Hitachi Zosen Corporation Green Bond Framework Pre-issuance Second Party Opinion

SECOND PARTY OPINIONHITACHI ZOSEN CORPORATIONGREEN BOND FRAMEWORK PRE-ISSUANCE

Prepared by: DNV Business Assurance Japan K.K.
Location: Kobe, Japan
Date: September 16, 2021
Ref. Nr.: PRJN-269261-2021-AST-JPN-01

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Hitachi Zosen Corporation Green Bond Framework Pre-issuance Second Party Opinion

Table of contents
Executive Summary

3

Ⅰ. Introduction

6

Ⅱ. Scope and Objectives

11

Ⅳ. Basis of DNV’s opinion

12

Ⅴ. Work Undertaken

13

Ⅵ. Findings and DNV’s opinion

14

Schedule-1

23

Hitz Green Bond Candidate Project

Schedule-2 Green Bond Eligibility Assessment Protocol

24

GBP-1 Use of Proceeds

24GBP-2 Process for Project Evaluation and Selection

26

GBP-3 Management of proceeds

28GBP-4 Reporting

29

Revision history
Revision
number0

Issue Date
16/9/2021

Remarks
InitialDisclaimer
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. Becauseof the selected nature (sampling) and other inherent limitation of both procedures and systems of internal control, there remains the unavoidable risk that errors or
irregularities, possibly significant, may not have been detected. Limited depth of evidence gathering including inquiry and analytical procedures and limited 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 a person 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 anindependent team of sustainability assurance professionals. DNV was not involved in the preparation of statements or data included in the Framework except for thisStatement. 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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Executive Summary
Hitachi Zosen Corporation (hereafter “Hitz”) is a plant engineering company rooted in Osaka
Tekkosho (Osaka Iron Works) and founded in 1881 by E.H. Hunter. Hitz has globally expanded
and developed its business in the field of “Environmental systems”, “Machinery andInfrastructure” in order to provide the values for society through manufacturing and engineering
technologies developed by shipbuilding technology (since the shipbuilding business division wasdivested in 2002). Its head office is located at Osaka in Japan.
Hitz considers creating a sustainable, safe, secure society through providing “clean energy andwater”, environmental conservation” and “building a disaster-resilient, prosperous community”
to every stakeholder a vital mission. Hitz are committed to continue working on “Forward 22”,the 3 year medium-term management plan which launched in 2020 and pass on to achieve theirlong-term goal “Hitz 2030 Vision” in 2030.
Hitz will issue the Green Bond to provide Hitz’s environmental solution technology and service(facilities and management). Hitz believes that delivering service consistent with theirenvironmental policy in all the business phases from funding to providing technology andservices to customers will achieve their mission. Hitz has established the Hitachi Zosen Green
Bond Framework (hereinafter, “framework”) in order to execute this green bond in a mannerthat conforms to the internationally established framework.
DNV Business Assurance Japan Co., Ltd. (hereinafter “DNV”) has evaluated the eligibility ofgreen bonds as an external review organization. Specifically, DNV provided an eligibility
assessment for the green bond framework against the Green Bond Principles (ICMA 2021,
hereinafter “GBP”) and the Green Bond Guidelines (Ministry of the Environment 2020,
hereinafter “GBGLs”), referring to technical standards such as Climate Bond Standards (CBI,
v3.0, hereinafter “CBS”) for Green Candidate Projects if applicable.
The following is a summary of the assessment results for the four elements indicated by GBP and
GBGLs.

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1. Use of Proceeds：
Hitz defines eligible criteria for the use of proceeds as green projects that meet the requirementsof its environmental policy and related frameworks. Table 1 shows Hitz Green Bond Candidate
Projects. Specifically, Energy-from-Waste facilities and equipment of energy-saving andemission saving type, a Methane fermentation system to extract biogas from solid organic waste
and convert it into energy, a wind power plant project, a land aquaculture system that reduces
the environmental impact of marine-aquaculture, a flood disaster countermeasure equipmentthat requires no electricity or manual operation using of the power of nature itself, and an
equipment that generates hydrogen from electricity and water. The proceeds will be allocated to
one or more of capital investment, R&D funds, business development/operation funds, working
capital of these projects as new expenditures or refinancing of existing expenditures. These
projects have been evaluated to bring about clear environmental benefits in accordance with theenvironmental policy, and are expected to contribute to the SDGs. These processes are incompliance with GBP-1.
2. Process for Project Evaluation and Selection：
Hitz confirms that the Green Project meets the GBP-1 eligible criteria and does not conflict withthe exclusion criteria defined in the framework in advance. Specifically, each responsible
department that implements each eligible business and finance department evaluate and selectthe projects through an appropriate prescribed process, and the final decision is made by the
Board of Directors. These processes are in compliance with GBP-2.
3. Management of Proceeds：
The Finance Department will allocate and manage the proceeds by the green bonds. Most of theproceeds will be allocated within three years of issuance (because often the case that large scale
project that newly launched cannot be delivered within 24months limits from the order). Until
the allocation of the proceeds is decided, the amount equivalent to the proceeds will be managedin cash and cash equivalents. The same amount of green bonds issued under this framework willbe allocated to any of the eligible projects. These processes are in compliance with GBP-3.
4. Reporting：Hitz plans to report annually on the status of funding until the full amount of the proceeds isallocated to projects that meet the eligible projects on the Hitz website and the integrated
report. This report will include the allocated amount, unallocated amount, project outline andstatus for each project category. After the project will be completed, Hitz plans to disclose
relevant indicators and quantified environmental benefits for each project category, focusing on
quantified GHG emission reductions or percentages. In addition, if there is a significant change in
the allocation status after the proceeds have been allocated, Hitz will promptly disclose it.
These processes are in compliance with GBP-4.

