Global Situation andEconomic Outlook in 2024
～The World at a Turning Point～
January 17th, 2024

0
© 2024 Sumitomo Corporation Global Research Co. Ltd.

Contents
01

The World at a Turning Point

P. 02

02

Political and Economic Situationin Each Country/Region

P. 10

03

Macro Economic Trends

P. 21

04

Global Issues Impacting Businesses

P. 27

1
© 2024 Sumitomo Corporation Global Research Co. Ltd.

01

The World at a Turning Point

2© 2024 Sumitomo Corporation Global Research Co. Ltd.

The World at a Turning Point

Shift in Global Opinion Related to Warfare

Global criticism against Russia's military invasion remains strong, although the Western “unity” may not be as strong as it seems, raising concerns about thesustainability of the support for Ukraine. Seems like there is a gap between political and military leadership in Ukraine.
The Israel-Hamas war, after a 7-day ceasefire, faces potential escalation in the near term due to Israel's assertive measures.
Criticism is voiced against Western countries that condemn Russia‘s war while tolerating Israel’s military actions in Gaza, calling it a double standard.

February 2023
UN Resolution Approximately One Year After Russia's Invasion
October 2023
UN Resolution After the Outbreak of Israel-Hamas Conflict

February 23, 2023: Emergency Special Session of the United Nations General Assembly
Resolution calling for the complete withdrawal of Russian forces and the investigationand prosecution of serious crimes under international law.

For: 141 countries
Against: 7 countries
Abstention: 32 countries
No Vote: 13 countries

October 27, 2023: Emergency Special Session of the United Nations General Assembly
Resolution calling for a humanitarian ceasefire leading to the cessation of hostilities
in the Gaza Strip of the Palestinian Autonomous Region.

For: 121 countries Against: 14 countries
Abstention: 45 countries No Vote: 14 countries© 2024 Sumitomo Corporation Global Research Co. Ltd.

3

(Source: Compiled by Sumitomo Corporation Global Research (SCGR) using CraftMap)

The World at a Turning Point

Spread of Partnerships Counteracting the "West" China and Russia solidify their partnership, expanding influence into the Middle East, Central Asia, Africa, and South America.
 Through the expansion of BRICS and SCO, the axis of opposition to the West gradually becomes prominent.
 In August 2023, BRICS announced the addition of six new member countries; numerous nations attended the BRICS Summit.

BRICS and Shanghai Cooperation Organization (SCO) Member Countries
Member countries for both BRICS and SCO(4 countries)

BRICS member
countries

Countries participatingin the BRICS Summit (2023)

RussiaSCO member countries

Kazakhstan

SCO observers/
dialogue partners

Uzbekistan

Egypt

Iran

KyrgyzTajikistan
Pakistan China

India
UAE
Saudi Arabia
Ethiopia

Brazil※ Argentina, Iran, Saudi Arabia, UAE, Egypt, Ethiopia
are scheduled to formally join BRICS from January 2024.

Argentina

South Africa

Argentina formally withdrew
from the planned BRICS
entry in Dec. 2023..
© 2024 Sumitomo Corporation Global Research Co. Ltd.

(Source: Compiled by SCGR using CraftMap)

4

The World at a Turning Point

Reversal of Easing Tensions in the Middle East: A New Equilibrium?


Reduced U.S. involvement accelerates the pursuit of autonomous security among Middle Eastern and Gulf countries (Saudi-Iran reconciliation, normalization ofrelations between Arab countries and Israel).
The Hamas attack in October 2023 highlights that there is no regional stabilization in the Middle East without the Palestinian issue being solved.
The new power balance (albeit a partial one) among the Arab countries, Palestine, Israel, and Iran could have a significant global impact.
LebanonHezbollah

Syria
IranianRevolutionary
Guard Corps

U.S.

Efforts to mediate the normalization of
diplomatic relations between Israel and Saudi Arabia
were hindered by the Hamas attack on October 7.

10/7 Hamas
attackIsraelWest Bank

Gaza Strip

Egypt

Russia Supports an immediate ceasefire
without condemning Hamas.

the normalization ofChina Mediates
diplomatic relations between

Iran

Saudi Arabia and Iran.

Joins the Shanghai Cooperation Organization and BRICS.

イスラエル

Saudi Arabia

JordanArab League Member
Countries and Regions(Source: Compiled by SCGR using CraftMap)

5© 2024 Sumitomo Corporation Global Research Co. Ltd.

The World at a Turning PointKey Elections in 2024 Shaping a "Turning Point"

Taiwan Presidential Election (January): Favorable to the ruling party due to the failure of the opposition coalition. Will China make any move before and after theelection?
Russian Presidential Election (March): Will Putin stay in office until 2036?
European Parliament Election (June): As seen in the recent Dutch election, if the right wing were to rise, there could be a shift in sustainability-related policies.
U.S. Presidential Election (November): .If former president Trump is re-elected, significant changes in foreign policy, economic policies could be expected.

European Parliament election（6-9 Jun）

U.S. presidential andcongressional elections（5 Nov）

UK general election（Nov? Dec?）

Russian presidential election（15-17 Mar）

Ukrainian presidential election(postponed?)
Iran

Mexican presidential andcongressional elections

Venezuela（2 Jun）

Pakistan

Bangladesh

Taiwan presidential election,
Legislative Yuan election
Indian general election（13 Jan）（Apr? May?）

Indonesian presidential andcongressional elections（14 Feb）

Countries with confirmed election schedules
Countries planning to hold elections(Source: Compiled by SCGR using CraftMap)

6© 2024 Sumitomo Corporation Global Research Co. Ltd.

The World at a Turning Point

China at a Crossroads: Where is it Heading?
Facing peak out of population and economic growth and unstable economy (real estate slump, decrease in investment). Meanwhile awareness of theenvironment issues and green initiatives are growing.
Although there is a growing trend China moves toward the second quadrant (hegemonic superpower), it is seeking to improve relations with some countries.
Increase in National Power

Hegemonic Superpower

Stable and Peaceful Great Power• Rise in economic and military power.

• Rise in economic and military power.
• Maintains a market-oriented system.

• Strong aversion to Western values.
• Utilizes digital tech and AI for social
stability albeit non-democratic governance.

• Pursues a unilateral foreign policy(Taiwan, territorial issues).

Population decline, “getting old before
becomes rich.“

End of rapid economic growth.

Emphasis on the environment andgreen economy.

Changes in consumer behavior(selective attitudes).

"Middle-income trap"?



Maintenance of a market-oriented
system?

Challenges
to the Existing
International
Ordercurrent
position

Vulnerable Authoritarian Superpower• Significant economic stagnation;
frequent disturbances, forceful containmentof public dissatisfaction.
• Strong aversion to Western values.

