Overview of Green Investment Guidance 2.0 (1)Disclosure based on the TCFD recommendations is progressing. In order to facilitate green investment, significant
progress since the publication of the first edition is reflected for investors and other stakeholders to understand theinformation disclosed. The new “addendums” discuss topics that are considered to be important.

Expected to help companies better understand the perspectives of investors and other stakeholders, leading to furtherdisclosure.

Basic Approach

Structure

Promote constructive dialogue (engagement) with companies, leading toenhanced corporate value.

Main

Identify and assess the risks and opportunities posed by climate change.

Text

Promote innovation for decarbonization, and to create mechanisms forappropriate flow of funds.

Aims to realize a “virtuous cycle of environment and growth”

Addendum
New

Provides commentary on evaluating andutilizing the information disclosed fromfour viewpoints. Reflects significant
progress since the publication of thefirst edition.
Discusses
topicsandinitiatives
considered to be important forinvestors and other stakeholders tounderstand the disclosure information.
To be revised taking into account thelatest situation.

Main highlights of revision
Progresson socialissuesCurrently, achieving carbon neutrality is becoming a goal for many countries and companies. In order toachieve this goal, transition on a massive scale and significant technological progress (innovation) arerequired. Therefore, a growing importance is placed on engagement.

Progresson financial
actionEfforts to reduce emissions from financial portfolios including indirect financing are gaining momentum.
Therefore, it is becoming necessary to take measures to encourage borrowers to respond to climatechange through long-term engagement.

Progress incorporate
disclosure

Disclosure is progressing due to factors such as increase in disclosing companies due to revision of theCorporate Governance Code, as well as use of internal carbon pricing and increased emphasis on Scope 3emissions. These necessitate investors and other stakeholders to consider such information taking into
account materiality.

1Overview of Green Investment Guidance 2.0 (2)Main text

It is important for investors and other stakeholders to understand information disclosed based onTCFD according to the following perspectives.

1.Governance Consider a companyʼs organizational structure in terms of governance to address climate change, and also whether it is actually functionaland effective to that end.
 Identify the organizational structures and functions in addition to corporate boards, and whether oversight by the board is effective.
 Verify that board oversight of climate-related governance is being effectively implemented, or that the equivalent to board oversight is ensured
through reports to the boards from the relevant committees.
 Management structures related to governance, their specific roles of each organizations and the management, as well as processes to reflect theirdeliberations in management.

Example of verification on governance through engagement by investors and other stakeholders【Verification of effectiveness】 Investor B engages with different counterparts of a company depending on the topic of interest, seeking
dialogue with the CEO to check the companyʼs commitment to climate-related issues, but going to the director(s) responsible for specificimplementation systems and their effectiveness. Through such engagement, the attitude of the whole company including management ischanged, leading to the creation of an appropriate governance system, such as building climate-related organizational systems or bringing
about discussions in board meetings.

2. Strategies and Business Models

 It is more important to check and assess the alignment between the decision-making processes that led to a companyʼs strategies and thescenarios used as well as their appropriateness within the industry, than the accuracy of the data of the scenario or analytical results provided
by the company.
 Context of the relevant scenarios selected and developed, any assumptions behind the scenarios, and alignment of a companyʼs underlying future
vision with its business model.
 The most crucial issue is whether the scenarios are being utilized appropriately to derive persuasive and reasonable results of analysis, or narratives,
and whether the companies have taken the necessary measures aligned with the narratives, rather than which scenarios have been used.
 Disclosures may be limited, and not all of the scenarios that have been used by that company for decision-making in strategy development may bedisclosed, and climate-related information inevitably includes uncertainty.
 In case of companies aiming for carbon neutrality, it is also important to increase understanding through encouraging the information disclosed
related to transition.
 It is desirable to consider the use of internal carbon pricing (ICP) after understanding the assumptions and grounds for the numerical values.
 ICP provides an opportunity for investors and others to engage and deepen their understanding of the strategy and business model.
Example of verification on strategies and business models through engagement by investors and other stakeholders【Scenario assessment】 Investor B is aware that scenarios should be understood as narratives based on multiple assumptions. What isimportant is not credibility of the results of analysis, but the responses to the expected futures, so in evaluation, it checks whether the2companies have taken such measures.

