and financing
operations for the Green Project.

Confirmed documents

DNV has confirmed that the proceeds by the green/transition
finance can be tracked in line with the issuer's accounting
integration system and other systems, and confirmed thesystems actually in use or to be used, and documents to becreated specifically for use through the assessment, andconfirmed that the management status of the proceeds wasproved.

During the green bond redemption period, thebalance of funds raised that is being tracked
should be adjusted at regular intervals to matchthe amount allocated to eligible projects
undertaken during that period.

Confirmed documents

If no investment or payment has been made in aqualified green project, the issuer should also
inform the investor of the possible temporary
investment method for the balance of unallocatedproceeds.

Confirmed documents- Framework
Interview withstakeholders- Framework
Interview withstakeholders- Framework
Interview withstakeholders

Page 75 of 88

DNV has confirmed that the issuer plans to regularly (at least
once a year) review the outstanding balance of the transition
financing by using the integrated accounting system and otherdocuments prepared specifically for this purpose described in
3a during the period from the implementation of the transition
finance to its redemption or repayment.
DNV has confirmed that the confirmation process of Osaka
Gas through the integrated accounting system and documents
produced specifically for this purpose is structured to ensurethat the balance of unallocated proceeds is recognised
sequentially.
DNV has confirmed through the Framework and assessmentthat the balance of unallocated proceeds will be managed in
cash or cash equivalents. DNV has also confirmed that thebalance of unallocated proceeds will be disclosed throughreporting on the allocation status of proceeds.

GBP/GLP-4 Reporting
Ref.

Criteria

4aPeriodical
Reporting

Requirements

Work Undertaken

DNV Findings

In addition to reporting on the useof proceeds and the temporary
investment of unallocated proceeds,
the issuer will consider each projectat least once a year for projects towhich the Green bond proceeds
have been allocated, taking into
account the following: A list of eachproject should be provided.
-Confidentiality and competitive
considerations-Outline of each project, expectedsustainable environmental andsocial effects

Confirmed documents

DNV has confirmed that the issuer will carry out annual reporting of thegreen/transition finance until the proceeds are allocated and disclose informationon the allocation status of proceeds, the projects to which the proceeds have been
allocated and the environmental benefits. DNV has also confirmed that the issuer
will report on the environmental benefits until the redemption or repayment of thegreen/transition finance is completed.

- Framework
Interview withstakeholders

DNV has also confirmed that, even after the allocation plan or allocation has been
completed, the issuer plans to report in a timely manner or in its reporting on any
changes in transition strategy or pathways, or any major changes in the allocation
plan or project implementation status (e.g., interruption of a project for which
allocation has been started, significant postponement on an annual basis, sale orretirement).
The report will be disclosed on the website.
<Allocation status>
Allocated amount per eligible criteria
Balance of unallocated amount
Estimated amount of the proceeds allocated to refinancing<Environmental benefits>
Environmental impacts are disclosed within the scope of confidentiality, tothe extent practicable, and in consideration of the characteristics of the
project, including an overview of the project (including progress,
completion, operation, etc.) and the expected environmental benefits(e.g., t-CO2/year).

<Other>Page 76 of 88

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

Initiatives to achieve carbon neutrality by 2050 will be reviewed as necessary
in light of policy and technological trends, and will be disclosed where
necessary.

The currently planned reporting for the transition project is described in thesection of GBP/GLP-4. Reporting in this document.

Page 77 of 88

Schedule-5 Sustainability-Linked Finance (with general corporate purpose) Eligibility
Assessment Protocol
Since the Daigas Group Green/Transition Finance may be implemented as a General Corporate Purpose transition-linked bond or loan, which does not specify theuse of proceeds, it is evaluated by applying the five elements of SLBP/SLLP required for eligibility evaluation of a bond or loan that does not specify the use ofproceeds defined by CTFH/CTFBG.
The checklist below (SLBP/SLLP 1 to 5) is a DNV evaluation procedure created for the Daigas Group Green/Transition Finance (Transition-Linked Bond or Loan withgeneral corporate purpose) based on the requirements of SLBP/SLLP.
The "confirmed documents" in the Work Undertaken include public or private documents (materials inside the Fundraiser) etc., and are provided by Osaka Gas asevidence of eligibility judgment for DNV.
*Please replace “Borrower”, “Lender” to “Fundraiser”, “Investor” in the context in the following requirements.