• Emphasizes conflict avoidance andcooperation with the U.S. andneighboring countries.
Acceptanceof the Existing
International Order

Introverted Great Power• Low economic growth.
• Busy addressing domestic issues,
reluctant to engage in external friction.
• Reluctant to fulfill the responsibilities
of a great power.

• Assertive foreign policy.
Decrease in National Power© 2024 Sumitomo Corporation Global Research Co. Ltd.

• Embraces diverse values and spreadof post-modern values.

7

The World at a Turning Point

Macro-Economic Changes:
Inflation, Interest Rates, Exchange Rates are Shifting Towards a New Phase Inflation in the West is showing signs of stabilization, possibly bottoming out. Is China settling into a dis-inflationary trend?
 When will interest rates be reduced, later than initially expected? Or Continuation of plateau ?
 Due to expansive fiscal policies in Japan, long-term interest rates has been rising. A possibility of significant fluctuations in FX rates
by policy shift of the BoJ.
Inflation：

Long-term interest rates：（YoY %）

12
10
8
6
4
2
0
-2
2010

U.S.

Euro area

Japan

8

China

6
4

2012

2014

2016

2018

2020

1.5

Japanese yen
Euro（right axis）

160
140

1.4
1.3

120

1.2

100

1.1

80

1.0

60

0.9
2024

2012

2014

2016

2018

2020

2022

（%）

1.5
1.0

0

0.0
2010

2012

(Start of 2000 = 100)

180
160
140
120
100
80
60
2000

China
Japan
India

2010

2014

2016

2018

2020

(100,000
people)

India

China

2024年

14,352

14,255

1,230

2040年

16,07813,800

1,115

2060年

16,948

12,111

970

2020

2030

2022

-0.5
2024

2050

2060

Japan

2040

（Source: Compiled by SCGR from BLS, Eurostat, Ministry of Internal Affairs and Communications,Japan, National Bureau of Statistics of China, Bloomberg, United Nations Population Fund）© 2024 Sumitomo Corporation Global Research Co. Ltd.

2.0

0.5

Population：

180

U.S.
Germany
Italy
Japan（right axis）

2
-2

2022

Foreign exchange ：

2010

（%）

8

The World at a Turning Point

Decarbonization in Political and Economic Turbulence Movements toward decarbonization are adjusting the speed based on the macroeconomic environment and political developments.
 On the other hand, investments are accelerating with the support of rules and policies. Discussions about biodiversity are graduallyintensifying, following decarbonization.
Changes in the Surrounding Environment
Upcoming elections in 2024
Changes in Economic Conditions
Emerging Geopolitical Risks
・EU: European Parliament election (June2024)

・U.S.: Presidential election (November 2024)

Slowing Factors of the Decarbonization•

High energy prices

Increased burden••High interest rates
China's economic
slowdown

on industry

UK: Postponement of the ban on the saleof internal combustion engine vehicles•

EU: Leaving the way of the use ofsynthetic fuels
Global: Reassessing the necessity offossil fuel use and the uncertainty of lowcarbon fuels•

Reconsideration in the Financial Sector•

Stagnation of ESG funds•

Anti-ESG movements•

Moves by major insurers to withdraw
from NZIA** Net Zero Insurance Alliance© 2024 Sumitomo Corporation Global Research Co. Ltd.

and consumers

Steady Progress Toward Decarbonization

Unexpected Changes Implementation of various technologies

Movement conscious of existing
infrastructure•・ Supply chain risks

Changes in Expectations
for Technology and the
Implementation
・Hydrogen: Concerns about
the uncertainty of future
demand・Wind: Reconsideration due
to rising interest rates andcosts

Dilution of investment
due to industrial
policy competition
・ Regulation (EU) vs.
preferential policies(U.S. IRA)

→Shiftinginvestments U.S.

→Responses in EU

・Solar power generation: Accelerating implementation
globally・EVs: Expanding sales in Europe, the U.S., and China
・Heat pumps: Increasing production projects in Europe
・Nuclear power: Movement of utilization

Formation and Practice of Rules
・ICAO: Net-zero by 2050 (2022) SAF
・IMO: Net-zero by 2050 (2023) NH3
・Steel, hydrogen: Discussions on green definitions

Initiatives Following Decarbonization
Active discussions, especially in “E” and “S“・Spreading concept of Nature-Positive
・Final TNFD recommendations (2023)
・Commencement of sustainability disclosure

9

02

Political and Economic Situationin Each Country/Region10© 2024 Sumitomo Corporation Global Research Co. Ltd.

Political and Economic Situation in Each Country/Region

United StatesAmid escalating partisan conflicts and internal strife within the Republican Party, the country enters another election season in 2024.
Trump's reelection could lead to significant policy changes.
Despite wage increases due to labor shortages, stable prices are elusive, and interest rates remain high. "Bidenomics" is unpopular among voters.
Confronted with simultaneous crises worldwide, allied and partner nations are worried about the U.S.'s inward turn.
Japan is a crucial partner to implement the Indo-Pacific strategy. Well-thought-out policies against China are expected to continue.

China

IndoPacificRussiaUkraineEuropeEmphasizing both deterrence anddialogue, a bipartisan cautious
stance against the Chinese
Communist Party (CCP) is
observed.
・Efforts are directed towards enhancing
cooperation within the coalition of thewilling, such as the Quad (U.S., Japan,
Australia, and India).
・Risks include U.S. unilateralism and acondescending approach hinderingcollaboration.

The fate of additional funding to
Ukraine remains uncertain due toopposition from MAGA
Republicans. Stalemate in theconflict, raising questions about
peace negotiations with Ukraine.
Commitment to European
security, including support for
Ukraine. Trade disputes,
particularly regarding steel andaluminum, cause tensions.

Politics
Escalation of partisan conflicts and the emergence of a deadlock.
Internal strife within the Republican-controlled House between
ultra-conservatives and moderates.
Diminished expectations for legislative achievements in a divided
Congress, with potential implications for foreign military assistance.
Risks of a “Divided Government” with the inaugurationof the 2025 administration.

EconomyDissatisfaction among voters with economic policy "Bidenomics."

Struggling to respond amid
divisions between Israel
supporters and those concerned
about the Gaza humanitariancrisis.

IsraelHamas

Diplomacy mediating between
Arab countries and Israel
temporarily halts. Heightened
vigilance against Iran.

MiddleEast

Regarding the question of supporting
Israel, there is a division among parties
and age groups, influencing domestic
politics in the United States.

While a substantial hike in policy interest rates is practically halted,
inflation rates remain high due to labor shortages.

11© 2024 Sumitomo Corporation Global Research Co. Ltd.