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Table-1 Hitz Green Bond Candidate Projects
Eligible Criteria
01

Category

Energy-Energy-from-Waste facilities and equipment of energy-saving

from-Waste

and emission saving type
Pollution

02

Project Outline and activities to be allocatedMethaneprevention andfermentatio

controln systems

equipment that extracts biogas from solid organic waste suchas food waste and pruned branches and converts it into energy（Business example）Hitz Kompogas system, WTM system
https://www.hitachizosen.co.jp/english/products/products055.html

Onshore03

andRenewable

offshoreenergyonshore and offshore wind power facilities.

bewind power

allocated：
Environmentall
y sustainable

04

Land

managementaquacultureof livingsystemnaturalresources andCapitalLand-aquaculture facilities and equipment that are
implemented in consideration of reducing the environmental
impact of marine-aquaculture while supplementing thesustainable use of natural resources.

land use

Climate05

Flap-Gate

Activities tochangeadaptation

investment
and costs
related tofacility /equipment
development,

flood disaster countermeasure equipment that requires no

manufacturing

electricity or manual operation, using of the power of nature, construction,itself such as tsunamis and storm surges.

installation,(Business example): neo RiSe, Seabed-type Movable Flap-Gate

operation, andtype Breakwater system

maintenancehttps://www.hitachizosen.co.jp/english/products/products026.html

Circulareconomy06

HydrogenadaptedGeneration

products,

Systemproduction
technologies
and processes

equipment that generates hydrogen from electricity and water,and requires a sufficiently low amount of electricity and CO2
emissions.
(Business example): On-site type water electro-chlorinationhydrogen generator Hydrospringhttps://www.hitachizosen.co.jp/english/products/products056.html

DNV has confirmed through the relevant documents and information provided by Hitz, including
the Green Bond Framework, that Green Bond meets relevant standards and is expected to beproperly planned and implemented.

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Ⅰ. Introductioni.

About the Issuer

Hitachi Zosen Corporation (hereafter “Hitz”) is a plant engineering company rooted in Osaka
Tekkosho (Osaka Iron Works) and founded in 1881 by E.H. Hunter. Hitz has globally expanded
and developed its business in the field of “Environmental systems”, “Machinery andInfrastructure” in order to provide the values for society through manufacturing and engineering
technologies developed by shipbuilding technology (since the shipbuilding business division wasdivested in 2002). Hitz will commit to become an impactful corporate that devotes to achieving
SDGs by providing the products and services using their experience of manufacturing andengineering and their advanced technology, and Hitz will continuously build trust with society bycommunicating with social stakeholders and through fair and spontaneous disclosure.

ii.

ESG Initiatives of Issuer

Hitz considers creating a sustainable, safe, secure society through providing “clean energy andwater”, environmental conservation” and “building a disaster-resilient, prosperous community”
to every stakeholder a vital mission. Hitz are committed to continue working on “Forward 22”,the 3 year medium-term management plan which launched in 2020 and pass on to achieve theirlong-term goal “Hitz 2030 Vision” in 2030.
“Hitz 2030 Vision” is a long-term vision that has been laid out for Hitz to commit to boosting
their own profitability through optimizing the value supplied to customers and aiming to becomea corporate group that can achieve sustainable growth as the understanding of UN’s SDGs
expand globally and the social movement toward the realization of sustainable development andrecycling-based society. Actions that align with Hitz Value, our management stance proclaimingthat quickly understanding clients’ needs and providing solutions lead to the prosperous society,is the premise for the setting of long-term management goals .
As a part of our initiatives for providing clean water and clean energy, Hitz will aim to expand theuse of renewable energy that contribute to the reduction of CO2 emissions by speed up to
expand capacity of Energy-from-Waste plant operations and develop wind power and biomass
power generation. Also, Hitz will foster cooperation between public-private partnerships by
involving local government to cover the lack of financial resources and will respond to water
demand in an emergency through rental equipment. In addition, Hitz will tackle waste treatment
and waste plastic issues through the Energy-from-Waste and recycling facility business topromote environmental preservation and protection, and work on maintenance and remotemonitoring of infrastructure such as aging expressways, and constructing flap-gate type seawalls
and GPS wave meter to mitigate natural disasters such as Tsunami.