SLBP/SLLP-1 Selection of KPIs (Key Performance Indicators)
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

1a

KPI – material
to coresustainability
and businessstrategy

The borrower’s sustainability performanceis measured using sustainability KPIs thatcan be external or internal. The KPIs should
be material to the issuer’s coresustainability and business strategy andaddress relevant environmental, social
and/or governance challenges of theindustry sector and be undermanagement’s control. The KPI should beof high strategic significance to the issuer’s
current and/ or future operations;

Confirmed documents- Framework- Daigas Group MediumTerm Management
Plan 2026- Daigas Group Carbon
Neutral Vision- Carbon Neutral
Challenge 2050 Action
Plan of the Japan Gas
Association- Gas and Electricity
Sector Roadmap of

DNV reviewed the KPIs related to Osaka Gas’ TransitionLinked Finance and has confirmed that the selected KPIs are
relevant and important to Osaka Gas' core transition
strategy and sustainability management.

It is recommended that issuer
communicates clearly to investors therationale and process according to which

Page 78 of 88

Osaka Gas' approach to sustainability promotion for the
Daigas Group and society is to provide solutions to realize asustainable society as an innovative energy and service
company by decarbonizing city gas feedstock andintroducing renewable energy.
In January 2021, Osaka Gas formulated the "Daigas Group
Carbon Neutral Vision," which presents a roadmap forachieving carbon neutrality and sets out the long-term goalof achieving carbon neutrality by 2050, which is consistent
with the goals of the Paris Agreement. Osaka Gas has set

Ref.

Criteria

Requirements

Work Undertaken

the KPI(s) have been selected and how the
KPI(s) fit into their sustainability strategy.
--

Ministry of Economy,
Trade and Industry
Daigas Group
Integrated Report
2023
Daigas Group ESG data

Interviews withstakeholders

DNV Findings
and published the short- and medium-term goals forachieving the long-term goal, which are "avoided CO2
emissions in the entire society of 7 million tonnes /renewable energy diffusion contribution of 4 million kW by2026," "introduction of e-methane of 1% by 2030 / avoided
CO2 emissions in the entire society of 10 million tonnes /CO2 emission reduction in the domestic supply chain (scope
1, 2, and 3) by 5 million tonnes compared to FY2018.3 /renewable energy diffusion contribution of 5 million kW /renewable energy ratio of domestic power projects
approximately 50%,” etc.
The selected KPI "CO2 emissions in the Daigas Group's
domestic supply chain (Scope 1, 2, and 3)" is in response to
climate change, which the Daigas Group positions as one ofits key management issues, and is a highly important andquantitatively verifiable indicator. This KPI will contribute toboth the transition strategy and sustainability management
to realize the "Daigas Group Carbon Neutral Vision."

1b

KPI Measurability

KPIs should be measurable or quantifiable
on a consistent methodological basis;
externally verifiable; and able to bebenchmarked, i.e., as much as possibleusing an external reference or definitions tofacilitate the assessment of the SPT’s levelof ambition.
Issuer are encouraged, when possible, toselect KPI(s) that they have alreadyincluded in their previous annual reports,
sustainability reports or other non-financial
reporting disclosures to allow investors to

Confirmed documents- Framework- Daigas Group MediumTerm Management
Plan 2026- Daigas Group Carbon
Neutral Vision- Carbon Neutral
Challenge 2050 Action
Plan of the Japan Gas
Association

Page 79 of 88

DNV concluded that the CO2 emissions required for theassessment of the KPIs are reliable indicators as they follow
the global standard GHG protocol and have been verified by
an external evaluation body in accordance with therequirements of ISO 14064-3.
DNV has confirmed that the KPIs selected by Osaka Gas are
consistent with the gas and power roadmaps of the Japan
Gas Association and the Ministry of Economy, Trade andIndustry, and that the KPIs are properly set as comparable
indicators.

Ref.

Criteria

Requirements
evaluate historical performance of the KPIs
selected. In situations where the KPIs havenot been previously disclosed, issuer
should, to the extent possible, provide
historical externally verified KPI values
covering at least the previous three years.