Political and Economic Situation in Each Country/Region

EuropeThe right wing’s gain in the seats in the June elections could transpire a major impact on the direction and speed of policy making process
Rifts surfaced in support of Ukraine, stance over the Middle East, etc., leading to delays in action
Even with close political relations with the U.S., the economic front, such as a rift over industrial policy remains an issue . Economy continues to experience low
growth, and the gap in energy prices between the U.S. and Europe might cause potential competitiveness issues.
Complex relationship with China would persist, given the divergent agendas amongst European countries, making consorted efforts hard to achieve

U.S.

Unity in support of Ukraine
and in the Middle East conflict
Rift over critical minerals
agreement and IRA

Politics
Can the EU be a global rule-maker?.
Climate change, IT/AI, semiconductors, competition rules, etc

China

RussiaUkraineEU’s Global Gateway tocounteract One Belt One
Road
Calls for a level playing fieldand EU firms’ market accessin China

Russia’s fixed assets for
Ukraine’s reconstruction?
Strengthening of NATO’s
Eastern flank, Baltic Sea
defense© 2024 Sumitomo Corporation Global Research Co. Ltd.

Whilst the EU aiming at being a geopolitical leader, the more it
seeks, the further away from unity it gets.
Israeli-Palestinian issue, military aids to Ukraine, Immigration
policy, fiscal discipline, EU accession negotiations, EU reforms

Will the change of government in the U.K. improve relations
with the EU?

EconomyEasing inflation and timing of interest rate cuts
Eurozone’s north-south divides
North-South gap in fiscal discipline reform
Whilst losing Russian energy, CBAM and information disclosure
are gradually being implemented in earnest.
Impact on competitivenessDifficulties in establishing common
views due to historical background
Inability of the UK to exert politicalinfluence

IsraelHamas

Governance deficiencies
stemming from Europe’s colonial
rule in the past

AfricaConcern over Wagner’s influence

A series of coups in West Africa in recent years
has posed security and immigration issues toEurope.
Recent coups in the southern Sahara (2019-2023)

Guinea, Mali, Burkina Faso, Niger, andChad are all former French colonies
Mali
Aug. 2020
May 2021
GuineaSep. 2021

Niger

July 2023

Burkina
Faso
Jan. 2022
Sep. 2022

Chad
Apr. 2021

Sudan
Apr. 2019
Oct. 2021

12（Source: Compiled by SCGR using CraftMap from Le Mond and WashingtonPost）

Political and Economic Situation in Each Country/Region

China




What brought China’s “smile diplomacy" since the autumn of 2023 ? (Foreign policy shift? For foreign investment? For making other countries depend on Chinese
economy?) Or to attract Taiwan?
Increased uncertainty in policy-making decisions: mysterious downfall of high-ranking officials. Multiple presumptions about Xi’s power within the PLA.
Emphasis on security (public order) remains a priority. Economic downturn, real estate slump and local government debt pose the serious challenges . Meanwhile,
decarbonization efforts are strengthened.
Balance of non-financial sector debt

U.S.

EuropeJapan

RussiaCollision on Taiwan issues.
Consent of dialogue to prevent theconflict (2023 Nov).
Frictions over the advanced
technologies.

Little compromise on humanrights and security.
Visits and discussions are
increasing.
Opposition to investigations into
EV subsidies.
Lukewarm effort to stabilize
relations.
Dissatisfaction with security
policies.
Criticism of the Fukushima
treated water release.
Maintains good relations.
Reluctant to provide lethal
weapons and "Power of Siberia
2.".
Increasing fossil fuels trade© 2024 Sumitomo Corporation Global Research Co. Ltd.

Politics
Strengthening social surveillance: Anti-Espionage Law.
Disappearance of foreign minister and defense minister→ raises concerns about internal governance of the CPP.
The pressure on Taiwan for unification and the possibility of Taiwan
blockade may increase. (depends on the result of the presidential
election.)

Economy

400
350
300
250
200
150
100
50
0

（RMB, trillion）

Corporate
Households
Government fundLocal government financial vehicles(LGFV)
Local government
Central government

2014

Increasing commitment to decarbonization: expanding renewableenergy capacity, suppressing petroleum refining, electrifying
transportation, and recycling resources.
Challenging the world's top position in science and technology(EV exports, general-purpose semiconductor production,
nuclear fusion, solid-state batteries, and autonomous driving).
Despite appeals for openness to foreign investment andinvitation of foreign investment , the influence of theAnti-Espionage Law reduces foreign companies' investment interest,
while strengthening dependence on China in mineral resources
etc.

2018

2020

2022

Estimated amounts by IMF (Source: Compiled by SCGR from IMF）

Economic downturn, real estate and local government debt issues.

Following the issuance of 1 trillion yuan in government bonds, the next
policy move requires close attention.

2016

China Automobile Export50※No classification before Feb. 2021

（10,000 unit）

40

NEV

Others

30
20
10
0

2020

2021

2022

2023
13

（Source: Compiled by SCGR from CAAM）

Political and Economic Situation in Each Country/Region

Russia

If reelected in March 2024, Putin's term extends until 2030. Under the current constitution, potential extension to 2036.
Conscious of the time advantage in the Ukraine war. Expecting Western support stagnation, Trump's return, and Zelensky's weakening power.
Deepening trade relations with emerging nations via the Eurasian Economic Union (EEU). Expanding FTAs while adopting a strict stance towards unfriendly
countries.

UkraineAiming to overthrow the Zelensky
government, engaging in dirty
tricks and election interference.

Focusing on undermining theinternational influence of the U.S.

U.S.

Actively supporting Trump's
reelection.
Retaliatory measures against
economic sanctions.

E.U.

Maintaining relations with
Hungary and Serbia, aiming to
exploit European divisions.

China
North
Korea

Strengthening cooperation ineconomics, trade, and themilitary.

Procuring ammunition from North Korea.

© 2024 Sumitomo Corporation Global Research Co. Ltd.

Politics
Putin seeks reelection, advancing information control,
aiming for a more authoritarian regime.
Concerns about power struggles with the aging
president (71 years old).
Is there a successor nominee?
Cleverly suppressing opposition, trying tohide rising war casualties
Ammunition obtained from Iran, North Korea, etc.

EconomyApproaching as a bypass
import route.
Maintaining a certain distancefrom Russia, implementing balanced
diplomacy with the West.
Hoping for support votes at the UN.
Sustaining influence through arms, grain,
and energy exports.

Ready for retaliation by nationalizing Western companies’
assets in Russia, if Western countries seize
Russia's frozen assets abroad.

Global
South

Planning to expand the FTA network through the EEU.

EEU

Serbiaロシア

Military spending and domestic demand drive
the economy, but growth remains low(predicted +1.1% in 2024, IMF October 2023).
Severe labor shortages during wartime, negatively affecting
the economy. Increased dependence on China is likely.

