Practical guide for Scenario Analysis
in line with the TCFD recommendations
2nd edition

Ministry of the Environment, Government of Japan
Climate Change Policy Division
March 2020

Contents
1.

Introduction
1-1. Purpose of this Practical guide

1-1

1-2. Positioning of scenario analysis on the TCFD recommendations

1-3

2. Scenario Analysis - Key Points of Practice

2-1

2-1. For starting scenario analysis

2-22-2. STEP2. Assess materiality of climate-related risks

2-9

2-3. STEP3. Identify and define range of scenarios

2-16

2-4. STEP4. Evaluate business impacts

2-25

2-5. STEP5. Identify potential responses

2-33

3-1

3. Scenario Analysis - Practice Examples

Appendix.

Appendix1. Parameter list

4-1

Appendix2. Physical risk assessment tools

4-46

Appendix3. Examples of scenario analysis

4-52

Contents Practice Examples supported by Ministry of the Environment, Government of Japan
3. Scenario Analysis - Practice Examples

3-1

Development Bank of Japan Inc.

3-6

LIXIL Group Corporation

3-92

ITOCHU Corporation

3-21

FUJIFILM Holdings Corporation

3-105

Chiyoda Corporation

3-29

Furukawa Electric Co., Ltd.

3-117

Mitsui O.S.K. Lines, Ltd.

3-37

Kagome Co., Ltd.

3-129

Japan Airlines Co., Ltd.

3-48

Calbee, Inc.

3-145

Mitsubishi Motors Corporation

3-54

Meiji Holdings Co., Ltd.

3-156

Kajima Corporation

3-60

KYOCERA Corporation

3-173

Sumitomo Forestry Co., Ltd.

3-71

Seven & i Holdings Co., Ltd.

3-185

Tokyu Fudosan Holdings Corporation

3-85

Lion Corporation

3-198

[Structure and Use of this Practical Guide]
Composed of The TCFD recommendations,examples, and Appendix
Corporate Needs

Key points for scenario

ractical

Chapters and the Practical Guide and Their Summaries

Companies want to know what the TCFD
recommendations are and what scenario
analysis is in terms of the TCFD
recommendations in the first place.

CHARTER 1. Introduction
This chapter explains the purpose of this practice guide, outlines the TCFD
recommendations in the background, and positions of scenario analysis.

Companies want to know the specificpromotion means and practical points for
scenario analysis.

CHAPTER 2. Scenario Analysis - Key Points of PracticeThis chapter explains how to practically undertake scenario analysis and describes
key points of its practice, based on use cases performed by companies under the
support program of the Ministry of Environment.

Companies want to know the actual
scenario analysis conducted by
Japanese companies for each step in theanalysis.

CHAPTER 3. Scenario Analysis - Practice Examples
This chapter explains how scenario analysis is carried out based on the support
cases of the Ministry of the Environment (18 companies).

Companies want to know the reference
tools and literature for scenario analysis.

Appendix.
Provide useful materials for scenario analysis based on supporting case studies

TCFD's approach for scenario analysis in this Practical Guide has been developed based on a technical supplement to scenario analysis ("TCFD Technical Supplement: The Use of Scenario
Analysis in Disclosure of Climate-related Risks and Opportunities" (2017.6)) as well as its own methodology and interpretations.
Figures for each case are based on information at the time of acquisition.
Examples of projects supported by the Ministry of the Environment are examples of projects supported by the "Project to Analyze Scenarios of Climate Risks and Opportunities in Accordance with
TCFD" implemented in FY2018 and FY2019.

1. Introduction
1-1. Purpose of this Practical Guide
1-2. Positioning of scenario analysis
on the TCFD recommendations
Chapter 1.

Introduction

This chapter explains the purpose of Practical Guide, concept of TCFD, andpositioning of scenario analysis

1-1[Challenges for companies in implementing scenario analysis]

There are roughly 4 difficulties that companies face in implementing scenario analysis
Scenario analysis is roughly understood, but no specific implementation process is known.
The processes and departments involved in scenario analysis differ for each company and product, and the level of
implementation of scenario analysis cannot be determined uniformly.
Efforts are required to ensure that internal management understands the purpose and the results of scenario
analysis.
Utilizable external data for scenario analysis is lacking.

The above issues can be resolved in this Practical Guide.
: Understanding of Practical Points and Practical Examples by Sector in this Practical Guide.
: First, scenario analysis is conducted using parameters within a known range. Start dialogue with the management team
based on the result.
: Describe the external data and parameter in Appendix.

The key is to begin scenario analysis with what you understand, and progress and deepen yourknowledge and experience.
Example: First, conduct qualitative scenario analysis. Then, try quantitative scenario analysis.
Example: First, apply scenario analysis to a certain segment. Then, apply to a greater part of your company.

The goal of scenario analysis is to
value

-

It is important not only to conduct scenario analysis, but also tohold dialogues with management.
Seize opportunities by continuing the cycle and incorporate it into business plans.

1-2

increase corporate
disclose information and1. Introduction
1-1. Purpose of this Practical Guide
1-2. Positioning of scenario analysis
on the TCFD recommendations
Chapter 1.

Introduction

This chapter explains the purpose of Practical Guide, concept of TCFD, andpositioning of scenario analysis

1-3

Background of the TCFD
Climate change risks could destabilize the financial system and become apossible threat to financial institutions
could prompt areassessment of the value of a large range of assets with a large volume of greenhouse gas emissions and destabilize
the financial
Board (FSB), Then Governor of the
Bank of England
Dr. Carney also refers to the possibility that a sudden reassessment could destabilize markets like the subprime loan
crises.

Speech by Mark Carney, Chair of the Financial Stability Board (FSB),
Then Governor of the Bank of England (September 2015)

There are three broad channels through which climate change can affect financial stability:
Physical risks : The direct impacts on property from climate related events, such as floods andstorms and indirect impacts on blocked global supply chain or depletion of resources;
Liability risks : The impacts that could arise if parties who have suffered loss or damage fromthe effects of climate change seek compensation from those they hold responsible;
Transition risks : The risks which could result from reassessment of the value of a large
range of assets with a large volume of greenhouse gas emissions during the process ofadjustment towards a lower carbon economy.

Source: Financial Times Online, September 30, 2015
1-4

Climate Change and Corporate Management
Climate change can present clear risks and opportunities for business
management
Business sustainability

Business management
Risks (opportunities) increase

Changes in modalities ofcompetition

Business common
sense and intelligence

Boycott and exclusionfrom market

Corporate value
Management

Investor-analyst
dialogue

Corporate brandimage

Non-financial
reporting disclosures

Business

Credit-rating
agencies
Environment/
CSR

Finance

Climate change requires reportingon not just the environment and CSR
but all matters.

The environment and CSR department has responded to the climate change, however,there is a growing need for a company to respond to the issues as a whole, as climate-

1-5

Objectives of the TCFD
The TCFD recommendations expect companies to gradually adopt therecommendations.
Objectives of the TCFD
Broad understanding of the concentrationof carbon related assets in the financial
to climate-related risks

Adoption Volume

Greater adaptation, further developmentof information provided (e.g., metrics andscenario analysis), and greater maturity
in using information

Final TCFD
ReportReleased
June 2017

Organizations begin todisclose in financial
filings

More complete, consistent, and comparable
information for market participants, increasedtransparency, and appropriate pricing of climaterelated risks and opportunities
Climate-related issues viewed as mainstream
business and investment considerations by bothusers and preparers

Companies already reporting under other frameworks
implement the Task

Five Year Time Frame
Resources: Task Force on Climate-related Financial Disclosures, 2017
1-6

Status of the TCFD recommendations in Each Country
Institutionalization of TCFD in Europe and China. Working on TCFD
recommendations can be global standard
Recent Trends in Each Country Based on TCFD
EU

Published a draft revision in March 2019 toward the revision of guidelines for non-financial reporting directive
On June 20, 2019, the draft revision of the guidelines and supplementary materials was announced. TCFD compliant (June 2019)

UK requests its regulators to support the TCFD recommendations

United Kingdom

The UK Green Finance Taskforce, established by the government to transition to a low-carbon society
Aiming to disclose information in line with TCFD of all listed companies and large asset owners by 2022.

Compiled recommendations on sustainable financing, including TCFD

CanadaExpert Panel established by the Ministry of the Environment and Climate Change and the Ministry of FinancePublication of the Final Report on the Issues and Recommendations on Institutionalization of Sustainable Finance, etc. (June 2019)
In addition, banks and other financial institutions and CSA (Canada Standard Authority) are taking the lead in discussing a unique Canadian taxonomy (October 2019).

FranceStarted standardizing and developing frameworks for non-financial data as a whole to disclose TCFD

Economic and Finance Minister consulted the Accounting Standards Authority to develop extra-financial information disclosure frameworks to disclose information based on TCFD.
Introduced a system to establish the Advisory Committee on Climate Change and Sustainable Finance composed of financial institutions, companies, and experts (July 2019)

China

Scheduled revision of Environmental Reporting Guidelines

A pilot project was launched in collaboration with the British government. Exploring the incorporation of a TCFD framework into the Chinese Environmental
Reporting Guidelines, and announcing its intention to make such mandatory for all listed companies by 2020 (January 2018). In addition, ESG has been
incorporated into the Governance Disclosure Guidelines (September 2018).

Developments toward institutionalization

EU revised its directive to comply with the TCFD recommendations

New York State department of Financial Services (DFS) has joined the Network
for Greeting the Financial System (NGFS)

United States

New York State Department of Financial Services (DFS) participates in NGFS. NGFS considers an appropriate response to the climate-related risks on financial
supervision, by publishing nonbinding recommendations in the integrated report in April 2019, including promotion of disclosu re based on the TCFD
recommendations (September 2019).
However, the United States officially notified the United Nations of its decision to withdraw from the Paris Agreement, and the future outlook is uncertain (October2019).
Japan

Released guidance on TCFD disclosures

METI released TCFD Guidance*1 by adding explanation to TCFD final report in order to promote disclosure by companies based on TCFD (December 2018).
The Ministry of the Environment announced a practical guide describing examples and methodologies to be used as a reference when companies conduct scenario analysis(March 2019, March 2020).
Led by five founders including Professor Kunio Ito of Hitotsubashi University, the TCFD Consortium was established (May 2019). The consortium formulated the Green Investment
Guidance*2 which provides commentaries on perspectives needed by investors and other stakeholders when understanding the information disclosed based on the TCFD
recommendations, and released it at the TCFD Summit (October 2019).
*1 Guidance for Climate-related Financial Disclosures *2 Guidance for Utilizing Climate-related Information to Promote Green Investment

1-7

Source: TCFD, 2019 Status Report Ministry of the Environment; European Union Commission website, etc.

[Status of approval for TCFD]
This is an initiative centered on the U.S. and Europe, and Japan ranks firstin the world in terms of the number of people in favor of it
As of February 25, 2020, 46 countries, 1,056 companies, governments, multilateral institutions, private organizations, etc., expressed theirsupport for TCFD. The Ministry of Environment on July 27, 2018, the Ministry of Economy, Trade and Industries on December 25, 2018, andFinancial Agencies Services Agency on December, 2017 announced that it agreed to adopt the TCFD recommendations.
As of June 2019, the total assets of financial institutions that have pledged their approval exceeded US$118 trillion, and thereafter increased(from the 2019 Status Report)

Number of Japanese Companies Presenting Support (as of February 25, 2020)

Non-Financial(161)

Source: TCFD Consortium-provided materials

1-8
1-8

Industries and Groups

Number of companies

Financial (61)61
Energy17

Transportation

10

Materials and Buildings

38

Agriculture, Food, and Forest Products

9

Trading, Retail

13

Electronics, Machinery, Telecommunications

45

Consumer Goods, Pharmaceutical

10

Services19Outline of TCFD Consortium
In view of the increased awareness on corporate disclosure and use of climate-related information highlighted by the Task Force on Climaterelated Financial Disclosures (TCFD) in Japan, the private-led TCFD Consortium was established on May 27, 2019 by five founders.
* Founders of the consortium: Professor Kunio Ito of Hitotsubashi University; Chairman Hiroaki Nakanishi of Keidanren (Japan Business Federation);
Chair Makoto Takashima of the Japan Bankers Association; President and Chief Executive Officer Takehiko Kakiuchi of Mitsubishi Corporation; andChairman of the Board Shuzo Sumi of Tokyo Marine Holdings.

the Consortium aims to further discussion on effective corporate disclosure of climate-related information and their use by financial
institutions for appropriate investment decision.
Green Investment Guidance was formulated to provide commentaries on perspectives needed by investors and other stakeholders
when understanding the information disclosed based on the TCFD recommendations and released globally at the TCFD Summit
held on October 8, 2019.
In the future, TCFD Consortium will consider formulating TCFD Guidance ver2.0 which was originally formulated by the Ministry of
Economy, Trade and Industry in December 2018.
Achieving a Virtuous Cycle of Environment and Growth through TCFD Consortium
first step toward TCFD disclosure, thereby
encouraging disclosure by companies based on the
TCFD recommendations.

Formulation of TCFD Guidance ver2.0(Addition of sector-specific guidance and case studies, etc.)

Information disclosure

Companies
Initiatives forinnovation andcommercialization

Visualization of companies
engaged in innovation

Financial institutions, etc.

Virtuous cycle

Properly utilizing andevaluating disclosed
information

Attracting ESG investment

ESG investment
Formulation of Green Investment Guidance for financial institutions, etc.
(Discussions on points to consider when investors evaluate disclosed information)

See below for more information on TCFD
guidance.
https://www.meti.go.jp/english/press/2018/pdf/1225_0
06b.pdf
Based on the increase in corporate information
disclosure, it provides commentaries on perspectives
needed by investors and other stakeholders when
understanding the disclosed information.
It is also expected that companies will deepen theirunderstanding of the viewpoints of investors and otherstakeholders, leading to further disclosure.
See below for more information on Green
Investment Guidance.
https://tcfdconsortium.jp/pdf/news/19100801/green_investment_gui
dance-e.pdf

Source: TCFD Consortium

1-9

Requirement of the TCFD Recommendations
The TCFD recommendations disclosure of information related toclimate change that poses financial risks and opportunities
Climate-relatedrisks

Climate-related
opportunities

Incorporating them in businessstrategies and risk management

Understanding financial impact
Disclosing information in financial
reporting
The TCFD recommendations request all companies to (i) use different climate-related
scenarios, including a 2 or lower scenario to (ii) assess their climate-related risks andopportunities, (iii) incorporate such risks and opportunities in their business strategies andrisk management, and (iv) understand and disclose their financial impacts.
Sources: prepared1-10

Climate[Financial Impact]
The TCFD recommendations present the scope of climate-related risks and opportunities,
and financial impacts to be disclosed

Climate-Related Risks, Opportunities, and Financial Impacts
Transition Risks

Opportunities

Policy and Legal

Resource Efficiency

Risks

Technology
MarketOpportunities

Energy Source
Products / Services

Reputation

Strategic Planning
Risk Management

Physical Risks

Financial Impact

Resilience

Markets

Acute

Financial Impact

Chronic
Revenues
Expenditures

IncomeStatement

Cash Flow
Statement

Source: prepared by the Ministry of Environment based on the Task Force on ClimateClimate-

Balance Sheet

Assets &Liabilities
Capital &Financing- Recommendations of the Task Force on

1-11[Climate-related Risks]
The TCFD Recommendations divided climate-related risks into two major categories: (1) risks
related to the transition to a lower-carbon economy and (2) risks related to the physical impacts ofclimate change

Category

Definition

Type

Major aspects and policy actions

Policy andLegalEnhancing regulations on GHG emissions, imposing
greater obligations on information disclosure
Replacing existing products with those based on low-

Risks related to theTransitiontransition to a lowerRisks
carbon economy

Physical
Risks

Risks related to thephysical impacts ofclimate change

Technology carbon technologies, investing in new technologies
that eventually turn out to be a failure

MarketChanges in consumer behaviors, market signals withgreater uncertainty, a rise in materials and costs

Reputation

Changes in customer or community perceptions,criticism against certain industries, increased concern
among stakeholders

Acute

Event-driven risks, including severity of extreme
events such as cyclones or floods

Chronic

Longer-term shifts in climate patterns, including
sustained higher temperatures, which may cause sea
level rise or chronic heat waves

Source: prepared by the Ministry of Environment based on the Task Force on ClimateClimate1-12- Recommendations of the Task Force on

[Climate-related Opportunities]
The TCFD recommendations identified the following five areas of climate-related opportunities
that organizations can produce in the course of their efforts to mitigate and adapt to climatechangeArea

Policy actions

Financial impact

Use of more efficient models of transport
Use of more efficient production anddistribution processes
Use of Recycling
Move to more efficient buildings
Reduced water usage and consumption

Reduced operating costs (e.g., through efficiency gains and cost
reductions)
Increased production capacity, resulting in increased revenues
Increased value of fixed assets (e.g., highly rated energy-efficientbuildings)
Benefits to workforce management and planning (e.g., improved healthand safety, employee satisfaction) resulting in lower costs

EnergySourceUse of lower-emission sources of energy
Use of supportive policy incentives
Use of new technologies
Participation in carbon market
Shift toward decentralized energy generation

Reduced operational costs (e.g., through use of lowest cost abatement)
Reduced exposure to future fossil fuel price increases
Reduced exposure to GHG emissions and therefore less sensitivity tochanges in cost of carbon
Returns on investment in low-emissions technology
Increased capital availability (e.g., as more investors favor loweremissions producers)
Reputational benefits resulting in increased demand for goods/services

Products
andServices

Development and/or expansion of low
emission goods and services
Development of climate adaptation andinsurance risk solutions
Development of new products or services
through R&D and innovation
Ability to diversify business activities

Increased revenue through demand for lower emissions products andservices
Increased revenue through new solutions to adaptation needs (e.g.,
insurance risk transfer products and services)
Better competitive position to reflect shifting consumer preferences,resulting in increased revenues

Markets

Access to new markets
Use of public-sector incentives
Access to new assets and locations needing
insurance coverage

Increased revenues through access to new and emerging markets (e.g.,partnerships with governments, development banks)
Increased diversification of financial assets (e.g., green bonds andinfrastructure)

Resilience

Participation in renewable energy programs
and adaptation of energy-efficiency measures
Resource substitutes/diversification

Increased market valuation through resilience planning
Increased reliability of supply chain and ability to operate under various
conditions
Increased revenue through new products and services

Resource
Efficiency

Opportunities

Source: prepared by the Ministry of Environment based on the Task Force on ClimateClimate1-13- Recommendations of the Task Force on[Guidance for Specific Sectors]
The TCFD supplemental guidance provides additional context and suggestions for
implementing the recommended disclosures for four non-financial sectors (Energy; Materials
and Buildings; Transportation; and Agriculture, Food, and Forest Products) potentially mostaffected by climate change
SectorIndustry

EnergyOil and Gas
Coal
Electric Utilities

Transportation

Materials andBuildings

Agriculture,
Food, and
ForestProducts

Recommended disclosure
Assessment and potential impacts of legal compliance, operating costs,
changes in risks and opportunities; changes in regulations and shift inconsumer and investor preferences; and changes in investment
strategy

Air Transport, Maritime
Assessment and potential impacts of financial risks of enhanced
Transportation
regulations and new technology on existing factories and equipment;
Land Transportation (RailR&D investment in new technologies; opportunities for use of new
Transportation, Tracking technologies to lower emissions standards and regulations on higher
Services)
fuel efficiency
Automobiles
Metals and Mining
Assessment and potential impacts of enhanced regulations on GHG
Chemicals
emissions and carbon pricing; risk assessment of increased severity ofConstruction Materials,
extreme weather events on construction materials and property; andCapital Goods
opportunities for products to improve energy efficiency or reduce
Real Estate Management energy consumption
and Development
Beverages, Foods
Assessment and potential impacts of GHG emissions reductions;
Agriculture
recycling and waste management; business of food and textile
products with lower GHG emissions, and shifts in consumer
Paper and Forest
preferences
Products

Source: prepared by the Ministry of Environment based on the Task Force on ClimateClimate-65
1-14- Recommendations of the Task Force on[The TCFD recommendations]
The TCFD recommendations are structured around four thematic areas: Governance,
strategy, risk management, and metrics and targets
Recommended
disclosures

Governance

Strategy

RiskManagement

Metrics andTargets

Disclose the actual andDisclose how the organization Disclose the metrics andgovernance around climatepotential impacts of climateidentifies, assesses, andtargets used to assess andrelated risks and opportunities related risks and opportunities manages climate-related risks manage relevant climaterelated risks and opportunities
Areas in detailbusinesses, strategy, andwhere such information isfinancial planning where suchmaterial
information is material
oversight of climate-relatedrisks and opportunitiesa) Describe the climaterelated risks and opportunities processes for identifying andthe organization has identified assessing climate-related
over the short, medium, andrisks
long termb) Describe the impact ofrole in assessing andclimate-related risks andRecommended managing climate-related risks opportunities on the
Disclosures and opportunities
strategy, and financial
planningc) Describe the resilience oftaking into considerationdifferent climate-related
scenarios, including a 2 C or
lower scenario
Source: prepared by the Ministry of Environment based on the Task Force on ClimateClimate-processes for managing
climate-related risksa) Disclose the metrics usedby the organization to assessclimate-related risks andopportunities in line with its
strategy and risk management
processb) Disclose Scope 1, Scope 2,
and if appropriate, Scope 3
greenhouse gas (GHG)
emissions, and the related
risksc) Describe how processes for c) Describe the targets used
identifying, assessing, andby the organization to manage
managing climate-related risks climate-related risks andare integrated into theopportunities, andperformance against targets
management- Recommendations of the Task Force on

1-15[Governance = Involvement of Management]
To incorporate climate-related risks and opportunities in business strategy, an organization
should establish a system involving management. The TCFD recommendations require an-related risks and opportunities, and-related risks and opportunities
Processes and frequency by which the board and/or board committees are informed
about climate-related issues
Whether the board and/or board committees consider climate-related issues whenreviewing and guiding strategy, major plans of action, risk management policies,
objectives, monitoring implementation and performance, and overseeing major
capital expenditures, acquisitions, and divestitures

governancearound climaterelated risks andopportunities

How the board monitors and oversees progress against goals and targets foraddressing climate-related issues

Management role in assessing and managing climate-related risks andopportunities
Whether the organization has assigned climate-related responsibilities tomanagement-level positions or committees; and, if so, whether such management
positions or committees report to the board or a committee of the board and whether
those responsibilities include assessing and/or managing climate-related issues
A description of the associated organizational structure(s)How management (through specific positions and/or management committees)monitors climate-related issues

Source: prepared by the Ministry of Environment based on the Task Force on ClimateClimate1-16- Recommendations of the Task Force on

[Strategy]
The TCFD recommendations require an organization to describe the climate-related risks andtaking into consideration different climate-related scenarios, including a 2 C or lower scenario
The climate-related risks and opportunities the organization has identified over the
short, medium, and long term
A description of what they consider to be the relevant short, medium, and long-term time
horizons
The specific climate-related issues for each time horizon that could have a material financial
impact on the organization
The process(es) used to determine which risks and opportunities could have a material financial
impact on the organization

Impact on the

The impact of climatebusinesses,
businesses, strategy, and financial planning
strategy, andHow identified climate-related issues have affected their businesses, strategy, and financial
financialplanning
planning (where
The impact on their businesses and strategy in the areas of products and services; supply chain
relevant
and/or value chain; adaptation and mitigation activities; investment in research anddevelopment; and operations
information is
The impact of climate-related issues on operating costs and revenues; capital expenditures andcritical)
capital allocation; acquisitions or divestments; and access to capitalclimate-related scenarios, including a 2 C or lower scenario
How resilient their strategies are to climate-related risks and opportunities
Where they believe their strategies may be affected by climate-related risks and opportunities;
how their strategies might change to address such potential risks and opportunities; and theclimate-related scenarios and associated time horizon(s)Source: prepared by the Ministry of Environment based on the Task Force on ClimateClimate-21
1-17- Recommendations of the Task Force on[Risk Management]
for identifying, assessing, and managing climate-related risks, as well as how these-relatedrisks

How theorganization
identifies,
assesses,and manages
climaterelated risks

Their risk management processes for identifying and assessing climate-related risks(An important aspect is how the organization determines the relative materiality ofclimate-related risks in relation to other risks)
Whether they consider existing and emerging regulatory requirements related to climatechangeTheir processes for assessing the potential size and scope of identified climate-relatedrisks; and definitions of risk terminology used or references to existing risk classification
frameworks used-related risks
Their processes for managing climate-related risks, (including how they make decisions
to mitigate, transfer, accept, or control those risks)
Their processes for prioritizing climate-related risks, (including how materiality
determinations are made)How processes for identifying, assessing, and managing climate-related risks

How their processes for identifying, assessing, and managing climaterelated risks are integrated into their overall risk management
Source: prepared by the Ministry of Environment based on the Task Force on ClimateClimate-22
1-18- Recommendations of the Task Force on

[Metrics and Targets]
The TCFD recommendations require an organization to describe the metrics used to assessclimate-related risks and opportunities in line with its strategy and risk management process;
GHG emissions; the targets to manage climate-related risks and opportunities, andperformance against targets
The metrics used by the organization to assess climate-related risks and opportunities inline with its strategy and risk management process

The metrics andtargets used toassess andmanage relevant
climate-relatedrisks andopportunities
where suchinformation ismaterial

The key metrics used to measure and manage climate-related risks and opportunities (organizations
should consider including metrics associated with water, energy, land use, and waste management)
Whether and how related performance metrics are incorporated into remuneration policies (whereclimate-related issues are material)
Their internal carbon prices as well as climate-related opportunity metrics such as revenue fromproducts and services designed for a lower-carbon economy
Metrics should be provided for historical periods to allow for trend analysis. The methodologies used
to calculate or estimate metrics should also be included.

Scope 1, Scope 2, and if appropriate, Scope 3 greenhouse gas (GHG) emissions, and therelated risks
GHG emissions calculated in line with the GHG Protocol methodology to allow for aggregation andcomparability across organizations and jurisdictions
Related, generally accepted industry-specific GHG efficiency ratios (as appropriate)
GHG emissions and associated metrics should be provided for historical periods. The methodologies
used to calculate or estimate the metrics should also be included.

The targets used by the organization to manage climate-related risks and opportunities
and performance against targets
Their key climate-related targets (such as those related to GHG emissions, water usage, energy
usage)
Other goals including efficiency or financial goals through the entire life cycle of products and services
Whether the target is absolute or intensity; time frames over which the target applies; key performanceindicators, etc.

Source: prepared by the Ministry of Environment based on the Task Force on ClimateClimate-23- Recommendations of the Task Force on

1-19

Materiality of Scenario Analysis
Disclosure through scenario analysis is recommended to assess theimpacts of climate-related risks and opportunities. Developed technicalsupplement for scenario analysis

Usefulness of
scenario
analysisTargetTransition
risk
Physical risk

Scenario analysis can be useful as a tool for an organization to strategically tackle challenges in the longrun that are highly uncertain
Disclosure should also include assumptions for critical scenarios for sectors where climaterelated risks are a concern. Scenario analysis requires skill and effort, but it also benefits theorganization.

Applicable range of scenarios
IEA WEO SDS/ETP 2DS/IEA WEO STEPS/IEA WEO NPS(2°C Target Achievement Scenario versus No Scenario)
Deep decarbonizaion Pathways Project (2°C target achieved)
IRENA REmap (doubling the renewable energy ratio by 2030)
Greenpeace Advanced Energy [R] evolution (2°C Target Achieved)
RCPs (Representative Concentration Pathway) Scenarios adopted by IPCC: RCP8. 5,
RCP6. 0, RCP4. 5, RCP2. 6

Source: Climate-Related Financial Disclosure Task Force, Recommendations by the Climate-Related Financial Disclosure Task Force (Final), 2017, pp. 25-29.
Prepared by the Ministry of the Environment based on the Task Force on Climate-Related Financial Information Disclosure, Utilization of Scenario
Analysis in Climate-Related Risks and Opportunities Disclosure, Auxiliary Guidance on Pages 2017, 21 & 25.
Scenarios listed on IEA WEO are updated based on the most recent publicly available report.
1-20

Materiality of Scenario Analysis
Scenario analysis enables strategic planning and internal/external
dialogue in response to future uncertainties
In

In a longer term, where outcomes are highly

VisionTarget1-21

Medium term business plan (3-5 Years)

Assume multiple scenarios

Business strategy cannot respond to changes in the future
The discussion never reaches a consensus on future
perspectives
Suspected of lacking business resilience

Business management can flexibly respond to future change
The discussion takes places without any subjective
viewpoints on futureManagement can demonstrate business resilience2. Scenario Analysis - Key Points of Practice2-1.

For beginning scenario analysis

2-2.

STEP2.

Assess materiality of climate-related risks

2-3.

STEP3.

Identify and define range of scenarios

2-4.

STEP4.

Evaluate business impacts

2-5.

STEP5.

Identify potential responses

Chapter 2

Scenario Analysis - Key Points of PracticeThis chapter explains how to practically undertake scenario analysis and describes key
points of its practice, based on use cases performed by companies under the support
program of the Ministry of Environment.

Points to consider when implementing scenario analysis in line with the TCFD
recommendations were mapped out for 18 companies, forming the basis for the trial
Notes in red: Points to consider in each step were added after the support program.

1
2

Ensure governanceIs in place

Integrate scenario analysis into strategic planning and/or enterprise risk management processes.
Assign oversight to relevant board committees/subcommittees.
Identify which internal (and external) stakeholders to involve and how.

Assess materiality ofclimate-related risksMarket andTechnology
ShiftsReputation

Policy andLegalPhysical
Risks

What are the current andanticipated organizational
exposures to climate-relatedrisks and opportunities?
Do these have the potential to
be material in the future? Are
stakeholders concerned?
Pick and choose fromyour industry
and company viewpoint!

Identify and define
range of scenarios
Scenarios inclusive of arange of transition andphysical risks relevant to
the organization

What scenarios (andnarratives) are appropriate,given the exposures?
Consider input parameters,
assumptions, and analyticalchoices. What reference
scenario(s) should be used?

Clearly imagine a future world
under certain assumptions!

4 Evaluate business
impacts
Impact on:
costs
costs
chain
interruption
Evaluate the potential effects

and financial position undereach of the defined scenarios.
Identify key sensitivities.

Try not to seek
too much accuracy!

5

Identify potential
responses
Responses might include
to businessmodel
to portfolio mix
incapabilities andtechnologies

Use the results to identify
applicable, realistic decisions
to manage the identified risks
and opportunities.
What adjustments tostrategic/financial plans would
be needed?
Do not narrow down!
Take multiple scenarios
into account.

Disclose information
Document the process; communicate to relevant parties: Be prepared to disclose
Documentation andkey
inputs,assumptions,analyticalmethods,
outputs,
andpotential
management
responses
disclose
Sources: The Task Force on Climate related
Disclosure of Climate
Related Risks and Opportunities June 2017.

6

2-1

3

Get management
and operation
divisions involved!

2. Scenario Analysis - Key Points of Practice2-1.

For beginning scenario analysis

2-2.

STEP2.

Assess materiality of climate-related risks

2-3.

STEP3.

Identify and define range of scenarios

2-4.

STEP4.

Evaluate business impacts

2-5.

STEP5.

Identify potential responses

Chapter 2

Scenario Analysis Key Points of PracticeThis chapter explains how to practically undertake scenario analysis and describes key
points of its practice, based on use cases performed by companies under the support
program of the Ministry of Environment.
2-2[When starting a Scenario Analysis ]Gaining understanding from management on the materiality of scenario analysis is important.
Establishing a team, scope and time horizon is necessary when starting scenario analysis.
Preparation

Preparation

understanding
Make sure management
understands the materialityof TCFD(Recognizes therecommendations andinstructs that they becomplied with)

Preparation

Preparation

Establish execution
team

Choose target foranalysis

Setting the analysis
time axis

Create an execution teamfor scenario analysis

Set a target scope for the
scenario analysis

Choose time horizon to
conduct scenario analysis
that looks beyond X years in
the future

Point
How to provide input to management in terms of climate change

2-3Preparation

Companies conduct scenario analysis regularly (recognition of a broad range of risks andidentification of potential responses). It is crucial for management to understand that investors
expect companies to conduct scenario analysis on climate change.

In a longer term, where outcomes are highlyIn

VisionTargetMedium term business plan (3-5 Years)

Assume multiple scenarios

Business strategy cannot respond to changes in
the future
The discussion never reaches a consensus on
future perspectives
Suspected of lacking business resilience

Business management can flexibly respond to futurechangeThe discussion takes places without any subjective
viewpoints on futureManagement can demonstrate business resilience

2-4

How to provide input to managementin terms of climate change
It is effective to convey the effect that climate change solutions have on the value of businesses
through workshops with experts. As part of the Ministry of the Environment's support programs,
selected companies held scenario analysis report meetings for management.
These meetings are effective in gaining and
Input from multi-stakeholders
Requests from multi-stakeholders for climate change response
accelerated

Investors andexperts

NPONGO

ESG investments
Requirement of TCFD
Disclosures
Engagement
OthersOther
companies
in the same
industry

Management level

Compliance
Requests, etc.

Comparison withpeer companies, etc.

Business-related departments
Environment-related departments

Changes in consumer preferences
Specific impacts of climate change on your company, etc.

There are some cases in which top management hears directly, butthere are also cases in which there is still significant distance.
In such a case, it is important to compile the status of requests
from multi-stakeholders, and input to management through study
groups with experts and other means that responding toclimate change can affect corporate value.
As an input source for support projects by the Ministry of theEnvironment
It is essential to hold briefings of impact of climate change(results of scenario analysis) for management, and thesebriefings have been proven to be highly effective.

[Results of the FY2018 Ministry of the Environment Scenario Analysis
Support Project]Company A: Established a new department specializing in the
integration of IR/Sustainability as the understanding of management
progressed. Periodic discussions with executives on TCFD held at
the Sustainability Committee
Company B: Improved understanding of management and launcheda team for climate change management. Executive Vice
President assumes chairmanship

2-5

Create an execution team for scenario analysis

Preparation

Some companies from the program noted the significance of internal involvement when
conducting scenario analysis. It is essential to form a team where divisions are involved

Pattern A

Pattern B

Get relevant divisions and departments involvedin the course of scenario analysis

Develop internal teams and start scenario analysis
Image

Start

STEP2

Image

STEP3
Business
Divisions

Business
Divisions

Accounting and
Finance

Accounting and
Finance
Management

Management
IR

Scenario analysis team

Environment and
CSR
IRCorporate
Planning

Environment and CSR

Corporate Planning

Advantages
Easy to start
Minimum burden on each division/department
Disadvantage
Internal coordination needed in the scenario analysis
process
Long process from the environment/CSR division to
management

Advantages
Divisions are cooperative as internal coordination iscompleted in advanceThe process swiftly reaches top management as awell-coordinated team performs analysis
Disadvantage
Takes time to start analysis
Great burden on each division/department

2-6

Choose target for analysis

Preparation

By defining the scope in terms of sales composition, relation to climate change, anddifficulty of data collection, companies can conduct scenario analysis in accordance with
their business model.
Item

Options for Scenario Analysis Scenario (Example)

RegionDomestic

Overseas

Scope of
Operations

Some businesses

All businesses

Corporatescope

Only for the scope of consolidated
financial statements

Entire supply chain
Proposal for selection

Proposal for selection

Proposal for selection

Identify scope of business basedon sales composition ratio[Sales composition (%)]

Identify scope of business basedon relevance to climate change[CO2 emissions (tCO2)]

Business C
11.8%
Business C
Business B

33.3%

98,765
123,456 Business A

54.9% Business A
3,549
Business B

Let's analyze business A andbusiness B, which have alarge sales composition

2-7

Consider businesses A and C,
which emit a large amount ofCO2.

Identify the scope based on
difficulty of data collection[CO2 emissions (tCO2)]
Foreignbranch X

Abundant internal
data

Foreignbranch Y

No internal data

Foreignbranch Z

No internal data

As for the overseas business,start with X with ample data.

Preparation

Choose time horizon to conduct scenario analysis

It is important to choose a time horizon with maximum benefit to the company by comparing
the merits and demerits of factors from a perspective of project length, amount of internal
involvement, and effect of physical risks[Forecast of global average surface temperature] (Difference from the 1986-2005 average)

Difference in theworldview depending on
when is being analyzed

4°C scenario

2°C scenario

2030

2050

[Discussions on time horizon decisions raised in support projects (examples)]Benefits

Disadvantage

2030

Abundant data available for reference
Relatively easy to link with business plans

Possibility that the impact of physical risk issmall and that the impact on the company will
be low

2050

Physical risks are emerging.

Cooperation may be difficult (cannot involvethe company) because there is distance fromthe time horizon of the business plan

Source: AR5 SYR Chart SPM.6, IEA, "ETP2017," UNEP, "The Emission Gap Report 2015
2-8

2. Scenario Analysis - Key Points of Practice2-1.

For beginning scenario analysis

2-2.