Work Undertaken---

Gas and Electricity
Sector Roadmap ofMinistry of Economy,
Trade and Industry
Daigas Group
Integrated Report
2023
Daigas Group ESG data

DNV Findings
The KPIs have been disclosed as actual results over the past
three years through the website etc.

Interviews withstakeholders
1c

KPI – Clear
definition

A clear definition of the KPI(s) should be
provided and include the applicable scopeor perimeter as well as the calculation
methodology.

Confirmed documents- Framework
Interviews withstakeholders

Page 80 of 88

DNV has confirmed that the KPIs selected by Osaka Gas
provide a clear assessment scope and calculation
methodology. The GHG emissions calculation methodology
required for the assessment of the KPIs follows the global
standard GHG Protocol and would be verified and reported
by an external evaluation body in accordance with therequirements of ISO 14064-3.

SLBP/SLLP-2 Calibration of SPTs (Sustainability Performance Targets)
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

2aTarget Setting- Meaningful

The SPTs should be ambitious, realistic andmeaningful to the issuer’s business and beconsistent with the issuers’ overall strategic
sustainability/ESG strategy.

Confirmed documents- Framework- Daigas Group
Medium-Term
Management Plan
2026
- Daigas Group Carbon
Neutral Vision- Carbon Neutral
Challenge 2050 Action
Plan of the Japan Gas
Association- Gas and Electricity
Sector Roadmap ofMinistry of Economy,
Trade and Industry- Daigas Group
Integrated Report2023- Daigas Group ESG
data

In January 2021, Osaka Gas formulated the "Daigas Group
Carbon Neutral Vision," which presents a roadmap forachieving carbon neutrality and sets out the long-term goalof achieving carbon neutrality by 2050, which is consistent
with the goals of the Paris Agreement. Osaka Gas has set
and published the short- and medium-term goals forachieving the long-term goal, which are "avoided CO2
emissions in the entire society of 7 million tonnes /renewable energy diffusion contribution of 4 million kW by2026," "introduction of e-methane of 1% by 2030 / avoided
CO2 emissions in the entire society of 10 million tonnes / CO2
emission reduction in the domestic supply chain (scope 1, 2,
and 3) by 5 million tonnes compared to FY2018.3 /renewable energy diffusion contribution of 5 million kW /renewable energy ratio of domestic power projects
approximately 50%,” etc.

Interviews withstakeholders

Page 81 of 88

Osaka Gas has set a reduction of 5 million tonnes in
FY2031.3 (compared to FY2018.3) as an SPT, which isconsistent with the gas and power roadmaps of the Japan
Gas Association and the Ministry of Economy, Trade andIndustry. On the other hand, promoting the energy shift tonatural gas in the transition period, such as fuel conversion,
will contribute to reducing CO2 emissions in the entire
society, but will also increase Osaka Gas' CO2 emissions. In
this context, DNV has confirmed that this SPT is anambitious and meaningful that aims to reduce total CO2
emissions by promoting energy efficiency and introducing emethane.

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
Osaka Gas plans to make carbon neutral investments ofaround 220 billion yen in the cumulative total for the period
FY2025.3-2031.3, and in the three-year period FY2025.32027.3, it plans to make investments of approximately 100
billion yen in carbon neutrality areas (e.g., conversion to
renewable energy sources in domestic power business, emethane) to build future earnings and approximately 460
billion yen in priority growth areas, as well as has presented
the CO2 reduction roadmap and specific initiatives.
Therefore, DNV judged that the SPT is realistic and feasible,
and is in line with Osaka Gas’ sustainability/transition
strategies.

2b

Target Setting- Meaningful

SPTs should represent a material
improvement in the respective KPIs and are
required to be beyond a “Business as Usual”
trajectory; where possible be compared to abenchmark or an external reference and be
determined on a pre-defined timeline, set
before (or concurrently with) the issuance ofthe bond.