Central
Asia

China

Iran
Egypt
EEU

India

(Russia, Kazakhstan, Kyrgiz, Belarus, Armenia）

VietnamIndonesia

FTA Signed

FTA
FTA Under consideration Under negotiation

14(Source: Compiled by SCGR using CraftMap)

Political and Economic Situation in Each Country/Region

Japan




GX policies making progress, but policies such as fiscal expansion for price stability, deflation countermeasures, and financial tightening contradict one another.
Significant decline in cabinet approval ratings (23% as of Dec 2023).
Can a positive cycle be achieved by reversing real wage decline? Will the monetary policy change?
Enhancing relations with Indo-Pacific countries through tailored GX support and infrastructure development assistance in a realistic manner.
Aiming to strengthen deterrence through strengthening alliance with the U.S.
Further strengthening alliancerelationships.

U.S.

Deepening cooperation for the
securement of strategic materials
and technology.
At the summit meeting, leadersagreed to maintain dialogue channels.
No prospect for resolving pending
issues such as economic security,
detained Japanese citizens, and theban on Japanese seafood exports.

China

Aiming for FOIP realization andworking towards the achievementof GX along the country-specificroadmap at AZEC, building alayered cooperative relationshipwith ASEAN, etc.

IndoPacific100%

Cabinet Approval Rating
Dec 2023

Disapprove

50%

58%

neitherApprove

0%
2021

23%

2022

2023

（Source: Compiled by SCGR from Japan Broadcasting Corporation）

Real Wage and Household Consumption

Politics
Implementing policy responses such as tax cuts andsupplementary budgets. No recovery in approval ratings.
Losing the opportunity for a rebound due to ministerial
resignations amid scandals.
Signs of change in the framework of the LDP coalition

Economy320

Household Consumption（yoy, %）

5.0

300

2.5

280

0.0

260

-2.5

240

2019

2020

2021

2022

-5.0

2023

The economic recovery from the COVID-19 pandemic is reaching astandstill, with the impact of inflation affecting personal consumption
and capital investment.

（Source: Compiled by SCGR from Cabinet Office, Health, Labour and Welfare Ministry）

Focus on the spring labor negotiations in 2024 amid
continued real wage declines.

120 （Start of 2020＝100）

Moderate real economic growth, with the effects of a weak yen
limited to certain industries.

110

In line with the rising trend in prices, financial policy is also changing.
Pay attention to the shift away from negative interest rates andits impact.

100

Changing financial policies in line with GX and economic security.
Accelerating industrial policies and mechanism creation.
© 2024 Sumitomo Corporation Global Research Co. Ltd.

Real Wage（annualized, trillion yen）

Indexes of Business Conditions
Leading Index
Coincident Index

115
105
2021

2022

2023

（Source: Compiled by SCGR from Cabinet Office, Government of Japan）

15

Political and Economic Situation in Each Country/Region

Asia and OceaniaThe economy is robust, driving global growth. However, exports declined due to the slowdown in the world economy (particularly in China), leading to a slowdown in momentum.
Taking advantage of the trend of investment and supply chain diversification to reduce dependence on China, Asia and Oceania countries pursue industrial enhancement andEX through EV production, semiconductor manufacturing and critical minerals strategy.
On the political front, Myanmar’s domestic politics and Indonesia’s presidential election in February 2024 require close monitoring.
Japan is leveraging its unique ties with ASEAN, which neither the U.S. nor China can substitute, to develop EX (e.g., AZEC), supply chain and security assistance.

U.S.

Collaboration on supply chain
enhancement (reducing
dependence on China), IPEF,
semiconductor production,and infrastructuredevelopment.

China

The close economic ties remainunchanged. Differences in
distance among countries. The
Philippines actively countervailing
China in the South China Sea
dispute.

20

Real Economic Growth of Southeast Asian
Indonesia
Countries(% y/y)Malaysia
ThailandPhilippines
Vietnam15
10
5

In emerging Asian economies, inflation is stable (2.6% in2023) and high-level growth continues (5.2% in 2023)
compared with other regions, though momentum slowing due
to stagnant exports (4.8% in 2024) *All figures are IMF forecasts.
Utilizing the trend of reducing dependence on China,
benefiting from both G7 and China in practical terms.
Agreement on supply chain strengthening for criticalminerals (Indonesia, Malaysia, India, Australia) andsemiconductors (Thailand, Malaysia, Vietnam, Philippines,
India) through IPEF. EV production network establishment
is pusued throughout ASEAN.

Politics

0-5-10

Economy

2021

2022

2023

(Source: Complied by SCGR from country statistics)© 2024 Sumitomo Corporation Global Research Co. Ltd.

New governments in Thailand, Cambodia, and NZ.
Indonesia's February elections and the impact of relocationof the capital need attention.
Myanmar postponed elections. Democratic and ethnic
minority armed groups intensifying resistance.

Many countries perceive Japan asa more reliable partner than the
U.S. and China.
Support for decarbonization in
AZEC and other initiatives, alongwith assistance in security-related
capacity building

Japan

ASEAN demands Israel to halt
attacks against Gaza.
Indonesia, Malaysia, and Brunei
express support for Palestine.
India, while expressing support
for Israel, maintains a balanced
approach.

Many countries in ASEAN andSouth Asia maintain relations.
Myanmar is strengthening ties.

MiddleEast

Russia16

Political and Economic Situation in Each Country/Region

Africa

5,000

2022

2020

2018

2016

2014

2012

2010

2008

2006

2004

Outstanding Government Debts
South Africa
100

Ethiopia

Ghana

Nigeria（% of GDP）

75
50
25
0

2026

Economic dependence on primary products,
with the possibility of growing disparities within the region
depending on demand.

（ Source: Compiled by SCGR from Boston University Global Development
Policy Center. 2023. Chinese Loans to Africa Database）

2024

If China's real GDP growth rate drops by 1 percentage point,
Sub-Saharan Africa's overall GDP growth rate is expected to decreaseby about 0.25 percentage points, with resource-exporting countries
facing a risk of over 0.5 percentage points reduction (IMF).

994
2002

0

2022

Reduced investment and financing from China for
Sub-Saharan Africa pose a threat to thecontinent's economic growth.

Financial tightening poses a high hurdle for securing funds
to address infrastructure shortages.
© 2024 Sumitomo Corporation Global Research Co. Ltd.

10,0002020

IsraelHamas

Nearly all African countries
support the UN resolution
calling for a "humanitarianceasefire," with only a minority
clearly supporting Israel.

15,0002018

Decrease in loans from China

20,000Fractures caused by imposing values from former colonial
powers lead to successive coups.

Economy28,45425,0002016

Requests debt deferrals.