STEP2.

Assess materiality of climate-related risks

2-3.

STEP3.

Identify and define range of scenarios

2-4.

STEP4.

Evaluate business impacts

2-5.

STEP5.

Identify potential responses

Chapter 2

Scenario Analysis - Key Points of PracticeThis chapter explains how to practically undertake scenario analysis and describes key
points of its practice, based on use cases performed by companies under the support
program of the Ministry of Environment.
2-9Assess materiality of climate-related risks:
What are the current and anticipated organizational exposures to climate-relatedrisks and opportunities?
Notes in red: Points to consider in each step were added after the support program.

1
2

Ensure governanceIs in place

Assess materiality ofclimate-related risksMarket andTechnology
ShiftsReputation

Policy andLegalPhysical
Risks

Get management
and operation
divisions involved!

Integrate scenario analysis into strategic planning and/or enterprise risk management processes.
Assign oversight to relevant board committees/subcommittees.
Identify which internal (and external) stakeholders to involve and how.

What are the current andanticipated organizational
exposures to climate-relatedrisks and opportunities?
Do these have the potential to
be material in the future? Are
stakeholders concerned?
Pick and choose fromyour industry
and company viewpoint!

3

Identify and define
range of scenarios
Scenarios inclusive of arange of transition andphysical risks relevant to
the organization

What scenarios (andnarratives) are appropriate,given the exposures?
Consider input parameters,
assumptions, and analyticalchoices. What reference
scenario(s) should be used?

Clearly imagine a future world
under certain assumptions!

4 Evaluate business
impacts
Impact on:
costs
costs
chain
interruption
Evaluate the potential effects

and financial position undereach of the defined scenarios.
Identify key sensitivities.

Try not to seek
too much accuracy!

5

Identify potential
responses
Responses might include
to businessmodel
to portfolio mix
incapabilities andtechnologies

Use the results to identify
applicable, realistic decisions
to manage the identified risks
and opportunities.
What adjustments tostrategic/financial plans would
be needed?
Do not narrow down!
Take multiple scenarios
into account.

Disclose information
Document the process; communicate to relevant parties: Be prepared to disclose
Documentation andkey
inputs,assumptions,analyticalmethods,
outputs,
andpotential
management
responses
disclose
Sources: The Task Force on Climate related
Disclosure of Climate
Related Risks and Opportunities June 2017.

6

2-10

[Overview]
List risk items, identify the potential impacts on business, and assessmateriality of climate-related risks
Stage1
List risk items
List the risks and opportunities
related to targeted businessareas

Stage2
Identify potential impacts on
business

Stage3
Assess the materiality ofclimate-related risks

From the list of risk andopportunities, qualitatively
describe the potential impact on
business

Conduct risk assessment basedon scale of impact (large tosmall) and determine how
important it isNote

To what extent should the risk assessment be conducted?
Source: This Practical Guide (example of Chiyoda Corporation: 3-31)
2-11

[Stage1: List risk items]
List risk and opportunity categories for targeted business areas
Classification

Risks and Opportunities Related to Climate Change(Examples)

Carbon price

PolicyRegulation

External reports

Carbon emissions targets/policies
olicies in eachcountry
Energy-saving policy
Fossil fuel subsidies(Industry-specific reports,
etc.)

Subsidies for renewable energy, etc.
Transition

Changes in the energy mix

RiskMarketChanges in energy demand
Changes in important products/prices

Technologies

TCFD Recommended
Disclosures

Reputation

CDP responses fromcompetitors

Other external
information(CDP responses, etc.)

Diffusion of renewable energy and energysaving technologies

Changes in customer reputation
Changes in investor's reputation
Increase in average temperature

Physical

Chronic

Risk

Changes in rainfall and weather patterns
Rising sea level

Acute

Increasing severity of extreme weather
conditions

2-12[Stage 2: Identify potential impacts on business]
From the list of risk and opportunity items, qualitatively describe thepotential impact on business

It is important toconsider not only thecompany's risks but
also its opportunities.
Separate and examinerisks and opportunities

CDP
responses
fromcompetitors
External reports and other external
information
Source: This Practical Guide (example of Chiyoda Corporation: 3-31)
2-13

Describe the possible impact in a narrative manner throughdiscussions with related parties within the company, basedon the company's business model, etc.
Materiality of risks is reviewed throughout each step (not a final
decision at this time, but will be reviewed in terms of business impact).

Discussions with internal stakeholders

[Stage3: Materiality assessment of climate-related risks]
Conduct risk assessment based on scale of impact (large to small)Business
impactLarge

Risks and opportunities tied
to business impact

Policies and regulationsof each country
Changes in rainfall andweather conditions

Carbon price
Changes in important
products/prices

MediumChanges in the energymix
Changes in the
reputation of customers
and investors

Small

Energy-saving policy
Fossil fuel subsidies
Subsidies for renewableenergy, etc.
Energy demand
Improving efficiency

Comparison of each risk andopportunity item from the perspective of
the size of the business impact forthe company
Example: Describe risks andopportunities that impact in a wide
range, and those that relate to
Describe those that have no impact
and.

Diffusion ofrenewable/energy-saving
technologies
Rising sea levels
Increasing in severity of
extreme weather conditions

Examples of Analysis (Changes
in Important Products)
Since raw materials accountfor a large proportion of thecost of sales, the business
impact may be large.

2-14

To what extent should the risk assessment be conducted?
Assessing materiality of risks after categorizing them by differences in products (by sector)
and affected supply chains (by supply chain) enables an analysis that is convincing tomanagement
ExampleExampleMateriality assessmentof risks by sector

Risk Item

Materiality assessmentof risks by sector
X

2-15

Materiality assessment of risks
by supply chain

Y

Risk ItemZ

Materiality assessment ofrisks by supply Chain
Procur Transpo
Sales
ement rtation

Risk A

Large Medium Small

Risk A

Large Large

Small

Risk B

Small

Large

Risk B

Small

Large Large

Opportunity C

Large Medium Medium

Opportunity C

Large Medium Medium

Opportunity D

Medium Large Large

Opportunity D

Medium Large Large Large

Small

Small

MediumSmall

2. Scenario Analysis - Key Points of Practice2-1.

For beginning scenario analysis

2-2.

STEP2.

Assess materiality of climate-related risks

2-3.

STEP3.

Identify and define range of scenarios

2-4.

STEP4.

Evaluate business impacts

2-5.

STEP5.

Identify potential responses

Chapter 2

Scenario Analysis - Key Points of PracticeThis chapter explains how to practically undertake scenario analysis and describes key
points of its practice, based on use cases performed by companies under the support
program of the Ministry of Environment.
2-16

Identify and define range of scenarios:
What scenarios (and narratives) are appropriate, given the exposures?
Notes in red: Points to consider in each step were added after the support program.

1
2

Ensure governanceIs in place

Integrate scenario analysis into strategic planning and/or enterprise risk management processes.
Assign oversight to relevant board committees/subcommittees.
Identify which internal (and external) stakeholders to involve and how.

Assess materiality ofclimate-related risksMarket andTechnology
ShiftsReputation

Policy andLegalPhysical
Risks

What are the current andanticipated organizational
exposures to climate-relatedrisks and opportunities?
Do these have the potential to
be material in the future? Are
stakeholders concerned?
Pick and choose fromyour industry
and company viewpoint!

Identify and define
range of scenarios
Scenarios inclusive of arange of transition andphysical risks relevant to
the organization

What scenarios (andnarratives) are appropriate,given the exposures?
Consider input parameters,
assumptions, and analyticalchoices. What reference
scenario(s) should be used?

Clearly imagine a future world
under certain assumptions!

4 Evaluate business
impacts
Impact on:
costs
costs
chain
interruption
Evaluate the potential effects

and financial position undereach of the defined scenarios.
Identify key sensitivities.

Try not to seek
too much accuracy!

5

Identify potential
responses
Responses might include
to businessmodel
to portfolio mix
incapabilities andtechnologies

Use the results to identify
applicable, realistic decisions
to manage the identified risks
and opportunities.
What adjustments tostrategic/financial plans would
be needed?
Do not narrow down!
Take multiple scenarios
into account.

Disclose information
Document the process; communicate to relevant parties: Be prepared to disclose
Documentation andkey
inputs,assumptions,analyticalmethods,
outputs,
andpotential
management
responses
disclose
Sources: The Task Force on Climate related
Disclosure of Climate
Related Risks and Opportunities June 2017.

6

2-17

3

Get management
and operation
divisions involved!

[Overview]
Choose scenarios, obtain forecast information on parameters, and shape the worldview
Stage1

Choose scenarios

Stage 2

Stage 3

Obtain forecast information on
relevant parameters (variables)

Shape the worldview inconsideration of stakeholders
Based on forecast information,

Obtain objective forecast
information of relevant parameters
on each risk and opportunity items,
and identify the effects to thecompany in further detail.

Choose a number of scenarios withdifferent temperature targets,operformance, and work towards
achieving internal and external
consensus by incorporating theperspectives from outside ofcompany (If needed).

Note

Note

How to coordinate theworldview with eachbusiness division?

What kind of scenarios
should be chosen?
Source: This Practical Guide (example of ITOCHU Corporation: 3-24, 3-25, 3-26)
2-18[Stage1: Choose scenarios]
than 2o[Forecast of global averages surface temperature](Difference from the 1986-2005 average)

4°C scenario:
The temperature will rise 3.2-5.4 C
above pre-industrial levels, unless
more rigorous measures are taken.
2°C scenario:
The temperature will rise 0.9-2.3 C
above pre-industrial levels, if strictmeasures are taken.

2030

2050

Almost the same temperature changes would occur in the 2°C and 4°C
scenarios by 2030.
Differences between scenarios widen in the years after 2030.

(Reference) 1.5°C scenario:
The temperature will rise less than
1.5°C above pre-industrial levels
with high probability, if fundamental
system migration is achieved
Scenario analysis in the TCFD
recommendations indicates applying
multiple temperature scenarios including
under 2 scenario

Sources: AR5 SYR Chart SPM.6, "ETP2017," UNEP, "The Emission Gap Report 2015, Global Warming of 1.5°C (IPCC).
2-19

What kinds of scenarios should be chosen?
oshould be chosen. It is desirable to choose scenarios with different temperature targets and worldviews in order to
It is essential to choose scenarios that fit the sector andsituation of the company, with consideration of the characteristics and parameters of each scenario.

Name Features

IEA WEO

SSP (Shared Socioeconomic

PRI IPR(World Energy Outlook)

Pathways)(Inevitable Policy Response)

Describes forecasts of the energy
market for middle to long term
Describes forecast
information (qualitative andquantitative) on energy

Describes socioeconomic
scenario considering the current
policy response and context
Describes macroeconomic
information for eachscenario

Describes scenario of near-term
policy response to climate change
Describes qualitative andquantitative forecasts related
to policy response to climatechangeSSP1

Temperature zone

RCP
8.5
RCP
6.0
RCP
4.5
RCP
3.4
RCP
2.6
RCP
1.9

SSP2

SSP3

SSP4

SSP5

CPS(Current Policies Scenario)
STEPS(Stated Policies Scenario)

FPS(Forecast Policy Scenario)

SDS(Sustainable Development
Scenario)
Partly notachieved

RCP (Representative Concentration Pathways) is a representative
pathway that has radiative forcing characteristics. Below figures areradiative forcing values (If RCP is 2.6, radiative forcing will rise to 2.6W/m2
by the end of 21st century, comparing to the value before industrialization.): With climate models for RCPs
: No model

See Appendix for an outline of the various
scenarios and examples of parameters.

Source: IEA Website, Riahi et al. (2017), PRI Home Paper
2-20

Column: 1.5°C Scenario
The Paris Agreement indicated that efforts will be pursued to keep the global averagetemperature increase well below 2°C and to keep it at 1.5°C compared to pre-industrial levels.
In October 2018, the Intergovernmental Panel on Climate Change (IPCC) prepared a special
report on the effects of a 1.5°C global warming and the pathways through which it can emit
greenhouse gases.
2

Impact difference between
and 1.5 scenario Examples
1.5

scenario

Sea level rise by
Rise of 26~77cm
2100

Biological
species loss

Insects 6%
decrease
Plants 8%
decrease
Vertebrates 4%
decrease

2

Greenhouse gas emissions pathways to 1.5°C

scenario

Explanationof the 1.5°C scenario
Rise of 30~93cm
Insects:18%(Planned)decrease
Plants:16%
decrease
Vertebrates:8%
decrease

Overview of 1.5°C (Scenario explanation,
announcement timing)
Once in 10 years
Quantitative data could increase and be a
Decrease ratio of
1.5 million tons candidate
3.0 million tons
for the chosen scenario
catches
Disappearance
frequency of sea
ice in the Arctic Once in 100 years
Ocean during
summerImpacts on coral Approximately
reef
70%~90% dies

Source: Global Warming of 1.5°C (IPCC)
2-21

Mostly annihilated

Examples of 4 representative pathways (P1 to P4) are listed.
P1: Low energy demand. No use of CCS
P2: Wide focus on sustainability
P3: Middle of the road scenario (business as usual)P4: Expected use of CCS

[Step 2: Obtain forecast information on parameters (variables)]Obtain forecast information on parameters and identify the effects to thecompany in further detailParameters list

List of Risks and Opportunities

It is important to obtain objective forecast information on parameters from external sources

Scenario Report

External reports(IEA WEO, IEA ETP (Energy Technology
Perspectives) etc.)(Industry-specific reports, academic
papers, etc.)

Climate Change Impact
Assessment Tools(Physical Risk Map, Hazard Map, etc.)
See Appendix for examples of parameters.

Source: This Practical Guide (example of Chiyoda Corporation: 3-31, 3-32)
2-22[Stage 3: Shape the worldview in consideration of stakeholders]such as future
work towards achieving internal and external
consensus by incorporating the perspectives from outside of company (if needed)
Components of the worldview surrounding the company (e.g.)

Government

Industry

Buyer(Customers)

Seller(Suppliers)

It would be useful to aim for building internal consensus
after incorporating the perspectives from outside ofcompany in order to understand comprehensive worldview.
Source: This Practical Guide (example of ITOCHU Corporation: 3-26)
2-23

Legal systems and regulations related torisks
Policies to promote opportunities
Trends, technologies and tendencies
related to climate change that are
mainstream in the industry
Customer trends and tendencies affecting
products, businesses, and services weprovideTrends affecting raw materials and costs
required for businessNew comer

Businesses themselves and new entrants
who can change supply chains

Substituteproduct

Substitutes, etc., that could affect themarket for the products, businesses, andservices provided

How to coordinate worldview with each business division?
It is important to create a worldview that can convince relevant departments including businessdivision through dialogue. In order to encourage relevant department members to think ofclimate change as their own problem, and to share the scenario's meaning and perspective, it isimportant to have a written narrative or some type of visualization to facilitate discussion.
Points in the discussion with each
Worldview (draft) developed by the Scenario
department to coordinate theAnalysis Teamworldview (Example)
Are there any discrepancies in theworldview, technology, products, etc.,
related to each business?

Business
Divisions

Is it a worldview that is likely to occur inthe future relative to the behavior of thesellers and buyers who interact with us inour day-to-day operations?

Are there any discrepancies comparedwith the company's management
strategy?
Corporate
Planning

Are there any prospects for the futurecompared to the industry outlook
mentioned in our daily operations?

Source: This Practical Guide (example of ITOCHU Corporation: 3-26)
2-24

2. Scenario Analysis - Key Points of Practice2-1.

For beginning scenario analysis

2-2.

STEP2.

Assess materiality of climate-related risks

2-3.

STEP3.

Identify and define range of scenarios

2-4.

STEP4.

Evaluate business impacts

2-5.

STEP5.

Identify potential responses

Chapter 2

Scenario Analysis - Key Points of PracticeThis chapter explains how to practically undertake scenario analysis and describes key
points of its practice, based on use cases performed by companies under the support
program of the Ministry of Environment.
2-25

Evaluate business impacts:
under each of the defined scenarios.
Notes in red: Points to consider in each step were added after the support program.

1
2

Integrate scenario analysis into strategic planning and/or enterprise risk management processes.
Assign oversight to relevant board committees/subcommittees.
Identify which internal (and external) stakeholders to involve and how.

Ensure governanceIs in place

Assess materiality ofclimate-related risksMarket andTechnology
ShiftsReputation

Policy andLegalPhysical
Risks

What are the current andanticipated organizational
exposures to climate-relatedrisks and opportunities?
Do these have the potential to
be material in the future? Are
stakeholders concerned?
Pick and choose fromyour industry
and company viewpoint!

3

4 Evaluate business

Identify and define
range of scenarios

5

impacts
Impact on:
costs
costs

Scenarios inclusive of arange of transition andphysical risks relevant to
the organization

Evaluate the potential effects

and financial position undereach of the defined scenarios.
Identify key sensitivities.

Clearly imagine a future world
under certain assumptions!

Identify potential
responses
Responses might include
to businessmodel
to portfolio mix
incapabilities andtechnologies

chaininterruption

What scenarios (andnarratives) are appropriate,given the exposures?
Consider input parameters,
assumptions, and analyticalchoices. What reference
scenario(s) should be used?

Get management
and operation
divisions involved!

Use the results to identify
applicable, realistic decisions
to manage the identified risks
and opportunities.
What adjustments tostrategic/financial plans would
be needed?

Try not to seek
too much accuracy!

Do not narrow down!
Take multiple scenarios
into account.

Disclose information
Document the process; communicate to relevant parties: Be prepared to disclose
Documentation andkey
inputs,assumptions,analyticalmethods,
outputs,
andpotential
management
responses
disclose
Sources: The Task Force on Climate related
Disclosure of Climate
Related Risks and Opportunities June 2017.

6

2-26

[Overview]
Estimate the financial impact on P/L and B/S, then compare the gap between
future perspectives and financial indicators in the business as usual
Stage 1

Stage 2

Stage 3

Identify potential financial
indicators affected by risks andopportunities

Consider calculation formula andestimate financial impact

Be aware of the gap between future
outlook and financial indicators inthe business as usual

Identify which financial indicators
are possibly affected by business
impact of climate change

Consider calculation formula forrisks that can be estimated, thenestimate the financial impact basedon internal information

Based on the estimated results, beaware of the scale of impact on the
future outlook

Note
What kind of internal data can beused for estimation?

Note
How do we treat data that cannot
be quantitatively estimated?

Source: This Practical Guide (examples of Kajima Corporation: 3-67, Mitsui O.S.K. Lines, Ltd.: 3-46, ITOCHU Corporation: 3-28)
2-27

[Stage1: Identify potential financial indicators affected by risks and opportunities]
Identify which financial indicators of P/L and B/S are affected by risks and opportunities
Change in operating revenues
affected by climate change

Change in raw material
procurement costs
due to climate change

Increased sales due tothe expansion of CCUS market

Price hike ofsteels

Etc.

Fluctuation of carbon tax

Decline in demandfor plants due totightening regulations

Expenses

Sales

Etc.

Burden of collecting
carbon tax for
Scope 1 and 2 emission

Etc.
Materiality assessment of risks
Etc.
STEP2
Impact on businesses

Risks Opportunities
Major
Class
ificati
on

Indi
cat
or

Minor
Classification

EachTrans CO2 emission
ition target Policies
Risks
Subsidiesincluded

Consideration

Risks

Damage of physical risk
Ass
ess
me
nt

Tightening regulations affects ordering fossilProLarfuel-delivered plants, which results infit
geaffecting PL.

Net
incomeIncreased cost of damage
due to increase
frequency of flood

Profit ratio =Fluctuation of profit, which also indicates that the impact can be largely different.)

Etc.

Business impact

2-28

What kind of internal data can be used for estimation?
By using data that is commonly used by business divisions (e.g. sales information bybusiness/products, operational costs, cost structure, greenhouse gas emissions), it ispossible to create estimations close to actual company conditions
Information available for consideration

Sales
Struc
ture

Current and future sales andoperating income by businesssegment(Targets for net sales and operating income)Sales forecasts and targets for related
products in the future(By product)

Current operating costs(Electricity and fuel prices, electricity and fuelconsumption, etc.)

Cost
Struc
ture

Information on the cost structure of
raw materials(Amount of raw materials used, procurement
cost, etc.)

Current and future GHG emissions(Scope 1 and 2, Scope3 if needed)

2-29

Methods for collecting information
Refer to the company's long-term management targets, etc.
In the absence of relevant information, it is possible tocalculate the current value using CAGR (annual growth rate),
etc.
Hearings from business divisions, corporate planning,etc.
If owned, also collect information on future market
conditions normally used by relevant departments.
Hearings from business divisions, corporate planning,etc.
Hearings from business divisions, corporate planning,etc.
If owned, also collect information on future market
conditions normally used by relevant departments.
Refer to the company's environment-related targets, etc.

[Stage2: Consider calculation formula and estimate financial impact]
Consider calculation formula for financial indicator that can be estimated, then estimate thefinancial impact based on internal information
Change in raw material
procurement costs
due to climate change

Change in perating revenues
affected by climate change
Revenue/Profitof plant(Yen/Year)

Decline in demand rate
for plant due totightening regulations(%)

Revenue/Profit
of CCUS (%)

Increased rate of profit
due to the expansionof CCUS market(%)

Cost of steels(Yen/Year)

Price hike rateof steels

Etc.

Fluctuation of carbon tax
Expenses
Scope 1,2
GHG
emissions(t-CO2)

Sales

Etc.

Carbon tax for Scope
1,2 GHG emissions(Yen/t-CO2)

Etc.

Damage of physical risks
Damage cost of floodin the past financial
year (Yen/Year)Business impact
Internal information to use (Example)

Increased rate ofdamage cost due
to increased frequencyof flood (%)

Net income

Etc.

2-30

How do we treat data that cannot be quantitatively estimated?
Regarding qualitative information or information with little scientific basis, measures such ascontinuous monitoring and interviews with external experts could be methods for evaluation.
It is important to identify evaluated/unevaluated risks and clarify the next action[Examples of actions for risks that cannot
be quantified]Interviews with outside experts

Risk Item

Validity ofquantitative
estimation ofbusiness impact

Review status

Hearings with external experts such as
research institutes and experts regarding risks
that could not be calculated

Risk A

Possible

Considered

Risk B

Possible

Considered

The results of the hearings are stored as
qualitative information.

Risk C
Risk D
Risk E

2-31

Not possible
Considered(Qualitative Information(Qualitative)
Only)
Not possible
Not considered(no scientific data)
Possible

Considered

Continuous internal monitoring
Continuously monitor to obtain up-to-date
information on risks.

[Stage 3: Be aware of the gap between future outlook and financial indicators inthe business as usual]
Based on the estimated results, be aware of the scale of impact on the future
outlook

Understand the impact of climate change on business prospects (future
management targets and plans)
What risks and opportunities have a greater impact?
It is possible to understand the extent to which climate change threatens the businessprospects for future management and targets. In some sectors and industries, the impact may
be smaller than anticipated.
Source: This Practical Guide (example of ITOCHU Corporation: 3-28)
2-32

2. Scenario Analysis - Key Points of Practice2-1.

For beginning scenario analysis

2-2.

STEP2.

Assess materiality of climate-related risks

2-3.

STEP3.

Identify and define range of scenarios

2-4.

STEP4.

Evaluate business impacts

2-5.

STEP5.

Identify potential responses

Chapter 2

Scenario Analysis - Key Points of PracticeThis chapter explains how to practically undertake scenario analysis and describes key
points of its practice, based on use cases performed by companies under the support
program of the Ministry of Environment.
2-33

Identify potential responses:
Use the results to identify applicable, realistic decisions to manage the identified
risks and opportunities.
Notes in red: Points to consider in each step were added after the support program.

1
2

Ensure governanceIs in place

Integrate scenario analysis into strategic planning and/or enterprise risk management processes.
Assign oversight to relevant board committees/subcommittees.
Identify which internal (and external) stakeholders to involve and how.

Assess materiality ofclimate-related risksMarket andTechnology
ShiftsReputation

Policy andLegalPhysical
Risks

3

What are the current andanticipated organizational
exposures to climate-relatedrisks and opportunities?
Do these have the potential to
be material in the future? Are
stakeholders concerned?
Pick and choose fromyour industry
and company viewpoint!

Identify and define
range of scenarios

4 Evaluate business

Scenarios inclusive of arange of transition andphysical risks relevant to
the organization

What scenarios (andnarratives) are appropriate,given the exposures?
Consider input parameters,
assumptions, and analyticalchoices. What reference
scenario(s) should be used?

5

impacts
Impact on:
costs
costs

and financial position undereach of the defined scenarios.
Identify key sensitivities.

Use the results to identify
applicable, realistic decisions
to manage the identified risks
and opportunities.
What adjustments tostrategic/financial plans would
be needed?
Do not narrow down!
Take multiple scenarios
into account.

Try not to seek
too much accuracy!

Clearly imagine a future world
under certain assumptions!

Identify potential
responses
Responses might include
to businessmodel
to portfolio mix
incapabilities andtechnologies

chaininterruption
Evaluate the potential effects

Get management
and operation
divisions involved!

Disclose information
Document the process; communicate to relevant parties: Be prepared to disclose
Documentation andkey
inputs,assumptions,analyticalmethods,
outputs,
andpotential
management
responses
disclose
Sources: The Task Force on Climate related
Disclosure of Climate
Related Risks and Opportunities June 2017.

6

2-34

STEP5 Definitions of Actions/ Target of Practical Guide
as it is crucial
for countermeasures involving business model transformation.

In-house Participation

Managements

Scenario Analysis
Team
Relevant In-house
Department
Solutions2-35

Phase 3
Consideration of establishing anorganizational structure and its
practical actions, and scenario
analysis procedure

Relevant
Departments
Operation
Divisions

Business modeltransformation responding
to climate change
Portfolio transformation
Investments fortechnologies

Incorporatingclimate change
into medium termbusiness plan

Phase 2
Consideration of future actions forresponding to risks and acquiring
opportunities

Incorporatingclimate change
into business plan

Phase 1
Understanding of current in-house
response to climate-related risks
and opportunities

Actions suggested by
Scenario Analysis
team

Actions that could beundertaken by relevant
departments within thecurrent medium termbusiness plan

Actions on medium
term business planthat includes climatechange[Overview]countermeasures,and establish practical action plans and an organizational structure
Stage1

Stage2status on risk management
Regarding climate-related risks withgreat financial impact, it is important tostatus for risk management. If
necessary, confirm the current statusof rival companies

Consider future countermeasuresfor climate-related risk management
and seizing opportunities
Consider practical countermeasures
for risks and opportunities with great
financial impact

Note

Note

Establish an organizational structure inorder to promote countermeasures,and take practical actions cooperatingwith relevant department. And also
consider how to proceed with scenario
analysis

Note

What kind of organizational
structures are suitable after
conducting scenario analysis?

How will scenario analysis
results be used in management?

Staeg3
Establish an organizational
structure and consider practicalcountermeasures and how toproceed scenario analysis

What steps should be taken in
the future?

Source: This Practical Guide (examples of FUJIFILM Holdings Corporation: 3-116, Kajima Corporation: 3-69, Development Bank of Japan Inc.: 3-20)
2-36

risks management and seizing
opportunities]
Regarding climate-related risks and opportunities with great financial impact, it is importantcurrent status of rival companies
Risks and Opportunities

Status of thecompany's own
response

Status of responses by competitors
Company X

Company Y

Company Z

Risk A
Policies/
TargetRisk B
Opportunity C
Risk D

MarketOpportunity E

Organizing
the status ofthecompany's
own
responses

Benchmark Survey of Competitors'
Responses

Opportunity F

It is a suggestion to conduct comparative analysis on the company andcompetitors regarding risk management
2-37[Stage 2: Consider countermeasures for climate-related risk management and seizing
opportunities]
Consider practical countermeasures for risks and opportunities with great financial impact

Scenario

2°C
scenario

4°C
scenario

Future business impact

Countermeasures (Example)

Operating income -JPY X trillion

Change in business model
Consideration of procuring
alternative materials
Investments in low carbon
technology

Operating income -JPY Y trillion

Strengthen supply chain
performance considering climatechangePromote response to BCP
Invest to improve quality of
raw materials

It will become important to plan resilient countermeasures that can be used in any situation

2-38[Phase 3: Establish practical action plans and an organizational structure]
Establish an organizational structure in order to implement countermeasures andtake practical actions cooperating with relevant department. And also consider
how to proceed with scenario analysis
Response
implementation period(Example)

Future Actions (Example)
Establish an organizational structure

Taking practical actions cooperating with
relevant department

Dissemination of the results of
scenario analysis within thecompany (including managements)
Currently or for a few
months1 yearGaining an agreement frommanagements on the needs forestablishing an organizational
structure in order to promote
countermeasures
Establishing an organizational
structure in order to promote
countermeasures through explaining
to relevant department

How to proceed with scenario analysis
Interviews with experts on importantrisks and opportunities for which
there is little information-

Cooperating with relevant
department and take practicalactions aligned with existing
business plans that is relatively easy
to implement

Establishment of a monitoring
system for scenario analysis
Monitoring

Beginning practical consideration
with relevant department for new
actions
As needed (timings
may differ for eachcompany)

Incorporating climate change into medium term business plan
Encourage dialogue with stakeholders on climate change to create markets
Introduction of internal carbon pricing as a mechanism to promote low-carbon investment

Consider scenario analysis procedure, establishing an organizational structure , and getting relevant
department involved in the course of scenario analysis, alongside with proceeding the incorporation ofclimate change into medium term business plan
2-39

How will scenario analysis results be used in management?
It is important that climate change be included in the process of business strategy planning.
One tip is to include climate change into the nearest midterm management plan

Report the results of scenario
analysis to managements

Management
PolicyEstablish an organizational
structure and take practicalactions cooperating with
relevant department

Incorporate climate change
into medium term business
plan

Creation of medium termbusiness plan

Report the results of scenario
analysis to managements

Alignment of target level and practicalmeasures for achieving the targets inthe medium term business plansession on climate change impacts on

Climate Change

Responding
to Risks andOpportunities

Promoting
Scenario
Analysis

scenario analysis) for managements[Results of the FY2018 Ministry of theEnvironment Scenario Analysis Support
Project]
Company A: Established a new
department specializing in the integrationof IR/Sustainability as the understandingof management progressed. Periodic
discussions with executives on TCFD
held at the Sustainability Committee
Company B: Improved understanding ofmanagement and launched a team forclimate change management. Executive
Vice President assumes chairmanship

Company-wide deployment of scenario
analysis
Materialization of countermeasures forrisk management and seizing
opportunities
Establishment of a system to promote
the above

Input of external environment

Consider indicators andtargets linked to medium
term business plan
Continuation of monitoring

Monitoring of risks andopportunities
Establishment of a system topromote the above

2-40

What kind of organizational structures are suitable after
conducting scenario analysis?
It may be suggested to create a cross-sectional organization directly under the corporate planningdepartment that deals with climate change to give effectiveness to the result of scenario analysis
As a cross-sectional organization with climatechange as a company-wide theme

Remain as limited initiatives by some divisions

Philosophy

Philosophy

VisionVisionManagement
Strategy

Input scenario
analysis results

Management
Strategy

Climate Change Measures Division
Climate Change
MeasuresBusiness
Divisions

XX Division
Collaborate undercommon goals

2-41

Collaborate undercommon goals

CSR
Division

Business
Divisions

XX Division
Cooperation on
climate change
is limited

Cooperation on
climate change
is limited

CSR
Division

Actions to be taken for the next step?
The goal of scenario analysis is to integrate climate change with business management, and to enhance
corporate value. With scenario analysis, it aims to continue the cycle of disclosing information andrebuilding an organizational structure (integration with business management).

Towards improving
corporate value

Scenario
Analysis

4

5
Continuously conducting
scenario analysis
as a cycle

Managements rebuild
an organizational structure
based on feedbacks

Through scenario analysis
it encourages
incorporating climate change
into business plans

Through disclosure it
encourages
Beginning dialogue with multistake holders/
Improving corporate value

Corporate
Management

3
Managements receive
reactionsfor the disclosure

Disclosure

2
Begin disclosing with1
Begin to work on
scenario analysis
2-42

Scenario
Analysis
understandings

Structure for
conducting
scenario analysis

3. Scenario Analysis - Practice Examples

Chapter 3. Scenario Analysis - Practice Example
This chapter explains how scenario analysis is carried out based on the support
cases of the Ministry of the Environment (18 companies).

Examples of scenario analysis by sector
For beginning scenario analysis
For beginning scenario analysis
SectorFinancial

Banks
EnergyCompany

Preparation

Preparation

Preparation

Preparation

Gainingunderstandings frommanagements

Establishing anorganizational structure
for scenario analysis

Setting target analysis

Setting timeline foranalysis

Development Bank of Japan Inc.
ITOCHU Corporation

3-7, 3-8

3-7

3-22

3-24

Chiyoda Corporation

3-30

Mitsui O.S.K. Lines, Ltd.

3-39

Transportation Japan Airlines Co., Ltd.

3-50

Mitsubishi Motors Corporation

3-55, 3-58

Kajima CORPORATION

3-61

Buildings/
Sumitomo Forestry Co., Ltd.
Forest Products
Tokyu Fudosan Holdings Corporation

NonFinancial

Construction
Materials
Materials

3-74

LIXIL Group Corporation
FUJIFILM Holdings Corporation
Furukawa Electric Co., Ltd.

Food

3-1

3-63

3-86

3-86

3-93, 3-94

3-94

3-106

3-108

3-118,3-119

3-122

Kagome CO.,LTD.

3-131

3-133

Calbee, Inc.

3-148

3-150

Meiji Holdings Co., Ltd.

3-157

3-157

Electronic
Equipment

KYOCERA Corporation

Retailing

Seven & i Holdings Co., Ltd.

Consumer
Products

Lion Corporation

3-175

3-199

3-186

3-189

3-199

3-202

Examples of scenario analysis by sector
STEP2. Assess materiality of climate-related risks
STEP2. Assess materiality of climate-related risks
Stage 1

Stage 2

Stage 3

Listing risk items

Identifying potential impact
on business

Assessing materiality ofrisks

Development Bank of Japan Inc.

3-10

3-10

3-10

ITOCHU Corporation

3-23

3-23

3-23

Chiyoda Corporation

3-31

3-31

3-31

Mitsui O.S.K. Lines, Ltd.

3-38

3-38

3-38

Transportation Japan Airlines Co., Ltd.

3-49

3-49

3-49

3-56, 3-59

3-56, 3-59

SectorFinancial

Banks
EnergyCompany

Mitsubishi Motors Corporation

3-62

3-62

3-62

3-72, 3-73

3-72, 3-73

3-72, 3-73

3-87

3-87

3-87

LIXIL Group Corporation

3-95

3-95

3-95

FUJIFILM Holdings Corporation

3-107

3-107

3-107

Furukawa Electric Co., Ltd.

3-121

3-121

3-121

Kagome CO.,LTD.

3-132

3-132

3-132

Kajima CORPORATION
Buildings/
Sumitomo Forestry Co., Ltd.
Forest Products
Tokyu Fudosan Holdings Corporation
NonFinancial

Construction
Materials
Materials

Calbee, Inc.

3-148, 3-149

3-149

3-149

Meiji Holdings Co., Ltd.

3-157 ~ 3-159

3-157 ~ 3-159

3-157 ~ 3-159

Electronic
Equipment

KYOCERA Corporation

3-174

3-174

3-174

Retailing

Seven & i Holdings Co., Ltd.

3-187, 3-188

Consumer
Products

Lion Corporation

3-200, 3-201

Food

3-187, 3-188
3-200, 3-201

3-200, 3-201

3-2

Examples of scenario analysis by sector
STEP3. Identify and define range of scenarios
STEP3. Identify and define range of scenarios
SectorFinancial

Stage 1

Stage 2

Stage 3Choosing scenarios

Obtaining forecast
information on relevant
parameters (viable)

Shaping worldview inconsideration of
stakeholders

Company

3-10 ~ 3-12

3-10 ~ 3-12

3-13 ~ 3-16

ITOCHU Corporation

3-24

3-25

3-26, 3-27

Chiyoda Corporation

3-30

3-32

3-33, 3-34

Mitsui O.S.K. Lines, Ltd.

3-39

3-40, 3-41

3-42 ~ 3-45

Transportation Japan Airlines Co., Ltd.

3-50

Banks
EnergyDevelopment Bank of Japan Inc.

3-56, 3-59

3-55, 3-58

3-63

3-64

3-65, 3-66

3-74

3-81

3-75 ~ 3-80

Mitsubishi Motors Corporation
Kajima CORPORATION
Buildings/
Sumitomo Forestry Co., Ltd.
Forest Products
Tokyu Fudosan Holdings Corporation
NonFinancial

Construction
Materials

3-88, 3-90

LIXIL Group Corporation

3-94

3-100

3-96 ~ 3-99

FUJIFILM Holdings Corporation

3-108

3-108

3-109 ~ 3-112

Furukawa Electric Co., Ltd.