Confirmed documents- Framework- Daigas Group
Medium-Term
Management Plan
2026
- Daigas Group Carbon
Neutral Vision- Carbon Neutral
Challenge 2050 Action
Plan of the Japan Gas
Association- Gas and Electricity
Sector Roadmap ofMinistry of Economy,
Trade and Industry

DNV has confirmed that this SPT shows a significant
improvement in KPIs and is beyond the trajectory of"business as usual."
In contrast to the Ministry of Economy, Trade and Industry's
Transition Roadmap in Gas Sector, which depicts a pathway
where the gas industry will see an increase in the demand
for natural gas as a result of society-wide fuel conversion,
which will increase gas companies' CO2 emissions (Scope 3)
in the short term, Osaka Gas has set a target to reduce theabsolute value of the domestic supply chain CO2 emissions(Scope 1, 2, and 3) for 5 million tonnes as of 2030, and thedecarbonization awaiting the establishment of innovativetechnologies would be difficult to achieve with conventional
approaches, due to the uncertainty of technologicalPage 82 of 88

Ref.

Criteria

Requirements

Work Undertaken--

Daigas Group
Integrated Report
2023
Daigas Group ESG
data

DNV Findings
establishment and the significant costs that would beincurred in the transition to decarbonization even if it wereachieved. Therefore, DNV has concluded that it is ambitious.
DNV has also confirmed that the SPT level is broadly in linewith the linear interpolation level from the baseline FY2018.3

Interviews withstakeholders

results to 2050 carbon neutrality, taking into account theequivalent increase in domestic CO2 emissions of the Daigas
Group due to these efforts to avoid emissions.

2cTarget Setting– benchmarks

The target setting exercise should be basedon a combination of benchmarking
approaches:
1. The issuer’s own performance overtime for which a minimum of 3 years,
where feasible, of measurement trackrecord on the selected KPI(s) is
recommended and when possible
forward-looking guidance on the KPI.
2. The SPTs relative positioning versus
the issuer’s peers where comparable
or available, or versus industry or
sector standards.
3. Systematic reference to science-based
scenarios, or absolute levels (e.g.,
carbon budgets) or official
country/regional/international targets
or to recognized Best-AvailableTechnologies or other proxies

Confirmed documents- Framework- Daigas Group
Medium-Term
Management Plan
2026
- Daigas Group Carbon
Neutral Vision- Carbon Neutral
Challenge 2050 Action
Plan of the Japan Gas
Association- Gas and Electricity
Sector Roadmap ofMinistry of Economy,
Trade and Industry- Daigas Group
Integrated Report2023- Daigas Group ESG
data

Page 83 of 88

DNV has confirmed that the process for setting SPTs isbased on an appropriate combination of benchmarking
approaches.
・

Osaka Gas has disclosed the base year and previous
years' results for the selected KPIs on its website etc.,
and targets are set until 2030 based on these results.

・Ahead of its competitors, Osaka Gas has set reduction
targets for absolute value of domestic CO2 emissions,
including Scope 3.

Ref.

Criteria

Requirements

Work Undertaken

DNV FindingsInterviews withstakeholders
2dTarget setting– disclosures

Disclosures on target setting should makeclear reference to:
1.

The timelines of target achievement,
the trigger event(s), and thefrequency of SPTs

2.

Where relevant, the verified baseline
or reference point selected for
improvement of KPIs as well as therationale for that baseline or reference
point to be used

3.

Where relevant, in what situations
recalculations or pro-forma
adjustments of baselines will take
place

4.

Where possible and taking into
account competition andconfidentiality considerations, how theborrowers intend to reach such SPTs

Confirmed documents- Framework- Daigas Group
Medium-Term
Management Plan
2026
- Daigas Group Carbon
Neutral Vision- Carbon Neutral
Challenge 2050 Action
Plan of the Japan Gas
Association- Gas and Electricity
Sector Roadmap ofMinistry of Economy,
Trade and Industry- Daigas Group
Integrated Report2023- Daigas Group ESG
data
Interviews withstakeholders

Page 84 of 88

DNV has confirmed that the SPT target setting is properly
disclosed.
・Through the Framework and the "Roadmap toAchieving Carbon Neutrality," it is explained how CO2
emission reductions will be achieved.