Struggling with the gap between non-border diversity and thepolitical-economic management required as a nation.

（Million dollars）

2014

China

Historical background incollaborating the anti-colonial
struggle creates expectations
for deepening relations.

Politics

30,0002000

U.S.
EuropeCalls for cooperation beyond
traditional development
assistance, seeking
collaboration on climatechange, and investment
promotion in the digital field.

Chinese Committed Loans to Afica

2012

High levels of sovereign debt and the instability after the successive coups pose a risk.
Continues to attract attention as a significant supplier of critical minerals, and also as a new market.
Struggles with infrastructure deficiencies, hindering value-added production in Africa,and persistent investment needs (relying on overseas funds) are a concern.

2010





(Source: Compiled by SCGR from IMF)

17

Political and Economic Situation in Each Country/Region

Central and South AmericaIn Mexico and Brazil, inflation is under control due to early financial tightening. A shift towards monetary easing is expected.
The new administration in Argentina may affect its relations vis-à-vis its neighbors and the Mercosur.
GDP Growth and Consumer Prices
The near-shoring/friend-shoring of supply chains and low water level of the Panama Canal may
in Latin America and the Caribbean
affect global trade.
（%）

U.S.
EuropeGenerally a mixed relationshipwith the U.S.
Mexico benefits from U.S.
efforts to build resilient supply
chains.
The EU-Mercosur FTA
negotiations remain opaque.

China

Participating in the Belt andRoad Initiative.
Expanding cooperation in
space development.
The new Argentine
government withdrew from theplanned BRICS entry.

IsraelHamas

Argentina clearly supports
Israel and condemns Hamas.
Most other countries in Latin
America support the UN
resolution calling for a"humanitarian ceasefire."© 2024 Sumitomo Corporation Global Research Co. Ltd.

Politics
Brazil's negotiating skills are put to the test as
it assumes the role of G20 chair in 2024.
The direction of Argentina's new government is unclear,facing a challenging path toward economic stabilization.
Depending on how the Venezuelan presidential election
is carried out, the relations vis-à-vis U.S. might once again
strain further.
Second national referendum in Chile on constitutional
reform resulted in maintaining the status quo.

EconomyLeft-leaning government in Colombia strengthens
economic cooperation with Venezuela.
Severe drought in the Panama Canal, with the risk oflogistics stagnation between the U.S. East Coast, Asia,
and South America due to passage restrictions.
The trend of greening, emphasized by countries
like Brazil, should be closely watched.

8
6
4
2
0
-2
-4
-6
-8

Real GDP Growth Rate

Inflation Rate2010 2012 2014 2016 2018 2020 2022 2024

16
14
12
10
8
6
4
2
0

（Source: Compiled by SCGR from IMF）

（transits per month）
1,400
1,200

Panama Canal Traffic Statistics

Reservation per day:20 vessels (Jan. 2024)
18 vessels (Feb. 2024)

1,000
800
600

2010 2012 2014 2016 2018 2020 2022 2024
（Source: Compiled by SCGR from Panama Canal Authority statistics）

18

Political and Economic Situation in Each Country/Region

Focus Country: IndiaA member of SCO, BRICS, QUAD, IPEF, and FOIP, holding the key to the future world order.
With the world's largest and expanding population, economy is growing steadily. FDI is also consistently increasing. Decarbonization is an important agenda.
Demonstrating leadership in the Global South, India's international presence is growing as it strengthens ties with the U.S. and the Middle East, while its uniqueself-centered approach is outstanding.
Reform progress is expected to continue under the Modi administration.

U.S.

China

MiddleEast

Collaboration in areas suchas semiconductors,
essential minerals,
technology and weapon
production.
Confrontation in regional
influence, border issues andthe digital field.
Interactions in SCO andBRICS exist, but tension
persists.
Strengthening relations with
Israel and the UAE.
Balancing support for Israel
and good relations with
Muslim countries.

2024 Lower House Elections (April-May) toward Modi’s 3rd Term

Prioritizing domestic
interests in ban on rice
exports.

Victory of ruling coalition and reappointment of PM Modi expected
due to Modi’s popularity despite the formation of an opposition
coalition.

Maintaining good
relations.

The Modi government will have been in power for 15 years.
Reforms that have been stagnant in recent years expected toproceed. Continue to promote manufacturing, decarbonization and
EV. Decarbonization initiatives seen as representing the interestsof the Global South.

Concerns about its uniquely outstanding self-centeredapproach, Hindu nationalism, and a retreat from liberal
democracy.
Economic Development
World's largest population (1.43 billion).
Population bonus period expected to continue until
around 2050 (expectations as the "next China").

Despite domestic industry protection, FDI continues to increase(including new sectors like mobile phones and semiconductors).
Improving human capital and creating employment remains major
challenges.
© 2024 Sumitomo Corporation Global Research Co. Ltd.

Demonstrating leadership in
G20 summit and other fora.

Oil imports continue,
while weapon imports are
declining.

GlobalSouth

RussiaIndia: Econ Growth and Inflation

15
12
9
6
3
0

India Real Econ Growth Rate（％ y/y）

13.1
4.0
2022

CPI Increase Rate（％ y/y）

6.2 4.5 6.1 7.8 7.6
2023

10
8
6
4
2
0

(Source: Compiled by SCGR from the Central Statistics Office of India)

19

Political and Economic Situation in Each Country/Region

Focus Country: TurkeyGeographically and in terms of the President's diplomatic ambitions, Turkey has an increasing presence as a key player in the world's changes.
After the President's re-election, Turkey’s monetary policy is shifting toward normalization. However, inflation and currency depreciation continue.
Deliberations in the Turkish parliament regarding ratification of the Sweden's NATO membership are stalled (conditional on U.S. approval of F-16 sales to Turkey).
Requesting the sale of F-16
fighter jets.

U.S.

Seeking the extradition of thealleged mastermind behind theattempted coup.
Criticizing human rights issues.

Stalled deliberations on
Sweden's NATO membership.

EuropeAspiring to EU membership andvisa liberalization.
Aiming to become a gas export
hub for Europe.

RussiaUkraineMediation between Russia andUkraineNot participating in sanctions
against Russia.
Providing drones to Ukraine.
Cooperation under the Belt andRoad Initiative.

China

Expressing interest in joining
SCO and BRICS+.
Increasing investments and loans

Politics
President Erdogan re-elected in May 2023 (5-year term).
Attention on whether the ruling AKP can regain the mayor’s
posts in major cities in the local elections in March 2024.

EconomyAfter the new administration took office, the new economic
team has shifted to orthodox monetary policy, by reversing the
low-interest-rate policy and significantly raising an interest rate.