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Hitachi Zosen Corporation Green Bond Framework Pre-issuance Second Party Opinioniii. Environmental Policy of Issuer
Since the 1970s, Hitz has been working on environmental conservation measures for offices,
factories and local communities. In 1992, Hitz established its “Basic Environmental Protection
Policies and Action Guidelines” for its employees as a good corporate citizen. In 1993, Hitz havealso established the “Hitachi Zosen Environmental Protection Promotion Plan” by theEnvironmental Protection Promotion Committee, built on the prior policies with a concrete
agenda based on the Action Guidelines. It adds breadth to our previous regional environmental
protection activities, with additional focus on areas like ozone layer protection, global warming
prevention, waste reduction and recycling. In this environmental policy, Hitz have established an
ISO14001 management system, and set up their "Environment Policy" to carry out theirbusiness activities;① Regarding our company products, service and business activity, Hitz tries to improve
environmental load-reducing and improve global environmental protection.
② Observe statutory and regulatory requirements, agreements and the other requirementsthat the organization has agreed to and also their company's self-imposed controls.
③ Set environmental objectives, and environmental targets for the year (an Environment
Management Program), and make a continuous commitment to reducing burden on theenvironment and preventing environmental pollution.
④

Review regularly, make continuing improvements and maintain operations of Environment
Management System effectively.

All factories located in Japan and the two business headquarters of Environment, Machinery andInfrastructure have acquired ISO14001 certificate. Also, ISO14001 periodical environmental
audits are conducted by an external reviewer in ISO14001 acquiring offices at all the sites.

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iv. Issuer’s Initiatives for SDGs
As awareness towards SDGs surges globally, the world has been working together to create asustainable and circular society. This trend aligns with their corporate vision which aims tocontribute to the realization of sustainable, safe and secure society through products andbusinesses.
Hitz approaches SDGs in two different ways: “Directly through products and businesses”, and“Internally through sustainability efforts”. These two types of approaches resonate with each otherand contribute to SDGs as whole corporate activities.
The contribution of the Green Bond Framework to the SDGs is shown in Schedule-1.

＊ The relevance to SDGs is complementary to the issuance of green bonds, and would not be intended
directly related to the funding purposes.

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Hitachi Zosen Corporation Green Bond Framework Pre-issuance Second Party Opinionv.

About the Green Bond Framework

For the purpose of issuing green bonds, Hitz has formulated the framework in accordance withthe four pillars set forth in the Green Bond Principles 2021 (Use of Proceeds, Process for ProjectEvaluation and Selection, Management of Proceeds and Reporting). This framework will be
disclosed on Hitz’s website, and in the legal documents related to green bonds issued based on
this framework and the documents and materials to be disclosed to stakeholders Hitz will
describe the contents stipulated in this framework and will inform to stakeholders.

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Ⅱ. Scope and Objectives
Hitz commissioned DNV to conduct pre-issuance assessment and periodical review for its Green
Bond. The objective of the pre-issuance assessment and periodical review of DNV is to conduct
assessment in order to confirm that the Hitz Green Bond meets the criteria such as GBP, GBGLs
and related technical standards of CBS, which will be described later, and other related standards
or guidelines (refer to the table below), and is to provide a second party opinion on this green
bond eligibility.
DNV, as an independent external review body, declares that it has no interest in the facts andperceptions with Hitz in providing its second party opinion.
In this paper, no assurance is provided regarding the financial performance of the green bond,the value of any investments, or the long-term environmental benefits of the transaction.

(1) Scope of review
The review assessed the following items and confirmed their alignment with four core elements in GBP.
☒

Use of Proceeds☒

Process for Project Evaluation and Selection☒

Management of Proceeds☒

Reporting(2) Role(s) of review provider☒

Consultancy (incl. 2nd opinion)☐

Certification☐

Verification☐

Rating☒Other (please specify): Providing review as a green bond issuance supporter (External Review
Division)(3) Standards/guidelines to be applied
No.

Standards/guidelines

1.

The Green Bond Principles (GBP)

2.

Green Bond Guidelines (GBGLs)

3.

Climate Bonds Standard 3.0v (Sector Criteria)

4.

Scheme owner
International Capital Market
Association (ICMA) , 2021
Ministry of the Environment,
2020

EU Taxonomy (technical screening criteria)
Green and Social Bonds: A High-Level

5.

EU TEG

Apply
Apply
Refer (applicabletechnical criteria)
Refer (applicabletechnical criteria)International Capital Market
Association (ICMA),2021

Refer

Handbook Harmonized Framework for Impact International Capital Market
Association (ICMA),2021
Reporting

Refer

Mapping to the Sustainable Development
Goals

6.

Climate Bonds Initiative,
2019

Applied level*1*2*1Apply: Eligibility for all four core common elements to each handbook, principle and guideline was evaluated*2*2Refer：Based on the green project and execution plan, the related contents were partially considered.

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Ⅲ.

Responsibilities of the Management of the Issuer and DNVHitz has provided the information and data used by DNV during the delivery of this review.
DNV’s statement represents an independent opinion and is intended to inform Hitz and otherinterested stakeholders in the Green Bond 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 Hitz.