3-120

3-122

3-123 ~ 3-125

Kagome CO.,LTD.

3-133

3-134

3-135 ~ 3-137

Calbee, Inc.

3-150

3-151

3-152, 3-153

Meiji Holdings Co., Ltd.

3-157

3-160

3-161, 3-162

Electronic
Equipment

KYOCERA Corporation

3-175

3-176

3-177 ~ 3-180

Retailing

Seven & i Holdings Co., Ltd.

3-189

3-190

3-191, 3-192

Consumer
Products

Lion Corporation

3-202

3-203

3-204 ~ 3-207

Materials

Food

3-3

3-51, 3-52

Examples of scenario analysis by sector
STEP4. Evaluate business impacts
STEP4. Evaluate business impacts
Stage 1

SectorFinancial

Banks
EnergyCompany

Identifying potential
financial indicators
affected by risks andopportunities

Stage 2

Stage 3

Considering calculation
formula and estimating
financial impact

Being aware of the gap
between future outlook andfinancial indicators in thebusiness as usual

3-17 ~ 3-19

Development Bank of Japan Inc.

3-28

ITOCHU Corporation
Chiyoda Corporation
Mitsui O.S.K. Lines, Ltd.

Transportation Japan Airlines Co., Ltd.

3-35

3-35

3-46, 3-47

3-46,47

3-53
3-56, 3-59

Mitsubishi Motors Corporation
Kajima CORPORATION
Buildings/
Sumitomo Forestry Co., Ltd.
Forest Products
Tokyu Fudosan Holdings Corporation
NonFinancial

Construction
Materials
Materials

LIXIL Group Corporation

3-68
3-83, 3-84
3-89, 3-91

3-101

3-102, 3-103
3-113

FUJIFILM Holdings Corporation

3-126, 3-127

Furukawa Electric Co., Ltd.
Kagome CO.,LTD.

Food

3-67

3-138

Calbee, Inc.
Meiji Holdings Co., Ltd.

Electronic
Equipment

KYOCERA Corporation

Retailing

Seven & i Holdings Co., Ltd.

Consumer
Products

Lion Corporation

3-138

3-139, 3-140

3-154

3-154

3-163

3-163, 3-164, 3-170, 3-171
3-181
3-193, 3-194

3-208

3-209, 3-210

3-4

Examples of scenario analysis by sector
STEP5. Identify potential responses
STEP5. Identify potential responses
Stage 1
SectorCompany

current status on risk
management
Financial

Banks
EnergyDevelopment Bank of Japan Inc.

Stage 2

Stage 3

Considering futurecountermeasures forclimate-related risk
management and seizing
opportunities

Establish an organizational
structure and considerpractical countermeasuresand how to proceed scenario
analysis

3-20

3-20

ITOCHU Corporation

3-36

Chiyoda Corporation
Mitsui O.S.K. Lines, Ltd.

Transportation Japan Airlines Co., Ltd.
Mitsubishi Motors Corporation
Buildings/
ForestProducts

NonFinancial

3-69, 3-70

Kajima CORPORATION
Sumitomo Forestry Co., Ltd.
Tokyu Fudosan Holdings Corporation

Construction
LIXIL Group Corporation
Materials
Materials

FUJIFILM Holdings Corporation

3-104
3-116

3-141 ~3-144

Kagome CO.,LTD.
Food

Calbee, Inc.
Meiji Holdings Co., Ltd.

3-5

Electronic
Equipment

KYOCERA Corporation

Retailing

Seven & i Holdings Co., Ltd.

Consumer
Products

Lion Corporation

3-116
3-128

Furukawa Electric Co., Ltd.

3-155

3-155

3-165, 3-172

3-165, 3-172
3-182 ~ 3-184
3-197

3-211

3-211

Financial Sector (Banks)
Practice Example

Development Bank of Japan Inc.

3-6

1

[Overview]

Overview of our scenario analysis
Scenario analysis of transition risks and analysis of expected impact on loans and investments by 2050
(Principle)
Focus on technological innovations and risks and opportunities due to policies and regulations aimed atrealizing a low-carbon society and a decarbonized society.
It is necessary for us to envision various economic and social scenarios in the future, including climate-relatedrisks and opportunities, and to consider the optimal portfolios accordingly.
To take into account socio-economic trends associated with climate change, utilizing the "Shared
Socioeconomic Pathways: SSP" scenarios
5 technologies (CCS, EV, biomass, hydrogen, renewable energy) are focused as a trial basis from among
technologies closely related to climate change.
Each technology is regarded as an investment opportunity, and the business impact is analyzed and evaluatedby scenario from the viewpoint of technological development and dissemination.
Transition risk
[Scope of this analysis (red frame)]
Policy and Regal
Technology

Resource efficiency

MarketProducts / Services

Reputation
Physical risk
Acute
Chronic

Energy Source
Risk

Opportunity

Strategic planningplanning
Strategic
Risk Management
Management
Risk

Markets
Resilience

Financial impact
Revenue
Expenditures

3-7

IncomeStatement

Cash Flow Statement

Balance
Sheet

Assets and liabilities
Capital and financing

1[Overview]

Sectors to be analyzed
We select 3 sectors (A, B, and C) frome
Priority Areastaking into account thebalance of money loans and other factors.
Opinions from departments in the relevant sector are
also reflected in the analysis.

3-81[Overview]

Steps to implement scenario analysis
2

Assess materiality ofclimate-related risks
Risk materiality
assessment
Selection of risk items
Assessment of theimportance of risk

3

Identify and define
range of scenarios
Selection of
scenarios
SSP

Selection of
timeframe
2050

Coverage of our trial

4

Evaluatebusiness impacts

5

Definition ofcountermeasures

Cross-sectoralcomparisons

Cross-sectoral
assessment

Impact on its portfolio

Concentrated anddiversified investment
etc

Future Challenges

For this analysis, we select assessment of the importance of risk(technologies/policies),
timeframe (2050), and SSP Scenarios.
3-92[Evaluation of the importance of risk]

Step

2

3

4

5

Risk materiality assessment and analytical perspectives after step 3
Selection and assessment of risk items (example)
Risk item
Small classification

Business impact/Uncertainty
Discussion

Assessment

Introduction of carbon prices to electricity generates additional costs for thecompany's power generation and increases the company's expenditure.
Consumer burdens increase when costs are reflected in electricity sales prices,
but consumers are more likely to choose renewable energy that gives them acompetitive advantage in terms of carbon prices.

Carbon price
Dissemination of renewableenergy and energy-saving
technologies
Developing next-generation
technologies
Carbon Emissions
Targets/Policies in Each Country

Large

Classify each risk item, and consider and assess thebusiness impact and uncertainty associated with each item.

MediumSmall

In the many of scenario
analyses, company
classifies each risk item
specifically and assess
the importance risk
according to temperaturetargets: 1.5 , 2 , and4 .

Changes in the energy mix

Viewpoints of the analysis after step 3[Target technologies][SSP Scenarios]
Evaluate the degree of importance based on the
degree of dissemination and development oftechnologies, etc.
Renewable energy

EV

CCS
Biomass

Hydrogen×

SSP offers a variety of possibilities forsocioeconomic development, difficulty of
mitigation and adaptation divided into 5
categories

NOTE: In order to facilitate data collection,limited to theabove-mentioned technologies on a trial basis

Afterwards, we will focus
on "technology" as aninvestment opportunity,
which is included in risk
items. In order toconsider the economic
and social factors behindclimate change, analysis
was conducted using the
SSP Scenarios.

3-10

3 [Definition of scenario groups]

Step

2

3

4

5

Selection of SSP scenarios
Scenario name

IPCC
Overview
temperature zone of the worldview

Sustainable

Conventional
development

3-11

Assuming a world in whichinternational cooperation is advancing
and the Paris Agreement is respected

Policies on environmental issues are of
low priority, and it is difficult to achievea decarbonizing society.

Assuming a world that prioritizes
domestic interests and values rather
than international cooperation suchas the Paris Agreement

2

Fossil-fueled
Low-carbon
society

The society depended on fossil fuels,
but low carbon will progress to someextent with the use of CCS and othertechnologies.

Assuming a worldview based oncooperation aimed at by the Paris
Agreement

4

Fossil-fueled
conventional
development
society

Expecting growth depended on fossil
fuels, it is difficult to achieve a
decarbonizing society.

Assuming a worldview that does notpresuppose cooperation aimed at by
the Paris Agreement

Decarbonizedsociety worldwide

4

Nationalism/Regio
nalism caused byeconomic
disparities

SSP5-1

SSP5-2SSP3International cooperation

Policies for sustainability have been
adopted, and a decarbonized society ishighly likely to be realized. Optimization
methods are applied to renewableenergy.

1.5

SSP1

Focusing on
achieving a decarbonized society

3 [Definition of scenario groups]

Step

2

3

4

5

(Reference) Economic and policy background data on SSP1-5 scenarios
SSP1

SSP2

SSP3

SSP4

SSP5

Growth rates are high in
low-and middle-income
countries, and moderate inhigh-income countries.

Medium, heterogeneous

Slow (low)Low-income countries have
low growth rates. Others are
mediumHigh

Disparity

Disparity narrows in Japanand overseas

Different conditions for theelimination of disparities inJapan and overseas

There is a large gap
between Japan andoverseas.

Expansion especially inJapan

Disparity narrows sharply inJapan and overseas

International
trade

MediumMediumEnforcement of strong
restrictions

MediumTrade is active. Production
with comparative advantage
of each country

Globalization

Markets are unified andproduction is carried out
in each region.

Some degree of freedom inglobalization

Reverse from globalization.
Active regional security
policies

Elite employees have global
connections

Globalization advancesand markets move towardunification.

Consumption
trend

Physical consumption
decreases in high-income
countries. Expand meat-freemealsConsumption centeres on
physical consumption,
moderate meat consumption

Mainly physicalconsumption

Consumption levels are highamong elites, but low among
others.

Material consumption,
tourism and mobility
consumption
Meat-centric life

International
cooperation

Have the effect

Relatively weak

Weak

Globally unified markets
outside of vulnerable people

Targets for development areachieved, but targets for theenvironment are not achieved.

Environmental
policyImproved management atregional and global volumelevels. Strengthening
pollution regulation

Although there are concerns
about pollution at the local
level, putting into practice issuccessful

Priority on environmental
issues is low.

Policydirection

Sustainability policy

Focus less on sustainability

Concentration of securityrelated policies

Relevant
agencies

The state and internationalorganizations haveinfluence

Have a moderate influence

Weak influence ofinternational organizations

Economic
growthEconomic and lifestyle
Policies and Related Organizations

Middle-and high-income
Focus on domestic policies,
countries focus on
but lack of interest in global
environmental issues, without
initiatives
measures for vulnerable people
Implementation of policies
related to free markets, humanresources development, anddevelopment
To foster a competitive
Effective measures for politics
market, relevant agencies
and business elites
will cooperate more closely
Policies that benefit thebusiness elite

Source: Brian C. O'Neill et al. (2017) "The roads ahead: Narratives for shared socioeconomic pathways describing world futures in the 21st century"
3-12

4 [Business impact evaluation]

Step

2

3

4

5

Steps to evaluate business impact
Step 4-1
Evaluation of 5 technologies(Qualitative & Quantitative)
Overviewof
Evaluation

Analyticalmethods

3-13

Step 4-2
Business impact evaluation(Qualitative)

Step 4-3
Business impact evaluation(Quantitative)

Classify of the technologicaldevelopment and acceptanceby scenarios.

Evaluate sector impact based on
scenario worldview andtechnology evaluation

Quantify the degree of impact oftechnology in the scenario andJapan's strengths in technology, andconsolidate them into sectoral units toevaluate "business impact."

Extract technology-related
descriptions from multiple
literature on climate change andclassify "technologicalprogress" into 3 stages

Qualitatively evaluate the external
impact of 3 sectors×4 scenarios
using 5Force analyses

Select recommended technologies
for investment by sector andscenario, and construct ourinvestment portfolio
Scored "degree of impact oftechnology" (up to 6 points) from theviewpoint of necessity of government
support and coverage of technology
Evaluation of Japan's technologicalstrengths on a 3-stage scale basedon comparison with other countries'
policies and budget requests inJapan

We conduct simulations foreach SSP scenario andcalculate "degree oftechnological dissemination" bytaking into account the results.

4 [Business impact evaluation]

2

Step

3

4

5

Step 4-1 Diagram
Group of scenarios
Scenario name
SSP1

SSP3

SSP5-1

SSP5-2

Technologicaldevelopment

Small to medium

Small to medium

Approachto Step 4-1
Large

Large

Socialacceptability

Maximum installable
volume:%CCS

Technical name

CCS/ primary energy:%
BECCS: %Coal + CCS:%
Similar analysis implemented for eachGas
+ CCS:%
technology (CCS, EV,biomass,
renewable
TechnologicaldisseminationDegree oftechnologicaldevelopment

Degree oftechnologicaldissemination

Classification of degree ofdevelopment (large to small) by
qualitative consideration from theliterature related to technology[Reference: 3-15]

Complement

Calculate the degree oftechnological dissemination under
the scenario by adding "social
acceptability" to "degree oftechnological development".

(Defects of SSP)No detailed definitions of the degreeof technological development(Constraints)
Socialacceptabilityenergy,EVhydrogen)Conduct simulations to determine the acceptability of thetechnologies in the world view of the assumed scenarios.

3-14

4 [Business impact evaluation]

2

Step

(Reference)

3

4

5

development by scenarios
Scenario name
SSP1

SSP3

SSP5-1

SSP5-2

CCS

EV

Biomass

Degree of technological development
High

MediumLow

CCS Realization of great cost
CCS Technological
CCS Technology would not
cut. Technologies related toCC(U)Sdevelopment advances, as welladvance. EOR project would be
BECCS becomeas cost cut
promotedcommercialized and spread
HydrogDescriptions on each technology were extracted from several literature on climate change, and discussions wereenmade based on their tone volumes, etc., and finally, the degree of technological progress was classified into 3stages.
Due to the nature of the classification, some combinations of technologies and scenarios are represented by ranges
Reas shown in the dashed lines.
Technical
nameTechnical name(Classification
examples)energy3-15

Approach to Classification of "Development"

4 [Business impact evaluation]

2

Step

3

4

5

Step 4-2 Diagram: Qualitative evaluation and 5Force analyses
Sector A

New comer(Global)Government

Customer<SSP1's worldview>
Emphasizing global andnational development
and achieving
sustainability goals
Growth rates: high in lowSupplier
Industry/and middle-income
Company
countries but unchanged<SSP1's worldview><Sub-sector 5>
in high-income countries<SSP1's worldview>
Globalization: The market isInternational cooperation:
Diparities: Narrows in Japan and overseas
unified and production isachieving bothcarried out in each region.
international mitigation<Sub-sector 6><Total sectors><Total sectors>
and adaptation to climate
Describe sectoral<Sub-sector
impact in5>a narrative manner based on scenario worldview and evaluationchangeof<Sub-sector 5>
Policy Direction: Toward<Sub-sector 7>
technology
Sustainability and
Improved Management of
Conduct similar analyses by sector and by scenario
Environmental Policies at<Sub-sector 6><Sub-sector 6>
the Regional
and Global
These analyses clarify the relationship between "sectors" and "technologies" related to climatechangelevel<Total sectors>: Expected actions

Based on these analyses, construct technology portfolio for investment (Step 4-3)

<Sub-sector 7><Sub-sector 7><Sub-sector 5><Sub-sector 6><Sub-sector 7>

3-16

4 [Business impact evaluation]

2

Step

3

4

5

Approach to evaluate business impact
Quantify "degree of impact of technology" and "Japan s strengths" for relative evaluation. Basedon these results, construct technology portfolio to conduct business impact evaluation
Based on 5Force analyses, selectrecommended technologies forinvestment by sector and scenario,
and construct our investment portfolio
in each sector

Technology portfolio

Scored as "degree of technologicalimpact" (up to 6 points) by adding
consistency with global data to "degreeof technological dissemination"
selected in STEP1.

=

Evaluation points (0 to 6)

Evaluation of Japan's technologicalstrengths on a scale of small to large"Strengths" in this analysis: Defined as anevaluation ratio whether Japan has theuniqueness of its technology and has thepotential to promote it worldwide in the future.
[Reference: 3-18]

×

Evaluation ratio (0.5 to 1.5)

Evaluation
Summary

SectorTechnologies

××

ScenarioBusiness impact

3-17

×

Degree ofimpact×
Scenario

Technological advantage

×
Assistance of the Japanese
government

Total points (4 grade evaluation: ++ to)4 [Business impact evaluation]

2

Step

3

4

5

(Reference) Approach to evaluate Japan's technology strengths
Setting technologies in which Japanese companies have relative advantages
Evaluation Points

A. Technological advantages (Current strengths)
StrongRe-energy

Hydrogen

B
i
g

EV
CCS

S
m
a
l
l

BiomassB. Support from the government of Japan (Potential
for future development)

Weak

Significance of Evaluation

1.5

Japan has a high degree of uniquenessregarding technology, and the size of thegovernment's budget is also large.

1

Medium both in terms of technicaluniqueness and budget size in Japan

0.5

Other countries are ahead of the othercountries in terms of technology, and thebudget is low.

Evaluation Standards
A. Current strengths
Comparing the content of reports published by the governmentand related organizations, if the technology strategy is unique, itis evaluated as strong, and if the technology is implemented inEurope, Central America, it is evaluated as weak, depending on
the strategy's expansion.
B. Assistance of the Japanese government
Referring to METI's "Outline of Resource and Energy Related
Budget" for FY2020, evaluation is made on a big scale when thebudget is JPY50 billion or more, on a medium scale when thebudget is JPY10 billion or more, and on a small scale when thebudget is less than JPY10 billion.

Note: Created based on information as of February 20193-18

5Definition of Countermeasures

Step

2

3

4

Step 4-3 Diagram: Business impact evaluation
Consider the priority of investment based on the evaluation of business impact
Sector A

Sector B

Sector C

+

++

+

SSP1

SSP3

SSP52

++

Approach to Business Impact Assessment
-

SSP5
-1

Investment priorities+-+For each scenario, the- total+ points are calculated based on the impact
and strength assessments of the evaluated 5 technologies. Based on
this evaluation, we set a threshold value and evaluate it on a scale from++ to - - 4.
They are allocated to each sector, and the average was used as the- + assessment.
ultimatebusiness impact
Rank

Significance of Evaluation

++
+ --

High impact of target technologies in the sector and high growth potential- -Influence of target
technologies in sectors and expected to grow
Limited impact and growth of target technologies in the sector
Low impact of target technologies in the sector and no growth expected

3-19

5

5

Definition of Countermeasures

Step

2

3

4

5

Future challenges
opportunities this time.
Consider utilizing the scenario analysis as one of the tools for strategic investment in the future. Issues tobe addressed are developing the scenario analysis and establishing organizational structure.

Enhancement of
scenario analysis

Points of Attention and Issues
Update and review of technology
Development ofparameters
evaluation tools
Adoption of the Japanese version of SSP
Physical risk
Research of other risks
Transition risk
Organizational
Collaboration

To build a system
Business continuity

Communication with related departments
Investigation of evaluation method
Establishment of a monitoring system

3-20

EnergyPractice Example
Practice Example

3-21

ITOCHU Corporation
Chiyoda Corporation

ITOCHU Corporation
Textile Company
Apparel Division
Brand Marketing Division 1
Brand Marketing Division 2

Machinery Company
Plant Project, Marine & Aerospace Division
Automobile, Construction, Realty & Logistics, Machinery &Industrial Machinery Division

Department in charge of
scenario analysis

Power Project Department

Metals & Minerals Company
Metal & Mineral Resources Division

Energy & Chemicals Company
Energy Division
Chemicals Division

Food Company
Provisions Division
Fresh Food Division
Food Products Marketing & Distribution Division

General Products & Reality Company
Forest Products & General Merchandise Division
Construction & Logistics Division

ICT & Financial Business Company
ICT Division
Financial & Insurance Business Division
As of 2018
3-22

STEP

2

Climate-change risks and opportunities for the power generation segment
Risk item3

4

5

Business impact (examples of considerations)

Carbon pricing/emission
rights trading

Introduction of carbon pricing and emission rights trading will increase the cost of thermal power
generation.
(It is highly likely that the cost will not be able to be passed on in the sales price.)
Competitive advantages for renewable energy will increase.

Large

Carbon dioxide emission
targets/policies ofcountries

Strict regulations will require the company to consider selling assets or making additional
capital investment.

Large

Change in energy mix

Electricity from particular resources will become unsaleable, opportunity loss will occur, or sales
will decrease.
The Company will have to consider selling assets, or making capital investment in alternative
energy resources.

Large

Spread of recycling andenergy-saving
technologies(CCS, storage batteries,
resource-saving design,etc.)

If carbon capture and storage (CCS) is made mandatory for thermal power generation, extra costs
will be incurred.
A drastic shift to renewable energy will require huge investment in storage batteries and grid
systems.
If a new, low-cost and high-efficiency renewable or energy-saving technology emerges, the demand
for thermal power generation will decrease.

Large

Renewable energy prices(FIT price)

Sales prices of new renewable energy projects will decline.
Competitive advantages for renewable energy will increase.

Large

Changes in the
reputations among
investors

Divestment will accelerate, and continuation of the thermal power generation business will increasefund-raising costs.

Large

Introduction of carbon pricing will lead to a rise in power generation costs and changes
in energy mix, which will have great financial impacts.
3-23

STEP

2

3

4

5

Scenario

4 C 2 C

Consider society in 2040 with two scenarios of climate change that are highly uncertain.
[Forecast of global average surface temperature (difference from the 1986-2005 average)]
( C)

2030
The temperature willrise 2.6-4.8 C above
pre-industrial levels,
unless more rigorous
measures are taken.

Nationally determined
contributions (NDCs) for eachcounty are 3-4 C increase levels.

4 C Scenario

The temperature
will rise 0.3-1.7 C
above preindustrial levels, if
strict measures aretaken.

Partly pressed by investors and communities, theenergy sector starts to set targets and drive lowcarbon and carbon-free actions.

2 C Scenario

Sources: Figure SPM.6 in the Synthesis Report (SYR) of the IPCC Fifth Assessment Report (AR5); International Energy Agency (IEA)

3-24

STEP

Present(2014)
Carbonpricing/emissionrights trading

Carbonemissionstargets/
policies*

Changes inenergy mix

Carbonpricing/emissionrightstrading
Fossil fuelpricesRenewableenergyprices(FIT price)(US)**
Energyoutput bysource(US)

Spread ofrenewable
Penetrationand energyrate of CCS
savingtechnologies
3-25

2

3

4

5

Scenario

4 C 2 C

2040
World 40 years ahead in the World 40 years ahead in the
4 C scenario
2 C scenario

Sources

N/A

N/A$140/t (US)IEA WEO2016(450 scenario)

Coal: $78/t

Coal: $108/t
Gas: $7.5/Mbtu (US)Coal: $77/t
Gas: $5.9/Mbtu (US)IEA ETP 2016
(4DS, 2DS)

PV utility scale: 7.2-8.8
yen/kWh
Onshore wind power: 6.2-7.7
yen/kWhPV utility scale: 6.6-7.1
yen/kWh
Onshore wind power: 6.2-7.7
yen/kWhIEA WEO2016(NPS, 450 scenario)

Coal thermal: 1,713
Coal thermal: 1,016 TWh
TWh (40%)
Coal thermal: 153 TWh (3%)(21%)
Gas thermal: 1,161 TWh
Gas thermal: 1,480 TWh
Gas thermal: 959 TWh (20%)
(27%)
(30%)
Renewable: 2,560 TWh (54%)
Renewable: 570 TWh
Renewable: 1,488 TWh (30%)(13%)

IEA WEO2016(NPS, 450 scenario)

Gas: $4.4/Mbtu (US)

N/A

N/A

N/A

Coal thermal with CCS: 64%
Gas thermal with CCS: 18%

IEA ETP 2016
(2DS)

2

STEP

3

4

5

Scenario

4 C 2 CIn the 4 C scenario, the world will see an increased share of renewable energy, while
the Company will continue following the present path towards further expansion

Government

A certain policy effort towards a low-carbon society

Pressure on fossil fuels

Gradual abolishment of subsidies to fossil fuels
Enhanced standards for power generation efficiency
Adoption of carbon tax by some countries

Divestment from coal and petroleum
Steady or slightly increased investment in renewable energy

A rise in material costs
Supplier(rawmaterials)

New entry

Investor

ActionEncourage disclosure and dialogue

Increased entries in the IPP and PPS
markets

A worldwide increase inelectricity demandMore IPPs and PPSs in some regions
Increased demand for coaland gas, and a rise in theirpricesIndustry/ Itochu

A drop in the cost of renewableenergyThe portfolio will remain on an
extension of the present path

Overall electricity demand will
increase.
Advanced countries will see a
decline in demand for coal andother thermal power generation(though gas power generation will
increase).
A drop in the cost of renewableenergy will encourage someconsumers to shift to renewableenergy.
Typhoons and floods will cause
power failures.

Overall electricity demand will increase.
The share of renewable energy will gradually
increase, while demand for coal power generation
will also increase in developing countries.
The additional cost of carbon tax and CCS will belimited, so thermal power generation will remain
profitable.
Physical risks will increase power generation costs.

Technology

Evolution of low-carbon power
generation technology, and a drop in
the cost of renewable energy
The adoption cost of renewableenergy stabilizing technology willremain high.
CCS will not become common.

Power company/
consumer

Action Enhance disaster preparedness and BCP

Departure from centralized
power generation
Alternatives

Spread of decentralized and self-power generation

While keeping the portfolio on an extension of the present path, enhance the business continuity plan
(BCP) to respond to physical risks
Encourage active disclosure and dialogue to secure reputation
3-26

2

STEP

3

4

5

Scenario

4 C 2 CIn the 2 C scenario, the world will reduce the use of thermal power generation,and substantially increase the share of renewable energy
Pressure on fossil fuels

Enhanced efforts towards a low-carbon society
Government

Abolishment of subsidies to fossil fuels
Enhanced standards for power
generation efficiency

Adoption of carbon tax by many countries
Subsidies to CCS will be granted/increased.

Changes in material costs
Supplier (raw materials)

Gas prices will increase.
Coal prices will gently decrease.
Land prices for renewable energy will
increase, and the land market will be
more competitive.

Technology

A drop in the cost of
renewable energy

Evolution of low-carbon power generation
technology, and a drop in the cost of
renewable energy
Further development of renewable energy
and electric vehicles, and inflated pricesof storage battery and scares resources
CCS will become common.
ActionIncrease investment related
to renewable energy

New entry

Investor

Divestment from coal and petroleum
Increased investment in renewable energy

More entries in the IPP and PPS
markets
A worldwide increase inelectricity demandMore IPPs and PPSs in some regions

Power company/consumer

The share of renewable energy willconsiderably increase.

Industry/Itochu

Overall electricity demand will increase.
Most electricity will be generated with renewableenergy.
Gas will replace coal as a backup source for renewableenergy stabilization. (A drop in coal demand)
Because of the additional cost of carbon tax and CCS,
thermal power generation will become less profitable.

Overall electricity demand will increase.
Carbon pricing will be adopted, dampening
demand for thermal power generation.
A drop in the cost of renewable energy willencourage consumers to shift torenewable energy.
Action

Review the portfolio, andsupply highly competitiveenergyAction Increase the share of renewable power

generation

Alternatives

Departure from centralized power
generation

Spread of decentralized and self-power generation
Action Go into decentralized and self-power

generation businesses

While constructing a business portfolio focusing on renewable energy in line with the world trend of
departure from carbon, pursue new electricity business opportunities
3-27

STEP

2

3

4

5

Scenario

4 C 2 C

Under both the 2 C and 4 C scenarios, the Company will maintain at least thecurrent level of income
4 C Scenario(Image)There are possibilities that:Gas power generation will be
more profitable.
Coal power generation will beless profitable.
Renewables will also be lessprofitable.
Accumulated income will drop.

2 C Scenario(100% carbon tax)

Accumulated profit
from power sources
built in 2021-40

Higher profitabilityof gas power
generation

Lower profitabilityof coal power
generation

Lower profitabilityof renewables(Image)Course of events

Focus on renewables

Power generation otherthan renewables will be
subject to carbon tax,
which will result in a
substantial drop in
profitability.
But the Company will beable to maintain or
increase profitability bybuilding new renewable
plants.

Increased
Carbon tax and Accumulated
Accumulated Increased
Increased
AccumulatedExpansion
profit from
Carbon tax
Reduction Reduction
CCS cost
profit fromprofit fromprofit fromprofit from
Decreased
profit fromin
expansion of
CCS saving fromin gas/oilin coalsaving from power sources
power
expansion of expansion of
profit frompower
renewable
renewable
cost
CCS
power
power
reduction in built in 2021-40
sources built gas power
coal powercarbon tax
sources built
power
power
adaption
generation generation
gas/coal power (renewablein 2021-40
generation
generationin 2021-40
generation
generation
generation
focused)

3-28

EnergyPractice Example
Practice Example

3-29

Accumulated profit
from power sources
built in 2021-40

ITOCHU Corporation
Chiyoda Corporation

Define range of scenarios
Analytical
Assumptions

TargetTarget2040

Scenarios

42
against climate change(ex: introduction of carbon tax, etc.)

Reference data

Sources: IEA WEO 2019 (Sectors

LNG/ Green Energy EPC/
Non-EPC such as hydrogen, CCU, and distributed composite
utilities* EPC = Engineering, Procurement, Construction* CCU = CO2 Capture and Utilization

Financial Data

Extending the data to 2040 based on business plan until 2023
disclosed in recovery plan.

3-30[Step 2: Assess materiality of climate-related risks]

Step

2

3

4

5

Scenario

4

2

Future climate change poses significant risks and opportunities for
Chiyoda Corporation
Risks and Opportunities
Major
classification

Small classification

Business impact
Index

Discussion: Risks

Discussion: Opportunities

Revenue

The introduction of carbon prices is expected to reduce thedemand for fossil fuels (to reduce the demand for petroleum
plants), which will have a medium-scale impact on PL.

Developments in carbon tax markets could create new opportunities in lowcarbon energy markets, such as hydrogen, CCU and bio-based chemicalindustries and decentralized utilities

Carbon emission
targets/policies of each
Revenuecountry (including
subsidies)

Regulatory tightening affects orders for fossil-fuel-derived
plants, affecting PL

The market for green energy, hydrogen, etc. is expected to expand withthe advancement of policy support, and the demand for plant andenergy transportation, etc. is expected to increase, creating business
opportunities.

In the energy mix
ChangeRevenue

Large impact on PL due to changes in fossil fuel-derived
power generation rate, which affects plant orders

Alternatives to coal such as LNG and natural gas may increase demandfor plant production, which can be an opportunity as well as a risk
Increased demand for green energy creates new business
opportunities

Energy Demand

RevenueSignificant impact on PL due to decrease in demand forgasoline and decrease in orders for petroleum refineries
Smaller plant size and diversification of customers andregions reduced business opportunities.

Promoting LNG and natural gas as low-carbon fuels creates business
opportunities in new markets (increased exports and imports in North
America and Asia)
New opportunities could emerge in low-carbon energy markets, such ashydrogen, CCU and bio-based chemical industries and decentralized utilities

Spread of low-carbon
technologies

Revenue

Influence on PL due to the spread of electric vehicles,
reduced demand for gasoline, etc., affecting the volume oforders received for petroleum plants.

Promoting LNG and natural gas as low-carbon fuels creates business
opportunities in new markets (increased exports and imports in North
America and Asia)
New opportunities could emerge in low-carbon energy markets, such ashydrogen, CCU and bio-based chemical industries and decentralized utilities

Developing nextgeneration
technologies

Revenue
Spending

Popularization of decarbonizing materials (bio-plastics, etc.)
reduces the market size of petroleum products and has alarge impact on orders for petroleum refineries

New opportunities could emerge in low-carbon energy markets, suchas hydrogen, CCU and bio-based chemical industries and decentralized
utilities

Changes in customer
reputation, changes ininvestor reputation,
Revenuerising mean
Spendtemperatures, risinging
sea levels, and extreme
weather conditions

Die investment accelerated for oil and LNG, and plant orders
declined or were suspended. In addition, the postponement andcancellation of projects have an impact on PL.
Construction delays caused by extreme weather conditions havean impact on PL due to increased construction costs, etc.

Investors' evaluation improves due to orders received for projects aimed atrealizing a low-carbon society such as renewable energy.
Expected increase in demand for plant resilient to natural disasters, etc.

Carbon priceTransition
Risk

Other

Assessment

Large

Small tomediumThe effects of "Carbon price","policy","change in energy consumption","demand transition" and "new technology ,which have an influence on orders, aresignificant. It is also assumed that the development of next-generation technologies linked to market opportunities will have a great financial impact.
3-31

[Step 3: Identify and define a range of scenarios]

2

Step

3

4

5

Scenario

4

2

Defining worldview for each scenario based on scientific evidence fromIEA and others.
2040

At present

4 (STEPS)

2 (SDS)(Reference) 2°C (FPS)

SourceIEA WEO2019
PRI FPS scenarios

Carbon price

Carbon tax-$31 to $39/t$125 to $140/t$25 to $100/t

Carbon Emissions
Targets/Policies in
Each Country

GHG emissions(Millions of tCO2)

Japan :1,078
Global: 6,087(2018)

Japan :666
Global: 7,117

Japan :287
Global: 3,748

No FPS data

EnergyChange in mix

Power Supply
Composition(TWh)Japan :1,069
Global: 26,603(2018)

Japan :1,062
Global: 41,373

Japan :1,005
Global: 38,713

Japan: no FPS data
Global: 40.4 thousand

IEA WEO2019
PRI FPS scenarios

Primary energy demand(Million tons)

Japan :434
Global: 14,314 (2018)

Japan :353
Global: 17,723

Japan :300
Global: 13,279

Japan: no FPS data
Global: 13,469

IEA WEO2019
PRI FPS scenarios

Final energy demand(Million tons)

Japan :293
Global: 9,955 (2018)

Japan :234
Global: 12,672

Japan :185
Global: 9.5 thousand

No FPS data

IEA WEO2019

LNG: Pipeline ratio(bcm)

352:436(2018)

729:549

636:358

No FPS data

IEA WEO2019

ZEV ratio

58 thousand units (EV, PHV, FCV)(2017)

PHV/ZEV:7%(123.81 million units)

PHV/ZEV:63%(1023.44 million units)

No FPS data

IEA Report and Global Calculator

World's storage capacity

4.67 TWh(2017)No IEA data

Hydrogen penetration rate0
(To the final energy of the world
Hydrogen demand in 2018

(No spread at 4°C)

2. 7EJ/ years

CCU penetration rate

CO2 reductions by CCUs: 0(2018)

113 million tons

1,770 million tons

Domestic Bio-plastics shipments:
70 thousand tons (2013)
Global disposable plastic raw materials
usage: 3.4Mb/d (2015)

Japan: No IEA data
Global: No IEA data

Ministry of the Environment, "FY2017
Greenhouse Gas Emissions" and "Longterm Strategy as a Growth Strategy Basedon the Paris Agreement"
IEA WEO2019

EnergyDemand trends

Low-carbon
technologies
Penetration

Next generation
technology
Progress

Penetration rate of
bioplastics

No IEA/FPS data
-15.75 TWh for IRENA

6.1Mb/d used

IRENA Report

Steel sector: 4. 0EJ/ years
Cement Division: 2. 0EJ/ years
No FPS data
CCU market size: US$1.5 trillion

Japan: No IEA/FPS data

IEA WEO2019
PRI FPS scenarios

IEA WEO2019
ICEF Roadmap

Ministry of the Environment's Global
Warming Prevention Plan

million tons were shipped.
Global: No IEA/FPS data

BP"Energy Outlook 2019" ET scenarios

3-32[Step 3: Identify and define range of scenarios]

Step

2

3

4

5

Scenario4

2

In the 4°C world, low carbon and carbon cycles are not promoted, anddependence on fossil fuels continues.
Government
GlobalNo active promotion of energy conservation and green
energy policies

Carbon tax introduced in some areas

MarketNo carbon tax
introduced

Increasing demand for
optimization of O&M due
to digitization

Large plant remains.
Small to medium sized
and modular plantincrease

Maintenance andmanagement

CO2
Diversification ofplayers(Rise of Chinesecompanies, etc.)