DNV has confirmed that Osaka Gas decided not to set annual
SPTs, but to promote medium- and long-term initiatives toachieve the FY2031.3 target as CO2 emissions (Scope 1, 2,
and 3) may fluctuate from year to year due to the significant
influence of domestic energy demand and the status ofindividual projects, and that progress towards this target will
be verified annually by an external organization. Similarly,
DNV has confirmed that milestone SPTs may be set
separately from these SPTs, taking into account thefinancing period etc., and that in such cases they will be
disclosed in the bond disclosure documents, the loan
agreement documents, etc. each time of the implementationof finance.
Based on the respective documents provided by Osaka Gas,
DNV has concluded that the SPTs were realistic, the plan
was feasible, and the SPT targets outlined in the Framework
were likely to be met.

SLBP/SLLP-3 Finance Characteristics
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

3a

Bond
Characteristi
cs – SPT
financial/str
ucturalimpactThe SLB will need to include a financial
and/or structural impact involving trigger
event(s) based on whether the KPI(s) reachthe predefined SPT(s).

Confirmed documents- Framework

DNV has confirmed that the Framework includes trigger
events and complies with the requirements described in the
SLBP.

Interviews withstakeholders

DNV has confirmed that transition finance (bond or loan)
implemented under the Framework will have financial andstructural characteristics that vary according to theachievement status of SPTs. DNV has also confirmed thatthe trigger events with specific SPT measurement timing andperformance requirements each time of the financeimplementation and the extent of their impact have internal
procedures to link target achievement and financial
incentives or penalties, and that details, including conditions,will be disclosed in the bond disclosure documents, the loan
agreement documents, etc.

Bond
Characteristi
cs – Fallback
mechanism

Any fallback mechanisms in case the SPTs
cannot be calculated or observed in asatisfactory manner should be explained.

Confirmed documents- Framework

DNV has confirmed that if Osaka Gas is unable to confirm
the achievement status of the SPT on the judgment date,the SPT will be treated as not achieved.

3bIssuers may also consider including, where
needed, language in the bonddocumentation to take into consideration
potential exceptional events.

Interviews withstakeholders

If it is required to change the measurement method of KPIs,
the setting of SPTs, assumptions and scope of KPIs, etc. dueto the occurrence of circumstances that cannot be foreseenor controlled at the time of the implementation of theTransition-Linked Finance with general corporate purpose(e.g., changes in business structure due to M&A etc.,
changes in various laws, systems, and regulations in eachcountry, other extraordinary events), there is a possibility toreview the SPT figures for the Transition-Linked Finance

Page 85 of 88

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
already issued. Osaka Gas plans to disclose the details on its
website etc.

Page 86 of 88

SLBP/SLLP-4 Reporting
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

4aReportingIssuers of SLBs should publish, and keep
readily available and easily accessible:

Confirmed documents- Framework

DNV has confirmed that the necessary information will be
disclosed in a timely manner on the following details
required by the SLBP/SLLP:Interviews withstakeholders

 KPI performance against the SPT: Subject to verification by
an external body etc., and disclosed on the website etc. atleast once a year after the implementation of theTransition-Linked Finance until the final judgment date
 SPT achievement status: Subject to annual verification by
an independent third-party organization and used todetermine financial and structural characteristics

1. Up-to-date information on theperformance of the selected KPI(s),including baselines where relevant
2. A verification assurance report relative
to the SPTs outlining the performanceagainst the SPTs and the related
impact, and timing of such impact, on
the bond’s financial and/or structuralcharacteristics

When change in the SPT is required: Osaka Gas will discusswith the relevant parties, for example, the setting of an SPTwith a level of ambition equal to or higher than the existingevaluation criteria, taking into account the changes.

3. Any information enabling investors tomonitor the level of ambition of the
SPTs
This reporting should be published regularly,
at least annually, and in any case for any
date/period relevant for assessing the SPT
performance leading to a potential
adjustment of the SLB’s financial and/or
structural characteristics.

Page 87 of 88

SLBP/SLLP-5 Verification
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

5aExternal
Verification

Issuers should have its performance against
each SPT for each KPI independently verified
by a qualified external reviewer with
relevant expertise, at least once a year andfor each SPT trigger event.

Confirmed documents- Framework

DNV has confirmed that Osaka Gas intends to undergo
independent verification of the data related to the KPIs atleast once a year by a qualified external evaluation bodywith relevant expertise in SPT trigger events.

Interviews withstakeholders

Page 88 of 88