DNV is not

responsible for any aspect of the candidate projects and assets referred to in this opinion andcannot be held liable if estimates, findings, opinions, or conclusions are incorrect. Thus, DNV
shall not be held liable if any of the information or data provided by Hitz and used as a basis forthis assessment were not correct or complete.

Ⅳ. Basis of DNV’s opinion
To provide as much flexibility as possible for Hitz, DNV has applied our green bond assessment
methodologies, which incorporates the requirements of GBP and GBGLs, to create Hitz-specificGreen Bond Eligibility Assessment Protocol (hereinafter “DNV’s Protocol”). The DNV’s Protocolhas capacity for potential application of green bond under GBP and GBGLs.
DNV’s Protocol includes a set of suitable criteria that can be used to underpin DNV’s opinion.
The overarching principle behind the criteria are that a green bond should “enable capital-raisingand investment for new and existing projects with environmental benefits”.
As per DNV’s Protocol, the criteria against which the Green Bond has been reviewed are grouped
under the four Principles.

•

Principle One: Use of Proceeds. The Use of Proceeds criteria are guided by therequirement that an issuer of a green bond must use the proceeds to eligible activities.
The eligible activities should produce clear environmental benefits.

•

Principle Two: Process for Project Evaluation and Selection. The Project Evaluationand Selection criteria are guided by the requirements that an issuer of a green bondshould outline the process it follows when determining eligibility of an investment using
green bond proceeds, and outline any impact objectives it will consider.

•

Principle Three: Management of Proceeds. The Management of Proceeds criteria are
guided by the requirements that a green bond should be tracked within the issuingorganization, that separate portfolios should be created when necessary and that adeclaration of how unallocated funds will be handled should be made.

•Principle Four: Reporting. The Reporting criteria are guided by the recommendationthat at least Sustainability Reporting to the bond investors should be made of the use ofbond proceeds and that quantitative and/or qualitative performance indicators should be
used, where feasible.

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Ⅴ. Work Undertaken
Our work constituted a high level of review of the available information, based on theunderstanding that this information was provided to us by Hitz 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-Issuance verification of Green Bond•

Creation of the Hitz-specific DNV’s Protocol;•

Assessment of evidential documents provided by Hitz before issuance of the Bond, andsupplemental assessment with desk review from a higher perspective;•

Interview with key personnel of the Hitz, and review of the relevant documentation; and•Reporting of findings against each element of the eligibility criteria

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Ⅵ. Findings and DNV’s opinion
DNV’s findings and opinion are as follows.

Principle one：Use of Proceeds
DNV has confirmed that Hitz planned to allocate the net proceeds except expenses from allproceeds by green bond to six green bond candidate projects (Table-2) that meet thefollowing representative eligible project categories represented by GBP and GBGLs as newinvestment and refinancing.

” Pollution prevention and control”” Renewable energy”” Environmentally sustainable management of living natural resources andland use”” Climate change adaptation”” Circular economy adapted products, production technologies and processes”

Specifically, the projects covered by this Green Bond are classified into the six green projects
shown in Tables 01 to 06 below, and net proceeds will be allocated to capital investment andexpenses related to the development, manufacturing, construction, installation, operationand maintenance of facilities and equipment. Please refer to the next page and Schedule-1
for the outline of the green project.

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Table-2 Hitz Green Bond Candidate Projects
Eligible Criteria
01

02

03

04

05

Category

Energy-from-Waste facilities andequipment of energy-saving andemission saving type

Energy-fromWaste＊１

Methanefermentation
systems＊２

Project outline and activities to be allocatedPollution prevention
and control

equipment that extracts biogas fromsolid organic waste such as food waste
and pruned branches and converts it into
energy（business example）Hitz Kompogas
system, WTM system

Onshore andoffshore wind
power

Renewable energy

onshore and offshore wind power
facilities.

Land aquaculture
systemEnvironmentally
sustainable
management ofliving natural
resources and landuse

Land-aquaculture facilities andequipment that are implemented inconsideration of reducing theenvironmental impact of marineaquaculture while supplementing thesustainable use of natural resources.

Climate change
adaptation

flood disaster countermeasureequipment that requires no electricity or
manual operation, using of the power ofnature itself such as tsunamis and storm
surges.

Flap-Gateactivities to beallocated：
Capitalinvestment andcosts related tofacility /equipment
development,
manufacturing,
construction,
installation,
operation, andmaintenance(Business example): neo RiSe, Seabedtype Movable Flap-Gate type Breakwater
system06

Hydrogen
Generation System＊３

Circular economy
adapted products,
production
technologies andprocesses

equipment that generates hydrogen fromelectricity and water, and requires asufficiently low amount of electricity andCO2 emissions.
(Business example): On-site type waterelectro-chlorination hydrogen generator
Hydrospring＊１：Energy-from-Waste
The target facility is an energy-saving / emission-saving type, and the process, incinerator ash
management, etc. are implemented in accordance with laws / regulations, etc., which corresponds to theeligibility requirements.
＊２：Methane fermentation systems
CO2 emissions are sufficiently low compared to standards, and waste type, manufacturing process, andbiogas quality are controlled based on domestic laws and regulations. Also, the residue after methane
fermentation is recovered as energy and corresponds to the eligibility requirements.
＊３：Hydrogen Generation System
It is electrolyzed by electricity derived from renewable energy, and the amount of electricity required forhydrogen production and direct or indirect CO2 emissions and electricity consumption are sufficiently small,which meets the eligibility requirements.