Overview of Green Investment Guidance 2.0 (3)Main text
3. Risks and Opportunities
 Have a balanced evaluation of a companyʼs risks and opportunities, by understanding a companyʼs efforts to address risks, while also activelyevaluating the potential opportunities of climate actions.
 Recognize the importance of innovation, and to positively evaluate the relationship between innovation and the companyʼs long-term
strategies, as well as organizational systems to promote innovation.
 Alignment of a companyʼs long-term strategies and underlying perceptions about the future business environment with the direction of its innovation
efforts.
 Regarding the management systems of a company engaged in innovation, confirm commitment of its management organizational design, processes,
and organizational culture

Example of verification on on risks and opportunities through engagement by investors and other stakeholders【Facilitation of proactive disclosure of opportunities through engagement】 Investor C is engaging not only with manufacturers of final
products but also with those providing technologies and components that support the final products, to discuss their future revenue
opportunities and social innovation opportunities. It is of the view that enhanced corporate value will result if investors discover suchopportunities and encourage their active disclosure.
4. Performance and Key Performance Indicators (KPIs）
 Understand a companyʼs rationale for establishing the specific KPIs that it manages and discloses, and confirm its alignment with thecompanyʼs strategies (Check not only the levels of KPIs but also their trend of improvement).
 Consider relevant industry characteristics upon comparative evaluation of KPIs.
 Evaluate companies by considering not only their GHG emissions through the entire value chain but also their contributions to emission
reduction at the usage of their products and services.
 Evaluate in a comprehensive manner by considering emissions throughout the entire value chain (Scope 3 emissions), as well as
contributions to reduction of products and services in the use phase.
 In order to use information on Scope 3 emissions on understanding risks and opportunities, basis and assumptions of calculation areimportant.
 Pay attention to intermediate products that would bring reduction contributions at a point of usage.

Example of verification on on Performance and Key Performance Indicators (KPIs) through engagement by investors and otherstakeholders【Confirmation of alignment of KPIs and strategies】 Investor A assesses climate-related KPIs set by companies from the perspective of both
environmental and business advantages. In doing so, the Investor looks not only at increased revenues but also at what corporate value iscreated and what business benefits can be anticipated.

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Overview of Green Investment Guidance 2.0 (4)Addendums

Topics that are considered to be important for investors and other stakeholders to understand disclosed information butfor which interpretation and viewpoints have not yet been determined are identified and discussed. These may be revised
in response to future discussions and trends in related topics.

1. Paris Agreement and Carbon Neutrality
In recent years, many countries and companies have adopted "carbon neutral" targets, but the futures envisaged are diverse.
Investors and other stakeholders should keep in mind that there are various pathways to carbon neutrality and should understand thebackground of the scenario used as a reference for disclosure by companies.

2. Transition FinanceNewNew

Transition finance is an important means for achieving carbon neutrality, and actively evaluating companies that demonstrate
appropriate transition plans will lead to decarbonization of their investment and loan portfolios in the future.

３. Initiatives for Investors and other Stakeholders on Climate Change NewInitiatives to decarbonize portfolios of various investors and other stakeholders, including asset owners, asset managers, banks, andinsurance companies are being launched. Under these circumstances, investors and other stakeholders are expected to engage inactivities that include facilitating the transition of their investees and borrowers towards carbon neutrality.

４. Evaluation of Participation in External Climate Initiatives
An increasing number of companies are taking part in external climate initiatives. However, it is recommended that evaluations bemade taking into account specific efforts rather than apparent characteristics such as participation or non-participation.

5. Carbon Pricing
New

Various forms of carbon pricing are considered by the government, with an intention to introduce without hesitation those that
contribute to materializing its growth strategies. Therefore, it is necessary to pay close attention not only to the trends of discussions
related to carbon pricing, but also to the development of relevant rules and guidelines.

6. Climate Change Risk Management for Investors and Other Stakeholders, and the Role of NGFS NewNGFS, a network of central banks and financial supervisors, maintains the view that climate change risks pose financial risks, andrecommends incorporating climate change risks into financial supervision monitoring. Through these trends, it is expected that private
sector financial institutions will be required to enhance addressing climate change risks and promote green investment.

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