Improving relations with Saudi
Arabia and UAE.
Maintaining strong ties with
Qatar.

countries

Turkey: Interest Rates and Consumer Price Index（%）

One-week repo interest rate
Consumer Price Index (y/y) (right axis)

（%）

100

40

80

30

60

20

40

10

20

0

2021/9© 2024 Sumitomo Corporation Global Research Co. Ltd.

Arab

Military attacks on Syria's
Kurds.

50

Inflation and currency depreciation persist, but gradualimprovement is expected with the policy shift.

IsraelHamas

Emphasizing support for
Hamas and strongly
condemning Israel.

2022/32022/92023/320
2023/90(Source: Compiled by SCGR from the CBRT website)

03

Macroeconomic Trends

21© 2024 Sumitomo Corporation Global Research Co. Ltd.

Macroeconomic Trends

Trends in Low Growth and Increasing Emphasis on Local Production and Consumption
 Low growth becomes the baseline.
 While the confusion in the global supply chain is subsiding, is the emphasis shifting to local production and consumption, leading to theslowdown in trade and investment—a phenomenon dubbed "Globalization 2.0"?
IMF World Economic Outlook (October 2023)※()2012-19 average

World
Advanced economies
Emerging market
Europe（EU）
Euro area
ASEAN-5

Asia

EuropeAmericasMiddle East
Africa

(3.4)
(1.9)
(4.6)
(1.6)
(1.3)
(4.9)
Japan
China
South Korea
TaiwanAustralia
ThailandIndonesia
Malaysia
VietnamIndia
Germany
RussiaU.K.
U.S.
MexicoBrazilSaudi Arabia
UAE
NigeriaSouth Africa（YoY %）

2022

2023

2024

2025

2026

3.5
2.6
4.1
3.6
3.3
5.5
1.0
3.0
2.6
2.4
3.7
2.6
5.3
8.7
8.0
7.2
1.8
-2.1
4.1
2.1
3.9
2.9
8.7
7.9
3.3
1.9

3.0
1.5
4.0
0.7
0.7
4.2
2.0
5.0
1.4
0.8
1.8
2.7
5.0
4.0
4.7
6.3
-0.5
2.2
0.5
2.1
3.2
3.1
0.8
3.4
2.9
0.9

2.9
1.4
4.0
1.5
1.2
4.5
1.0
4.2
2.2
3.0
1.2
3.2
5.0
4.3
5.8
6.3
0.9
1.1
0.6
1.5
2.1
1.5
4.0
4.0
3.1
1.8

3.2
1.8
4.1
2.1
1.8
4.5
0.7
4.1
2.3
2.8
2.0
3.1
5.0
4.4
6.9
6.3
2.0
1.0
2.0
1.8
1.5
1.9
4.2
4.2
3.1
1.6

3.2
1.9
4.1
2.0
1.7
4.6
0.5
4.1
2.2
2.6
2.2
3.0
5.0
4.4
6.8
6.3
1.9
1.0
2.1
2.1
1.8
1.9
3.3
4.3
3.1
1.4

© 2024 Sumitomo Corporation Global Research Co. Ltd.

World Production and Trade
15 （YoY %）Gross domestic product, constant prices

Volume of imports of goods

10
5
0
-5
-10
-15

1990

1995

2000

2005

2010

2015

2020

2025

Supply Chains and Prices
10
8
6
4
2
0
-2
-4

（%）

2016

Global Supply Chain Pressure Index

2017

2018

2019

OECD Major 7 CPI Total

2020

2021

2022

China CPI

2023

（Source: Compiled by SCGR from IMF, FRB, OECD and National Bureau of Statistics of China）

22

Macroeconomic Trends

Significant Changes in Key Countries
 China: Direct investment within the country has sharply decreased in the wake of the reconsideration of supply chains, contributing to thestagnation of private fixed asset investment.
 Germany: Pulled down by high energy costs and the rise of Chinese-made electric vehicles, Germany's economy is witnessing a slowdown
in manufacturing.
 United States: With Mexico replacing China as the largest trading partner, there is a possibility of further changes in the supply chain fromthe perspective of economic security.
Mexico Surpasses China as the United States’
Sharp Decline in Direct Investment in China
Sluggishness in German Manufacturing
Largest Trading Partner
Mining and quarrying; manufacturing; electricity, gas,steam and air conditioning supply
Manufacture of chemicals and chemical products

90

50
40

80

30

70

© 2024 Sumitomo Corporation Global Research Co. Ltd.

（Source: Compiled by SCGR from Eurostat）

2023

0
2023

50

2022

10
2021

60
2020

（Source: Compiled by SCGR from IMF）

20

2019

2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023

20

2022

40

0

60

2021

60

100

2020

80

Mexico

70

2019

100

80

China

2018

110

Manufacture of motor vehicles, trailers and semi-trailers（Start of 2015＝100）

2017（billion dollars）

2018

120

（billion dollars）

2016

Direct investment, liabilities
Quarterly
moving(Direct
average
4 区間移動平均…

Trade in Goods with China & Mexico

2015

China's Inward Direct Investment(Source: Compiled by SCGR from The U.S. Census Bureau）

23

Macroeconomic Trends

Turbulent Bond Market, ‘Maginificent Seven’ Stocks Hype
 Concerns arise in the bond market due to the Federal Reserve's balance sheet reduction and increased redemptions, impacting supply
and demand.
 Bonds look undervalued, but interest rates may remain elevated as inflation risk persists due to factors like labor supply shortages etc.
 Investors prefer artificial intelligence (AI)-related names to EV-related ones, and large-cap stocks to small-mid ones. ‘Magnificent Seven’ –the seven tech firms such as Nvidia, Apple, and Microsoft stand out.
Expanding Government Debt (United States)
35

iShares 7-10 Year Treasury Bond ETF Class USD INC
iShares 10-20 Year Treasury Bond ETF Class USD INC
iShares 20+ Year Treasury Bond ETF Class USD INC（trillion dollars）

Non-marketableFederal Financing Bank
Floating Rate Note
Treasury inflation-protected securities
Bonds
Notes
Bills

30
25
20
15
10

180

2011

2016

2021

U.S. Equity Market Capitalization（trillion dollars）

160

3.0

150

Russell2000

4.0
3.5

Apple

2.5

140
130

2.0

120

1.5

Microsoft
Tesla

1.0

100

2006

AI Boom

170

110

5
0

Rising Interest Rates = Falling Bond Prices

90

0.5

80
2020

0.0

2021

2022

2023

2024

NVIDIA
2021

2022

2023

2024

(Source: Compiled by SCGR from FRB and Bloomberg） 24© 2024 Sumitomo Corporation Global Research Co. Ltd.