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Use of proceeds categories as per GBP:☒

Renewable energy☐

Energy efficiency☒

Pollution prevention and control☒

Sustainable management of living natural

Terrestrial and aquatic biodiversity☐

Clean transportation

resources and land use☐

conservation☐

Sustainable water management☒

Climate change adaptation☒

Eco-efficient products, production☐

Green buildings with regional, national or

technologies and processes

internationally recognized standards andcertifications☒

Other (please specify)； Strengthening disaster prevention functions such as tsunami

and storm surge

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Principle two：Process for Project Evaluation and Selection
DNV has confirmed through the review that the six Green Bond Candidate Projects listed in
Schedule-1 meet the issuer's Group Philosophy and Group Vision, and are evaluated andselected by the relevant department (Each responsible department implementing eacheligible project and Finance Department) of the issuer through an appropriate prescribed
process, and the Board of Directors, the highest decision-making body in business execution,
will give final approval.

In selecting a project, it shall meet the eligible criteria shown in "(3) Standards/guidelines tobe applied in the section ‘II Scope and Objectives’ " and meet the following requirements.
- The environmental impact assessment by the country of residence or local government iscarried out appropriately, if necessary.
- Providing adequate explanations to local residents when conducting business.
- Making efforts to decrease the environmental risks through management of emissions bysetting voluntary standards and target values that are more strict than the law on theemission of pollutants to the environment in the equipment manufacturing process.
- To prevent environmental problem and minimize environmental risks, make sureemployees are strictly following manuals when at work and also all the equipment are
thoroughly checked on a regular basis.
- Being aware of the risk of bringing environmental disaster, and prepare manual that
demonstrate procedures to minimize the effect of the disaster. Also, conduct emergency
drills on a regular basis.

Evaluation and Selection☒

Conforms to the issuer’s achievement of☒Documented process to determine that projects

environmental contribution goals☒

fit within defined categories

The project is eligible for use of proceeds☒

Documented process to identify and manage

by green bond and transparency ispotential ESG risks associated with the project

ensured.
☒The project is evaluated and selected based☐

Other (please specify):

on the published standard summary

Information on Responsibilities and Accountability:☒

Evaluation / Selection criteria subject to☒In-house assessment

external advice or verification☐

Other (please specify):

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Principle three：
DNV confirmed through a review of its plans for how Hitz will track and manage paymentsfrom bonds since the bond was issued. DNV also confirmed that the plan for managing total
funds was appropriate and clear.
The Finance Department is in charge of allocation of the proceeds to eligible projects andmanaging the proceeds. The budget and actual outlay of the proceeds from the Green Bondissuance will be traced and managed using an internal management system on a monthly
basis in accordance with Hitz's cash management flow by numbering each eligible project.
In addition, Hitz will preserve cash management related documents complying with Hitz's
accounting rule defining the range of accounting documents and preservation of the
documents, and manage the documents with document saving books. Hitz intends toallocate most of the proceeds of the Green Bonds within 3 years of the issue date. Until the
allocation of the proceeds is decided, unallocated proceeds will be managed in cash or cash
equivalent forms.
As mentioned above, no assurance is provided regarding the financial performance of thegreen bond, the value of any investments, or the long-term environmental benefits of thetransaction.

Tracking of proceeds:☒

Some or all of the proceeds by green bonds that are planned to be allocated are systematicallydistinguished or tracked by the issuer.

☒

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

Other (please specify):

Additional disclosure:☐

Allocations to future investments only☒

Allocations to both existing and future☐

Allocation to individual disbursements☒

Allocation to a portfolio of disbursements☐

Disclosure of portfolio balance of☒

Other (please specify): Percentage andinvestments

unallocated proceeds

amount of existing and new investment incandidate projects subject to green bondallocation will be disclosed at the time of
periodical reporting

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Principle four：reporting
DNV confirmed that the issuer will report annually on allocation status for eligible projects
and their environmental impact. Specifically, it will be as follows.
During construction of the eligible projects, Hitz will only disclose allocation of the net
proceeds. After completion of the eligible projects, Hitz will report environmental impact
from the year starting operation until the redemption of the green bond.

Reporting of allocation status
Hitz will provide information of both allocated amount and unallocated amount annually on
their website or integrated report until net proceeds are fully allocated. In addition, Hitz will
disclose allocation breakdown in proportion by each project level subject to the clients'
approval. For long-term assets that will be continuously refinanced by using several green
bonds, we will report the elapsed years, remaining durable year as well as refinancing
amount in the possible extent at the time of green bond issuance.
The first allocation report will be made public within 1 year from the date of the Green Bondissuance. In case of material developments, we will renew the information on the use ofproceeds on a timely basis even after the full allocation of the proceeds.