CO2

LNG : Increased
Petroleum Maintained
Hydrogen No opportunity
CCU No opportunity

N/A
N/A

Industrial Plants (fossil fuels) Increased(Green Energy) MaintainedPlayers

CO2
Green Energy Power
Fossil fuels

3-33

Due to intensified extreme weather,longer construction period and much
more construction cost are required

The use ofbatteries and
EVs have notspread andconventionalenergy generation
remains

LNG Maintained
Petroleum Decline or matintained
Hydrogen No opportunity
N/A
N/A
CCU No opportunity
Industrial Plant (fossil fuel) Maintained(Green Energy) Maintained

Increased demandfor efficiency
improvements andstructural changes
in the supply chainof building
materials

No carbon regulations
were introduced,building material
costs depend on
the market

[Step 3: Identify and define range of scenarios]

Step

2

3

4

5

Scenario4

2

In the 2°C world, low carbon and carbon cycles are promoted, and demand for green
energy facilities expands. The introduction of hydrogen and CCU is accelerated
Government

GlobalPromoting policies such as subsidies and R&D
for energy-saving

Introduction of acarbon tax

Introduction of acarbon tax

MarketWith digital technology,
demand for optimizationof resources grows

Large plant remains,small to medium sized
and modular plantincreased

CO2
H2

H2

Companies
with advanced
technology
may enter themarketIntroducing
hydrogen tosome industries

New entry
Clean tech digitalcompany

CCU
Technology

CO2

CCU
technology

LNG (subject to responding tochange in business structure) :Maintained
Petroleum Maintained

LNG

Promoting clean-tech, including
use of EV at construction sites

Promotinggreen energy
power and the
spread ofstoragebatteries andEVs

Declined

Hhydrogen Slightly increased
CCU

Hhydrogen Slightly increased
CCU Increased
Plants (fossil fuels) Declined(Green Energy) Increased

Spread ofdecentralizationand sector
coupling

Decline or maintained

Petroleum

Slightly increased

Plants (fossil fuels) Declined(Green Energy) Increased

Increased demandfor efficiency improvements Cost increase ofbuilding materials
and the structural majorchange for building materials due to carbon
regulations

3-34[Step 4: Evaluate business impacts]

Step

2

3

4

5

Scenario

42

Considering the direction of the calculation (business as usual/our potential) from"market growth" and "market share"
Market growth

LNG
Green Energy(PV/Biomass)

In response to
structural changes inbusiness promotion

Marketexpansion

Green Energy

MarketShrink or expand

Utility

Hydrogen

CCU

The present market
share maintainedMarket expansion(Creation of newmarkets)

Direction of Estimation
Business as usual

Our Potential

No increase in profit
beyond the businessplan

No countingof potential

Due to the small
market expansion

Not counted

Profit declined
Assume 10% *1
acquisition of Japanesemarket(Offshore wind
power)
Oil-related

Share

The present
market share
maintained

Not counted

Market expansion iscounted as an opportunity

Profit declined due
Market expansion isto the shrinking
counted as an opportunity*2
marketAssume 1%
acquisition*3 of themarketNot counted

Market expansion iscounted as an opportunity

Assume 2%
acquisition*4 ofhydrogen supply

Profit increased dueto the market
expansion

Not counted

Assume 5%*3
acquisition of CCU
marketNot counted

Market expansion iscounted as an opportunity*1: Assuming an internal share ratio of 10%, *2: At 4°C, the oil-related market will expand, so there will be no decrease in sales at the time of completion. *3: Since entry into a new market and major players
have already been established, it is temporarily set at 1%. *4: Assuming that 2% of hydrogen supply will be obtained from our efforts to date, *5: Entering into a new market, it is temporarily set at 5%.

3-35

[Step 5: Identify potential responses]

Step

2

3

4

5

Scenario

42

Considering the direction of countermeasures for responding to risks andsecuring opportunities
Summary of impact calculations and policy for countermeasures
Items(Impact on our company)

2

4

Policy for countermeasures

Provide services that respond to changes inthe business structure

LNG

Petroleum
Fossil fuel plant

Hydrogen

CCU

Green Energy Plant

Respond to optimization of customer
assets by utilizing digital technology

Early entry into the market and securingmarket share is required due to increasing
demand for low-carbon and carbon cycle-

Develop utility business based on future
trends

3-36

Transportation
Practice Example
Practice Example
Practice Example

3-37

Mitsui O.S.K. Lines, Ltd.
Japan Airlines Co., Ltd.
Mitsubishi Motors Corporation

Climate-related Impact on Mitsui O.S.K. Lines
Risk item

Transition risk

Increase/decrease in
Key products and prices

Promotion of next-generation
vesselsNational regulations on
SOx/NOx
Energy-saving policy(EEDI/Energy efficiency laws)
Energy-saving subsidies

Trend in energy demand

OthersCarbon pricing
Change in reputation amongcustomers (shippers) andinvestors; melting of permafrost
and glaciers; extremely
abnormal weather; etc.

STEP

2

3

4

5

Business impact
Changes in energy mix will impact the demand for key cargo transport (crude oil, petroleum products, petrochemicals, coal, LNG),
leading to fluctuations in profit of ocean shipping businessTransition to a low-carbon society will decrease the demand for coal and petroleum, which will reduce the cargo volume and profit in
the ocean shipping business.
However, the spread of CCS and CCU can revive the demand for coal transport, enabling the shipping business to maintain profit.
Spread of EVs and other next-generation vehicles will substantially change the ways of completed vehicle transport and supply
chains. This will reduce the vehicle transport volume and lower profit in the ocean shipping business.
Spread of renewable energy will increase the demand for hydrogen transport, which can help maintain profit in the ocean shipping
business.
Increased demand for onshore wind power generation will increase profit from development of onshore facilities (costs oftransport and installation), which will increase profit in the ocean shipping business.
Climate change will adversely impact cereal crop harvests, which will lower the demand for bulk cargo transport and reduce profit in theocean shipping business.
Shippers will expect environmental considerations in transport, calling on the ocean shipping business to shift to next-generation
vessels. This will increase R&D costs, capital investments, and overall expenditures.
Adaption of next-generation vessels will save fuel costs and payments of carbon tax, reducing overall expenditures.
The 2020 IMO fuel sulphur regulations will require the ocean shipping business to purchase appropriate fuel. This will increase
operating costs and overall expenditures.
Installation of SOx scrubber systems will increase capital costs and overall expenditures. Promotion of alternative fuels, though notdirectly related to climate change or global warming, can indirectly contribute to CO2 emissions reduction.
The EEDI for new ships will tighten the regulations (Phase 2 from 2020 and Phase 3 from 2025), which will inflate ship prices, andincrease maintenance costs and overall expenditures.
Access to energy-saving subsidies will save capital investment, and reduce overall expenditures.
FIT and other policies to promote renewable energy will reduce the demand for crude oil, coal and LNG transport, the transportvolume, and income in the ocean shipping business.
An increase in the demand for biomass fuel transport will increase the transport volume and income in the ocean shipping business.
Stricter regulations on the use of cleaner fuels or those with less environmental impact will increase the costs of technology
development, capital, fuel and vessels (including crew training costs), and overall expenditures.
If market-based measures (MBMs) for GHG from ships are made obligatory by IMO, fuel will be charged, and ship operators will haveto purchase emission rights for emissions exceeding their allocated volumes. This will increase overall expenditures.
General preference to transport means with environmental considerations will increase the demand for vessels.
Development of the North Sea Route will reduce traveling time, and the capital and travel costs. This will lead to more new contracts andincrease freight revenue.
Abnormal whether and typhoons require ship operators to change navigation routes to longer routes. This can damage reputation fromshippers.

Large

Mediumto large
Small tomediumAdoption of carbon pricing and emission rights trading will increase vessel fuel costs and overall expenditures.
In addition, investment in development of next-generation vessels will have considerable financial impacts.
3-38

Consider society in 2030 with two scenarios
STEP

2

3

4

5

Scenario

4 C 2 C

[Global average surface temperature (difference from the 1986-2005 average)]
( C)

2030
4 C Scenario

2 C Scenario

Source: Figure SPM.6 in the Synthesis Report (SYR) of the IPCC Fifth Assessment Report (AR5)3-39

The temperature willrise 3.2-5.4 C above preindustrial levels, unless
more rigorous measures
are taken.

The temperature willrise 0.9-2.3 C above
pre-industrial levels, if
strict measures aretaken.

Assumptions in the Scenarios
Present
Total traffic
volumeCoal traffic
volumePetroleum traffic
volumeIncrease/
Automobile
decrease intraffic volume
Keyproducts
Steel demandand prices
LNG demand

Spread ofnextgeneration
vessels
Regulations

Carbonpricing

66,000 G tonne-km/year(2015)
7,300 G tonne-km/year(2015)
19,000 G tonne-km/year(2015)
36.2 million vehicles/year(2017)
1,670Mt(2014)
3,635bcm(2014)

STEP

2

3

4

World in the 4 C scenario

2030
World in the 2 C scenario

113,588 G tonne-km/year

101,178 G tonne-km/year

7,665 G tonne-km/year

5,256 G tonne-km/year

25,039 G tonne-km/year

15,987 G tonne-km/year

53.02 million vehicles/year

43.27 million vehicles/year

1,855Mt

1,855Mt

4,269bcm

4,545bcm

Demand foroffshore wind
power generation

350GW(2014)

1,255GW

1,840GW

Spread of nextgeneration fuels

FAME: 1,040USD/Mt, 38MJ/kg
MDO: 482USD/Mt, 43MJ/kg (2016)

n.a.

n.a.

EEDI regulations

Phase 1 = 10%

Phase 3 = 30%(in and after 2025)

Phase 3 = 30%(in and after 2025)

CO2 emissions ofglobal marinetransport

810 million tonnes(Emissions from ships worldwide,2010)

924 million tonnes(Emissions from ships
worldwide)

823 million tonnes(Emissions from ships
worldwide)

Carbon tax* Average bidding price: Approx. $8/t
at the EU-ETS

Fuel price

Europe: $37/t
China: $23/t

Petroleum: $113/bbl

Petroleum: $97/bbl

5

Scenario

4 C 2 C

Sources
2ii(ACT, LCT scenarios)
IEA WEO2017/2ii(ACT, LCT scenarios)
IEA WEO2017/2ii(ACT, LCT scenarios)
The Global Calculator V23(IEA 2DS/4DS scenarios)
IEA ETP 2017
(RTS, 2 C scenario)
IEA ETP 2017
(RTS, 2 C scenario)
Agency for Natural Resources
and Energy, Renewable Energy
Institute, Japan Maritime Center,
etc.

IMO
2ii
(UMAS Scenarios 8, 10)

Japan, North America, Europe:$100/tChina: $75/t

Petroleum: $97/bbl

IEA WEO 2016
(450, NPS scenario)
Considerations of Emissions
Ministry of Environment report,
2016
IEA ETP 2016/2ii

3-40

CO2 Emissions from the Global Maritime Transport Sector
STEP

2

3

4

5

Scenario

4 C 2 C

4 C Scenario

2 C Scenario

Opt 2 = Scenario 8:
The scenario sets CO2 emissions targets at 33Gt during the period 2010 to 2100 on the assumption that MBM starts in 2025 and
20% of the total revenue derived from a carbon pricing can be used to purchase CO2 offsets. It is used as an ACT scenario (2 C) in
the 2ii report.
Opt 5 = Scenario 10:
The scenario sets CO2 emissions targets at 79Gt during the period 2010 to 2100 on the assumption that MBM starts in 2025 and
80% of the total revenue derived from a carbon pricing can be used to purchase CO2 offsets. It is used as an LCT scenario (4 C) in
the 2ii report.
-

3-41World in the 4 C Scenario: More Natural
Disasters and Inflated Fuel Costs

STEP

2

3

4

5

Scenario

4 C 2 C

Higher port charges
due to a rise in sea levels...
CO2
Government

CO2

BiofuelFCVNo change in EEDI or otherregulations or policies.
Regulations will not work
properly even after MBM starts.

Fossil fuelEV
Increased demand forEVs, increasing thecargo volume
Development of
icebreakers eyeing to
the North Sea Route

Increased demand forbiofuel as an alternative

Inflated fossil fuel prices,increasing the cargovolume

CO2

SO

NOx

Increased demand foroffshore wind power
generation

Regulations in line withrules of the international
community

IMO

Storms and cyclones will force ship operators to change
navigation routes. This will increase the capital and fuelcosts, cause delays in delivery, and pose adverse impacts
on ferry terminals.

3-42World in the 2 C Scenario: Cleaner Society, Shift to Renewables,
and Dampened Demand for Fossil Fuel2
3
4
5
4 C 2 C
STEP

Scenario

More use of EVs andhydrogen

FCVEV

Green energy

Carbontax rise
Shift to local production
for local consumption,
which emits less carbon
dioxideSteel

Government
CO2

Fossil fuelWider application of carbon tax
Change in fossil fuel demand
Development of
icebreakers eyeing theNorth Sea RouteHydrogenDecreased demand
due to spread oflighter vehicles

BiofuelDevelopment of nextgeneration fuels

Stricterregulations to
80% cuts

Increased demand foroffshore wind power
generation
Stricter EEDI regulations,start of MBM, stricter
regulations on SOx and
NOx

3-43

IMO

World in the 4 C scenario, the Company will continue following thepresent path towards further expansion.
2
3
4
5
4 C 2 C
STEP

Scenario

World in the 2030s in the 4 C scenario
Accelerating
technology innovation

Supplier

Suppliers will develop EEDIcompatible, high-fuel efficiency
technologies, and see
increased development costs ofnext-generation vessels.
Subsidy schemes will help
them save capital investment.

ActionEnergybusiness

Request incentives/
subsidies

New entry

Change in transportdemandRainstorm, typhoon, rise in
sea levels

Industry/MOL

Physical risks will emerge, which will
increase insurance costs.
Traffic volume will increase as a result of
population growth.
A rise in sea levels will result in higher port
charges.

Adoption of carbon tax and MBM
will increase petroleum and coal Action
fuel prices.
More use of LNG as alternative
Increased demand for biofuel asalternative, but increase will belimited due to prices and supply
volumeComply with EEDI regulations anddevelop technology to reduce
environmental burden

Changes in navigation routes
will increase the capital and fuelcosts, and cause delays indelivery.
Promotion of renewable energy
will slightly decrease coaltransport, increase oil andbiomass fuel transport, andsubstantially increase natural
gas transport.
Increased demand for offshore
wind power generation
Poor harvests will reducetransport demand.
Substantial increase in demandfor EVs will change transport
supply chains.
Adverse impacts on ferry andterminal businesses

Action Develop navigation

Entry in related businesses

Alternatives

Development of the North Sea Route andrelated businesses(No particular action needed)alternative fuels andsuppliers

More subsidies

Customer

Shipping industry

Higher demand forfossil fuelAction Consider prices ofNo impact on new entry

New entries will have no impact from climatechange.
(No particular action needed)routes and vessels
compatible with climatechangeCall for understandingof an increase in capital
investment

Government

No change in EEDI or otherregulations or policies
IMO targets of 50% cuts by
2050 will continue.
Adoption of carbon tax andMBM (charges on vessel fuel,and obligation to purchaseemission rights)
Harbors and ports will be
developed to meet the new
regulations
Enhanced SOx/NOx
regulations will accelerate theuse of alternative fuels.

ActionEnhance and maintainliaison with thegovernment to swiftly
gain information about
any revisions toregulations

3-44

World in the 2 C scenario: More Action Needed towards
2
3
4
5
a Low-Carbon Society
STEP

Scenario

4 C 2 CWorld in the 2030s in the 2 C scenario
Accelerating
technology innovation

Supplier

Suppliers will develop EEDIcompatible, high-fuel efficiency
technologies, and see
increased development costs ofnext-generation vessels.
Subsidy schemes will help
them save capital investment.
Low-carbon technology will
help increase vessel prices andlease charges.

Investment in next-

Action generation technology(joint investment)

Energybusiness

Increased fossil
fuel costs

Adoption of carbon tax andMBM will increase fossil fuelprices.
Rapid spread of LNG fuel asalternative
Hydrogen supply chain will be
put into practice.
Increased demand for biofuelas an alternative, but theincrease will be limited due toprices and supply volume

Action3-45

Shift from fossil fuel toalternative fuels

New entry

No impact on new entry

New entries will have no impact fromclimate change.
(No particular action needed)

Shipping industry
Industry/MOL

Predict moves towards
a low-carbon society based on
climate change external factors.

Vessels will consume less fuel.
(LNG ships, higher engine efficiency, higher
propeller efficiency, reduced ship resistance)
The industry will promote technology
development of next-generation fuels.

ActionAlternatives

Develop technology towards
a low-carbon society

Consider impacts of landtransport on marine transport

Accelerated modal shift
Development of the North Sea Route andrelated businesses

Customer

Decline in fossil fueltransport

Increase in renewable/EVtransport
Promotion of renewableenergy will decrease coal andoil transport, and increasebiomass fuel transport.
Increased demand for offshore
wind power generation
Consumers will opt for lowcarbon-oriented, local
production for local
consumption. Traffic volume
will not increase in proportion
to population growth.
Substantial increase indemand for EVs will changetransport supply chains.
Spread of lighter vehicles will
decrease steel demand.
Increase in electric furnaces
will decrease iron ore demand.
Impacts of population growth
will be minimal.
Poor harvest will reducetransport demand.
Adverse impacts on ferry andterminal businesses

Action Change in portfolio(gradual shift fromfossil fuel transport)

Government

Intensified
actions forclimate change(Stricter MBMs and carbon tax)
Many countries will raisecarbon tax rates, which will
impact office and onshorebusinesses.
IMO targets of 50% cuts of
GHG by 2050 will continue.
EEDI regulations willcontinue, and more effective
MBMs will be adopted.
(charges on vessel fuel, andobligation to purchaseemission rights)
Enhanced SOx/NOx
regulations will accelerate
the use of alternative fuels.
Harbors and ports will be
developed to respond to
short-term abnormal weather.

Action Adopt next-generation

ships underpartnership withgovernment, and builda supply chain

World in the 4 C scenario, population growth and other factors will increase traffic
volume. The Company will use high-efficiency and
STEP
Scenario 4 C 2 C
2345
LNG vessels to deal with inflated fuel costs.
Financial impact
indicator

Risk item

Magnitude of
impact(¥100 million)

Background of the impact

Coal traffic volume

Sales (profit of ocean
shipping business)

Increase in traffic volume will increase profit The continued upward trend of coal demand, and population growth and vital economy will boost(freight revenue) of ocean shipping business. coal demand further.

Petroleum traffic
volumeSales (profit of ocean
shipping business)

Increase in traffic volume will increase profit The continued upward trend of petroleum demand, and population growth and vital economy will(freight revenue) of ocean shipping business. boost coal demand further.

Automobile traffic
volumeSales (profit of ocean
shipping business)

Consumers will not have enough incentives to purchase next-generation vehicles because of
Increase in traffic volume will increase profit
unsolved infrastructure problems, poor availability of related products, and high prices. So, the(freight revenue) of ocean shipping business.
vehicle market will remain focused on vehicles with an internal combustion engine (ICE).

Steel traffic volume

Sales (profit of ocean
shipping business)

Currently, steel is used the most for construction and automobiles. It is hardly possible to
Increase in traffic volume will increase profit consider any alternative to steel for construction, so impacts of transition risks will be minimal.
(freight revenue) of ocean shipping business. (Increase in climate disasters will result in an increase in demand for stronger and more durable
materials.)

LNG traffic volume

Sales (profit of ocean
shipping business)

Increase in traffic volume will increase profit The continued upward trend of LNG demand, and population growth and vital economy will boost(freight revenue) of ocean shipping business. LNG demand further.

Traffic volume related tooffshore wind power
generation

Sales (cost of ocean
shipping business)

Increase in related projects will increase
cost (freight revenue) of ocean shipping
business.

Transport of otherproducts

Sales (profit of ocean
shipping business)

Increase in traffic volume will increase profit The continued upward trend of demand, and population growth and vital economy will boost(freight revenue) of ocean shipping business. demand further.

MBM/emission rights
trading

Expenditures (cost ofocean shipping business)

Emission trading will increase expenditures.

Emission trading will be adopted to achieve the CO2 reduction target by 2050, but the trading
volume will be limited. New technologies will be put in place to achieve the goal.

Inflated fuel prices

Expenditures (cost ofocean shipping business)

Adoption of carbon pricing will inflate fuelprices, which will increase cost (fuel costs)of ocean shipping business.

Carbon pricing will slightly increase. This will be passed on to fuel prices in advanced countries,
causing financial impacts.

Trend inenergy demand

Inflated fuel prices

Expenditures (cost ofocean shipping business)

Rise in fuel prices due to supply-demandbalance will increase costs (fuel costs) of
ocean shipping business.

Considerable rise in fossil fuel costs will have great financial impacts.

Energy-saving
policy/ regulations/carbon pricing

EEDI and otherregulations

Expenditures (cost ofocean shipping business)

Adoption of high-efficiency vessels will
reduce cost (fuel costs) of ocean shipping
business.

Low-carbon transport modes will be required. Fuel efficiency of vessels will be improved, reducing
operation costs.

Expenditures (cost ofocean shipping business)

Regulations will increase new shipbuilding
costs.

To develop low-carbon transport modes, shipbuilders will seek high-efficiency vessels and installhigh-efficiency facilities in existing vessels. This will increase shipbuilding and repair costs.

Expenditures (cost ofocean shipping business)

Adoption of LNG-fueled vessels will impact
Adoption of LNG-fueled vessels will reduce vessel fuel costs and costs equivalent to carbon
cost (fuel costs) of ocean shipping business. pricing.

Expenditures (cost ofocean shipping business)

Adoption of LNG-fueled vessels will increase Adoption of LNG-fueled vessels will require additional investment as the difference fromnew shipbuilding costs.
conventional vessels, having great financial impacts.

Expenditures (cost ofocean shipping business)

Spread of biofuels will increase cost (fuelcosts) of ocean shipping business.

Increase/decrease in key
cargoes

Transition risks

Summary of impact

Energy-saving
policy/ regulations/ carbon pricing

Spread of nextgeneration
vessels

Adoption of LNG-fueled
vessels

Spread of nextgeneration
fuels (biofuels, etc.)

Further spread of renewable energy and particularly an increase in demand for offshore windconstruction (transport and installation costs).

Biofuels will become common and more easily available. Businesses will consider adopting such
fuels toward a low-carbon society.

3-46World in the 2 C scenario, fossil fuel traffic volume will decrease.
The Company will face greater burden of
STEP
2
3
4
5
emission trading and carbon tax.
Summary of impact

Coal traffic volume

Sales (profit of ocean
shipping business)

Decrease in traffic volume will reduce profit(freight revenue) of ocean shipping business.

Shift from fossil fuels to renewable energy will reduce the coal traffic demand.

Petroleum traffic volume

Sales (profit of ocean
shipping business)

Decrease in traffic volume will reduce profit(freight revenue) of ocean shipping business.

Shift from fossil fuels to renewable energy will reduce the petroleum traffic demand.

Automobile traffic volume

Sales (profit of ocean
shipping business)

Increase in traffic volume will increase profit(freight revenue) of ocean shipping business.

Demand for EVs will considerably increase, affecting transport supply chain. A low-carbon
society will draw higher attention, reducing the growth of traffic volume of ICE. But population
growth will offset the reduction, and overall traffic volume will increase.

Steel traffic volume

Sales (profit of ocean
shipping business)

Increase in traffic volume will increase profit(freight revenue) of ocean shipping business.

Currently, steel is used the most for construction and automobiles. It is hardly possible toconsider any alternative to steel for construction, but steel can be replaced by lighter materials
such as aluminum, plastics, and CFRP for car bodies.

LNG traffic volume

Sales (profit of ocean
shipping business)

Fluctuations in traffic volume will increase
profit (freight revenue) of ocean shipping
business.

Increased LNG demand in a low-carbon society will increase LNG traffic volume.

Traffic volume related tooffshore wind power
generation
Transition risks

4 C 2 C

Financial impact
indicator

Risk item

Increase/decrea
se in keycargoes

Scenario

Transport of otherproducts

Sales (cost of ocean shipping Increase in related projects will increase costbusiness)(freight revenue) of ocean shipping business.
Sales (profit of ocean
shipping business)

Increase in traffic volume will increase profit(freight revenue) of ocean shipping business.

Background of the impact

Further spread of renewable energy and particularly an increase in demand for offshore windconstruction (transport and installation costs).
The continued upward trend of demand, and population growth and vital economy will boost
demand further.

MBM/emission rights
trading

Expenditures (cost of ocean
Emission trading will increase expenditures.
shipping business)

Emission trading will be adopted to achieve the CO2 reduction target by 2050, but the tradable
volume will be large. The Company will have to purchase emission rights if it fails to meet thetargets. This will increase expenditures.

Inflated fuel prices

Adoption of carbon pricing will inflate fuelExpenditures (cost of ocean
prices, which will increase cost (fuel costs) of
shipping business)ocean shipping business.

Carbon pricing will increase. This will be passed on to fuel prices in advanced countries,
causing financial impacts.

Trend inenergy demand

Inflated fuel prices

Rise in fuel prices due to supply-demand
Expenditures (cost of oceanbalance will increase cost (fuel costs) of
shipping business)ocean shipping business.

Slight rise in fossil fuel costs will increase fuel costs.

Energy-saving
policy/regulations/ carbon pricing

EEDI and otherregulations

Energy-saving
policy/regulations/ carbon pricing

Spread of nextgeneration
vessels

Adoption of LNG-fueled
vessels

Expenditures (cost of ocean Adoption of high-efficiency vessels will reduce Low-carbon transport modes will be required. Fuel efficiency of vessels will be improved,
shipping business)cost (fuel costs) of ocean shipping business. reducing operation costs.
Expenditures (cost of ocean Regulations will increase new shipbuilding
shipping business)costs.

To develop low-carbon transport modes, shipbuilders will seek high-efficiency vessels andinstall high-efficiency facilities in existing vessels. This will increase shipbuilding and repair
costs.

Expenditures (cost of ocean Adoption of LNG-fueled vessels will impact
shipping business)cost (fuel costs) of ocean shipping business.

Adoption of LNG-fueled vessels will reduce vessel fuel costs by the amount equivalent tocarbon pricing.

Expenditures (cost of ocean Adoption of LNG-fueled vessels will increaseshipping business)
new shipbuilding costs.

Adoption of LNG-fueled vessels will require additional investment as difference fromconventional vessels, having great financial impacts.

Spread of next-generation Expenditures (cost of ocean Spread of biofuels will increase cost (fuelfuels (biofuels, etc.)
shipping business)costs) of ocean shipping business.

3-47

Biofuels will become common and more easily available. Businesses will consider adopting
such fuels toward a low-carbon society.

Magnitude of
impact(¥100 million)

Transportation
Practice Example
Practice Example
Practice Example

Mitsui O.S.K. Lines, Ltd.
Japan Airlines Co., Ltd.
Mitsubishi Motors Corporation

3-48

Scenario Analysis in Practice STEP 2 Assess materiality of climate-related risks (extract)
List and categorize risk items into three groups in terms of assumed impacts on thebusiness
Category

Risk item

Policy and
LegalTargets and regulations on carbon emissions and fuel efficiency in theairline industry
Targets and regulations on carbon emissions and fuel efficiency inrelevant countries

Technology
ShiftsMediumMediumSpread of alternative fuels

Large

Improvement in fuel efficiency

MediumDevelopment of next-generation airplanes

Small
Large

Increased severity of extreme weather events

Large

Changes in rainfall and weather patterns

Large

Rise in average temperature
3-49

Large

Carbon pricing

Market Shifts Inflated fuel prices

Physical
Risks

Assessment

Medium to Large

Scenario Analysis in Practice
STEP 3 Identify and define range of scenario
Consider a society with high climate uncertainty in 2030 with two existing scientific scenarios[Forecast of global average surface temperature (difference from the 1986-2005 average)]
( C)

2030

The temperature willrise 2.6-4.8 C above
pre-industrial levels,
unless more rigorous
measures are taken.

4 C Scenario
The temperature
will rise 0.3-1.7 C
above preindustrial levels, if
strict measures
are taken.

2 C Scenario

3-50

Sources: Figure SPM.6 in the Synthesis Report (SYR) of the IPCC Fifth Assessment Report (AR5); International Energy Agency (IEA)

Scenario Analysis in Practice STEP 3 Identify and define range of scenario (extract)
4 C
Scenario

The world in the 4 C scenario will be an extension of the present.
Further policy effort towards a low-carbon society
Government

Some countries and regions will adopt carbon tax.
Enhanced fuel efficiency regulations

New entry

Rise in material costs
Supplier(raw materials)

Gentle spread of biofuels
Inflated conventional jet fuelpricesFuel efficiency willcontinue improving.

Supplier(airframe makers)

Airframe fuel efficiency will improve.

New LCC focusing on low-price oriented
customers will enter the airline market at thepresent pace.

Increased costs
Industry/JAL

Fuel efficiency will improve, butdevelopment of next-generation
airplanes and spread of alternative
fuels will be limited.
Dependency on conventional jet fuelwill remain high and inflated crude oil
prices will increase fuel costs.

Development of supersonic transports
will progress.

No particular change
Substitutes

3-51

Continued increase in new
entries in the LCC market

Considerable increase in
Customer demand for international
flights
Demand will particularly increase indeveloping countries.
Population growth and vital economy
will boost demand for logistics.
Interest in low-carbon energy andmodal shift to railways, etc., will belimited.
Extreme weather events will be more
sever and more frequent, causing
concerns over service rates andpunctuality.

Scenario Analysis in Practice
STEP 3 Identify and define range of scenario
In the 2 C Scenario, alternative fuels will become more available, and modal shifts will
2 C Scenario
take place. Therefore, the Company may have to revise its supply chain and business model.
Considerable policy effort towards a low-carbon society
GovernmentMore countries and regions will adopt carbon tax towards a carbon-free/low-carbon society.
Enhanced fuel efficiency regulations
More countries and regions will promote development and spread of alternative fuels towards acarbon-free/low-carbon society.

Fluctuations in material
Supplier (rawcosts

Carriers with electric airplanes
will enter the airline market.

New entrymaterials)

Use of biojet fuel will vary among
regions, which can raise differencesin costs among regions

Industry/JAL

More efforts towards a
low-carbon society

Enhanced regulations will raise carbon
pricing.

Fuel efficiency willcontinue improving.

More airline companies will use biojet
fuel.

Supplier(airframe makers)

Development of next-generation
airplanes will progress.
Demand for higher fuel-efficiency,
next-generation airplanes will increase.

Substitutes

Customer

Increase in demand forinternational flights

Demand will particularly increase indeveloping countries.
Interest in the environment willheighten, and some customers may
shift transport modes to railways,
vessels, and other modes with lower
environmental burdens.

Modal shift to railways andvessels

3-52

Scenario Analysis in Practice: STEP 4 Evaluate business impacts
Analyze parameters based on financial and non-financial information, and estimate
financial impacts.

Financial information

B/S, P/L,
breakdowns ofoperating costs, etc.

Future B/S and P/L
Financial impacts on B/S andP/L (2 C)

Non-financial information
Fuel consumption
and efficiency
CO2 emissions

Impacts byparameter (2 C)

Ratio of biojets
Financial impacts on B/S andP/L (4 C)

External information
IEA, ICCT, IATA
and other reports
Publicly available
information on
relevant countries

3-53

Other reports

Impacts byparameter (4 C)

Transportation
Practice Example
Practice Example
Practice Example

Mitsui O.S.K. Lines, Ltd.
Japan Airlines Co., Ltd.
Mitsubishi Motors Corporation

3-54

STEP

2

3

4

5

Scenario

4 C

2 C

1-3a STEP3 Identify and define range of scenario (4 C)
In 2030 in the 4 C Scenario, the world will see 1.5-2 fold increases in the number of natural disasters and resulting damage.
The scenario assumes that the use of electric vehicles will not be widespread.
Automobile industry
Renewables
will account for
15% of allenergy supply

Fossil fuel costs
will increase
2.5 times

Conventional business
form (production/
development/sale)

Energy society

Thermal power
generation

Conventional market(advanced country-oriented)

Government policy

Conventional corporate management

Mitsubishi
MotorsCentralized

Conventional policy

Regulations, subsidies, and other policy
will have less impact.

High demand for fossil fuels

Sales of EVs will
increase 1.5 times

Natural disasters will occur
3.5 times more often
ICE vehicles

Travel chiefly by car

Severerphysical risks

ICE vehicles will remain the dominant form,
while the necessity for disaster-countermeasures will arise.

3-55

STEP

2

3

4

5

Scenario

4 C

2C

1-4a STEP4 : Evaluate business impacts (4 C)
Changes in social environment
Events that can take place in the future

Future prediction
Choice and combinations of information, storymaking

Changes in customer behaviors
Further spread of EVs
Enhanced carbon tax and ZEVChanges in consumer behaviors, government
regulations
policy, and technology progress will increase
Progress of next-generation vehicle
car sales to 3 million cars per year. (Global
technology
market)Drop in battery prices

Impacts on business
Interpretation of actual impacts

Business impacts
Impacts onannual profit

Expanded share of EVs
The share of EV sales will grow at a certain rate.
Demand will increase chiefly for PHEV. The average battery capacity
will slightly increase.
Battery costs will remain the same because of increased demand for
scarce resources and increased battery production.
Capital investment and R&D will slightly increase to meet the increased
share of EVs.
Government subsidies
Subsidies at the present level will be secured (for capital investment inrenewables)

Inflated energy prices
Inflated energy prices
Increased energy procurement costs
Accelerating renewable energy andIncreased demand for fossil fuels will raise fuel
Increased demand for fossil fuels will increase energy prices.
energy-saving development
prices from 2,200 yen to 4,950 yen/barrel.
Further efforts for energy-saving and renewable energy development
The share of renewables will increase from 7%
Energy consumption will be reduced to the mandatory annual rate set in
to 15% in Japan. Demand for ancillary services
the Energy-Saving Act.
will increase, leading to higher electricity rates.
Grid power procurement costs will increase
from 14,300 yen to 15,620 yen/Mwh.
More frequent and severe natural Natural disasters will cause greater damage to Increased damage to production facilities and supply chainsdisasters
the economy.
The Company will have overall physical damage to supply chain,
Temperature rises will lead to more frequentsuspension of operations, and worsening of working environment.
and severer natural disasters.
Enhanced efforts to protect supply chain
In particular, Japan will experience more
The Company will enhance countermeasures against natural disasters
torrential rains, 0.2 to 0.7 more times per year.
to minimize damage to supply chains to at least present levels.
Increased natural disasters will increase car
Development of new technology to avoid physical risks
accidents and flood damage cars. This will
Development of flood-ready vehicles
increase payments for insurance companies.
Enhancement of V2X function
Sale of new-tech vehicles to avoid physical risks
The Company will seek to expand the market share with new value
added.

3-56(Reference) Examples of Actual Physical Risks (Business Impacts)
Mitsubishi Motors CEO Says West Japan Torrential Rains Reduce
Production of More than 10,000 Cars

Mazda warns of 28 billion yen loss from Japan floods
Production disrupted for months in areas hit by rain

Mitsubishi Motors Co. published consolidated financial results on November 6th. Net
profit increased 7% year-on-year to 51.8 billion yen due to strong sales of sports
utility vehicles (SUVs) and minivans in emerging economies including Indonesia,
Thailand and China. A series of natural disasters including the West Japan Torrential
Rains, and typhoons Nos. 21 and 24 caused the company to reduce production
worth 4 billion yen. The Company, however, achieved profit growth.

Mazda Motor expects a roughly 28 billion yen ($248 million) hit to operating
profit due to production cuts at the main factory (Hiroshima pref.) and the Hofu
plants (Yamaguchi pref.) from the torrential rains that flooded western Japan in July,
the company said.
They operated at reduced capacity in August and September, as paralyzed

At a press conference for the first half of fiscal 2018, held on November 6th, thedamage to Okayama prefecture, where our Mizushima Plant is located, and the

For the year ending March, many factors squeezed earnings, such as the higher
costs of materials such as steel and precious metals, as well as spending to bolster
regulations. This leaves the company with little room to absorb the losses fromthe rains from the reduced production of 28 billion yen.

suppliers and many business partners, however, we managed to minimize the(Nikkei Shimbun, November 6, 2018)

Impacts of West Japan Torrential Rains and Typhoons(100 million yen)

Operating profit

Impact of WestJapan Torrential
Rains

Impacts of
Typhoons Nos. 21
and 24(Nikkei Shimbun, September 21, 2018)

Vehicle Insurance Claims Exceed 20,000 - Nearly 70% in Heavy Rain-hit
Okayama and Hiroshima, a GIAJ report reveals

The General Insurance Association of Japan (GIAJ headed by Keiji Nishizawa)
compiled the number of car accident claims related to the torrential rains in west
Japan. A total of 48,303 insurance claims including vehicles (including commercial
vehicles), fire, and new types (including accident insurance) insurance claims were
Total
brought to member insurance companies by July 17. Car insurance claims totaled
23,644. Member companies set up emergency headquarters at their head offices or* Impacts in the 1st half of FY2018
local branches in the afflicted prefectures, and started to inspect and collect flood(Mitsubishi Motors Reports First-Half Financial Results for FY2018, November 6, 2018) damaged cars under insurance coverage...
(Daily Automobile (Nikkan Jidosha Shimbun), July 23, 2018)
Non-operating andextraordinary
losses

3-57

STEP

2

3

4

5

Scenario

4C

2 C

1-3b STEP3 Identify and define range of scenarios (2 C)
In 2030 in the 2 C Scenario, the number of natural disasters and damage will remain almost present levels.
The scenario assumes that the use of renewables, energy-saving technology, and electric vehicles will steadily progress,(and that, as a result, the 2 C target will be achieved.)
Automobile industry

Renewables
will accountfor 22% of allenergy supply

Fossil fuel costs will
increase 1.5 times

Efforts towards a carbonfree society (energysaving facilities/ business
transfer)

Conventional market(advanced countryoriented)

High demand for fossil fuels
Maas market will
expand 16 times
Sales of EVs will
increase 10 times

ZEV regulations
will come toeffect worldwide

Government policy

Mitsubishi
MotorsDecentralized

CO2 emissions
from factories will
be cut 2% per year

Carbon tax
11,000 yen/t-CO2

Conventional corporate management

Energy society

Renewables

Local production
will increase

Stricter policy to a carbon-freesociety will result in higher
carbon tax and stricter
regulations.