Macroeconomic Trends

Structural Changes in Commodity Markets
 The loss of cheap gas from Russia boosted Europe’s LNG demand and energy costs – strong headwind for Europe, especially compared to
the US The gold market remains buoyant despite rising interest rates and strong dollar; emerging countries buy more gold as a reserve currency.
 Copper price unmoved, but China is reshaping global flows of the metal; China still imports copper but more as an ore than refined metal –what would the rapid expansion of copper smelting capacity result in, especially at the time of low domestic demand?
Natural Gas：divergence80（$/MMBtu）※Monthly average

Natural gas, U.S.
Natural gas, Europe
Asia LNG

60
40
20

Gold：all-time high, with central bank demand
Asia・Europe
＞U.S.

Asia＞
Europe and America

0
2019

2020

2021

2,500
2,000

（$/Toz）
Gold
US 10-Year Real interest rate（right axis）

1.0

1,000

0.0

0
2023

 Policies and geopolitics increasingly impact on
prices, not just macroeconomics andfundamentals.
 Many countries aim to process crude oil/ raw
materials rather than simply importing/exporting
them; reshaping global trade flows, value chain
 Cost differentials also affect industrial
competitiveness.

© 2024 Sumitomo Corporation Global Research Co. Ltd.

2.0

1,500
U.S. Interest
Rates & Gold

500

2022

3.0

600
400
200
0
-200
-400
-600

2010

2015

-1.0
2020

-2.0

ETFs & similar products
Central banks & other inst.
Central banks & other inst. as % of total demand（right axis）（Ton）

World gold demand
2010

2015

2020

45%
30%
15%
0%
-15%
-30%
-45%

Metals：moving up the value chain
12,00010,000
8,000
6,000
4,000
2,000
0
1,500

1,000

（$/ton）

LME Copper
Futures（1,000 tons）（1,000 tons）

Refined Copper Total Import
Copper Refined Production
Copper Ore & Concentrate Import

Copper Supply
in China（right axis）

2,000

1,000

500

0

3,000

2010

2015

2020

0

（Source: Compiled by SCGR from Bloomberg, World Gold Council）25

Macroeconomic Trends

Potential for Smoldering Shock Events
 Historically, the bottoming of stock prices often occurs in the late stages of a recession, known as the "stock market boom in a recession." After a significant financial tightening, during the initial interest rate reduction, is there a possibility of another "shock event"?
20
18
16
14

Recession

（%）

1971
Nixon shock
Oil crisis

12

Oct.1987
Black
Monday10

Dec.1994
OrangeCountybankruptcy

S&P 500 (right axis)

Apr. 2000
Dot-com
bubblecollapse

Oct. 2001
Enronbankruptcy

8
6
4

Sep.1989
S&L crisis

Sep.1998
LTCM
bankruptcy

Aug. 2007
Paribas shock（Logarithmic）

Trade
war

COVID-19
pandemic

5,000

U.S. regionalbanks crisis
Fall of Credit
SuisseMar.2008
Bear Stearns
bankruptcy
Sep. 2008
Lehman Brothers
collapse

500

Oct. 2022
LDI crisis

1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023

2
0

U.S.policyinterestrate

50（Source: Compiled by SCGR from Bloomberg）26© 2024 Sumitomo Corporation Global Research Co. Ltd.

04

Global issues with business impact

27© 2024 Sumitomo Corporation Global Research Co. Ltd.

Global issues with business impact

Energy balance will change drastically A fundamental energy transition is essential to achieve carbon neutrality by 2050. Many business opportunities exist in the changes

2021

Total energy supply

Total final
consumption*2050 net-zero achievement scenario in the
IEA (NZE scenario) base

2050

Total energy supply(1)

Total final
consumption
(3)

(1)
(5)

(3)
(2)

(4)

(2)

(5)

(4)

(6)

(Source: IEA 2023; from Energy Technology Perspectives 2023, P.43, P.44, Figure 1.3, License: CC BY 4.0, some text added by SCGR)

Year 2021

Year 2050

469EJ (79%)

88EJ (16%)(1) Decrease of fossil energy in total energy supply
Fossil energy (share)
Solar power generation(share)Wind power generation(share)(3) Expansion of hydrogen use
Low-emission Hydrogen
Production© 2024 Sumitomo Corporation Global Research Co. Ltd.

Year 2050

20%

53%

1%

51%

22%

49%

34%

70%

(4) (5) Electrification in total final consumption

1,023 TWh (4%)

31,237 TWh (41%)

Electrification rate of total final
consumption
Electrification rate in thetransportation sector
Electrification rate in the industrial
sector

1,865 TWh (7%)

23,442 TWh (31%)

Electrification rate in the buildings
sector(2) Increase of renewable energy (solar and wind) in power generation

Year 2021(6) Use of negative emission technology
1 million tons

420 million tons

CO2 removal by DAC-

621 million tonsCO2(Source: Compiled by SCGR from IEA 2023; World Energy Outlook 2023)

28

Global issues with business impact

Carbon Neutrality Order and Characteristics of Transformation by Demand Sector
 Transformation progresses from low-cost measures to high-cost ones (①→⑤).
 Crucial aspects of transformation vary by demand sector.
 In carbon offset, with storage is more valuable than without storage, carbon removal is more valuable than emission reduction, and longlived storage is more valuable than short-lived storage. It will become mainstream (Oxford Principles).
MeasureDemandsector① Energy conservationelectrification (railroads)*NZE: 51% electrification rate /2050

Transport
Sector④ Tertiary energy utilization + CCU⑤ Expand use of negativeemission technology[Long distance, high power]
SAF & Hydrogen (Aviation)
Ammonia (Ship)
 Aircraft: SAF approx. 70%/2050
e-Fuel Ships: Low carbon fuels(ammonia, hydrogen,bioenergy)85％/2050[Manufacturing process]Electric furnace conversion(steelmaking), Electrification (manyindustries)*NZE: 49% electrification rate /2050

generalIndustrial
Sector③ Fossil fuel + CO2 capture Stop sales of internal
combustion vehicles/2035[Short distance, low power]  Stop selling internal
EV (cars, trucks),
combustion trucks/2045

general

Building
Sector

② Clean power supply,
electrification[Lighting/Heating]
Geothermal, air conditioning,heat pumps[CCS]
Power generation, steelmaking,chemicals, cement, paper Cement： nearzero clinker
 Steelmaking: Scrap ratio
93％/2050
48％/2050[Lighting/Heating]Home (all-electric)*NZE: 70% electrification rate /2050[High heat and reduction process]Hydrogen and e-methane (chemical,
ceramic, steelmaking)

BECCS/DACS, Steelmaking: Near zero steel (DRI *Carbon Credits+ electric furnace, hydrogen CO2 removal：
reduction ironmaking, CCS laying)
1.7billion tons/2050
95％/2050
 CO2 capture：[Lighting/Heating]6billion tons/2050
Hydrogen and e-methane (city gas) Building: Zero carbon
 Major milestone in IEA
compliance (electrification and
NZE Scenario
renewable energy) 80％/2050
Transport sector : “Electrification" will be the main method for short distances and low output. For long distances and high output, "tertiary energy utilization" will expand.
Industrial sector : For manufacturing processes that are difficult to electrify (e.g., high heat, reduction, etc.), "tertiary energy conversion, fossil fuel + CO2 capture (CCS)“ will expand.
Building sector: In addition to further promotion of "energy conservation, cleaner power sources, and electrification," conversion of city gas (in the residential sector) to hydrogen and e-methane.
 Heating：HP
55％/2050

29（Source: Compiled by SCGR from IEA 2023; World Energy Outlook 2023）© 2024 Sumitomo Corporation Global Research Co. Ltd.