Impact reporting
Table-3 shows the indicators (examples) in impact reporting. Hitz commits to report on the
any of or several of the following impact indicators related to eligible projects on an annual
basis until the redemption of the Green Bond on the company's website or the integrated
report to the extent practicably feasible considering confidentiality.

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Table-3 Indicators for impact reporting(example)
Eligible Project
Energy-from-Waste

ICMA GBP Category

Indicators for environmental impact（example）

Pollution prevention›

and control

Outline of each facility constructed / installed(including processing capacity, whether it isunder construction or completed)›

Annual power generation output after the startof operation of the constructed and installedfacility (MWh / year)›

Annual GHG emission reduction based on annual
power generation output (t CO2/ year)

Methane fermentation›

systems

Outline of each facility constructed / installed(including processing capacity, whether it isunder construction or completed)›

Biogas generation capacity›

Annual CO2 emission reduction based on annual
biogas generation capacity (tCO2/ year)

Onshore and offshore

Renewable energy›

wind power

Number of facilities constructed / installed andoutline of each facility (including whether underconstruction or completed)›

Annual power generation output (capacity) after
the start of operation of the constructed andinstalled facility (MWh / year)›

Annual power generation output after the startof operation of the constructed and installedfacility (MWh / year)›

Annual GHG emission reduction based on annual
power generation output (tCO2/ year)

Land aquaculture

Environmentally

systemsustainable(Including certification acquisition / preparation

management of

status, whether under construction orlivingcompletion status, and response status to nature

natural resources

conservation outside the farm）›

Outline of each facility constructed / installed

and land use
Flap-Gate

Climate change›

adaptation

Number of facilities constructed / installed andoutline of each facility (including installation
purpose, assumed disaster prevention target
area / population, whether under construction orcompletion)›

Operation status and disaster prevention effectat the time of disaster (disaster reduction status)

Hydrogen Generation

Circular economy

Systemadapted products,(including installation purpose, hydrogenproduction

production capacity (Nm3 / h), whether undertechnologies andconstruction or completion)›

Outline of each facility constructed / installed

processes

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Hitachi Zosen Corporation Green Bond Framework Pre-issuance Second Party Opinion

Hitz plans to conclude a review agreement with DNV to evaluate whether the eligible
projects conform to this framework before one year has passed since the issue date of thegreen bond. This review will be conducted annually until all proceeds by the green bondhave been allocated.

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):in case of a major change in allocation status occurs after the proceeds
have been allocatedImpact reporting (Environmental benefits):☐

Project-by-project☒

On a project portfolio basis☐

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

Frequency:☒

Annual☐Other ESG indicators (please specify):☐

Semi-annual☐

Energy Savings

Information reported (expected or ex-post):☒

GHG Emissions / Savings☒

Other ESG indicators (please- Outline of each facility constructed and installed

specify):(certification acquisition / preparation status, response status
to conservation of the natural environment outside the farm,assumed disaster prevention target area / population, etc.)- Operation status and disaster prevention effect at the timeof disaster (disaster reduction status)-Hydrogen production capacity（Nm³/h）

Means of Disclosure☒

Information published in financial report☐

Information published in sustainability report☒

Other (please specify): Hitz’s web site

（Integrated Report）☐

Information published in ad hoc documents☒

Reporting reviewed (if yes, specify which parts of the reporting are subject to external review)

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Hitachi Zosen Corporation Green Bond Framework Pre-issuance Second Party Opinion

Assessment Conclusion
On the basis of the information provided by Hitz and the work undertaken, it is DNV’sopinion that the Hitz Green Bond meets the criteria established in the Protocol and that it isaligned with the stated definition or purpose of green bond within the GBP and GBGLs, whichis to “enable capital-raising and investment for new and existing projects with environmental
benefits”.

DNV Business Assurance Japan K.K.

16th Sep. 2021

Mark Robinson

Naoki Maeda

Manager, Sustainability Services

Managing Director

DNV Business Assurance, Australia

DNV Business Assurance Japan K.K.

Masato Kanedome

Tatsuya Ono

Project Leader

Assessor

DNV Business Assurance Japan K.K.

DNV Business Assurance Japan K.K.

About DNV
Driven 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

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Hitachi Zosen Corporation Green Bond Framework Pre-issuance Second Party Opinion

Schedule-1 Hitz Green Bond Candidate Project
Project
01

Energy-fromWaste

02

Methanefermentation
systems

03

Category

Project overview and Activities to be allocatedEnergy-from-Waste facilities and equipment ofenergy-saving and emission saving type

Pollution prevention
and control

equipment that extracts biogas from solid organic
waste such as food waste and pruned branches andconverts it into energy（business example）Hitz Kompogas system, WTM
systemOnshore andoffshore wind
power

Renewable energy

onshore and offshore wind power facilities.