Natural disasters
will slightly increase

Electrification
Modal shift/MaaS

Further electrification and modal shift
will increase demand for EVs.
3-58

STEP

2

3

4

5

Scenario

4 C

2 C

1-4b STEP4 Evaluate business impacts (2 C)
Changes in social environment
Events that can take place in future
Changes in customer behaviors
Enhanced carbon tax and ZEV
regulations
Progress of next-generation
vehicle technology
Drop in battery prices

Future prediction
Choice and combinations of information, story-making
Further and quicker spread of EVs
Changes in consumer behaviors, government policy, andtechnology progress will increase car sales to a maximum
17.6 million cars per year. (global market)

Impacts on business
Interpretation of actual impacts
Expanded share of EVs
The share of EV sales will sharply grow. Sales of new cars will decrease under the
4 scenario.
Demand will increase chiefly for EV. The average battery capacity will double.
Adoption of alternative resources and sharp increase in battery production will morethan halve battery costs.
Capital investment and R&D will increase to meet the increased share of EVs.
Government subsidies
Subsidies will be secured for investment in battery development and renewables.
Credit incomes will also be secured.

Inflated energy prices
Accelerating renewable energy
and energy-saving development

Inflated energy prices
Increased energy procurement costs
Increased demand for fossil fuels will raise fuel prices fromFor CO2 emissions reduction, inexpensive thermal power generation and oil prices
2,200 yen to 3,630 yen/barrel.
will cost more.
The share of renewables will increase from 7% to 22% inElectricity will cost more because of carbon pricing on thermal power generation.
Japan. Demand for ancillary services will increase, leading toFurtherefforts for energy-saving and renewable energy development
higher electricity rates.
The Company will seek low-cost electricity through third-party PVs and grid power
Grid power procurement costs will increase from 14,300 tocompanies.
16,610 yen/Mwh.

Inflated energy prices
Accelerating renewable energy
and energy-saving development
Spread of EVs

Development of a renewable energy decentralized society
Increased use of renewables and inflated fossil fuel prices
will make the electricity system less stable.
This will lead to a decentralized society. More use of V2X
and reuse of batteries.

Entry in energy management business
Launch of new businesses including sales of reusable batteries
The Company will build a battery supply chain management scheme to minimize
costs of used batteries.

Changes in customer behaviors

Accelerating progress of Maas and urban traffic
Heightened inclination to the environment and shift in
preference from ownership to sharing will facilitate
development of MaaS and urban traffic.

Decrease in new car sales
Development of Maas and urban traffic will reduce new car sales in the global market.
Entry in new businesses
Entry in Maas and CASE businesses will help the Company secure profit.

More frequent and severe natural Natural disasters will cause greater damage to the economy. Increased damage to supply chainsdisasters
Temperature rises will lead to more frequent and severer
More torrential rains will cause physical damage to supply chains, suspension ofnatural disasters. In particular, Japan will experience more
operations, and worsening of working environments.
torrential rains, 0.2 to 0.5 times more per year.
Enhanced efforts to protect supply chains
Increased natural disasters will increase car accidents and
The Company will enhance countermeasures against natural disasters to minimize
flood damage cars. This will increase payments fordamage.
insurance companies.
Creation of new value added
The Company will deal more with V2H functions to increase the market share.

3-59

Business impacts
Impacts onannual profit

Building/ Forest Product
Practice Example
Practice Example
Practice Example

Kajima Corporation
Sumitomo Forestry Co., Ltd.
Tokyu Fudosan Holdings Corporation

3-60[Sales Composition of Kajima Group, Scope of Review]

The scope of consideration is domestic construction (civil engineering + building
construction), which accounts for more than 60% of consolidated net sales.

Overseas
Subsidiaries
and Affiliates

123%

Domestic
Subsidiaries
and Affiliates

15%

12%
3%

JPY2
trillion[Scope of this investigation]
Non-consolidated
domestic construction
business

Consolidated
Net sales

Real Estate
and Others(Domestic)

3-61

Civil
Engineering

1

47%

2

Building

Based on FY2018 results

22 [Step2: Assess materiality of climate-related risks]

From the characteristics of the industry, it was evaluated that the risks related tothe market and technology were large in addition to the policy trend.
Classification

Transition risk

Consideration of Risks and Opportunities

Assessment

Price competitiveness including carbon price and development of low-carbon materials and construction technologies arenecessary.
A delay in the development of low-carbon is subject to patent royalties from other companies, which reduces competitiveness.
The use and development of low-carbon building materials progresses.
Construction investment decreases due to an increase in construction costs .

Large

Construction investment is restrained by regulations on the total amount of Carbon emissions, our construction revenue isrestrained, and sales decline.
Additional expenses such as credit purchases are incurred when the upper limit is not achieved.
Improvement of design technology on low energy buildings such as ZEB (Zero Energy Building) is required.

Large

PolicyCarbon price

PolicyCarbon Emissions
Targets/Policies

MarketChanges in customer
behaviours

Carbon emissions are some of the evaluation items in order competition.
The global enterprise demands the low carbon construction of the world standard in the domestic.
A decrease in fossil fuel-related construction projects affects orders.
The energy mix changes and construction related to renewable energy increases.

Large

Technologies

Renewable energy andEnergy conservation
technologies

Technology development costs related to renewable energy and energy conservation increase at the construction stage and at
the facility operation stage.
The technology required varies greatly depending on the legislation.
Competition arises with advanced companies such as from Europe etc. where renewable energy is spreading.

Large

-

Energy-saving policies, advances in next-generation technologies, recruitment and education to acquire expertise, changes in investor and bank behavior, andincreases in energy demand and prices

Medium to
Small

Increased heatstroke risk at construction sites leads to a decrease in productivity and an increase in costs.

Chronic

Physical risk

PolicyChronic/
Acute

Deterioration of working andChanges in construction methods and materials are required to ensure quality.
construction conditions Due to the harsh working conditions, the number of prospective employees decreases.
(attributable to increased temperature)

Changes in labor laws

Large

Sales decline due to legislation prohibiting outdoor work during the summer season.
Progress in mechanization and labor-saving in construction is accelerated.

Large

Changes in rainfall and Process delays due to rainfall, strong wind, etc. occur, and costs increase due to countermeasures costs.
Delay in delivery of (overseas) procured materials and increase in procurement (transportation) costs occur.
weather patterns/
Demand for flood control and other measures to strengthen national resilience increases.
Increasing severity of
extreme weather conditions The disaster prevention and disaster mitigation markets expand.

Large(Due to an increase in disasters)

Market-Lower advantages inlocation

The domestic construction market shrinks due to the transfer of production facilities in the disaster risk area to overseas.

Large
Medium to
Small

Subsidence, rising sea levels, tightened disaster response regulations and reduced insurance coverage

3-62

3 [Step3: Identify and Define a range of scenarios]

Analyzed impacts on company by drawing the 2
regarding highly uncertain climate change

and 4

scenarios of 2030

Given the geographical characteristics of Japan, the possibility that natural disasters
will become increasingly severe, which cannot be predicted based on past knowledge.
We recognize that the construction industry's mission is to respond to that kind of
uncertainty.
()[Global Average Terrestrial Temperature Change (Difference from the 1986-2005 Average)]

2030
4°C scenario

2°C scenario

3-63

Source: AR5 SYR Diagram SPM.6[As is]
The temperature willrise 3.2-5.4 C above
pre-industrial levels,
unless more rigorous
measures are taken.

[Active transition]
The temperature willrise 0.9-2.3 C above
pre-industrial levels,
if strict measures
are taken.

3 [Step3: Identify and Define range of scenarios]

Assumptions based on scientific evidence (such as IEA)
Item

Parameter

Carbon price

Carbon tax

Carbon Emissions
Targets/Policies

Target values foremissions

Changes in customer
behaviors

Power Supply
Composition

Renewable energy andEnergy Conservation
Technologies

ZEB target

Deterioration ofworking andconstruction
conditions
Legislation" as a policy
risk is a derivative.

2030

At present

4

2

Average successful bid in
the European EU-ETS: Approx.
$8 per tonne

Rate of decline inlabor productivity
due to heat stress
Temperature
increase

Changes in rainfall andDays of heavy rain
weather patterns
Increasing extreme
weather conditions(typhoons, heavy rains, Flood damage insediment, disaster,urban areasstorm surges, etc.)

88 USD/t

SourceIEA WEO 2018 SDS(Developed countries)
GoJ Targets
IEA ETP B2DS

100% as a benchmark

-3%

-66%

Coal thermal:337 TWh (32%)
Oil thermal:97 TWh (9%)
Gas-fired thermal: 440 TWh(42%)
Nuclear: 12 TWh (2%)
Renewable energy: 73TWh(7%)

Coal thermal:264 TWh (25%)
Oil thermal:33 TWh (3%)
Gas-fired thermal power: 287
TWh (27%)
Nuclear: 216 TWh (21%)
Renewable energy: 250 TWh(24%)

Coal thermal:83 TWh (9%)
Oil thermal:17 TWh (2%)
Gas-fired thermal power: 284
TWh (29%)
Nuclear: 247 TWh (25%)
Renewable energy: 347TWh(36%)

IEA WEO2018 NPS(Japan)-On average for new buildings
Realize ZEB

On average for new buildings
Realize ZEB

Basic Energy Plan

0.4%

0.99%

0.99%

ILO Working on awarmer planet

0°C as a benchmark

Average 2.1(2030-2050)

Average 1.9(2030-2050)"Climate Change
Adaptation Information
Platform" by the
Ministry of theEnvironment, etc.

2.5 days/year

3.0 days/year

2.5 days/year

Ministry of theEnvironment andJapan Meteorological
Agency Report$3.3 billion/year$7.3 billion/year

WRI "The Aqueduct
Global Flood analyze"

advantage as market risk
3-64

3 [Step3: Identify and Define range of scenarios]

42
Increased demand due to increased physical risk
Possibility of labor restriction during summer due to the harsh heat

Assumption of Future Society (4°C scenario)
Direct impact
to the constructionindustry

Effects ofEnergy mix changes

Damage and working
stoppages increase due tointensified typhoons, etc
Lower productivity due to heatstressRestrictions on summer work
caused by the extreme heat

Adoption of design andconstruction methods tocope with climate change(mechanization and laborsaving)3-65

Changes in themarketFundamental review of flood control plans, etc.

CO2
The fossil fuelpower plant willcontinue to exist.

Increase ofrenewable energy
facilities based on
the current policy

Relocation from disaster risk areas(Domestic relocation: Increase in demand,
Overseas relocation: Decrease in demand)
Significant expansion of the disaster prevention,
disaster mitigation, and BCP markets

Strengthening building regulations
ZEB (Zero Energy Building) and energy
conservation
progress based on the current
ZEB
policy.Ready3 [Step3: Identify and Define range of scenarios]

42
Increased demand due to increased physical risk
promotion of renewable energy/ZEB (zero energy building) progress while
introducing a carbon tax and reducing fossil fuel power generation as a policy

Assumption of Future Society (2°C scenario)
Direct impact
to the constructionindustry

Effects ofEnergy mix changes

Changes in themarketSignificant review of flood control plans, etc.

Substantial
increase inrenewable energy

Introduction of a carbon tax

Review of the location of new buildings
Expansion of the disaster prevention, disastermitigation, and BCP Market

Significant
decrease in fossil
fuel power
generation

Restrictions on businessactivities due to theintroduction of emission
allowances

Rapid spread of ZEB (zero energy buildings)

CO2

Increase in the
introduction ofhydrogen andother new energy
sources

Technological development
for low-carbon construction
and materials

Increase in energy conservation renewals(decrease in new buildings) /Expansion of energy management services
ZEB
Ready
Market entry from otherindustries
Above

Increased demand for in-house renewableenergy facilities
3-66

4 [Step4: Evaluate business impacts]

Considering the impact of each key driving force on the income statement (P/L)
Changes in demand
Carbon tax

Restraint of investment

Carbonprice

Changes in the energy mix
Fossil fuels
Renewable energy
Nuclear power

Expenses

Sales

Physical risk
Temperature
increase

Government ZEB target

Disaster prevention,
disaster mitigation, andnational resilience

3-67

CO2 emissions from
cement, steel, etc.

Net
incomeWeather patternschangeSevere disaster4[Step 4: Evaluate business impacts] Assumptions: around 2030

Reflecting disasters with extreme severity, demand for disaster prevention, disastermitigation, and national resilience is increased
Additionally,
2°C scenario

tax have an great influence.
On the other hand, demand is expected to increase due to the spread of renewable energy and zero-energy-buildings (ZEB).
4°C scenario
The deterioration of working conditions due to the increase in temperature is significant.

Risk/Opportunity Items

4°C scenario

Cost increase due to carbon tax

2°C scenario---

Shrinkage in the construction market due to a tax-

increase
Business restrictions due to CO 2 emission-

allowances
Energy mix change (decrease in fossil fuels)-

Increase in renewable energy-related demand++++

ZEB (Zero Energy Building) market expansion+++

Effect on working conditions due to temperature rise---

Disaster prevention, disaster mitigation, and national++++

resilience
Relocation from disaster risk areas

+-

3-68

5 [Step5: Identify potential responses]

For items with large business impact, future countermeasures were examined.
It is necessary to promote technological development that meets market needs.
Response to Carbon Tax and Emission Allowance
Regulations
Cost increase due to carbon tax
Contraction of the construction market due to the tax increase
Business restrictions due to CO2 emission allowances

Promote activities to reduce CO2 during construction
Development and promotion of introduction of lowcarbon materials
Securing renewable energy

Technological development in response to newmarkets and climate change
Energy mix change (decrease in fossil fuels)
Increase in renewable energy-related demand
ZEB (Zero Energy Building) Market Expansion
Effect of rising temperature on working conditions

Responding to Severe Extreme Weather
Disaster prevention, disaster mitigation, and national resilience
Relocation from disaster risk areas

3-69

Selection of focus areas based on energy mix
Development of engineering and construction
technologies for renewable energy facilities
Pursuit of ZEB profitability and comfort
Development of labor-saving construction technology

Promotion of technical development related to disasterprevention, disaster mitigation, and BCP
Development and utilization of hazard maps
incorporating unique knowledge
Construction that contributes to the strengthening of
national resilience including buildings and structures

[Development Case of Low-Carbon Building Materials (Concrete)]

Eco-cleat R3

CO2-SUICOMManufacture by reusing the waste returned concrete
Ultimate Recycling-Oriented Concrete

By "sinking" CO2 in a way that trees breath ,Concrete to reduce the amount of CO2 to virtually zero or less

Thermal power plant

Cement plantRaw concreteused atexamination

CementAlternative materials

CO2

Slaked lime

CementAlternative materials

CO2
InhaleChangereturned concrete
into concrete again!

CO2-SUICOM

Zero CO2 emissions or less

Reducing cement consumption byusing coal ash, special admixturesand other materials instead of
cement, and absorbing CO2 into theconcrete during manufacturing, weare able to reduce CO2 emissions tovirtually zero or less.
Co-developed by Chugoku Electric Power Co., Inc.,
Kajima Corporation, and Denka Co., Ltd.

Amounts of CO2 Emission

In "CO2 - SUICOM",

3-70

CementReducing
cementconsumption

Total
CO2
reduction

absorbing
CO2

In general
Concrete

In "Eco-Crete R3",
This is an environmentallyconscious concrete that reuses thereturned concrete which had been
inevitably disposed. Eco-Cretecontributes to resource recycling
and reduce in CO2 emissions.

CO2-SUICOM

Readymixed
concreteConcrete block

Reduce CO2 emissions by up to 90%
Amounts of CO2 Emission

Coal ashRemaining
unused concrete
after being
unloaded

NormalConcrete

Eco-Crete R3

Building/ Forest Product
Practice Example
Practice Example
Practice Example

3-71

Kajima Corporation
Sumitomo Forestry Co., Ltd.
Tokyu Fudosan Holdings Corporation

-

STEP

2

3

4

5

Timber & Building
Materials

Housing andConstruction

Forest protection policy, and increase in forest fires and pests will have impacts
Risk item

Business impact on timber and building material business

Assessment

Carbon emissions targets/policies

Transition risk

Forest protection policy
Renewable energy subsidies

Changes in energy mix

Sluggish economic activities due
to stricter climate change
regulations

logging tax and charges will increase timber procurement costs.
Promotion of wood biomass power generation will increase sales. If the government stops
subsidies, sales will decrease.
If relevant countries incorporate biomass in their sustainability standards, sales will
increase.
But increased demand will increase fuel costs (timber chips) in the biomass power
generation business.

Large

If construction itself is suppressed, supply and demand of timber and building materials will
become sluggish, and sales will decrease.
Forest fires and pests will increase timber procurement costs.

Physical risk

Rise in average temperatures
Changes in precipitation andweather patterns

Changes in forestation and timer procurement areas will increase timber procurement costs.

Increased severity of extreme
weather events

Suspension of factory operations will reduce sales. Decreased forest resources will increasetimber procurement costs.

Fluctuations in key product prices,
progress of next-generation
technology, changes in reputation
among investors, dissemination ofrenewable and energy-saving
technologies

OthersHigher temperature and increased precipitation will facilitate timber growth, possibly
improving productivity and reducing timber procurement costs.

Adoption of AI and IoT will reduce transport and factory operation costs.

Small toMediumIncreased trade of energy-saving products and high-efficiency insulating materials will increase
sales of timber and building materials for renewable-oriented markets.

Efforts to comply with
forest protection policy and logging regulations, as well as changes
in forest resources caused by physical risks, will have great financial impacts.
3-72

-

STEP

2

3

4

5

Timber & Building
Materials

Housing andConstruction

Changes in sales caused by housing policy and delay in construction due toextreme weather events will have impacts
Risk item

Transitional risk

National carbon emissions
targets/policies

Business impact on housing and construction

Assessment

will increase timber procurement costs.

Forest protection policy

timber procurement costs.
increase investment and reconstruction costs.

Building policy

Physical risk

Increased severity of extreme
weather events

OthersChanges in reputation
customers

Subsidy policies or RE, changes inenergy mix, changes in reputation
investor, fossil fuel subsidies,average temperature rise, etc.

If the government continues subsidies, monetary incentives will arise. Some policies canimpact market competition and sales.

Large

If customers pay more attention to climate change, they will opt for forest certified timber,which will increase procurement costs.
Severe natural disasters will cause delays in construction. This, together with recovery offacilities, will increase construction costs.
More extremely hot days will lower outdoor work efficiency, and cause delay in construction
and require more careful health management of workers. All this will increase costs.
Subsidies for PV power systems will increase monetary incentives.
Accelerating divestment will be more unfavorable to companies not practicing environment
business.
Changes in subsidies will change demand for renewable and other forms of energy, having impacts
on operation costs.

Small toMediumChanges in government policies on forest protection and buildings, as well as severer extreme weather
events, will increase costs and have great financial impacts.
3-73

STEP

2

3

4

5

Scenario

4 C 2 C

Consider society in 2030 with two scenarios of climate change that are highly uncertain.
Assess climate change risks and opportunities in the 2 C and 4 C scenarios[Global average surface temperature (difference from the 1986-2005 average)]( C)

The temperature will rise
3.2-5.4 C above preindustrial levels, unless
more rigorous measures
are taken.

2030
4 C Scenario

The temperature will rise
0.9-2.3 C above preindustrial levels, if strictmeasures are taken.

2 C Scenario

Source: Figure SPM.6 in the Synthesis Report (SYR) of the IPCC Fifth Assessment Report (AR5)
3-74

STEP

2 3 4 5

Scenario

4 C 2 C

Timber & Building
Materials

Housing andConstruction

In the 4 C scenario, increased forest fires and pests by global warming change supply
chainsWorld in the 2030s in the 4 C scenario (example)

Increased forest
Supplier fires and pests will

New entry

No new entry(No particularaction needed)

increase costs.
(region: xxx)
Increased fires and pests
will raise timber prices.
(region: xxx)
Flooding and soil drainage will
reduce timber supply andraise timber prices. There will
be risk of suspension offactory operations.

Changes in material needs
in response to
extreme weather events

CustomerFrequent extreme weather
events will increase demand forheavy duty building materials.
Changes in forestation areas
and materials will require theCompany to reconsider
suppliers and business partners.

(region: xxx)
Government introduce
forest protection
regulations and policy toachieve NDC target. They
may stipulate stricter
regulations

procure materials and develop
products to meet the needs(region: xxx)
No regulations on forest
absorption in relation to
NDC. The government will
maintain the present level

Timber & building material industry
Further action in light ofglobal warming impacts
Industry/Sumitomo
Forestry

Preparation for possible changes inforestation areas and materials (with aneye to the latter half of the 21st century)

Actionregulations and policy will change supply
change, and raise forest management andlogging costs.
ActionSecure suppliers with aneye to changes
in forestation areas
Prepare disaster prevention
measures for forest fire andflooding(Collaboration with
suppliers)

ActionAlternatives

Accelerating shift toalternative materials

Timber will be replaced by metals for building
structures (as a result of increased demand forheavy duty materials)
Action3-75

Develop tougher productsReview supply chain

Change business portfolio

Regulations
remaining at thepresent level

Government

Other
stakeholders

Intensified
consumerboycott

NGOs will label logging asunhealthy acts, pushing antilogging protests and consumer
boycotts
ActionPromote dialogue with
NGOs and otherenvironmental groups
Participate in initiatives

return emission rights
when logging under theemissions trading scheme.
ActionGather up-to-date
information about
government regulations
Secure transparency of
supply chains

STEP

2 3 4 5

Scenario

4 C 2 C

Timber & Building
Materials

Housing andConstruction

In the 2 C scenario, stricter forest regulations and increased forest fires will have
impacts
World in the 2030s in the 2 C scenario (example)

Stricter regulations
will increasetimber material costs.
Increased forest fires
and pests will
increase costs

Supplier

Increased demand from biomass
power generation

New entry

Overall
Stricter regulations willlead to higher logging tax
rates and reduced material
productions. This will
increase sales costs andprocurement costs.
(region: xxx)
Forestation areas will
shift slightly to north,increased forest fires andpests will raise timber
prices.

Customer

New entries supplying biomass materials andpower generation

Timber & building material industry(Region: xxx)
The government will set
stricter forest protection
regulations and policy
against logging with thetarget deforestation rate
under 350h/year.

Increase the share andsecure domestic materials
Supply materials to biomass
power generation
Promote forest certificationand forestation

Industry/Sumitomo Forestry

ActionPreparation for possible changes inforestation areas and materials
Securing of suppliers with an eye tostricter regulations and inflated prices
Reduction in new housing starts due toageing society with lower birth rate

ActionDevelop a network contributing to transport
cost reductions
and suitable for the local production for
local consumption model

Gather up-to-date
information about
government regulations
Secure transparency of
supply chain

Changes inOtherinvestment andstakeholders

financing

Investors and financial
institutions will change theirstance in accordance with thequality of forest management(reforestation, etc.).

More use of carbon-freematerials (including wood)

Alternatives

Much stricter
government
regulations

Overall
Stricter regulations on
natural forest logging

ActionUse of waste materials and new materials(bioplastics, CNF, etc.) in preparation for reduced
supplyAction Promote forest certificatesand plantation forests

Action Develop new materials and approaches

3-76

Government

Changes in supply volume
will encourage developmentof materials and new
approaches.
Increased demand forbiomass fuelPromptly secure promising regions(resilient regions, etc.)

ActionActionSecure suppliers with an eye
to higher logging tax rates
Prepare measures fordisaster prevention arisingfrom forest fires

Higher environment
consciousness
More use of biomass

STEP

2 3 4 5

Scenario

4 C 2 C

Timber & Building
Materials

Housing andConstruction

In the 4 C scenario, the world will be on an extension of the present path (The landscape of the
housing and construction industry will remain unchanged. The focus will be on BCP.)
World in the 2030s in the 4 C scenario (example)
Increased forest
fires will increasematerial costs.

Supplier

Risks of natural
disasters will increasematerial costs.
Procurement of heavy
duty materials and timber
against natural disasters.
ActionEstablish supply chain
considering physical risk

Energybusiness

Rise in new entries
New entry

IT businesses and mass home applianceretailers are already in the renovation market.

(No particular action needed)

Housing and constructionindustry
Continued efforts for BCP
and spread of ZEH
Industry/
Sumitomo Forestry

Technology development for BCP, energy-saving
housing, and HEMSZEH will increase, but not among large
residential houses
Longer construction schedules

Inflated grid
power rates

Grid power rates will increase.
Use of heat as renewableenergySteadily promote energysaving and ZEHAction3-77

Possibly more frequent extreme
weather events and slope
failures will increase demand fortougher, more resilient
housing.
Global warming will slightly
increase air-conditioning
demand and costs, and slightly
decrease heating demand andcosts. If the cooling trend
prevails, demand for and costsof heating will increase.
Demand for energy-saving andheat-resistant housing willslightly increase.

ActionActionSecure non-utility powersourcesMore efforts for BCP
Continued efforts
Customerfor ZEH

Alternatives

No alternatives will emerge.
(No particular action needed)

Continue promoting ZEH
Develop highly resilient
housing

Continued efforts

Government

Increased subsidies for
BCP
The government will promoteenergy-saving houses, andvisual control of renewableenergy and home energy
management systems, HEMS,(through subsidies).
The government willencourage the industry torealize ZEH targets (50% of
new houses by 2020, andmore widespread by 2030).
Efforts for carbon pricing will
not bear fruit.

ActionGather up-to-date
information about
government policy andsecure subsidies

STEP

2 3 4 54 C 2 C

Scenario

Timber & Building
Materials

Housing andConstruction

In the 2 C scenario, the Company will have to find business solutions to increased demand forlower-carbon housing
World in the 2030s in the 2 C scenario (example)
Rise in new entries

Inflated timber prices

New entry

Supplier

Forestry regulations(logging tax, etc.) will raise
timber prices.
Risks of natural disasters
will increase material
costs.

Electronics, automobile and IT makers,
particularly those with energy-saving andenergy storage technology will enter the market.

Business partnerships and M&A

ActionActionEstablish supply chainsthat can accommodate
natural disaster risk.
Consider supply chains withan eye to stricter regulations
Promptly secure necessary
parts for ZEH

Increased demand for
Industry/ high-function housing
Sumitomo Forestry

Reduction in new housing starts due toageing society with lower birth rate
Longer construction schedules
Development of advanced ZEH, efforts
for lower pricing

More sophisticated(high-function)
ZEH at lower costs

Government

Promotion of lowercarbon policy
for households

The ZEH market will
mature and the demand
will be polarized (toinexpensive housing andmore sophisticatedhousing).
Higher interest in lower
power rates will increase thedemand for housing withhigher energy efficiency.
Increased demand for

The government will set
stricter targets thancurrent NDC, and adopt
stricter building andhousing regulations(including ZEH) andsubsidies.
Policy to use surplus power
for wider use of PV power
generation
Promotion of electrification
for lower carbon in thehousehold sector(depending on the progress

deforestation.

technology)

ActionMore use ofrenewable energy

Energybusiness

Develop and apply advanced ZEH andlow-price ZEH technologies

Increased share of
renewable energy
Creation of FIT-free andaggregated business
ActionHousing andconstruction industry

Customer

Alternatives

Secure non-utility powersources and supply fromother companies

Increased demand fornew materials

Inflated prices of steel, cement and othermaterials will increase demand for bioplastics,
CNF and other new materials.
Action3-78

ActionActionMore focus on lower-pricehousing
More focus on advantageous
field (wooden housing)Work with the government
for the spread of advanced
ZEH,
Adopt renewable energy,
and deal with carbon tax tocreate emission rights

Develop new low-carbon (wooden)materials(Reference) Image of a future society in the 4 C scenario

STEP

2

3

4

5

Scenario

4 C 2 C

Government initiatives will increase energy-saving housing (ZEH), while there will be risk that
more forest fires and pests make it difficult to procure timber and construction materials
Forestation areas willslightly shift to north.
Procurement costs will
increase.

(Region: xxx)

Increased forest fires
and pests will increase
procurement costs.

Troubles with transportroutes due to extreme
weather events

Longer growths period canincrease logging supply.

Protect forests against
extreme weather events
Government

The government will maintain or possibly
enhance logging tax rates and regulations
on emission rights in relation to logging.

(Region: xxx)

Floods will reduce timber
supply, can possibly
cause factories to stop
operations.

Increased demand for heavy duty
construction materials
Expansion of sharing economy
Further urban concentration of
population

Timber and building materials
3-79

Government

Promotion of energy-saving,
renewables, and energy
storage for housing

The government will promote energy-saving houses,
and visual control of renewable energy and HEMS.
The government will encourage the industry to realize
ZEH targets.

Consumers will have slightly higher interest in energysaving housing, use of renewables, and purchase of
ZEH to cut electricity bills.
Global warming will slightly increase air-conditioning
costs, and slightly decrease heating costs. Extreme
weather events will increase heating costs.
Increased demand for energy-saving and heatinsulating housing.

Technology development for BCP,
energy-saving housing, and HEMS

Housing and construction

(Reference) Image of a future society in the 2 C scenario

2

STEP

3

4

5

Scenario

4 C 2 C

Government initiatives will lead to the ZEH market maturity. They will also facilitate development of advanced ZEH and lower
pricing, and new entries from other industries will increase. There will also be risk that stricter forest regulations and increased
fires make it difficult to procure timber and construction materials.
Further promotion of low-carbon policy
for households
Assistance to technology development(region: xxx)

Slightly increased forest
fires and pests will slightly
increase procurement costs
in some regions.

Government

A longer growth periods
will increase timber supply insome southwestern regions.

The government will set stricter construction and housing
regulations than NDC, and enhance subsidies.
Promotion of electrification for lower carbon in the household
sector, as well as carbon tax and emissions trading

Promotion of local production for local
consumption and domestic timbermaterials with an eye to higher LCA

Promotion of advanced ZEH and lower
pricing

Stricter regulations and policy
to protect forest resources

Government

Stricter (natural) forest regulations
Possible higher logging tax rates andsuspension of exports
Spread of the notion
Increased efforts for emission rights(region: xxx)

Demand will increase for higher energyefficiency housing.
Electronics, automobile and IT makers
with energy storage and supply
technology will enter the market. Active
business operations using surplus powerfrom PV power generation

Use of waste materials anddevelopment of new materials
with an eye to reduced supply
New entries from the housing
and material industries

Higher logging tax rates
will increase procurement
costs.

Entries of biomass material
suppliers and generators

Timber and building materials

Housing and construction

3-80

STEP

2

3

4

5

Scenario

4 C 2 C

Define the world in selected scenarios based on IEA and other scientific grounds
Present
National carbon
emissionstargets/policies

Government targets

Forest protection Forest protection policy
policy(likely to be logging tax)

Building policy

Rise in averagetemperatures

Subsidy amount
Share of biomass
power generation

Sources

2C

Indonesia deforestation
325ha (the 2030 target)

450ha (assumed)

300ha (assumed)

Indonesia NDC

Regulations on logging in
natural forests

None

Country targets(20-100%)(Assumptions)(Malaysia: $12/m3)(n.a.: unpredictable)(n.a.: unpredictable)(to be considered)New housing starts

xxx unit (present level)xxx unit(opportunity loss of xx%)

(Assumptions)Share of ZEH

ZEH: xxx%

Advanced ZEH:
xxx%

Energy mix in Japan
1.7%

3.7%

4.6%

xxx%,

ZEH targets

Subsidies forrenewableenergies, etc.
Changes inenergy mix

2030
4C

(Assumptions)

Agency for Natural Resources1

the 2030 Energy Mix - Overall

Natural Resources Canada

Changes in vegetationand increase in fires

Forest fire area
0.951%/year(Canada)1.594%/year

1.690%/year

Increase in forest pests(n.a.: data unavailable)(n.a.: unpredictable)(n.a.: unpredictable)(to be considered)$405m/year(Indonesia)$875m/year$405m/year

WRI "The Aqueduct Global
Flood analyzer"

Changes inprecipitation and Flooding risk
weather patterns(RCP2.6, RCP8.5)

Ministry of the Environment,

Severer extreme
weather event
3-81

Frequency of torrential
rains

Event probability: 0.3
times/year(Japan)0.6 times/year(around 2100)(n.a.: data unavailable)

Observations, Projections andImpact Assessments of1

Housing andTimber & Building
STEP
2
3
4
5
[Key indicator: Annual area burned]
Materials
Construction
A rise in temperatures will increase the number of large fires, having great impacts
both in the 2 C and 4 C scenarios.

Scientific forecasts

Recognition of forestry companies

Annual area burned by large fires in Canada

CDP response on climate change risks

Annual area burned (qualitative)
Present

Forest fires in
the central part of the continent

2030

Large scale forest fires
central region

2050

Forest fires also in
the northwest

Companies
cited

Comments (extracts)

STORAENSO
UPM

Higher risks of forest fires: Not yet occurredin northwestern Russia, where the company
procures materials, but possible future risks(UPM)

BramblesImpacts of unforeseeable cyclones, fires,
earthquakes and other natural disasters(Brambles)

Annual area burned by large fires (Area burned/year)
Present

2030

Forest fire risk recognition among worldwide companies

2050

2

0.951%

1.594%~1.690

4 C

STORAENSO: A forest products company providing products inover 30 countries worldwide. A leading company in the global
market
UPM: A forest industry company having production plants in 13
countries, strong in business fields combining bioenergy andforestry industries
Brambles: A supply-chain logistics company doing business inover 60 countries worldwide

1.873%~3.045%World leading forest companies recognize thatclimate change is causing more forest fires.
Source: CDP response
3-82

STEP

2

3

4

5

Scenario

4 C 2 CIn the 4 C scenario, the Company must eliminate financial impacts of forest
fires
4 C scenario
Forest protection and building(ZEH) regulations will remain at
the present level.
Annual area burned by large
scale fires will be 1.594%.
(Area burned/year)
Increased torrential rains will
prolong construction schedules
and increase costs.
The penetration rate of biomass
power generation is assumed
to be 3.7% in Japan.

Business impact

2030
with no action

2030
with actions
taken

3-83

Evaluation(100 million yen)

Higher timber prices due to forest
protection regulations

XX

Opportunity loss due to failure to develop
higher-level ZEHXXHigher timber prices due to forest fires

XX

Higher costs due to heavy rainsXX

SubtotalXX

Securing timber suppliers with an eye toforest protection

XX

Opportunities through development of
ZEH and higher-level ZEHXX

Increase in demand for biomass power
generation

XX

Efforts to prevent forest fires

XX

Total

XX

STEP

2

3

4

5

Scenario

4 C 2 CIn the 2 C scenario, the Company must eliminate financial impacts of stricter
regulations (forest and ZEH) and forest fires
2 C scenario
Timber costs will sharply increaseon the assumption that the
governments of countries
enhance forest protection policies
and restrict exports of timber fromnatural forests. (The percentageof restricted imports wascalculated based on the share ofnatural forest in each country. The
inflated timber costs will not bepassed onto timber prices.)
Opportunity loss due to failure todevelop higher-level ZEH
Annual area burned by large
scale fires will be 1.690%. (Areaburned/year)
The penetration rate of biomass
power generation is assumed to
be 4.6% in Japan.
It is also assumed that theCompany will complete a changeof timber suppliers as a forest fire
prevention measure.