Global issues with business impact

EU Carbon Border Adjustment Mechanism (CBAM) Driving Global Industrial and Trade
Transformation

 Transitional period started from October 2023, with reporting obligations.
 Further acceleration of global industrial and trade transformation with potential expansion of CBAM target products, along with a reduction
in free allocation ratio in EU-ETS.
CBAM concept
Schedule

October 1, 2023, to December 31, 2025: Transitional period, importers required to report quarterly

From January 1, 2026: Full implementation, CBAM certificates purchase and surrender obligations

Design elements
Target goods
Scope of target
emissionsPrice to be applied

Overview
Iron and steel (including downstream products such as screws, bolts and nuts), aluminum,
cement, electricity, fertilizer, hydrogen
Direct emissions (Iron and steel, aluminum, hydrogen) / Direct and indirect emissions(cement, electricity, fertilizer)
In principle, EU-ETS price＜Cautious Mechanism Design＞
 Introduction of CBAM is gradual, reducing freeallocation in EU-ETS.
 No export refunds.
 Limited scope of indirect emissions application.
 Setting transitional period.

Gradual Transition to CBAM, Gradual
Reduction of EU-ETS Free Allowance
EU-ETS Free Allowance Phase-out and
CBAM Phase in(%)
2.5 5 10
22.5
48.5
61
73.5
86
100
100 97.5 95 90
77.5
51.5
39
26.5
14
EU-ETS freeimportSmallburdenOut-of-EU
manufacturing

border<EU>

ChargeexportBig
burden<Outside EU>Big
burdenNo
refundSmallburdenSmallburdenOut-of-EU
manufacturing EU goods

Out-of-EU
EU goods manufacturing

EU-ETS allowance price change

120（Euro/ton）

100
80
60
40
20
0

2018

2019

2020

2021

2022

2023

2024

*Data until January 10, 2024
30
(Source: Compiled by SCGR from Bloomberg)（Source: Compiled by SCGR from the European Commission website and various other documents)

無償割当比率
allowance phase-out© 2024 Sumitomo Corporation Global Research Co. Ltd.

border<Outside EU>

CBAM比率CBAM phase-inGlobal issues with business impact

Rapid Standardization of Sustainability Information Disclosure From 2023 to 2024, EU, U.S., and the International Sustainability Standards Board (ISSB: within the International Financial ReportingStandards (IFRS) Foundation) are consecutively developing sustainability information disclosure standards, gradually establishing global
rules. Too much details in every rule and the competition among rules bring about concerns in the business community.
 Following climate change, focus on biodiversity, human rights, and human capital has been increasing.

Trends in the Development of Sustainability Information Disclosure Standards
2023 Development of disclosure frameworks and standards forenvironmental and social issues other than climate change

September 2023: The Taskforce on Nature-related Financial
Disclosures (TNFD) published the final recommendations.

EU

January 2023
Corporate Sustainability
Reporting Directive(CSRD) takes effect.
March 2022

IFRS IFRS Sustainability DisclosureStandards: Draft publication ofFoundation
General requirements and climaterelated disclosures

July 2023
Adoption of the European Sustainability
Reporting Standard (ESRS), which isdetailed disclosure standards under
CSRD.
July 2023
The standards were endorsed by
the International Organization of
Securities Commissions (IOSCO).

2024

2025~

2024 (planned): The Taskforce on Inequality and Social-related Financial
Disclosures (TISFD) starts activities.

FY2024 (planned)
CSRD/ESRS application starts. Gradually expanding toapplicable companies.

FY2028 (planned)
Starting CSRD/ESRS
application to outside
EU companies.

Mandatory disclosure of comprehensive sustainability information for companies
operating inside EU

2024 ~ (planned)

The foundation selects new themes for making standards.
(Candidates： 1) biodiversity, ecosystems and ecosystem services,2) human capital, 3) human rights, and 4) integration in reporting.)

Advocating for a global baseline that serves as the foundation for national regulations
January 2023
JAPAN Amendment to the Cabinet Office Ordinance to establish a sustainability
information section in securities reports. Starting aplication to thecompanies whose FY ends in Mach 2023.

March 2024 (planned)
Sustainability Standards Board Japan (SSBJ) publishes a draft of Japan's version
of sustainability disclosure standards based on ISSB.

March 2025 (planned)
SSBJ publishes Japan's
version of sustainability
disclosure standards.

(Source: Compiled by SCGR based on publicly available data from various organizations)© 2024 Sumitomo Corporation Global Research Co. Ltd.

31

Global issues with business impact

Shift of Thinking toward “Nature-Positive”
 Escalation of ecosystem destruction → Growing momentum to stop and reverse biodiversity loss ("Nature-Positive")→ The “Kunming-Montreal Biodiversity Framework” (adopted in December 2022)
and Japan’s “National Biodiversity Strategy 2023-2030” (approved by the Cabinet in March 2023)
 In September 2023, the Taskforce on Nature-related Financial Disclosures (TNFD) publishes the final recommendations.
 Key to business solutions lies in “Circularity.”

By 2030, we aim for astate where nature has
recovered better than it didin 2020 (net-positive).

(1) To analyze/understand their impacts and dependencies on nature

2020

2030

Restoration of nature

Companies’ aggressive responses to “Nature-Positive”

Biodiversity-related metrics

Concept of “Nature-Positive”

2040

2050 (year)

To put nature on a recovery track, stop andreverse the loss of biodiversity (=recover nature).

• Analysis of business according to the TNFD framework.

(2) To avoid and reduce activities that harm nature• Review of management/business strategies, products, and production
methods.
(3) To contribute to the restoration of nature(Creating true corporate value and social value beyond disclosure)• Shift to new business model and collaboration with other companies.
(Source: Compiled by SCGR)

32© 2024 Sumitomo Corporation Global Research Co. Ltd.