04

Land
aquaculture
systemEnvironmentally
sustainable
management of living
natural resources andland use05

Flap-Gate

Climate change
adaptation

06

Hydrogen
Generation
SystemCircular economy
adapted products,
production
technologies andprocesses

Land-aquaculture facilities and equipment that are
implemented in consideration of reducing theenvironmental impact of marine-aquaculture while
supplementing the sustainable use of natural
resources.
flood disaster countermeasure equipment that
requires no electricity or manual operation, using of
the power of nature itself such as tsunamis andstorm surges.
(Business example): neo RiSe, Seabed-type
Movable Flap-Gate type Breakwater systemequipment that generates hydrogen from electricity
and water, and requires a sufficiently low amountof electricity and CO2 emissions.
(Business example): On-site type water electrochlorination hydrogen generator Hydrospring

Page 23 of 29

Activities to be allocated：
Capital investment andcosts related to facility /equipment development,
manufacturing,
construction, installation,
operation, andmaintenanceContribution to SDGs

Hitachi Zosen Corporation Green Bond Framework Pre-issuance Second Party Opinion

Schedule-2 Green Bond Eligibility Assessment Protocol
The checklist below (GBP-1 to GBP-4) is a DNV evaluation procedure created for the Hitz Green Bond Eligibility Assessment based on therequirements of GBP.

GBP-1 Use of Proceeds
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

1aType ofbond

The bond must fall in one of the following
categories, as defined by the Green Bond
Principles:•Green Use of Proceeds Bond•
Green Use of Proceeds Revenue Bond•
Green Project Bond•
Other

Confirmed documents:- Green Bond Framework

The Bond falls into the category below:•
Green Use of Proceeds BondThe cornerstone of a Green Bond is theutilization of the proceeds of the bondwhich should be appropriately describedin the legal documentation for the
security.

Confirmed documents:- Green Bond Framework- Green Project related
documents

1b

Project
Categories

Interview with Hitz

DNV has confirmed that Hitz planned to allocate the net proceeds
except expenses from all proceeds by green bond to six green bondcandidate projects that meet the following representative eligible
project categories represented by GBP and GBGLs as newinvestment and refinancing.

Interview with Hitz
Specifically, for the projects described in Schedule-1, net proceedsfrom green bond will be allocated to capital investment andexpenses related to the development, manufacturing, construction,
installation, operation and maintenance of facilities and equipment.

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Project

Category

01
02

Pollution prevention and control
Pollution prevention and control

Energy-from-Waste
Methane fermentation systems

Hitachi Zosen Corporation Green Bond Framework Pre-issuance Second Party Opinion

Ref.

1c

Criteria

Environment
al benefits

Requirements

All designated Green Project categories
should provide clear environmentally
sustainable benefits, which, where
feasible, will be quantified or assessed by
the issuer.

Work Undertaken

Confirmed documents:- Green Bond Framework- Green Project related
documents
Interview with Hitz

1d

Refinancing
share

In the event that a proportion of theproceeds may be used for refinancing, it
is recommended that issuers provide anestimate of the share of financing vs. refinancing, and where appropriate, also
clarify which investments or project
portfolios may be refinanced.

Confirmed documents:- Green Bond Framework

Interview with Hitz

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DNV Findings
03
04

Onshore and offshore wind power
Land aquaculture system

05
06

Flap-Gate
Hydrogen Generation System

Renewable energy
Environmentally sustainable
management of living
natural resources and land use
Climate change adaptation
Circular economy adapted
products, production
technologies and processes

The green project has environmental benefits such as reduction of
CO2 emissions through low carbonization and decarbonization by
project classification and category projects shown in 1b which
contributing to Hitachi Zosen's environmental policy and goals basedon the medium- to long-term vision. It was confirmed that theenvironmental impact was quantitatively evaluated based on CO2emission reduction amount, introduction facility outline, power
generation output, etc., and reported annually.
Of the proceeds by the green bond, net proceeds will be allocated toprojects selected from eligible candidate projects included in
Schedule-1 as new investment or refinancing. The specificrefinancing amount, ratio, etc. for each project will be clarified in theannual report after the bond issuance.

Hitachi Zosen Corporation Green Bond Framework Pre-issuance Second Party Opinion

GBP-2 Process for Project Evaluation and Selection
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

2aInvestmentdecision
process

The issuer of a Green Bond should
outline the decision-making process it
follows to determine the eligibility of
projects using Green Bond proceeds.
This includes, without limitation:• A process to determine how the
projects fit within the eligible Green
Projects categories identified in theGreen Bond Principles;• The criteria making the projects
eligible for using the Green Bond
proceeds; and• The environmental green objectives

Confirmed documents:- Green Bond
Framework- Green Project related
documents

DNV has confirmed through the review that the six Green Bond Candidate
Projects listed in Schedule-1 meet the issuer's Group Philosophy and Group
Vision, and are evaluated and selected by the relevant department (Eachresponsible department implementing each eligible project and Finance
Department) of the issuer through an appropriate prescribed process, andthe Board of Directors, the highest decision-making body in businessexecution, will give final approval.