Business impact

2030
with no action

2030
with actions
taken

Evaluation(100 million yen)

Higher timber prices due to forest
protection regulations

XX

Opportunity loss due to failure to develop
higher-level ZEHXXHigher ZEH costs

XX

Higher timber prices due to forest fires

XX

Higher costs due to heavy rainsXX

SubtotalXX

Securing timber suppliers with an eye toforest protection

XX

Opportunities through development of
ZEH and higher-level ZEHXX

Increase in demand for biomass power
generation

XX

Efforts to prevent forest fires

XX

Total

XX

3-84

Building/ Forest Product
Practice Example
Practice Example
Practice Example

3-85

Kajima Corporation
Sumitomo Forestry Co., Ltd.
Tokyu Fudosan Holdings Corporation

Target business segments and years of the climate-related risk assessment
Consider urban development and resort (resort hotels, golf courses, and ski areas)business segments
Target business segments and years

Business segment

Target year

Urban
development

2030

Resort business(resort hotels,
golf courses,
and ski areas)

2050

Grounds

The purpose is to consider action to be taken in
the mid-term timeframe from the scenario
analysis perspective.

The purpose is to consider physical risk impacts
and possible countermeasures to be taken.
These impacts will differ in magnitude in the long
run.

3-86

Assess materiality of climate-related risks

Politics

EconomyGreat
impactEnergy prices
Increased use of renewable
Adoption of carbon tax will
incur costs for CO2 emissions. energy and inflated fossil fuelprices will lead to less stable gridGreat
systems and increase energy
impactprices.
Carbon emissions

Carbon pricing

targets/policies

Transition
Risks(Stricterregulations,etc.)

Trends in energy demand
Expanded coverage of energyFluctuating demand for energy assaving laws, enhanced targets
a whole will impact energyof cap and trade programs,
procurement costs.
and mandatory installation ofenergy-saving functions will
Changes in energy mix
increase technology andChanges in the share offacility installation costs.
renewable energy will change
emission reductions companiesGreat
impactneed to make.

STEP

2

3

Society

4

5

Scenario

4 C 2 CTechnologyGreat
impactGreat
impactChanges in
consumer behaviors

Progress of
ZEB technology

Increased needs for (i) disaster-

Rise in advanced materials andtechnologies will reduce ZEB
construction and repair costs.

Great

Changes in
impactreputation among
consumers and investors

Great

Spread of energy- impact
saving andrenewable technology

Any delay to meet the needs for(i) disaster-resilient and (ii)Progress towards a low-carbon
society will facilitate
development of energy-saving
consumer boycott and withdrawal and renewable technology, andof investors.
reduce adoption costs.

ZEB regulations

Application of ZEB regulations
to buildings will increase
construction and repair costs.

Higher average temperatures and sea levelsGreat
impactA rise in average temperatures will cause more heatstroke. It will also lead to more use of air-conditioning, which will increase operation

Physicalcosts.
Risks
Great
Severer extreme weather events (wind and flood damage) impact(climatechange, etc.) More frequent typhoons and torrential rains will cause more wind and flood damage to buildings, increase repair costs, and reduce
customers.

3-87Scenario 4 C 2 C(Reference) Image of a future society in the 4 C scenario STEP 2 3 4 5Extreme weather events will be more frequent and shifts to a low-carbon society andrenewable energy will not progress.

Low-carbon and remote work policy willbasically remain at the present level.

Urban

Government

Whether companies have BCP or
not will be a key factor forinvestors and customers.

ResortInvestor/customer
Competition for land acquisition,
disaster preparedness, andenhanced facilities will increasedevelopment costs.

Properties vulnerable to flood
risks will be low rated.
Customers

Increased extreme weather
events will reduce thenumber of visitors.

Heavy rains will cause
sediment disasters.

Failure to adopt renewableenergy will result in large
CO2 emissions.

Active policy andadoption of BCP

CO2

CO2

Climate change will
increase operating
costs.

CO2

Brown
electricity

Fossil fuels

Climate change will lead tolower revenues at ski
resorts.

More employees will
wish to work indoors.

Disaster preparedness
will increase repair costs.

3-88

Development
business

STEP
Scenario 4 C 2 C
2
3
4
5
Business impacts in the 4 C scenario
Interpret that changes in the environment in the future will have impacts on
business to some extent

2030

Changes in social environment

Adverse business impacts

Positive business impacts

Events likely to occur in futureInterpretation of actual business impacts

Interpretation of actual business impacts

Enhanced environment regulations
including ZEB and energy-saving
laws

Adoption of energy-saving, renewable and
ZEB for legal compliance

Increased extreme weather events
BCP-oriented customer preference
and transfer of properties

Resortbusiness

Decrease in customers/visitors as
they avoid the outdoors due toincreased extreme weather events

3-89

Loss of customers due to insufficient BCP

Enhanced resilience of buildings andmore active customer promotion

Higher vacancy rate due to increased Loss of customers due to increased remote
Increase in satellite offices
remote work
work
Lower revenues at ski resorts due toclimate change

2050

Increased damage to buildings

Steady efforts for compliance

Torrential rains and sedimentdisasters
Increased workload due to climatechangeIncreased procurement and airconditioning costs due to climatechangeShorter business hours at ski resorts

avoidance of outdoor activities and shift toalternative recreation

Adoption of advanced snow machines

Creation of new business opportunities
leveraging existing assets

Increased loss due to sediment disasters
Increased labor costs for emergency
actions
Increased air-conditioning and operating
costs due to higher temperatures
Increased food material costs due to higher
temperatures

Efforts and promotion for heatstroke
measures and BCP

Scenario 4 C 2 C(Reference) Image of a future society in the 2 C scenario STEP 2 3 4 5Extreme weather events will be less frequent than in the 4 C scenario, and adoption of ZEB
and renewable energy will progress(i) Stricter low-carbon regulations(ii) Carbon tax(iii) Subsidies for renewable energy(iv) Promotion of remote work

Urban

Investor/customer(i) Green building will be a key factor for-making(ii) Spread of remote work will change
criteria for customers for housing
rent/purchase.

Green energy

Possible entry of companies
with advanced technology

New
entry

Carbon tax will increasematerial costs.

Government

ZEB

Green energy

New entry

ResortGreen energy

Energy-saving andrenewables will
reduce costs.

Energy-saving andrenewables will
reduce costs.

Increased extreme weather
events will reduce thenumber of visitors.
ZEB

Adoption of renewable energy
and ZEB with various
procurement means
ZEB

CCS thermal power
plant as the main
power source

Brownelectricity
CCS
technology

Torrential rains andsediment disasters
ZEB

Disaster preparedness
will increase repair costs.

Customer
Climate change will
reduce revenues at
ski resorts.

Climate change will
increase operating
costs.

More employees will
wish to work indoors.

3-90

Urban development
business

STEP
Scenario 4 C 2 C
2
3
4
5
Business impacts in the 2 C scenario
Interpret that Stricter laws and regulations in the future will have impacts on
business to some extent

Resortbusiness

2030

2050

3-91

Changes in social environment

Adverse business impacts

Positive business impacts

Events likely to occur in futureInterpretation of actual business impacts

Interpretation of actual business impacts

Adoption of carbon tax

Increased construction costs including ZEB
Steady efforts for complianceadoption costs

Enhanced environment regulations
including ZEB and energy-saving
laws

Adoption of energy-saving, renewable and
ZEB for legal compliance

Reduced costs thanks to ZEB technology
development

Stricter cap and trade programs

Increased costs of green electricity
certificates

Reduced costs thanks to renewable
technology development

BCP-oriented customer preference
and transfer of properties

Increased damage to buildings
Loss of customers due to insufficient BCP

Improved competitiveness of resilient
buildings

Enhanced environment regulations
including energy-saving laws

Increased costs of saving-energy adoption

Adoption of renewable and other nonutility electricity

Lower revenues at ski resorts due toclimate change

Shorter business hours at ski resorts

Adoption of advanced snow machines

Decrease in customers/visitor as they
avoid outdoors due to increased
avoidance of outdoor activities and shift toextreme weather events
alternative recreation
Increased procurement and airconditioning costs due to climatechangeIncreased air-conditioning and operating
costs due to higher temperatures
Increased food material costs due to higher
temperatures

Creation of new business opportunities
leveraging existing assets

Efforts and promotion for heatstroke
measures and BCPConstruction Material
Practice Example

LIXIL Group Corporation

3-92

1. Target Business1 - 1 LIXIL Groups and Target Organizations[Company Overview](The fiscal year ending in March 2019)[LIXIL core philosophy]
The Group's superior products and services
contribute to improving people's comfort and lifestyles.

[Target organization][LIXIL's business domains]
LIXIL Group's products and services support more than 1 billion
people's daily lives worldwide through various partners.
Condominiums
Office Buildings
Detached
Houses
Housing Materials

House Building
Companies
Builders

Commerce
Facilities

Leasing
Houses3-93

Developers
Building materials

Building Contractors

Housing Equipments

Sales JPY1,832.6 billion
Approx. 75 thousand employees
Sites in 150 or more countries

Building
Technology
Business
13.7%

Distribution and Retail9.5% Housing and Services
3.1%
Water
Technology Business44.7%

Net sales

JPY1,832.6 billion(The fiscal year
ending in March 2019)

General Contractors

PublicFacilities

Housing Technology Business
29.5% (Japan 29.0%, Overseas 0.5%)

STEP

1

2

For 2 businesses, estimate financial impacts in 2030 using the 2/4scenario.

1. Target Business1 2 Selection of target business divisions[Target business]
Reasons for selection

Sash door

Due to the impact of higher costs for raw materials
due to tighter regulations and the spread of highperformance products such as energy-saving products

ZEH

4

5

[Participating departments]

Targetbusiness

Net Zero
Energy House

3

Introduction of renewable energy for climate change
countermeasures,
As demand for ZEH products is expected toincrease

Sash and door business
ZEH promotion division
Technology development
Environmental division
Cooperation: other related departments at
headquarters[2 future scenarios](°C)

Scenarios with large physical impacts
There is no significant tightening of regulations.
4
Expansion of damage caused by extreme weather
Scenario
conditions such as typhoons and floods
Re-energy and ZEH penetration is limited, etc.

2030
Global Average Terrestrial Temperature Change(Difference from the 1986-2005 Average)

Scenarios in which the impact of policy shifts issignificant
Introduction of a carbon tax, drastic tightening of2
recycling regulations, etc.
Scenario
Rising raw material and energy prices
Increasing use of renewable energy and ZEH, etc.

3-94

2. Assessment materiality of climate-related risks

STEP

1

2

3

4

5

Assumed risks and opportunities were identified, and the impact was assessed fromlarge to small.
Assumed risks

Anticipated business impact

Major
classification

MediumSmall

Transition risk

Policies andregulations

Carbon tax

Tightening
regulations

Renewableenergy policy

Marketchanges /technologicalchangeTechnology
investment
Changes in
the market

Physical risk

Acute

Extremeweather

Risk

Opportunity

Fuel taxes and soaring electricity prices

To boost efficiency
Increase awareness of energy conservation
among customers

Tightening of regulations, such as energysaving standards
Mandatory use of alternative materials andrecycled materials

Convergence of FITs and subsidies

ImpactStrengthening housing energy conservation
standards
renewable energy products
Sustainable raw material utilization
Creation of a market for renewable energyrelated services
Promotion of in-house renewable energy
improvement measures

Increased investment costs in the
manufacturing process

Promoting Innovation in manufacturing
processes

Rising prices of raw materials

Development of alternative materials

Increase in damage caused by natural
disasters
Supply chain disruptions

Business opportunities for disasterprevention products
Increase resilience through BCP measures

Large

Medium to
small

3-95

STEP

3. Identify and define a range of scenarios
3-1 Worldview of the 2°C scenario

1

2

3

4

5

At 2°C, the strengthening of regulations promotes decarbonization and accelerates the spread of ZEH-related
products and the introduction of renewable energy.

Distributed power generation

Green energy

Government

MarketWith the advancement of a wide variety of
renewable energy procurement methods
Promoting the introduction of renewableenergyDevelop manufacturing processes that do
not emit CO2

With the introduction of ZEH housing
and other measures
Increased demand for adaptive
products- Residential solar power- High-performance sashes and insulating
panels- Renovation products

Introduction of a carbon tax
Strengthening of energy-saving
regulations on housing
Strengthening recycling
regulations, etc.

2

Scenario
Increasing demands for recycled materials
Develop aluminum production that does notemit CO2

Suspend operation
at plants due toextreme weather(Lower than 4°C)

Factory

CO2
Abandon fossil fuels

Sea

Green energy

3-96

3. Identify and define a range of scenarios
3-2 5Force analysis of the 2 scenario

STEP

Housing materials industry
Seller(Raw Material
Suppliers)
Cost increase of raw
materials due to carbon
regulations
Shift to recycled materials
Review of low-carbon
procurement methods, etc.,
and response to physicalrisks

New comer
Companies in other industries, such as IoTtechnology and power-related businesses
Strengthening ofcollaboration(Alliances, M&A)

Industry competition
Promote the reuse and electrification of energy atfactories
Reducing the carbon content of raw materials andpromoting R&D of recycled materials
Expansion of sales channels through the spread of
ZEH and renewable energy

Seller(energy, etc.)
Increase in renewableenergy ratio
Renewable energy costs
decreased
Securing power sources forprivate consumption
Investment in renewable energy
Reducing the carbon content offactories

3-97

For low-carbon production
R&D and development

Diversification of re-rnergy-related Systems
As high-performance
Development ofproducts
To consider
new high-value-added
high performanceandproducts products
new high-value-added

2

3

4

5

: Required actions

Buyer(Customers)
Promotion of energy-efficient
products (including recycling)
Needs for energy-saving
products increase
Customers' energy
conservation needs increase
due to the promotion of ZEH
and energy conservation
policies Expanding needs
to high insulation products
for houses
Increased demand forresidential solar power andother renewable energyrelated services due tocustomers' renewableenergy needs and rising
electricity prices(Alternative)
Emergence of disaster response-type products,
etc.

1Development of value-added
products for reducing the cost andcarbon, recycled materials,
residential solar power

Government
Introduction of carbon tax
Promoting energy
conservation, renewableenergy, electrification,
ZEH, low-carbon policies,
and subsidy enhancement
to achieve CO2 reduction
targets
Establishment of a system
for the widespread use of
ZEH
Subsidies (breakwater, etc.)
for increased flood damage
have been developed to acertain extent.
In cooperation with thegovernment,
make an ecosystem/ruleon low-carbon markets

STEP

3. Identify and define range of scenarios
3-3 Worldview of the 4°C scenario

1

2

3

4

5

At 4°C, policies are not implemented, increasing physical risks and increasing demand foradaptive products.
Government

MarketDistributed power generation

Increase in demand forrelaxed-type productsHigh insulation sashes/shades

Green energy

Energy conservation and renewableenergy policies are not advancing.
(Carbon tax not introduced)

Lack of renewable energy
procurement and delays inintroduction

CO2

2
Suspend operation atplants due to extreme
weatherLack of low-carbon production
at plants, resulting in large
volumes of CO2 emissions

CO2

CO2

Factory
CO2

Fossil fuels

Fossil fuel-derived electricity

Sea

3-98

3. Identify and define range of scenarios
3-4 5Force analysis of the 4°C scenario

STEP

Housing materials industry
Seller(Raw Material Suppliers)

Physical risks emerge insome factories and resource
suppliers
Consideration of diversified
procurement, etc.

Seller(energy, etc.)
Renewable energy will
spread to a certain extent,
but depend on fossil fuels
Optimization of renewableenergy-related investment

3-99

2

3

4

5

: Required actions

New comer
There is no particular entry.

Buyer(Customers)

There is no carbon
regulation.
No shift to recycledmaterials

1

Industry competition
Re-energy and energy-saving measures
implemented as in the past
Development of adaptive products
Physical risks at the company's sites
become apparent
Promotion of measures forrenewal and energy conservation,and examination of portfolios ofsites with high physical risks, etc.

(Alternative)
Develop products for market entry with theincreasing needs for air conditioners

To consider new high-value-added
products

Political support weakened andenvironmentally conscious
products were successful.

Needs for low-carbon,
recycled materials, etc. arelow.
Stakeholders would not
require Response
Demand for highinsulation and sunlightshielding products
increased due to higher
temperature.
Due to flooding damage,demand in high-rise regions
has expanded and demand
for rental properties has
expanded.
Increasing needs foradaptive products

Providing products thatmeet new needs

Government
As the trend of low
carbon/decarbonization weakens
and external pressure from theinternational community weakens,regulations such as carbon tax
and the use of recycled plastics
are not introduced.
In some countries, CO2
emissions at factories are
regulated, and emissions trading
is expected to be more active(not to be introduced in Japan).
ZEH/ZEB penetration has notprogressed, and there are no
aggressive policies.
Subsidies (breakwater, etc.) will
be provided due to rising sea
levels and increased water stress.

Rapid access to policy
information and securing ofsubsidies(mainly in collaboration with thegovernment on physical risks)

3. Identify and define range of scenarios
3 5 Assumptions for each scenario
At present
Carbon price

Renewableenergy policy

Carbon tax

ZEH penetration
rate

STEP

1

2

2030

3

4

5

Source2°C world

4°C world-$100/t(Not installed at 4°C)

Newly built houses
54,352 units (2018)

Newly built homes 100%(market at 4°C)

Existing houses
159 units(2018)%(market at 4°C)

Japan environment cocreation initiative "Net Zero
Energy House support
project survey presentation
2019 materials"

IEA WEO 2019

Investments
in low carbon
technology

Regulation ofrecycled plastics-

14%(Price is assumed toincrease by 1.2 times)(No restriction at 4°C)

EU "The plastic strategy"

Increase/dec
rease inprices ofheavy-use
products

Price ofaluminum$2,108/mt(1.25 times higher at 4°C
with introduction ofcarbon tax)

$2.2 thousand/mt

World Bank "World Bank
commodities forecast "Increasing
disasterswith extreme
severityFrequency offloods1 time

1.7 times

Technical review committee
on flood control plans basedon climate change"Recommendations on water
control plans based on
climate change"

3 times

3-100

4. Evaluate business impacts
4 1 Estimated items for business impact evaluation

STEP

1

2

3

4

Select risk/opportunity items to be prioritized in the current scenario analysis.
Estimated Risks and Opportunities
Increase in energy costs due to introduction of carbon tax
Risk

Rising raw material prices and rising costs due to regulations
Increase in operating costs due to flood damage, etc.
Increase in sales of high-performance products for new homes
Increase in sales due to expansion of renovation market

Opportunity

Increase in sales due to market expansion of adaptive products
Reduction of business activity costs through promotion of energy conservation
and renewable energy measures

3-101

5

1

STEP

2

4. Evaluate business impacts
4 2 Business impact evaluation (summary of the 2°C Scenario)

2
Scenario

3

4

5

In the 2°C scenario, there is a large increase or decrease in profit due to institutional development by the government,tightening of regulations, and changes in consumer preferences.
Especially, the renovation of the existing house which occupies the majority of the house is indispensable.
In the analysis, we assume that national policy is expanded.

Risk
Opportunity

There are risks such as "introduction of a carbon tax" and "soaring material prices .
There is the possibility of cost reduction due to sales increase by the renovation market
the introduction of energy saving and creating facilities to factories, etc.

and

3-102

1

STEP

4. Scenario analysis results
4 3 Evaluation of Business Impact (Summary of the 44
Scenario

3-103

3

4

5

Scenario)

As the 4°C scenario is an extension of the current scenario, the increase and decrease ofprofit is relatively small.
Risk
Opportunity

Operating income[FYE2019]

2

Carbon tax
Introduction

Risks such as

material prices" and "flood damage" exist.

Sales increase for high-performance building materials and solar panels due to the dissemination of new ZEH(current pace), in addition to expected increase in profits due to the expansion of market for adaptive products.

Material prices Steeprise

Flood damage

Increase in sales(Newly built)

Increase in sales(Renovation)

Increase in sales
Cost reduction
Operating income(adaptive products) (energy conservation,[FYE2031]
etc.)

STEP

5. Future Challenges and Plans

1

2

3

4

5

For the next fiscal year and beyond, company plans to
expand scenario analysis into other businesses,
consider countermeasures deeply, anddisclose information
1

2

Ensure governance is in place
3

Assess materiality ofclimate-related risksMarket andTechnology
ShiftsReputation

Policy andLegalPhysical
Risk

Identify and define range of
scenarios

Scenarios inclusive of a rangeof transition and physical risks
relevant to the organization

Assess materiality ofclimate-relatedrisks/opportunities

Set multiple scenarios

4

Evaluate business
impacts

Documentation andInformation Disclosure

Identify potential
responses

Business impact on:
Input costs
Operating costs
Revenues
Supply chaine.g.

Countermeasures
Changes to business
model
Changes to portfolio mix
Investments in capabilities
and technologies
e.g.

Evaluate business impactof risks/opportunities
quantitative

Consider of proposed
revisions to the business
plan

Expand scenario analysis into other businesses

65Consider countermeasuresand utilize into merchandisingor commercialization

Disclose appropriate information about strategies and risk management incorporating scenario analysis
Disclose information andreflect in management strategy

3-104

Material
Practice Example
Practice Example

3-105

FUJIFILM Holdings Corporation
Furukawa Electric Co., Ltd.

Fujifilm Group Basic Information (Business Field)
Copy machines andmultifunction
machines

Color film
QuickSnap

Digital cameras

Imaging
Solutions
Document
Solutions

Laser printerMedical system(medical images, endoscopes,
etc.)

JPY386.9 billion
16%

FY2018
JPY1,039 billion
JPY1,005.6 billion Net sales
JPY2,431.5 billion 43%
41%

Healthcare &Materials Solution

On-demand printing
systemFilm
Processors/Printing
Equipment
Color paper

Healthcare
products

Pharmaceuticals

Recording Media

Flat panel
Display materials(Films for LCDs, etc.)

Graphics system

Optical Devices(Lens unit for mobile phones)

Electronic materials(Semiconductor
Manufacturing Materials)

177

3-106

Risk Items in Display Business and Industrial Equipment Business
Risk Item

Business impact

Small classification

Index

Discussion (Example)

Plastic regulations

Spending

Regulations on plastics are progressing led by Europe, and expenditures for replacement of alternative materials, upgrading of recycling, introduction of
tracking systems, etc. are increasing, which has an impact on PL/BS.

Developing next-generation
technologies

Revenues, expenditures,
and assets

Strategies for plastics such as material recycling and chemical recycling are required, which affects PL/BS.
Introduction of a carbon tax will impose taxes on fuel procurement costs, which will increase production costs in factories in countries with higher carbon
taxes and have a medium-scale impact on PL/BS.

Carbon priceInvestments in low carbon technology

Revenues, expenditures,
and assets

Environmentally conscious and financing drivers increase demand for low-carbon products such as TACs and require conversion from PETs, affecting
PL/BS.

Risks The
associatedwith plastics regulations and their response
damage to employees, factories, and supply chains caused by heavy rains, floods, and typhoons causes additional investment in shutdowns,
production
decreases,
and equipment restoration.
In addition,
costs such as insurance premiums will increase for assets on high-risk land, which will
Financialriskof introducing
carbontax

Increasing severity of extreme weather
Expenditures and assets
conditions

Spending
Revenues, expenditures,
and assets

Changes in the energy mix

Expenditures and assets

Changes in the energy mix will greatly change the emission factor, greatly change the achievement of the carbon emission target, and affectP/L and B/S including changes in the site.

Renewable energy subsidy policy

Revenue

Subsidies for renewable energies such as CCUS, BECCUS will accelerate the introduction of renewable energies in the world and affectproduct liability.

Energy-saving policy

Spending

Rigorous regulations governing GHGs emitted from factories could increase the cost of investments and affect PL/BS.

Customer reputation change

Revenues andexpenditures

Increase in the average temperature

Expenditures and assets

Changes in Important Products/Prices

Revenues, expenditures,
and assets
Revenues, expenditures,
and assets

Transformation to renewable energy is required in order to achieve CO2 reduction target, and correspondence costs such as the purchase of facilities
and green power increase, which has a large impact on PL/BS.
CCUS, BECCUS is assumed in low-carbon societies based on 1.5°C and has a large impact on PL/BS.

Impact on PL/BS due to increased CO2 emissions from in-house manufacturing facilities, increased consumer interest in SDGs (including selection ofpartners), and need for energy conservation, ESG investments, etc.

Business
opportunities by promoting the introduction of CCUS, BECCUS
Increased temperature induces a move toward decarbonization, requiring suppliers to take measures against global warming, raising procurement costs
for TACs, PETs, etc., and thereby affecting PL/BS.

Changes in prices of raw materials such as PETs and TACs increase procurement costs and affect PL/BS

Expenditures and assets

Increased production and sourcing costs due to tighter regulations related to decarbonization have an impact on PL/BS

Changes in the investor's reputation

Revenues, expendituresand capital

The trend of die vestment accelerates, and the winds of enterprises that do not practice environmental management become stronger. As a result,financing costs increase and affect PL/BS.

Changes in rainfall and weather
patterns

Expenditures and assets

The water level of the dam declines due to changes in rainfall, and power transmission from hydroelectric power plants is disrupted, and the plant stops
operation and affects PL.

Energy Demand

Expenditures and assets

Changes in energy costs for transporting materials and operating factories, increased operating costs, and medium-sized impacts on PL/BS

Expenditures and assets

Water stress increases supply costs, effectively rendering production virtually impossible, and increases in production costs due to tighter regulations onwater withdrawals for production, thereby affecting PL/BS.

3-107

MediumSubsidies for renewable energies such as CCUS, BECCUS will accelerate the introduction of renewable energies and affect product liability.

Policies on forest protection

Rising sea level

Large

affect PL/BS.

Carbon Emissions Targets/Policies in
Each Country

Renewable energy subsidy policy

Assess
ment

Small

178

Definition of each worldview based on scientific grounds such as the IEA

2030

At present

Carbon Emissions
Targets/Policies in
Each Country

Introduction ofcarbonsectortax
In the industrial

4°C world

Source2°C world

Ministry of the Environment,"Japan's draft promise" and"Toward a drastic reduction ofgreenhouse gases in anticipationof 2050"

GHG emissions

413 Million tCO2
(2017)

401 Million tCO2

401 Million tCO2

Carbon price

Carbon tax (Japan)

Not introduced(Not installed at 4°C)

$88/t

Estimated from IEA WEO 2018

Changes in theenergy mix

Power Source
Composition (Japan)

Coal: 360 TWh
Nuclear: 33 TWh
Renewable energy: 186
TWh(2017)

Coal: 264 TWh
Nuclear: 216 TWh
Renewable energy:
250 TWh

Coal: 83 TWh
Nuclear: 247 TWh
Renewable energy: 347
TWh

IEA WEO2018 (New Policies
Scenario, Sustainable
Development Scenario)

28.3 Mt

31.6Mt31.7 Mt

Estimated from IEA WEO 2018

37%
80Mt

51%
137Mt

42%
138Mt

Estimated from IEA WEO 2018

1.7 Times

Estimated from IEA WEO 2018

Regulations
on theof newsprint
use
Productionof ofrecycledplastics
Impactlow
carbon emissions

Promotion of CCS

Rate of recycled
aluminum
Production of aluminum

Increasing severity of
extremeweather
conditions
1 time(No restriction at 4°C)

Plastic regulations

Recycled plastics
Utilization ratio

Developing nextgeneration
technologies

CO2 recovery by CCSs
(Global)0.00 Gt(market movement at
4°C)

Industrial sector 0.54 Gt
Power generation 0.30 Gt

Estimated from IEA WEO 2018

In extreme weather
conditions
Increasing severity

Days of heavy rainfall
per year (Japan)

2.5 days

3.0 days

2.5 days"Japan's Weather at the End of
the 21st Century" (2015) by the
Ministry of the Environment and
the Japan Meteorological Agency

179

3-108

4°C world: Low carbon/decarbonisation is not promoted and physical risks increase

Government

MarketDigitization of printing technology

Distributed power generation
Increase in procurement costof aluminum has small impact

Green Energy

PS and CTP market

Delays inintroduction due tolack of renewableenergy procurement

No active promotion ofenergy conservation
and renewable energy
policies(Carbon tax not
introduced)

Market expansion ofElectronic paper OLED Micro LED

CO2

Lack of low-carbon production
at plants, resulting in large
volumes of CO2 emissions

CO2

CO2

Factories on asuspension of operation
due to torrential rain andextreme weather

Factory
Brown Electric

CO2

Fossil fuels

Sea
3-109

180

In the 2°C world: Advanced decarbonization accelerates the progress of adopting
renewable energy, recycled plastics, and CCUS.
Government

Development in paperless
Distributed power generation
Introduction ofcarbon tax, stricter
recycling
regulations, etc.

Acceleration of Digitization of Printing Technologies

Green Energy

Printing process
Forcing the pace

Promoting the introductionof renewable energy basedon various procurementmeans for renewable energy

Electronic paper OLED Micro LED
Market expansion

Diversification of printed materials

Demand is expanding in
the global market for massprinting such as
newspapers, despite
progress in paperlessprinting.

Increase in needs forrecycled materials
Js

Generating renewableenergy on company
property throughimplemented solar panel
on roofGreen Energy

FactoryCCS
technology

Generating plants
incorporating CCS
technology becomes amainstream

Offshore wind

Sea
EOR

3-110

Distributed power generation

BECCS

181

In the 4°C world: Low carbon/decarbonisation is not promoted and physical risks increase

4°C worldview @2030s (Example)
Display and industrial equipment industries
Seller(Raw Material Suppliers)
There is no carbon regulation.
The shift to recycledmaterials (PET, TAC) is
assumed to be a market trend.
Physical risks emerge forsome factories and resource
suppliers

Considering portfolios
with high physical risk
Seller(energy, etc.)
Grid parity remains insome areas because of thelack of renewable energy
use. Renewable energyrelated costs remained
high in many regions.

New comer
Threat of new market entrants due to the
spread of the organic EL market

Industry
No major changes due to ongoing
renewable energy and energy
conservation measures
Actualization of Physical Risks
to Our Bases
Implemented conventional energysaving and re-energy-saving
measures
Consideration of the portfolio ofsites with high physical risks, etc.
Expansion of organic EL market(Alternative)
For renewable energyrelated investment
Minimization(for some regions only)
3-111

Organic EL and Micro LED display materials
are becoming popular.

Buyer(Customers)
Low-Carbon Constraints
Are Weak, and CCUS
Markets Have Been
Popularing on Stagnation
Needs for low-carbon,
recycled materials, etc. arelow, and no special
response from stakeholders
is required.

: What to do

Government
Regulations are notadvancing as low
carbon/decarbonization
trends weaken and externalpressures from theinternational community
weaken.
Promoting renewableenergy policies in someregions (U.S.)
Regulations on the use of acarbon tax and recycledplastics (PET and TAC) are
not introduced.

Traditional portfolio
Maintain

Popularization of CCUS has
not progressed, and no
positive policies have beenformulated.
Rapid access to policy
Subsidies(breakwater,
information,
securingetc.) subsidies
will be provided(mainlyfor
inincreases
in sea withlevel.thecollaboration
government on physicalrisks)

182

In the 2°C world: Advanced decarbonization accelerates the progress ofadopting renewable energy, recycled plastics, and CCUS.
2°C worldview @2030s (Example): What to do

Display and industrial equipment industries
Seller(Raw Material Suppliers)
Increased procurement costs due
to carbon regulations
Shift to recycled materials
expanded and procurement andmanufacturing costs increased
Intensification of resourcecompetition. As a result, procurement
costs increased.
Responding to factories andresource suppliers with high flooding
risks
Review of low-carbon
procurement methods(strengthening cooperation with
suppliers of recycled materials,
etc.)
Response to Physical Risks(less than 4°C risk)

Seller(energy, etc.)
Increase in renewable energy
ratio
Renewable energy costs
decreased
Securing power sources forprivate consumption
Investment in renewable energy

New comer
Diffreent types of industries that are strong in
CCUS business emerge, and companies which arestrong in organic EL-technology

Industry

Government

Buyer(Customers)

Aiming to achieve CO2 reductions
by promoting the use of renewableenergy, electrification, and theintroduction of CCUS technologies.
Subsidies are also enhanced.

Low-carbon manufacturing
processes (including recycling,etc.) = Increasing demand for lowcost products

In some countries, CO2 emissions
at factories and other facilities are
regulated, and emissions trading is
becoming more active.
(not expected to be introduced inJapan)

Strengthen
Recycling policies increase
collaboration (alliances,demand for recycled materials
M&A, etc.)

Promote the reuse and electrification ofenergy at factories
Increase in procurement costs due toincrease in raw material prices andintensified resource competition
Active R&D on recycled materials
Organic EL, electronic paper, and CCUS
are becoming trends in the marketplace.

Customers' renewable energy
needs are increasing, and reuse ofenergy is required in the
manufacturing process as well.

Introduction of a carbon tax.
Factories that emit a large amount of
CO2 are subject to the regulations.

Demand for organic EL display
materials.

Introduction of regulations
concerning the use of recycledplastics

Low-carbon CCUS technologies
are required.

Subsidies (breakwater, etc.)
associated with sea level rise will
also be developed to a certain extent.

Reducing the carbon content of factories
R&D on recycled materials
R&D on organic electroluminescence,electronic paper, and CCUS

(Alternative)
Threats of market-substitution by organic EL and Micro LED display materials
Alternative technologies for separating membranes such as CO2 absorbent
solutions

CCUS's infrastructure-building
Manufacturing including
recyclingHigh efficiency and low carbon inprocesses
R&D on recycled materials
Develop value-added products
and CCUS technologies

Rapid access to policy
information,
And securing subsidies
Contributing to the disseminationof organic electroluminescence incooperation with the government
Contributing to CCUS Markets

Considering added value through digitalization andintegration with services

183

3-112

Business Impact Assessment (Example)

Business impact items
Response to flood damage caused by heavy rains andfloods4

Increase in sales of non-destructive testing services toprepare for extreme weather conditions

Assessment- ×× billion yen+ ××billion yen

Sub total
2

Billion yen

Cost for improving the rate of recycled plastics usage- ×× billion yen

Responding to the strengthening of carbon taxes andregulations- ×× billion yen

Increase in sales of related materials due to CCUS
penetration+ ××billion yen

Sub total

Billion yen

4Physical risks increase in a 4°C world, and costs increase in response to heavy rains and floods
Increasing need for non-destructive testing services from the perspective of preventive maintenance2
Regulatorys and demand for recycled plastics are rising, and costs for recycled materials and other materials are rising.
Financial impact of the introduction of a carbon tax and increased investment in energy conservation to comply with regulations
Increase business opportunities by revitalizing CCS and CCUS markets
3-113

184

Basis of calculation of business financial impact assessment
CCS-Related Market Forecasts
Sales
In the 2°C scenarios, the demand for CCS is increasing, and themarkets for CO2 separation and recovery are growing.
2
Scenario

Expect to launch rapidly

2018

2022

2030

2018

2022

2030

4
Scenario

185

3-114 Source: Compiled from IEA ETP2017, etc.

Basis of calculation of business financial impact assessment
CO2 self-storage forecast
Unit: Gt CO2
Other transformation
IndustryPower

2°C
scenario

2014

2015

4°C
scenario

Source: Prepared by IEA ETP2017
3-115

2020

2025

2030

2035

2040

2045

2050

Assuming market
movements

186

Initiatives for Future Scenarios and Examples of Future Measures(Risk Response)
Possible "risk preparations" for future scenarios
Important items

Current Initiatives

Examples of risk countermeasures

Carbon price

Reduce CO2 emissions by 30% by FY2030 (comparedto FY2013)
Contribute to reducing social CO2 emissions by 50
million tons by FY2030
Setting targets for the rate of renewable energy usage

Reducing CO2 Emissions by Introducing Internal Carbon
Pricing
Accelerate investment in environmental facilities by
issuing green bonds

Plastics
Regulation

Reduce waste generated by the Group by 30% by
FY2030 (compared to the same level as in the previous
year)
30% improvement in resource input per unit ofproduction by our group by FY2030 (compared to thesame level above)
Recycling of PET/TAC at Plants

Strengthened monitoring of regulatory trends related tochemical recycling for PET/TAC films and other display
materials
Investigation of setting targets at the recycling PCR rate *1,
including external recycling

Developing nextgeneration
technologies

Demonstration of gas separation membranes atoverseas gas fields
Non-destructive inspections have a track record inregular inspections, detailed designs, repair designs,
and repair work for the maintenance and managementof social infrastructures.

To further develop and study methods for CO2 separation
and recovery(In-house development or alliance)
Transform business by developing and utilizing AI and othertechnologies in non-destructive inspection solutions

Identify water risks using indicators for water stress,
water input, and business impact in each country andregion.

Establishment of specific action guidelines for floods anddisasters
Preparation for long-term infrastructure disruption (response topower outages, etc.)
Establishment of procurement strategy to minimize
procurement risk
Anti-liquefaction, anti-seismic reinforcement and anti-tsunami
measures

Increasing severityof extreme
weather conditions(Flood damage)

3-116* 1: post-consumer recycling ratio: Percentage of commercially recovered materials used in recycled materials.

Material
Practice Example
Practice Example

3-117

FUJIFILM Holdings Corporation

Furukawa Electric Co., Ltd.

187

Overview of Furukawa Electric Group BusinessElectronics & Automotive Systems
Div.