Interview with Hitz

In selecting a project, it shall meet the eligible criteria shown in "(3)Standards/guidelines to be applied in the section ‘II Scope and Objectives’ "and meet the following requirements.
-

The environmental impact assessment by the country of residence or
local government is carried out appropriately, if necessary.

-

Providing adequate explanations to local residents when conducting
business.

-

Making efforts to decrease the environmental risks throughmanagement of emissions by setting voluntary standards and target
values that are more strict than the law on the emission of pollutants
to the environment in the equipment manufacturing process.

-To prevent environmental problem and minimize environmental risks,
make sure employees are strictly following manuals when at work and-Page 26 of 29

also all the equipment are thoroughly checked on a regular basis.
Being aware of the risk of bringing environmental disaster, and prepare
manual that demonstrate procedures to minimize the effect of thedisaster. Also, conduct emergency drills on a regular basis.

Hitachi Zosen Corporation Green Bond Framework Pre-issuance Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

2bIssuer’s
environmentalgovernanceframework

In addition to information disclosed
by an issuer on its Green Bond
process, criteria and assurances,
Green Bond investors may also take
into consideration the quality of theissuer’s overall framework andperformance regarding
environmental sustainability.

Confirmed documents:- Green Bond
Framework- Hitz Management
Philosophy, MediumTerm Management
Plan, etc.
- Hitz Integrated Report
2020- Hitz’s Website

DNV confirmed that the green project implemented by the issuer is in linewith the issuer's management and environmental policies.
DNV confirmed through the confirmed documents such as framework etc.,
and through interview that Hitz is working on the conservation of thesurrounding environment in each related department and is conducting orplanning to carry out regular monitoring in the PDCA cycle when operating
and implementing the project.
It was also confirmed that the green project implemented by Hitz based on
the framework is an effective project for the realization of a sustainable
society.

Interview with Hitz

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Hitachi Zosen Corporation Green Bond Framework Pre-issuance Second Party Opinion

GBP-3 Management of proceeds
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

3aTracking
procedure-1

The net proceeds of Green Bonds should be credited
to a sub-account, moved to a sub- portfolio orotherwise tracked by the issuer in an appropriatemanner and attested to by a formal internal processthat will be linked to the issuer’s lending andinvestment operations for Green Projects.

Confirmed documents:- Green Bond Framework- Hitz Internal Management
Documents(Cash management table,
fund management flow)

The Finance Department is in charge of allocation of theproceeds to eligible projects and managing theproceeds. The budget and actual outlay of the proceedsfrom the Green Bond issuance will be traced andmanaged using an internal management system on amonthly basis in accordance with Hitz's cash
management flow by numbering each eligible project.
DNV confirmed that Hitz carried out tracking
management by internal control based on the above
process.

Interview with Hitz

3b

Tracking
procedure-2

So long as the Green Bonds are outstanding, thebalance of the tracked proceeds should beperiodically reduced by amounts matching eligible
green investments or loan disbursements madeduring that period.

Confirmed documents:- Green Bond Framework- Hitz Internal Management
Documents(Cash management table)
Interview with Hitz

Hitz can confirm regularly (at the end of each month)that the total of the allocated amount and theunallocated balance match the proceeds, and DNV
confirmed that Hitz has a system to manage theproceeds separately from other balances.

3c

Temporaryholdings

Pending such investments or disbursements toeligible Green Projects, the issuer should makeknown to investors the intended types of temporary
investment instruments for the balance of
unallocated proceeds.

Confirmed documents:- Green Bond Framework- Hitz Internal Management
Documents(Cash management table)
Interview with Hitz

Through the confirmation process based on the internalmanagement system, it was confirmed that the balanceof unallocated amount is recognized sequentially.
It was confirmed through the framework andassessment that the amount equivalent to the proceeds
will be managed in cash and cash equivalents until the
allocation of the proceeds is decided. It was confirmedthat the balance of unallocated amount will be clarified
through the reporting of the allocation status.

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Hitachi Zosen Corporation Green Bond Framework Pre-issuance Second Party Opinion

GBP-4 Reporting
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

4aPeriodical
reportingIn addition to reporting on the use of proceeds and thetemporary investment of unallocated proceeds, issuers
should provide at least annually a list of projects towhich Green Bond proceeds have been allocatedincluding- when possible, with regards to confidentiality and/or
competitive considerations- a brief description of the projects and the amounts
disbursed, as well as the expected environmentally
sustainable impact.

Confirmed documents:- Green Bond Framework- Hitz Integrated report 2020
- Hitz’s Website

DNV confirmed that the issuer will carry out anannual report on green bonds through its website
and integrated report until the proceeds areallocated, and will disclose information on the
allocation status and environmental impacts.
Regarding the environmental impacts, it was
confirmed that one or more of the following tables
will be disclosed to the extent possible inconsideration of confidentiality and as long as it isreasonably feasible.

Interview with Hitz

<Allocation status>
Allocated amount
Balance of unallocated amount andoperation method
Allocation ratio for each project, etc.
<Environmental impact>Outline of installed facilitiesPower generation output

GHG emission reduction etc.

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