Communications Solutions Div.

Automotive Products Div.

Optical Fiber and Cable Products Div.

Electric Conductor Div.

FITEL Products Div.

Magnet Wire Div.

Broadband Solutions Business Div.

Copper & High Performance
Material Products Div.

Automotive products& batteries

Copper Tube Div.

Communications

SolutionsElectronics&
Automotive
Systems

Infrastru
ctureTarget Div.
(In this analysis)
Electronics
componentmaterials

EnergyInfrastructure

Energy Infrastructure Div.

Functional Products Div.

Power Cable Div.

Thermal Management Solution& Products Div.

Industrial Cable & Power Cable
Accessories Div.

AT & Functional Plastics Div.
Functional
products

Memory Disk Div.
Copper Foil Div.

189

3-118 All Rights Reserved, Copyright© FURUKAWA ELECTRIC CO., LTD. 2020

Characteristics of Target Businesses
Item

Communications Solutions Business
Optical fiber cables

Energy Infrastructure
Business
Power Cables

Target productcategory
Optical Fiber

Hikari/Metal
Communication Cable

Underground
Power Cable

Medium-Low
Voltage Cable

Materials used

Glass materials (optical fiber)
Plastics (fiber, cable dressings, etc.)
Copper (metal communication cable)

Copper (Conducting material)
Plastics (cable dressings)

EnergyAmount used

Large amount used in optical fiber
manufacturing process

Be relatively small

Expansion of production bases globally(Asia, North and South America, EMEA)

Japan, China

Bases

3-119 All Rights Reserved, Copyright© FURUKAWA ELECTRIC CO., LTD. 2020

190

Scenario development process

Analysis step

Questions
Analysis level

Level 1
Be based on TCFD
requirements
As a minimum
requirement
Level

Identify and define
range of scenarios

Evaluatebusiness impacts

Identify potential
responses

For any variable
Do you want to target?

In any scenario
Do you set it?

What is the size of which
position?
Should we calculate indepth?

To the extent of themeasures
Do you consider it?

Qualitative and partial
quantitative assessmentsof the business impact ofeach scenario

Present
countermeasures areshown, but linkage with
future scenarios isunclear.

Important variables
identified but not fully
discussed and explained
their importanceThis time
Details of
implementation

Assess materialityof climate-relatedrisks

In multiple scenarios,
Simply cite existingscientific scenarios/only
bivariate scenario branching

Communications
solutions

4°C (business as
usual)

Energy infrastructure

2°C (strict measures)

Identify high-priority risks inthe 2 businesses

Define 2 scenarios

Estimated impact
on net sales andoperating income

Insurance, etc.

Estimated Impact ofCarbon Tax and
Copper Price Rise

Considerconversion toother materials

191

3-120 All Rights Reserved, Copyright© FURUKAWA ELECTRIC CO., LTD. 2020

Assess materiality of climate-related risks(Communications Solutions Business)

Assess materiality ofclimate-related risks

Increase in production costs due to the introduction of carbon prices, an increase in procurement costs due to the increase incopper demand, and the effects of physical risks
On the other hand, opportunities such as market expansion due to the spread of smart cities have a major financial impact.
Risk Item
Major
classification

Business impact

Asses
sment

Small classification

Index

Discussion (Example)

Carbon Emissions Targets/Policies
in Each Country

Spending
AssetsDepending on the amount of CO2 discharged by the plant, the conversion to renewable energy is required,
and the corresponding costs for purchasing facilities and green power, etc. are increasing.

Dissemination of renewable energy
and energy-saving technologies

Revenue
Assets

Acceleration of introduction of renewable energy, etc. and increase of renewable energy ratio of electricity
supplied to manufacturing plants

Carbon priceSpending

When a carbon tax is introduced, taxes are levied on fuel procurement costs.

Energy conservation, regulations ineach country

Spending

If the energy conservation policy is not achieved, the company's environmental image will be damaged by
the announcement of the company name.

EconomyChanges in the energy mix

Spending

Carbon tax
New
Technology
Rawmaterial
cost
Reputation

In order to achieve CO2 reduction target, the introduction of renewable energy will be accelerated, and the ratio ofelectricity supplied to manufacturing plants will increase. Risks associated with the introduction of emissions trading,etc.

Developing next-generation
technologies

Revenue
Spending
AssetsDemand for optical fibers is increasing due to demands for increased communication volume and speed due to the
spread of next-generation infrastructures utilizing AI and IoT, electrification of transportation systems (autonomous
driving, EV, etc.), micro/digital grid, and smart cities.

Changes in Important
Products/Prices(Intensification of resourcecompetition)

Revenue
Spending
AssetsDemand for copper and plastics, the main raw materials for electric wire and cable, has increased due to the
spread of EV and renewable energy, and procurement costs have increased due to changes in the supplydemand balance.

Rising sea level

Spending

The operation of coastal plants was shut down due to natural disasters such as floods and a sharp increasein tides. Increasing investment in the installation of breakwater.

Drought: changes in rainfall andweather patterns

Spending

Drought, increased production costs due to water restrictions, additional investments for systemdevelopment, etc.

Typhoon: Increasingly severe
extreme weather conditions

Spending
AssetsDue to plant damage caused by typhoons, additional investments were made to shut down operations,
reduce production, and restore facilities. Increase in the premium

Customer reputation changes,
Increase in the average temperature
Changes in the investor's reputation

Revenue
Spending
AssetsDue to the increasing interest of business partners, preference has emerged for SBT and other companies that havemade progress in environmental measures.
MediumDie Best moves faster and more winds into the enterprise. Worsening of the mining working environment due to the
hot weather.

Transition
Toward a
Risk
Low-Carbon

Physical
Risk

Other

3-121 All Rights Reserved, Copyright© FURUKAWA ELECTRIC CO., LTD. 2020

Large

192

Examples of definitions based on scientific grounds

Identify and define range of scenario

such as IEA
2030* 1

At present

4°C world

2°C world

SourceCarbon Emissions
Targets/Policies in
Each Country

In the industrial sector
GHG emissions

413 Million tCO2
(2017)

401 Million tCO2

401 Million tCO2

Carbon price

Carbon tax-(Not installed at 4°C)

$88/t

In energy
conservation andother countries
Regulation of organic
compounds

Recycled plastics
Utilization rate

12.5%
(2017)(No restriction at 4°C)

14.0%

FIT's purchase price(yen/kWh)Solar: 14 (bidding system)
Wind: 2019-36 (2019)(From FIT at 4°C
Assuming that independence
is difficult)

Renewable energy, etc.
Subsidy policy
Unit price of renewable energy
generation(yen/kWh)
Re-energy and Energy
Conservation
Dissemination oftechnology

Solar: 21.8
Land Wind: 21.5 (2017)

Ministry of the Environment, "Japan's draftpromise" and "Toward a drastic reduction ofgreenhouse gases in anticipation of 2050"
Estimated from IEA WEO 2018

European plastics strategy,
Plastics Recycling Association

Solar: JPY7/kWh (2025)
Wind: JPY8-9/kWh

Solar: 13.5
Land wind: 20.6

Agency for Natural Resources and Energy

Solar: 12.4
Land wind: 20.6

IEA WEO2017 (450 scenarios)

Capacity to augment thetransmission network-

Increase of more than 6.65
million kW(until 2027)

Increase of more than 6.65 million kW(until 2027)

ZEV ratio

58 thousand units (EV, PHV, FCV) (2017)

PHV/ZEV:5%(72.38 million units)

PHV/ZEV:39%(536.85 million units)

IEAs and JETORO reports
Global Calculator
IRENA Report

Agency for Natural Resources and Energy

World's storage capacity

4.67 TWh (2017)6.62~7.82 TWh

11.89~15.27 TWh

Changes in theenergy mix

Power Source Composition(Japan)(TWh)

Coal: 360
Nuclear: 33
Re-energy: 186 (2017)

Coal: 264
Nuclear: 216
Renewable energy: 250

Coal: 83
Nuclear: 247
Renewable energy: 347

IEA WEO2018 (NPS,SDS)

Next-generation
technology
Progress ofSmart City Market Size and
M2M Communications
VolumeSmart City Market Size: JPY38 trillion
M2M communication volume: 4 exerbites(market at 4°C)

Smart City: 4 thousand trillion yen
M2M: 745 Exabyte/month

Cisco Report
Frost & Sullivan Japan
SMART CITY PROJECT

Increase/Decrease inPrices of Heavy-Use
Products/Products

Predicted value of copper
demand5,000 thousand tons (2015)

9,000 thousand tons

10,500 thousand tons

Than Sebastiaan Deetman and others
Estimate

Sea level rise

Magnitude of sea level rise-

0.25m (2050)

0. 2m (2050)

Ministry of the Environment, Japan
Meteorological Agency Report

Drought

Water stress

Extracting values from eachcountry from tools(2040 *2)-

TyphoonNumber of occurrences-

WRI "Aqueduct," Our CDPs

The number of typhoons approaching is forecast to decrease, but
uncertainty remains.

26 (2016)

Ministry of the Environment, Japan
Meteorological Agency Report193

3-122 All
*1:Rights
The timehorizonto be examinedfor physicalrisks isCO.,
set LTD.
at 2050.
Reserved,
Copyright©
FURUKAWA
ELECTRIC
2020* 2: Figures for 2050 are not available, and figures for 2040 are used.

Select the evaluation items for business impact
Item

Transition risk
Physical risk
3-123

A

With the spread of smart cities,
increased demand for fiber

B

In the expansion of thetransmission network, demand for
power cable increase

C

Increase in copper procurement
costs

D

Carbon tax

E

Sea level riseF

DroughtG

Typhoon(Increased Stormand Flood Damage)

Identify and define range of scenario

City

A

Strengthening of SmartCity

Urban Land

B
Expansion of thetransmission network withthe spread of renewableenergyMiningAll Rights Reserved, Copyright© FURUKAWA ELECTRIC CO., LTD. 2020

C

Urban areas

Intensification of resource competition due
to low carbon and increased demand forcopperD

Government(Cost increase due to introduction of carbon tax)

I nt r o du ct i on ofcarbon tax,
stricter recycling
regulations, etc.

F

Influence on plant
operations in areas ofhigh water stress

G
Intensification of extreme
weather conditions (typhoons)Effects on factories, etc.

By rising sea
levelsPlant shut down
E

Sea
194

In the 4°C world, low carbon/decarbonization is notpromoted, Increased physical risk (business as usual)
MiningIdentify and define range of scenario

Smart cities are not making
progress, and urban formats aremaintained as in the past.

While low carbon will not
progress, copper demand
will increase as a result ofmarket trends.

City

Government

No active promotionof energy
conservation andrenewable energy
policies

Urban Land

(Carbon tax not introduced)

Lack of renewable energy
procurement and delays inintroduction(Costs also remain high)Urban areas

Renewable power

Re-energy

3-124

CO2

Fossil fuels

Renewable power

Influence on plant
operations in areas ofhigh water stress

Factory

In line with the increase in demand forelectricity, the transmission network will
be strengthened to a certain extent.
Increased demand for resilient wire

Brown power

CO2

CO2

Low-carbon plants do notmake progress, and large
volumes of CO2 are emitted.

CO2

Still dependent on
fossil fuels
Plant shut down
due to sea level rise

Sea

Intensification of extreme
weather conditions (typhoons)Effects on factories, etc.

195

All Rights Reserved, Copyright© FURUKAWA ELECTRIC CO., LTD. 2020

In the world of 2°C, low carbon is being promoted, renewable energy
consumption and smart cities become popular (severe measures)
MiningIdentify and define range of scenario

Intensification of resource competition
due to low carbon and increased
demand for copper

Government

City(Cost increase due to introduction ofcarbon tax)

Introduction ofcarbon tax,
stricter recycling
regulations, etc.

Urban Land
Promoting integrated supply
and demand through the spreadof storage batteries and EVs
Expansion of the transmission
network with the spread ofrenewable energy
Renewable power

Urban areas

Move away from fossil fuelswith low carbon anddecarbonization

CO2

Brown power

Re-energy

Fossil fuels

Renewable power

Influence on plant
operations in areas of highwater stress(less than 4°C)

Increasing demand
for recycledmaterials

Plant shut down
due to sea level rise

CO2
CO2

Factory
3-125

Achieving low-carbon factories by
securing renewable power sources
and in-house power generation

All Rights Reserved, Copyright© FURUKAWA ELECTRIC CO., LTD. 2020

Brown power(less than 4°C)

Submarine cable

Demand for submarine cableincreased with the spread ofrenewable energy (e.g.
offshore wind).

Offshore wind

Sea

196

Communications Solutions Business: 4°C (business as usual)

Evaluate business impacts
Identify potential responses

Working with insurance companies to avoid risks and secure increased profits.
Revenue
Increase

Revenue
Decrease

Countermeasures
Implementation

Risk avoidance throughcollaboration withinsurance companies

Due to insufficientscientific grounds, it isdifficult to estimate.

The impact of the decline in profits due to drought is large.

A

C

D

E

F

(not considering response costs)

Risk avoidance throughcollaboration with insurancecompaniesG

197

3-126 All Rights Reserved, Copyright© FURUKAWA ELECTRIC CO., LTD. 2020

Communications Solutions Business: 2°C (strict response)

Evaluate business impacts
Identify potential responses

Reduce greenhouse gas emissions and collaborate with insurance companies to avoid
risks and recover the increase in revenues.
Revenue
Increase

Revenue
Decrease

Countermeasures
Implementation

Due to insufficientscientific grounds, it isdifficult to estimate.

Risk avoidance throughcollaboration withinsurance companies(not considering response costs)

Assumed purchase costof non-fossil certificatesfor SBT complianceMarket expansion due to the spread of smart cities, but the
impact of carbon tax and drought is large.

A

C

D

E

3-127 All Rights Reserved, Copyright© FURUKAWA ELECTRIC CO., LTD. 2020

F

Risk avoidance throughcarbon tax measures andcollaboration with insurancecompanies

G

198

Identify potential
responses

Countermeasures

Carbon tax and physical risks need to be addressed in a timely manner.
Item

Transition risk

C

Cost ofprocuring copper
Increase

Risk response measures
Consider passing on cost increases, etc. In order to minimize the risk, we will
partially consider the possibility of shifting from copper to aluminum, which is
expected to see a steep rise in prices.

Physical risk

D

Carbon tax

Re-energy introduced at headquarters, factories and value chains
Implementation of ambitious target setting (SBT, etc.)

E

Sea level rise

Consider collaboration with insurance companies that have in-house tools tominimize risk
Strengthen preventive measures against existing assets (breakwater, etc.)

F

Drought

Consider collaboration with insurance companies that have in-house tools tominimize risk
Implementation of preventive measures for existing assets (water supply towers
and reservoirs)
Relocation of some bases

G

TyphoonBe scientifically examined in the future, including the quantification of risks

199

3-128 All Rights Reserved, Copyright© FURUKAWA ELECTRIC CO., LTD. 2020

Food
Practice Example
Practice Example
Practice Example

3-129

Kagome CO.,LTD.
Calbee, Inc.
Meiji Holdings Co., Ltd.

Introduction of Kagome
Company Overview
As of the end of December 2018
Head Office
Head Office

Nagoya-shi, Aichi

Founded

1899

Common stock

JPY19,985 million

No. of individual
investors

186,095

Sales consolidated)

JPY209,865 million

Number of
employees(Consolidated)

2,504

Business Offices

Head Office, Tokyo Head Office, 1 division office,8 branches,
6 plants, Innovation Division (Research Institute)

Group Companies

Hibikinada Green Farm Co,. Ltd.
Iwaki Onahama Green Farm Co., Ltd.
Kagome Axis Corporation
KAGOME LOGISTICS SERVICE CO., LTD.
Kagome Inc.
United Genetics Holdings LLC
Vegitalia S.p.A.
Holding da Industria Transformadora
DoTomate, SGPS S.A. (HIT)
Kagome Australia Pty Ltd.
Taiwan Kagome Co., Ltd. and others(40 subsidiaries and 5 affiliates)

Innovation Division (ResearchInstitute)

Branches and Offices
Factory

Innovation DivisionTokyo Head
OfficeHead Office

3-130

Introduction of Kagome (Manufacture and sale of beverages and foodstuffs,
development of vegetable varieties, and cultivation)
Description of business

International
business
22%
Agri-businesses(Domestic) 5.5%

Food andothers(Domestic)
32.7%

3-131

FY2018Others/Intersegment
transactions -2.7%

Beverage(Domestic)42%

[Step 2: Assess materiality of climate-related risks]

Step

2

3

4

5

Scenario

Extract the risk of Kagome, evaluate the impact on a large, medium, or small scale, andidentify those with the greatest impact.
Risk Item
Major
Classification
classification

Transition
risk
Reputation

Chronic
Physical
risk

Acute

2

Business impact

Small classification

Index

CO2 emissions in eachcountry
Strengthening Reduction
Policies
Changes in consumer
behavior

Discussion (Example)

Assessment

With the introduction of a carbon tax having a broad impact on raw
materials, containers, and packaging materials
Cost increases

LargeExpenditures
and assets

Energy-saving policies are strengthened and high-efficiency machines
for manufacturing facilities are developed.
Need to be renewed

MediumRevenue

Expansion of purchasing behavior considering environmental impact
due to climate change

Large

Spending

Increase in carbon tax

Policies/
Regulation

4

Changes in theinvestor's reputation

CapitalInvestor reputation if climate change response is inadequate
Deterioration and difficulty in raising funds

Small

Increase in the averagetemperature

Expendituresand revenues

Crop quality and yield deterioration occur.

Large

Changes in rainfall andweather patterns

Expendituresand revenues

Increased rainfall and drought adversely affect crop areas
Reflecting high raw material prices

Large

Reduction of biodiversity

Spending

From the generation ofpests
Declines in production

Expendituresand revenues

Farmers
Lower productivity

Expendituresand revenues

Due to water stress
Declines in production
Increasing severity of
extreme weather
conditions

Procurement due to difficulty of plant pollination due to decrease ininsects
Generation of raw materials that are impossible
With the expansion of pests and pests lowering the production andquality of crops
Difficulty of stable procurement
By lowering the labor productivity of agricultural workers due to higher
temperature
Higher funding costs

MediumExpendituresand revenues

Water shortage makes it difficult to secure water and prices soar.

Large

Expendituresand revenues

Damage due to frequent extreme weather events such as storms
Frequent production areas

Large

Large

Small

3-132

[Step 3: Identify and define range of scenarios]

Step

2

3

4

5

Scenario

42

Consider a 2050 society under 2 scenarios (4°C, 2°C) for highly uncertain climate change(4°C: If the temperature rises without taking any measures, 2°C: If a variety of measures aretaken)[Global Average Terrestrial Temperature Change (Difference from the 1986-2005 Average)]()

4°C scenario

The temperature will rise
3.2-5.4 C above preindustrial levels, unless
more rigorous measures
are taken.

The temperature will rise
0.9-2.3 C above preindustrial levels, if strictmeasures are taken.

2°C scenario

Source: AR5 SYR Diagram SPM.6
3-133

Set 2050-year time horizon
for transition risk andphysical risk

[Step 3: Identify and define range of scenarios]

2

Step

3

4

5

Scenario

4

2

Collect scientific evidence on the situation for 2050 (use in calculating thefuture impact amount)
2050

At present

2°C world-

53USD/tCO2 (EU)180 USD per tCO2
(developed countries)

128.5 billion USD

397.5 billion USD(3.1 times the current level)

397.5 billion USD(3.1 times the current level)

Changes in tomato
yields--17~7%-2~10%

Change in carrot yield--0.1~2%

-2~1%

-

4%

5%

Carbon price

Carbon tax

Purchasing behavior
choices,
Changes in
Sales of Sustainableconsumer behavior
Certification Products(U.S.)
Increase in the
averagetemperature

Source4°C world

Changes in rainfall
Orange yield change
and weather
patterns
Changes in apple
yield

The Deloitte Global Millennial Survey
2019
Nielsen "product Insider"

GAEZ (yield per hectare)

No data

Reduction of
biodiversity

Reduction of pollenborne organisms

Decrease inproduction due towater stress

Production bases inwater-stressedareas

No. of production bases with water
stress of Extremely high: 1

Number of manufacturing
sites that are Extremely
high to water stress: 7

No. of manufacturing sites
with Extremely high water
stress: 7

Annual occurrenceof heavy rain
Incremental days

2.5 days

4.3 days

2.9 days

Amount of rainfall-+8~+15%+8~+15%Flood damage
increase rate-

5.9 times

2.2 times

Increasing severityof extreme weather
conditions

IEA WEO 2019

No data
WIRI Aqueduct"Japan's Climate at the End of the 21stCentury," Ministry of the Environment
and the Japan Meteorological Agency,"Observations and Forecasts of Climate
Change and Integrated Report on
Impact Assessments 2018-Climate
Change and Its Impact in Japan."Supplemental to WRI 2030 annual data

3-134

[Step 3: Identify and define range of scenarios]

Step

2

3

4

5

Scenario

4

2

Using Michael Porter's 5Forces to forecast the 2050 worldview
4°C worldview @2050s (Example)
Procurement, production, and distribution of vegetables
Seller(Suppliers)
Increase in production areas
destroyed by catastrophic
disasters (inability to secure raw
materials even if prices are raised)
Yield decreases in many areas due
to poor harvest and poor quality(pass-through to selling prices)
Growth damage due to increased
soil degradation and the rate ofoutbreak of disease (risk ofincreased use of agrochemicals)
Decrease in production of apples, etc.
due to sharp decrease in insects
through pollen
The possibility of delays in thetransportation of vegetable raw
materials, containers, packaging
materials, etc.
Rising water prices due to water
shortage (difficulty in obtaining water)
Establishment of a system for
cultivating crops even in extreme
weather conditions (storms, etc.)
Collaboration with Agricultural
Suppliers

Development and marketingof climate-resistant varieties
Promoting health services
and other quality businesses

3-135

New comer
Food manufacturers with plant factories (fresh
foods)
Contracts andholding withplant factories

Industry
Production suspended due to increased
damage from extreme weather
To shut down or relocate production lines due
to water shortages and invest in water-saving
facilities
Explore and develop production areas andmove production bases
Development of products compliant withthe certification system

Moving to more secure sites
Drought countermeasures
Strengthen BCP (industry collaborationfor emergency transportation anddelivery risk diversification)
Development of preserved foods

Buyer(Customers)
Expansion of demand for
products compliant with thecertification system
Demand for products declined
when raw material costs werepassed on to product prices.
Increasing frequency of natural
disasters and increasing
demand for stored foods
Changes in the quality
demanded by consumers due
to global warming
Development of products
compliant with thecertification system
Develop products thatmatch the needs of climatechangeBranding as an
Environmentally
Conscious Company

By utilizing big data
New cultivation technology withminimal water(Alternative) Practical application (drought)
Products made from agricultural products that are resilient toclimate change

Government
Establishment of incentives fortechnological development topredict heavy rain, storm,
cyclone, and typhoon
Study and introduce regulations
and policies to deal with water
stress, such as water withdrawal
regulations
Introduction of subsidies forcapital investment, etc. tofarmers
Shortage of raw materials forprocessing due to policyoriented fresh vegetablepriority measures
Relaxation of standards forlabeling of origin (frequentchanges in production areas,inability to maintainproduction areas)
Collaboration with theGovernment for Sustainableagriculture (mainly
adaptation)
To the government's
response to climate changemonitoring

Providers of Capital
Investment in enterprises withongoing environmental initiatives(assuming progression beyond the
2°C scenario)

[Step 3: Identify and define range of scenarios]

2

Step

3

4

5

Scenario

4

2

Using Michael Porter's 5Forces to forecast the 2050 worldview
2°C worldview @2050s (Example)
Procurement, production, and distribution of vegetables
Seller(Suppliers)

Active entry into new businesses through low-carbon
and non-carbon products and low-carbon businessmodels (certified products, etc.)

Yield decreases in some areas due
to poor harvest or poor quality(pass-through to sales prices)

Expansion of demandfor products compliant
with the certification
systemTo consider an aggressive businessmodel for decarbonizing

The possibility of delays in thetransportation of vegetable raw
materials, containers, packaging
materials, etc.

To shut down or relocate production lines
due to water shortages and invest inwater-saving facilities

Rising water prices due to water
scarcity
Review of Procurement

Study and introduce regulations
and policies to deal with water
stress, such as water withdrawal
regulations
Considering relief in the eventof frequent agricultural
damageDemand for products
declined when raw
material costs werepassed on to productprices.

Enterprises with contract farms bail out
part of the damage

Strategy(Exploration anddevelopment of new
production areas)
Strengthening the
procurement network(Strengthening the alternative
procurement structure)
Collaboration with
agricultural suppliers

Establishment of incentives fortechnological development topredict heavy rain, storm,
cyclone, and typhoon

Selection of products witha high price advantagethat do not pass throughcarbon price increases

Industry
Partial suspension of production due toincreased damage from extreme weather

Carbon price burden for logistics,
containers and packaging (passed
on to sales prices)

Consider, implement andstrengthen carbon taxes on anational and local level to
implement national commitments,
such as NDCs.

Buyer(Customers)

New comer

Some areas where raw material
cultivation is difficult

Government

Shift to low-carbon production, use of
low-carbon substitutes, and lowcarbon transportation

Limited amount of water
available for 1 productIntroduction of a government
system for certification of lowcarbon labeled agricultural
products

Shifting costs to carbon
prices and low/decarbonizing

Development of products compliant
with the certification system

Development and marketingof climate-resistant varieties
Promotion of health services
and other quality businesses

Cooperation with Governmentfor Sustainable Agriculture(mainly Mitigation)
Government's monitoring ofclimate change countermeasures
Introduction of Internal Carbon
Pricing

Development of products
compatible with certified
products
To the needs of climatechange productdevelopment that matches
As an environmentallyconscious company
branding

CO2 carbon offsets that cannot be
reducedDrought countermeasures
Strengthen BCP
To expand into high-profit,
low-carbon businesses(Alternative)
Products made from agricultural products that are
resilient to climate change

Providers of Capital
Progress in investment in companies
that are making progress inenvironmental initiatives

3-136[Step 3: Identify and define range of scenarios]

Step

2

3

4

5

Scenario4

2

In the 2°C world, several production areas will be damaged by storms, and many production will not be able toharvest in the 4°C world. Water shortage will worsen due to global warming.
Major Worldwide Views in 2050

Suppliers and ourselves
Production
area

2

4

Water
procurement

Customer
I would buy
vegetables even if
they are expensive

Large
number ofdamagePartialdamage2

Customers and investors
Changes inpurchasing
behavior

I would prefercertifiedproducts

I want to eat
meat, maybe
soybean meat

I want to have somethingrefreshing because it is
hot today

4

I need preserved
foods because
natural disasteroccurs frequently

Factory

Difficulty ofobtaining water for
4 in 10 peoplePriceincrease

Carbontax

2Insect4
pollination crop

CO2

3-137

I take nutrition fromsupplements because
vegetables are expensive

Product

Increaseincertifiedproducts

Steep rise incarbon taxes

Field

RisingpricesInsectloss

Decline inapple
production

2

4

Cost
increase

Certification

Invest in theenvironmentallyconscious
companies

Providersof Capital

Shift tolowcarbon

Investment
target[Step 4: Evaluate business impacts]

Step

2

3

4

5

Scenario

42

Summary of estimated risk items
Determine the calculation logic for risk items and calculate the impact on business.
Risk Item

Carbon price

Assumedparameter

Carbon tax

Increase in the averagetemperature
Changes in rainfall andweather patterns

Impact(Billions of
yen)
4
2

Overview of Impact and Assumptions

Effect factor

Pricing logic

Scope 1 and 2 (in-house) emissions:
CO2 emissions in the process of processing
and manufacturing raw materials are subject
to a carbon tax.

Sales
Cost

CO2 emissions frommanufacturing countries ×
business growth rate × carbon
pricesScope 3 (Supplier) emissions:
CO2 emissions from purchased raw materials
and products are subject to a carbon tax.

Sales
Cost

CO2 emissions of purchased
raw materials and products(excluding N2O) × businessgrowth rate × carbon prices

Rising raw material prices, including those inundesired areas, due to changes in weather
patterns and rising average temperatures

Sales
Cost

Amount procured × degree of
price increase

Increased temperatures in summer in Japanrequire air-conditioning in greenhouses
resulting in capital expenditures and expenses.

Sales
Cost

Estimated Cost of Cooling(Equipment + Expenses)

Rising water prices

Water stress Water shortage increases water prices andputs pressure on profits.
data

Business
ProfitActual increase in costs during
drought × Rate of increase inwater-stressed production sites

Increasing severity of
extreme weather
conditions

Flood
Damage to production sites and production
damagesites due to heavy rain, typhoons, andincrease rate
cyclones
data

DamageCost

Results of damage in the eventof a disaster ×
Flood damage increase rate

Total
3-138

Step

[Step 4: Evaluate business impacts]

2

3

4

5

Scenario4

2

In the 4°C world, business profit will decrease by X billion yen due to water price increase
and damage to production areas.
Transition and Physical Risks

Billion yen(In-house)(Purchased raw materials
and finished goods)

X Billion
yen

Carbon tax effectSignificant impacts
on water priceincrease and thedamage to the
production areas

3-139

Step

[Step 4: Evaluate business impacts]

2

3

4

5

Scenario4

2

In the world of 2°C, the impact of a carbon tax is large, and the business profit will decreaseby X billion yen.
Transition and Physical Risks

Billion yen

The impact of acarbon tax islarge(In-house)

Carbon tax
effectX Billionyen(Purchased
raw materials
andfinished goods)

3-140[Step 5: Identify potential responses]

Step

2

3

4

5

Scenario

42

Summary of estimated countermeasures
The following measures are necessary in order to recover the business impact that decreasing
operating profits
Impact(Billions of yen)

Means of recovering the business
impactEffectfactorCarbon tax

Achieve the 2050 CO2 reduction target for
Scope 1 and 2 (in-house) (50% reduction)

Cost ofsales

Estimate the avoided costs of a carbon tax if CO2
target of 2050 CO2 emissions is at the current
50% level.

Carbon tax

CO2 reductions at Scope 3 (suppliers)

Cost of
sales

Assuming a 25% reduction on a basic unit basis

Pass-through of tax
burdens accompanied
by CO2 reductions

Passing on cost increases for carbon taxes
that meet reduction targets and remain

Cost ofsales

Shifts over 60% of the carbon tax costs thatcannot be avoided by reducing CO2 above to
products.

Smart Agriculture andClimate Change
Resilience

Climate Change Responses in Agriculture

Cost ofsales

Avoidance of about 70% of cost increase

For summer airconditioning
High efficiency

Reduction of Costs for Cooling ofGreenhouses

Cost ofsales

Avoid about 30% of the increase in costs(assuming an annual level of about 1% based on
the Energy Conservation Law, etc.)

Water recycling
Water saving

Reduction of rising water costs due todrought

Cost ofsales

Reducing and Assuming a 50-Fraction ofElevated Water Costs During Drought.

Resistance toabnormal weather

Establishment of a system that can beprocured even during extreme weather
conditions

Cost of
sales

Assumed to be about 50% of the amount ofdamageFollow-up to and sales expansion ofenvironmentally conscious purchasing
behavior of consumers

OperatingprofitSales of certified products × Business growth rate
×
Projected Increase in Sales of Certified Products

Environmentally conscious products withhigh added value

OperatingprofitAssumed to be about 50% of the cost that cannot
be absorbed by the above-mentioned method at
4°C.
(Temporary assumption of 4°C for 2°C)

Risk Item

Reduced CO2
emissions

Consumer
Behavioral changeHigh added value of
products
Valuing

Assumed parameter

Choice of buying
behavior
Sales of certified
products

Total of measures
3-141

4

Pricing logic

2

Scenario

42

Business impact of risks and its recovery through countermeasures
In the world of 4°C, operating profits decline by X billion yen, and countermeasures
recover the business impact by X billion yen
Billion yen

Transition andPhysical Risks

Implementation ofCountermeasures

Final-X Billionyen

X Billionyen+X Billion
yen

3-142

Scenario

4

2

Business impact of risks and its recovery through countermeasures
In the world of 2°C, operating profits decline by X billion yen, and countermeasures
recover the business impact by X billion yen.
Billion yen

Implementation ofcountermeasures

Transition and Physical
Risks

Final
+X

X Billion
yen

Billion yen+XBillion yen

3-143[Step 5: Identify potential responses]

Step

2

3

4

5

Scenario

42

Practical measures at Kagome to restore business impact
Item

Specific risk countermeasures

Carbon price
Increase

Achieve the goal of reducing CO2 emissions by 50% by 2050
through energy conservation, energy creation, and energy
purchase within the Kagome Group
Reduce CO2 through collaborating with suppliers
Formulate and implement cost-shifting measures for eachproduct
Raise in-house CO2 reduction target (emissions
0%)

A

B

Understanding of consumers' purchasing behavior andaccurate sales activities
Development of environmentally conscious products andcertified products proactively

Develop and sell products that meet the needs ofcustomers under extreme weather conditions

Rainfall and weather
conditions
Shifts in patterns

Respond to climate change through smart agriculture, suchas data utilization
Acquire vegetable varieties that can cope with climatechange (such as high temperature resistance and pest
resistance)

Global expansion of sales of vegetable varieties thatcan cope with climate change

Biodiversity
decrease

Propose and disseminate agriculture that coexists with allliving things

Promote a tomato cultivation that does not use beesin greenhouses

To water stressproduction by
decrease

Promote water recycling and water conservation efforts at plants(membrane treatment, etc.)
Develop and use a tomato cultivation system that can be producedwith minimal water
Promote recycling-oriented agriculture (use of factory wastewater andrainwater in agricultural land)

Global expansion of a tomato cultivation systemcapable of producing with minimal water

Consumer
Behavioral change
Averagetemperature
Increase

C

D
E

F

Opportunity

In extreme
weather
conditions,increasing severity

Upgrade procurement strategies (reviewing and diversifying
production areas)
Create a system that can be cultivated even during storms
Upgrade BCP measures (assuming climate change)

Transition to Koto Businesses(To be a service business that is not susceptible tocost fluctuations)

3-144

Food
Practice Example
Practice Example
Practice Example

3-145

Kagome CO.,LTD.
Calbee, Inc.
Meiji Holdings Co., Ltd.

History of the Calbee Group

3-146

Copyright © Calbee, Inc. All rights reserved.

Product Mix ( Fiscal year ended March 2019 )Consolidated net sales

JPY248 billion* Figures are rounded down.

More than 50% of total sales consist of products made from potato.
3-147

Copyright © Calbee, Inc. All rights reserved.

Step[Step 2: Assess materiality of climate-related risks]

2

3

4

5

Assessed Material Risks in Major Value Chain of Domestic Food BusinessSelected domestic foodbusiness for materiality
assessment because it
consists of more than
80% of total businessSelected procurement, production, logistics
and sales as key value chains for materiality
assessment
R&D

Procurement

Production

Distribution

Sales

ConsumeFacilities

Distribution
Inventory

Shift indemandorientation

Disposal

Main raw materials
include potato and oat
Specialty raw materials
include shrimp

Business Portfolio

Main raw materials
and specialty raw
materials are taken
into consideration.

Domestic
food businessNot only production but also distribution,
package and sales activities are taken into
consideration.

Referenced to the list of important parameters of each value chain

3-148

Procurement

Production

Distribution

Sales

Carbon pricePrecipitation
changeEextreme weather
occurrence
Rise in temperature

Carbon price
Energy-saving
policyCarbon price

Changes incustomer
behaviours

Copyright © Calbee, Inc. All rights reserved.

[Step 2: Assess materiality of climate-related risks]

Step

2

3

4

5

Listed Material Risks Related to Climate Change

Risks
1 Carbon price2 Precipitation changes

3

Extreme weather occurrence e.g.
heat wave, tropical cyclone, flood

4 Rise in temperature

Metrics
Cost
Cost
Revenue
Cost
Revenue
Assets
Cost
Revenue

Financial impact
ImpactGHG emissions: Scope 1&2+
packaging material +supply chain
Decreased yield of potato
Decreased yield of Oats
Decreased yield of potato
Decreased yield of Oats
Suspended production
Damage on facilities
Decreased yield of potato
Decreased yield of OatsAssessment
Large
Large

Large

Large

(e.g. temperature rise, acidification)

Cost
Revenue

Decreased yield of prawn

Large

6 Changes in consumer behavior

Revenue

Decreased sales of anti-environmental
products

Large

5

Changes in ocean environment

3-149

Copyright © Calbee, Inc. All rights reserved.

[Step 3: Identify and define range of scenarios]

Step

2

3

4

5

Scenario

42

Considered 2030 Societal Impact of 2 Scenarios as to Climate Change

Changes in Global Ground Temperature fromaverage temperature between 1986 and 2005)
( )

2030

The temperature willrise 3.2-5.4 C above
pre-industrial levels,
unless more rigorous
measures are taken.

4°C scenario

The temperature willrise 0.9-2.3 C above
pre-industrial levels,
if strict measures aretaken.

2°C scenario

Source: AR5 SYR Diagram SPM.6
3-150

Copyright © Calbee, Inc. All rights reserved.

[Step 3: Identify and define range of scenarios]

Step

2

3

4

5

Scenario

4

2

Defined Worldview of 2 Scenarios Based on Scientific Grounds of IEA
At present

Carbon price

Carbon tax

Changes incustomer
behaviours

Response tocertification

Raw material
impacts due toprecipitation
changes causedby rise intemperature

2030

2 C world

4 C world

Average successful bid in
For the developed countries
the European EU-ETS:
88 USD per tonne CO2Approx. $8 per tonne
No procurement

Certification price +%Assumed no carbon tax inJapan

IEA WEO 2016
(450, NPS Scenario

Assuming no certification

Private research firm
(No scenario)
Academic literature(RCP8. 5, RCP4. 5,
SI92a scenarios)

Changes in potato
yields(Base year)

Domestic yield %U.S. yield %Domestic yield %U.S. yield %Changes in oat
yields(Base year)

Australian yield+%

Australian yield+%(Base year)

Assume no change

Japan - %U.S. import - %China import - %Change in ocean
Changes in fisheryenvironment

Occurrence ofIncrease in theextreme weather number of days ofevents such as
heavy rainheat waves,tropical cyclones,
floods, etc.
Severe typhoons
and cyclones

2.5 days a year on averagein Japan

2.5 days a year on averagein Japan(Base year)

Damage +120%

Copyright © Calbee, Inc. All rights reserved.

GAEZ (United Nations)(Scenarios A2 and B1)
Academic literature(A2 scenario)

The Ministry of theEnvironment and other3.0 days a year on average government offices,in Japan
Academic literature(RCP2.6 RCP8.5
Scenario)
Damage +200%

The parameters were set at 2°C and 4°C for each transition risk and physical risk.
3-151

SourceTemporarily based on
IPCC Report

[Step 3: Identify and define range of scenarios]

Step

2

3

4

5

Scenario

4

2

Demand for sustainable products increases as low-carbon and de-carbon
progress.
2°C scenario
Carbon tax incurred carbon-intensive sectors! Need to reduce GHG emissions significantly!

Government
Scarce land availability for afforestation, biofuel
and agriculture

Need toreduce GHG
emissions inagriculture

Certified products
Increase indemand for
certifiedproducts

Slight decrease inboth quantity andquality of harvest

Concerns about
environmental
impact ofpetroleumbased package
and value chains

Resistanceto natural
shrimpConsumer
Negative impact on
harvest for rise intemperature

CarbonpriceburdenReduce CO2
emissions at
plantsEco-friendly
delivery¥¥¥Warehouse

Shift tolowcarbon
packageEV

Increase in risk of
wildfires anddrought

Norther shift ofhabitats

3-152

Disruption of
supply chain

Logistics

CO2

Factory

Copyright © Calbee, Inc. All rights reserved.

[Step 3: Identify and define range of scenarios]

Step

2

3

4

5

Scenario

4

2

Potato harvest and shrimp fishery reduce and extreme weather damage increases
4°C scenario
Government

Ensure thorough safety and healthmanagement of employees!

As agriculture and fishery decrease, develop alternative products!

Newly added
Business

Increased needfor agricultural
efficiency

Demanddecreases due
to rise in prices¥¥¥

Supply shortage due
to shortage of raw
materials

Lower harvest
volumes andquality
Farmers' losses¥¥¥

Consumer
Decrease in
harvest for risein temperature

CO2

CO2

Warehouse
CO2

CO2
CO2

Increased risk of
wildfire anddrought
3-153

Farmerdiscontinuity
increases

Decrease in
the catch ofnatural shrimp

Disrupted
supply chain
Copyright © Calbee, Inc. All rights reserved.

Logistics

Factory

Risk offlooding

Scenario 4
Step
2
3
4
5
2
[Step 4: Evaluate business impacts]
Evaluate the impact of transition and physical risks based on sales, market size, etc. in 2030.

ImpactTransition risk

Risk Item

Parameter

4

Estimated assumptions (common for 2 C and 4 C)

CO2 Emissions from Manufacturing Sites Carbon-Prices
CO2 emissions from use of cardboard and packaging materials
CO2 emissions on logistics carbon prices

Policy Carbon price

Carbon tax

Changes inMarket customer
behaviours

Selective purchasing and need forthe certified sustainable products
in US

Decrease in sales of products not certified for sustainability

Changes in potato yields

Shift harvest area to make up for potential decline in yields

Chronic

Changes inprecipitation,
Impact on raw
material harvest

Changes in ocean
environment
Physical risk

2

sales

Changes in oat yields

Other factors would allegedly exist to hinder the correlation between the increase inyields and the price increase in the market principle,

Changes in fishery

Estimated changes in procurement from each area by referring to the fluctuations offishery in Japan, the U.S., and China.

Response to drought and wildfires

Insufficient parameters of palms and oats (not estimated)
Damage from past heavy rain

Frequency of
extreme weather
events (tropicalAcutewaves, tropical
cyclones, floods,
etc.)carbon prices

Increasing number of days ofheavy rain per year

Increase rate of heavy rain

Damage due to past heavy rainfall Increase rate of heavy rainfall
Production suspension due to inability of employees to come to work (including
suspension of operations due to high tides)

The number of typhoons andcyclones

Damage from past typhoons

Rate of increase in typhoons

Impact assessments are performed using parameters of 2°C and 4°C.
3-154

Copyright © Calbee, Inc. All rights reserved.

[Step 5: Identify potential responses]

Step

2

3

4

5

Scenario

42

Consider initiatives for multiple scenarios
Item

Existing Initiatives

Additional counter measures against risks

Carbon priceincrease

CO2 Reduction Target (30% Reduction by 2030)
Conversion to liquefied natural gas (LNG)
Implementation of high-efficiency operation of
biomass boilers
Aggressive introduction of energy-saving
equipment and energy-saving activities at offices
Improve load factor by standardizing cases
Low and decarbonized logistics
Promoting joint delivery and modal shifts

Integration of production lines and factories to improve energy
efficiency
Implementation of carbon offset by credit, tree-planting andblue-carbon offsetting
Achieve 100% renewable energy

Sales decrease
for shifting
consumer
behavior

Reducing packaging materials and eliminating
plastics
Assessing and obtaining certification
Expansion of best before date to reduce food losses

Actively participating in the initiative
Obtaining sustainability certification and establishing voluntary
certification system

Harvest change
due to rise intemperature

Diversification of farming areas for potato andother raw materials
Promotion of field storage management
systemDevelopment of varieties resilient to climatechange and environmental change
Product development using materials otherthan potato

Utilization of development tools of and collaboration withresearch institutions, etc. to mitigate risks
Promotion of consortia and initiatives in Japan and participate
in working groups to consider countermeasures
Lobbying to deregulations on agriculture
Diversification of product portfolio and raw materials
Storage of carbon in soil, innovation in cultivation methods
and enhancement of variety cultivation
Strengthening BCP with alignment among production andlogistics sites globally

Change inprecipitation
Increase in
extreme weather
eventsIn the marine
environment
Change3-155

Copyright © Calbee, Inc. All rights reserved.

Food
Practice Example
Practice Example
Practice Example

Kagome CO.,LTD.
Calbee, Inc.
Meiji Holdings Co., Ltd.

3-156

TCFD scenarios (summary)
Themes to be analyzed

Scenario setting at 2°C and 4°C

Dairy
ingredients

Infectious
diseases

Milk,
Yogurt, etc.

Antimicrobials

Basic year of dairy
ingredientsin 2030

Vaccines

Important risk items

4°C scenario

2°C scenario

Source: AR5 SYR (image) SPM.6

Dairy ingredients

Infectious diseases

Changes in rainfall and temperature patterns

Increase in the
average temperature

Container and packaging recycling

Increasing frequency of
extreme weather events

Changes in consumer behavior

3-157

Basic year of
infectious diseases
in 2050

Introduction ofa carbon tax

Rising sea level
Important products/
Changes in product prices

For internal
use onlyRisk assessment for dairy ingredients
Risk Item
Small classification

Index

Business impact
Discussion
Decrease in production of raw milk. Measures to cope with heat (feeding management, cattle barn environment) are
required, and the cost of procuring raw materials is increasing.
Increased interest in environmentally conscious consumption (ethical consumption) and increased costs associated withconscious procurement of raw materials.

Assessment

Increase in the average temperature

Expenditures andrevenues

Changes in rainfall and temperaturepatterns

Expenditures andrevenues

Increasing frequency of extreme
weather events(typhoons, floods, etc.)

Expenditures, revenues,of manufacturing bases and distribution routes. Cost increase for recovery. Yields of biological resources may decrease
and assets

Carbon price

Expenditures

Increased production and transportation costs due to the introduction of a carbon tax, and higher production costs due tohigher fossil fuel-derived electricity prices, as well as higher operating costs for data centers, etc.

Container and packaging recycling

Revenues andexpenditures

Costs incurred for raw materials, such as the use of environmentally friendly raw materials (certified paper, biomass
plastics, etc.) and the introduction of recyclable raw materials.

Changes in consumer behavior

Revenues

Consumers are increasingly interested in the use of natural materials, recycling of packaging materials, and CO
emissions, and they are increasingly purchasing products from companies that are proactive in addressing climate change(increased ethical consumption).

Risks associated with changes in rainfall and temperature patterns (e.g., deterioration of water quality, drought) increase.
Costs of securing adequate water will increase.
Natural disasters (e.g. heavy rain, floods, droughts) have resulted in suspension of operations or suspension of distribution
and procurement costs may increase due to higher feed costs.

Changes in Important Products/Prices Expenditures and assets Rising operational costs and the threat of collapse of the entire value chain.

Food loss

Expenditures and assets

Increased procurement costs due to stricter regulations on the disposal of milk and GHG emissions, and higher equipment
costs due to the introduction of cooling facilities.

Dairy ingredients emit large amounts of GHG in the process. The unit price of raw milk rises if it becomes regulated in
Carbon emissions targets/policies in
Expenditures and assets
each country
each country.
Soil degradation

Expenditures andrevenues

Energy-saving policy

Expenditures and assets

Rising sea level

Revenues, assets andexpenditures

Changes in the investor's reputation

Revenues and assets

Dairy farms are subject to tighter regulations, which may increase the cost of operating equipment and restrict businessexpansion, thereby affecting raw material availability and procurement costs.
Expenses for changing manufacturing processes, procuring alternative materials, and installing energy-saving equipment
and highly efficient equipment increased.
Water disasters such as floods and a sudden increase in droughts have an impact on production, such as the shutdown ofplants located in coastal areas vulnerable to disasters and areas with low sea levels.
Investors' increased interest in climate change and other environmental issues and sustainability, and inadequate
countermeasures, will adversely affect PL/BS and reputation of investors.

For internal
use only

3-158

Risk Assessment in Infectious Diseases

Risk Item
Small classification
Rising sea level

Business impact
Index

Discussion (Example)

Revenue
Assets andexpenditures

Influence from floods, etc., that shut down the operations of plants located in coastal and other areas.
Also affects the reproduction of infectious agents and changes the supply and demand of products.

Increase in the averagetemperature

Revenue

The frequency, spread timing and area of infectious diseases may change, and demand for eachproduct may fluctuate significantly.

Increasing frequency of
extreme weather events(heat waves, typhoons,floods, etc.)

Revenue
Assets andexpenditures

Frequent heavy guerrilla rains, typhoons, etc., cause major damage to inventories and facilities,
resulting in an increase in facility restoration costs, etc.

Changes in important
products/prices

Expenditures
and assets

Product prices fluctuate due to the risk of sharp rises in raw material prices and decreases in theamount that can be secured.

Carbon price

Expenditures
and assets

The introduction of a carbon tax will impose taxes on transportation fuel for raw materials andcommodities and increase transport costs.
Production costs at plants in countries with high carbon taxes also increased.

Carbon emissions
targets/policies in eachcountry

Expenditures
and assets

New technologies and equipment installation costs are incurred due to the tightening of regulations oncarbon emission policies in each country.

Investments in low carbon
technology

Expenditures
and assets

Capital expenditures in the entire value chain, including raw material procurement and transportation,
were incurred in order to transition to low-carbon technologies.

Investment in temperatureadjustment equipment

Expenditures
and assets

Additional temperature control equipment is required for product processing and transportation,
resulting in an increase in equipment costs.

Changes in the investor's
reputation

Revenue

There is growing interest in sustainability, so investors reputation will deteriorate if insufficientmeasures are taken.

3-159

Assessment

For internal
use onlyForecasts of various factors in the base year
Dairy ingredients (food)

Infectious diseases (pharmaceuticals)

2030

2050

At present

Carbon price

Carbon tax-

4°C world

2°C world

4°C world

EU $23 per tonne
China $23 per tonne
Japan not yet introduced$100 per tonne

Japan and Europe
China $75/ton

Source2°C world
Japan and Europe

China $29/ton
Japan not yet introduced$191 per tonne

IEA WEO 2018

China $180 per tonne

Recyclingof containers
and packaging

Recycled plastics
Utilization rate

Not introduced

Not introduced

30%

-

-

EU government

Changein customer
behavior

Rate of decline in sales
due to failure to comply withsustainability certification-

Down 2%

Down 3%--

Private research firm

Changes inrainfall andweatherpatterns

Rate of increasein the frequency of floods

1 times

Japan 1.5 times
China 2.1 times

No change

Japan 1.5 times
China 2.1 times
Indonesia 2.9 times
India 5.8 times
Spain 1.1 times

No change-

Up 4.02%

No increase--

Mosquito-borne infectious
diseasesPopulation at Risk (Asia)

Approx. 3.82 billion--

Approx. 4.36 billion

Approx. 3.86 billion

Academic literature

Number of outbreaks ofwaterborne infections(diagnostics) (Asia)

Approx. 2.53 billion--

Approx. 2.92 billion

Approx. 2.72 billion

Academic literature

Magnitude of sea level rise

-

-

-

0.25m

0.2m

Increase ratio of cost for
operating the barn
Increase in the
averagetemperature

Rising sea level

AQUADUCTUSDA(U.S. government agency)

Ministry of theEnvironment and Japan
Meteorological Agency
ReportInternational Energy Agency: An advisory body to 29 member countries to provide reliable, affordable and clean energy to their citizens.
AQUEDUCT (in the Japanese language, "pipelines and pipelines"): A tool that provides free global maps and other information about the latest water risks released by the World
Resources Laboratory (WRI)
USDA(United States Department of Agriculture): Government Offices governing U.S. agricultural policies

For internal
use only

3-160

Conceptual diagram: 4°C scenario
While low carbon/decarbonization is not promoted (business as usual) and the physical riskincreases, the possibility of the market expansion of infectious diseases is considered.
Dairy ingredients (food)

Infectious diseases (pharmaceuticals)

Productivity decline in dairy cows
due to heat stress
Cost increase for air-conditioning
and other measures

Increased risk of mosquito-borne
infectious diseases
Diarrhea due to water contamination(enteritis, cholera, etc.)

Increase in facility operation andtransportation costs due to natural
disasters

Support for dairy farmers due to declining production of raw milk
Support for countermeasures against physical risks such as
water stress and natural disasters
Government

Environmental pollution
Effects of foodshortages

Government

Increase in facility operationand transportation costs due
to natural disasters

Collaboration with Asian countries based on
Industry-Government-Academia collaboration
Support for countermeasures against physicalrisks such as natural disasters

Possibility of plant
shutdown
due to natural disasters

Establishingproduction bases andreinforcing
production systems

Influence on plant operations
in areas of high water stress3-161

For internal
use only

Conceptual Diagram: 2°C scenario
Measures to reduce carbon emissions will be promoted, and investors and customers will be more interested inenvironmental issues.
While various cost increases may occur, there is a possibility that the customer's ethical orientation will increase.
Dairy ingredients (food)

Increase in manufacturing costs fromthe introduction of a carbon tax

Infectious diseases (pharmaceuticals)
Increasing interest in environmental issues related to climate change
Corporate environmental initiatives become the axis of corporate investment
Increasing the number of customers purchasing sustainable products
Investors and customers

Increased risk of mosquito-borne
infectious diseases
Diarrhea due to watercontamination (enteritis, cholera,etc.)

Promoting carbon taxes and emissions trading for further carbon reduction
Promoting the regulation of chemical-based plastics and the utilization ofrecycled plastics
Implementation of policies related to recycled plastics
Promotion of low-carbon livestock production as a government policy

Environmental pollution
Effects of food shortages

Government
Possibility of plant shutdown
due to natural disasters

Increase in transportation costs due tointroduction of a carbon tax
Increase in manufacturing andprocurement costs by promoting the useof recycled materials

Establishing production
bases and reinforcing
production systems

Increase in production
costs due to introductionof a carbon tax

For internal
use only

3-162

Important risk items and evaluation of business
impacts on dairy ingredients
Risk item

Expected business impact

Changes in average temperature

Nurturing cows by preventing hot weather(feeding management, cattle barn
environment)

Impact value
Increased cost of raw milk, dairy raw
materials

42

XX billion USD
No impact

Increased demand for products to prevent thirst
due to temperature increase, and increased
heatstroke due to temperature increase

Increased demand for products forprevention of thirst and heatstroke-

Need to improve quality of water inmanufacturing and rearing due to water quality
deterioration*not in 2030

Increased cost due to water risk responses-

Decreased opportunity because of stopped
supply chain

4
2

XX billion USD
XX billion USD

Increased cost due to a carbon tax

42

XX billion USD(only in China)
XX billion USD

Increase in the price of cattle feed ingredients
due to a decrease in crop yield

Changes in precipitation patterns

Increase in the unit price for water supply inanimal-rearing areas due to drought
Frequency of extreme weather events(typhoons, floods, etc.)

Lost opportunities due to suspension of
production and logistics
Restoration of damaged facilities for
production and logistics due to flood

Carbon priceIntroduced a carbon tax in manufacturing sites(plants)
Introduced a carbon tax in logistics

Recycling of packages

Introducing recycled plastics due to plastics
ban

Increased cost due to replacement withrecycled plastics

42

No plastics ban
XX billion USD

Changes in customer behaviors

Growing environmental consciousness(reduction of environmental burden
environmentally-friendly) due to increased
frequency of extreme weather andenvironmental regulation (such as CO2 andplastics).

Increased ethical consumption

4
2

XX billion USD
XX billion USD

3-163

For internal
use only

Profit simulation in Dairy Ingredients by Scenario

Simulation under the 4°C Scenario

Simulation under the 2°C Scenario

Cost increase

Cost increase2030
expected
profits

ImpactRaw milk
Dairy ingredients offlood
Cost increase

Impact ofa carbon tax

Cost of using Not responding
recycled plastic to ethicalconsumption

4°C scenario
Profits2030
expected
profits

ImpactRaw milk
Dairy ingredients ofCost increase flood

Impact ofa carbon tax

Cost of usingNot responding to
ethicalrecycled plastic
consumption

2°C scenario
Profits

For internal
use only

3-164

Outline of measures to deal with business risks
and opportunities in dairy ingredients
Existing Initiatives
Seize
opportunities

Expansion of
ethicalconsumption
Expansion ofdemand for
responding totemperature
increases,
etc.

Risk
mitigation

Raw material
price increase

Requirements for anti-thirst and heat stroke
countermeasures are increasing. In response tothese needs, products for anti-thirst drinks and heatstroke countermeasures are launched
Shift to environmentally conscious raw materials
FSC-certified paper and recycled paper:
FY2018 Result 55.3%
Certified palm oil:
FY2019 Plan Use approx. 10%

Reduction in plastic consumption due to thinning,etc.
Introduce solar power facilities for renewableenergyPlastic
regulations
Increasedwater risk
Introductionof a carbon
tax

3-165

Future Initiatives
Examination of products that meet the possibility of
expanding demand for products with minimal
environmental impact
Considering expansion of anti-thirst and anti-heatstroke products
Aggressive use of environmentally friendly raw
materials in response to heightened environmental
awareness due to extreme weather and various
regulations

Significant reduction in plastic consumption due tothinner-walled plastics and shift to paper, andreplacement with recycled plastics.
Considering the use of raw materials with minimal
logistics impact
Efficiency of water consumption in production andflood countermeasures
Further promotion of energy conservation and shift
to renewable energy
Considering support for heat countermeasures tomaintain milk production for dairy farmers

Completion drawing (image) the solar facilities of Meiji Co., Ltd.
Kyushu Plant

For internal
use only

Infectious diseases particularly affected bytemperature increases
The vaccine for Japanese encephalitis and dengue fever, and antimicrobials
for diarrhea (cholera, etc.) are assumed to be affected by temperature rise.
Various infectious diseases and routes
Routes oftransmission

Vectors/
VehiclesInfection

Bite
Feces

RabiesToxoplasmosis, Ascaris

Mosquito
Tick
Rodens
Flea
SnailsJapanese encephalitis, malaria, dengue fever, West Nile
fever, and Rift Valley fever
Tick-borne Encephalitis
Hantavirus Pulmonary Syndrome
PlagueSchistosomiasis japonica

Water/
Soil-borne

Water
Soil
contamination

Diarrhea (cholera, etc.)
Anthrax

Food (animal
derived) borne

Meat
Fish meat

Enterohemorragic E. coli O157 infection, salmonellosis
Anisakiasis

Directtransmission
Indirecttransmission

Vector-borne

Infectious
Diseasesassumed to be
impacted by
global warming

Source: What is known about global warming and infectious
diseases today? (Ministry of the Environment)

For internal
use only

3-166

Relationship with Global Warming in Infectious
Diseases
It has been suggested that the risk of infectious diseases is generally
increased by global warming.
Climate change affects rainfall volumes and patterns

Climate change raises temperature
Raises the highest temperatures in summer

Raises the lowest temperature in winterIncrease rainfall volumes during a specific period

Expansion of living areas where

Mosquitoes that had been dead during the winter the number of mosquitos andlive over the winterthe number of natural hosts increase

Increase the number of mosquitos andthe number of natural hosts

Agents intrude into
the body

Existenceof vector
And natural
host

Number of agents and opportunities
Vector (mosquitoes, etc.)that penetrate the human body Natural hosts (mice, livestock, etc.)

Changes in human clothing and living environments(Increase in short-sleeve and field activities, etc.)

Social environment
where agents caneasily intrude

Building patterns,
economic activities,
cultural lifestyles, andother environments thatfacilitate contact with
vectors and natural hosts

Human health

Nutritional and hygiene conditions
that are easily affected

Climate change has also been reported to increase diarrhea by 3%, malaria by 5%, and malnutrition by 10%, assuming thatthe risk of infections other than Japanese encephalitis, dengue fever, and diarrhea has also increased.
Source: What is known about global warming and infectious diseases today? (Ministry of the Environment)

3-167

For internal
use only

Population growth rate at risk due to increased temperature ofmosquito-borne infectious diseases (4°C scenario)
The population at risk for mosquito-borne infections
is predominantly in Asia.
Market size: Population at risk for mosquito-borne infectious diseases (100 millions of people)
Pharma sales bases (subsidiaries)

No pharma sales base (subsidiary)

EuropeNorth America

315%

114%

119%

Asia
South America

Africa and the Middle East

117%

111%

Source: Prepared by Deloitte based on the 4°C scenarios of Ryan SJ and others
Global expansion and redistribution of Aedes-borne virus transmission risk with climate change

For internal
use only

3-168

Increasing rate due to number of diarrhea andtemperature increases (4°C scenario)
The number and increase rate of diarrhea are high in Asia and Africa.
Market size: Number of diarrhea occurring (100 millions of incidents)
Pharma sales bases (subsidiaries)

No Pharma sales bases (subsidiaries)

EuropeNorth America

100%
115%

100%

Asia
Africa and the Middle East

South America

103%
101%

Source: Adaptation costs for climate change-related cases
Deloitte Ltd. from of diarrhoeal disease, malnutrition, and malaria in 2030 (2008) 4°C scenarios

3-169

For internal
use onlyImportant risk items and evaluation of business
impacts on Infectious Diseases
Risk item

Expected business impact

Impact value

Changes in averagetemperature

Increased risk for Mosquito-borne
infection

Increased demand for vaccine
and antimicrobials

42

XX billion USD
XX billion USD

Decreased opportunity becauseof stopped supply chain

4
2

XX billion USD
XX billion USD

Increased cost due to a carbon
tax

4
XX billion USD (only in
China)
2
XX billion USD

Increase cost due to cancelled
manufacturing

4
Assume no damage due torising sea level
2
Assume no damage due torising sea level

Increased cases of diarrhea
Frequency of extreme
weather events (typhoons,floods, etc.)

Lost opportunities due tosuspension of production andlogistics
Restoration of damaged facilities for
production and logistics due toflood

Carbon priceIntroduced a carbon tax inmanufacturing bases (plants)
Introduced a carbon tax in logistics

Rising sea level

Increased flood damage due to thesea level rise

For internal
use only

3-170

Profit simulation in Infectious diseases by Scenario

Simulation under the 2°C Scenario

Simulation under the 4°C Scenario
Cost
increase

2050
expected
profits

3-171

Impact ofa carbon tax

Impact offloodsCost
increase

Profitincrease

Demandfor vaccines

Demand for
antimicrobials

Scenarioprofits

Impact of2050
expected a carbon tax
profits

Impact offloodsProfitincrease

Demandfor vaccines

Demand for
antimicrobials

Scenarioprofits

For internal
use onlyOutline of Business Risks and Opportunities for
Infectious Diseases

Seize
opportunities

Growingdemand for
infectious
diseasedrugs andvaccines

Risk
mitigation

Increasedwater risk
Introductionof a carbon
tax

Existing Initiatives

Future Initiatives

Increase in sales volume of products due tothe expansion of infectious diseases

Strengthen business development in Asian
countries with subsidiaries as bases.

Upgrading of production bases in Asian
countries
Reinforcement of product lineup

Strengthening of stable procurement system
Building a Production System to Ensure
Stable Supply
Periodic maintenance of equipment
Energy conservation promotion
Ensuring the safety of plant employees
Proper management of equipment using
fluorocarbons

Contributing to the Asian market throughindustry-government-academia-medical
collaboration

Implement measures to increase the efficiency ofwater consumption in production and to prevent
plant shutdowns due to natural disasters
Promotion of energy conservation and shift torenewable energy
Reinforcement of management for chemical
resistance in factory wastewater
Appropriate management of plant waste and totalmaterial input
Reduction of plastic consumption by considering
use of thinner-walled and biodegradable plastics

For internal
use only

3-172

Other Sector

3-173

Practice Example

KYOCERA Corporation(Electronic Equipment)

Practice Example

Seven & i Holdings Co., Ltd.
(Retailing)

Practice Example

Lion Corporation(Consumer Products)

Step

2

3

4

5

Scenario

4

2

Assessing the impact of climate change on the energy sector
Analyzed mainly in the energy field of the Kyocera Group
Item

Technological
Development

Transition
Risk(Policy
Risk)

PhysicalRisk(NaturalDisaster
Risk)

Response todecarbonized society

Major Impact

Assessment

Developments in VPP technologies (e.g., power generation forecasting technologies,
power generation stabilization technologies), power generation and storage efficiencies,
high-volume storage batteries production technologies, environmentally friendly
technologies to introduce renewable energy (e.g., offshore and water-based
photovoltaics), and alternative energies (e.g., hydrogen technologies) can have asignificant impact on decarbonized society and sales.

Large

Carbon emissions targets
National targets/energy policies have a major impact on societal decarbonisation andfor each country
sales.
/Energy policy
Carbon tax

When a carbon tax is introduced, manufacturing costs increase.

Large

MediumRecycling regulations

When recycling regulations are introduced, businesses may bear the recycling fee, which
Mediumaffects sales.

Increasing severity of
extreme weather
conditions

Natural disasters cause costs such as shutdowns, production declines, and equipment
restoration.
Costs for natural disaster countermeasures and insurance premiums increase.

Medium

VPP (Virtual Power Plant): Technologies that can be used to balance power supply and demand by combining
distributed energy resources possessed by factories, households, etc., and then controlling these resources remotely
and in an integrated fashion.
3-174

Assumptions for Scenario Analysis

Step

2

3

4

5

Scenario4

To keep temperature increases below 2°C

Temperature increases can be limited to less than 2
by increasing the proportion of non-fossil fuels in the world
Unit: 1 trillion
kilowatts

About
80%

Source: OECD/IEA, IRENA

Scenario analysis case

2°C Scenario: The Future of Decarbonized society
4°C Scenario: A Current Extended Future
3-175

Scenario analysis is conductedwith 2030 as the target year.

2Assumptions for Scenario Analysis

Stepgeneration(yen/kWh)NaturalDisaster

Increasing
severity
in extreme
weather
conditions

Other

3

4

Scenari
Scenario
o

5

2030

At present
FIT's purchase price(yen/kWh)
Renewable
Economic energy, etc.
Efficiency Subsidies
Unit price of
Policyrenewable energy

2

4

2

Source4°C world

2°C world

Solar: 14 (bidding system)
Wind: 19-36 (2019)(Assumed to havedifficulty in become selfreliant from FIT at 4°C)

Solar: 7 (2025)
Wind: 8-9

Agency for Natural Resources
and Energy

Solar: 21.8
Land wind: 21.5
(2017)

Solar: 13.5
Land wind: 20.6

Solar: 12.4
Land wind: 20.6

IEA WEO2017 (450 scenarios)

Frequency of floods

1 times

3 times

1.7 times

Technical Review Committee
on Flood Control Plans Basedon Climate Change"Recommendations on Water
Control Plans Based on
Climate Change"

Battery cost
(USD/kWh)280 (2015)(business as usual)150 (0.54 times)

Estimated from IEA ETP 20172014 Advanced Battery Societyof Europe Target Value

Demand for solar
power
Amount of electricity(TWh)

190 (2014)

1,402 (7.38 times)

1,757 (9.25 times)

Estimated from IEA ETP 20172014 Advanced Battery Societyof Europe Target Value

Demand forbatteries
Reserves of power(GW)

159 (2015)
EV application 98.8%

219 (1.38 times)

172 (1.08 times)
EV application: 99.8%

Estimated from IEA ETP 2017

Demand response
capacity (GW)

11 (2015)

25 (2.3 times)

39 (3.5 times)

Estimated from IEA ETP 2017

3-176

The 2°C World: Shift toward decarbonized society

Step

2

3

4

5

Scenario

4

2

Governments
Support System for Introduction of Renewable energy
Introduction of A Carbon Tax and Recycling Regulations
Renewable Energy Introduction
Support System

Introduction ofrenewable energy
support system

Introduction ofrenewable energy
support system

Electric power companies
Nuclear power plant resumption and renewable energy introduction ratio increased
Collaboration

Supplying electricity with low CO2 emission factors
Society and customers

Photovoltaic power generation, storage batteries, and fuel cell industries
Suppliers

KyoceraIncrease in carbon
tax payments

Improve the environment for
introducing renewable energy byadvancing technological development

Physical risks
emerge in someareas

VPP-related technology
Improve power generation and storage
efficiency

VPP Business
Popularization ofalternative energy(hydrogen)

Decarbonization in thesociety advances with policy
support and renewableenergy technologies
Increase in carbon tax
payments
Physical risks materialize

Environmentally friendly renewableenergy introduction technology
Technology for mass production ofrechargeable batteries

To expandsales

Alternative energy development(hydrogen, etc.), etc.
Reinforcement of in-house renewableenergy and energy conservation measures
Increase in carbon tax payments
Physical risks materialize
Increase in recycling costs
3-177

Competition

Newcomer
New VPP operators
New high-efficiency energy companies

The 2°C World: Shift toward decarbonized society
Power consumption increased due to the spread of
IoT technology.

Urban area

Damage from natural
disasters (less than 4°C)

Decarbonization proceeds due to policy support
and advances in renewable energy technologies

2

Step

4

4

2

Electric power companies

Low CO2emission factor
supply ofelectricity

VPP operators

Scenario

Renewable Energy
Introduction Support
SystemGrid integration

Photovoltaic power generation,
storage batteries, and fuel cell industries

5

Governments

City

Corporate buildings and factories

Providing renewable energy

3

Increase inratio ofrenewableenergy use

Resumption of operationsat nuclear power plants

Improve the environment for introducing renewable energy byadvancing technological development
Examples of Technology Development
VPP-related technology
Power generation and storage efficiency improvement technology
Environmentally friendly technologies for introducing renewable energy (offshore, water-based solar
power generation, etc.)
Storage battery mass production technology
Alternative energy technology (hydrogen), etc.

Collaboration

Plant shut down due totyphoons and other extreme
weather conditions(estimated impacts would beless significant than 4°C)

CO2
CO2

Sea

3-178

The 4°C World: Current Extension

2

Step

3

4

5

Scenario

4

Governments
Policies will remain unchanged
A carbon tax will not be introduced

Electric power companies
Generation continues using fossil fuels and CO2 emission factor of electricity does not decrease
Energy prices of fossil fuels fluctuate depending on social conditions in oil-producing countries.
Supplying electricity with higher CO2 emission factors
Photovoltaic power generation, storage batteries, and fuel cell industries
Suppliers
Increase in costs
for responding tochanges in energy
pricesPhysical risksmaterialize

Society and customers

KyoceraTechnology development for the introductionof renewable energy has been delayed, andthe spread of renewable energy in the market
has not progressed
No progress
VPP-related technology
Technologies for Improving the Efficiency of Power
Generation and Storage
Environmentally friendly renewable energy
introduction technology

inpenetrationofrenewableenergyDecarbonization fails to evolve due
to weak policy support and fewer
renewable energy technology
options
Physical risks materialize
Increase in costs for responding tochanges in energy prices

Technology for mass production of rechargeable
batteries
Alternative energy technologies, etc.

Reinforcement of in-house renewable energy andenergy conservation measures
Physical risks materialize
Increase in costs for responding to changes inenergy prices

3-179

In many companies,
most businesses are stagnant andthey would be in crisis.
Don't make it the 4°C world2The 4°C World: Current Extension

Step

2

3

4

City

Urban area

Society's decarbonization does notadvance

CO2

Supply ofelectricity
with higher
CO2 emission
factors

CO2

Scenario

4

2

4

2

Governments

Policies to be
maintained at thecurrent level
A carbon tax not
introduced

Corporate buildings and factories

Photovoltaic power generation, storage batteries, and fuel cellindustries

5

CO2

Electric power companies
CO2
Power generation from fossil fuelscontinues
Energy costs for fossil fuels fluctuate
depending on social conditions.

Due to a delay in technological development related tothe introduction of renewable energy, the spread ofrenewable energy into the market is not advancing

Plant shutdown due tosevere natural disasters

Examples of Technology Development
VPP-related technology
Power generation and storage efficiency improvement technology
Environmentally friendly technologies for introducing renewable energy (offshore, water-basedsolar power generation, etc.)
Storage battery mass production technology
Alternative energy technology (hydrogen), etc.

Sea

Most businesses in many companies are stagnant or their survival is at risk.
Don't make it the 4°C world

3-180

Evaluate business impacts

Step

2

3

4

5

Scenario

Carbon tax

2°C scenario

4°C scenario
RecyclingCompliancewithregulations

Measuresfor Nature
Disasters

EnergyIncrease inprofit fromsolutionsbusiness

Most businesses in many companies
are stagnant or their survival is at risk.
Don't make it the 4°C world

BAU
Profitincrease

BAU
Profitincrease
UltimatebenefitCurrent
situation
ProfitLead to the decarbonization ofsociety

Energy Carbon Compliancewith
Increase in tax
recycling Measures
profit fromforregulations
solutions
NaturalDisasters
business

Current
situation
ProfitBAU: Business As Usual1.

echnical issues related to the introduction of renewableenergy2. Economic challenges for renewable energy introduction
Attempt to solve these problems

3-181

UltimatebenefitCountermeasure 1: Solving Technical Challenges

2

Step

3

4

5

Scenario

4

2

Technical Challenges for
VPP
Power generation
forecasting technology

VPP
Hypothetical
Power plant

Power stabilization
technology to connect tothe power system
Capacity improvement ofstorage batteries toachieve power stabilization,
etc.

Rapid diffusion of distributed resources

3-182

Source: Ministry of Economy, Trade and Industries Agency for
Natural Resources and Energy

Solve technical issues related to VPP and increase the rate ofrenewable energy use

Countermeasure 2: Solving Economic Issues and Future
Energy Utilization

2

Step

3

4

5

Scenario

Optimization of intra-regional energy(local production for local consumption)

Power supply by photovoltaic power generationon the roof (Private consumption)

2033
Mega After FIT
Housing use
electricity services

Industrial use
electricity services

Kyocera Kanden
EnergyKyocera EPA

Business
entityLong-term reliability/
High-temperature, highmoisture resistant solar

Electricity
services

Housing withphotovoltaic power generation/industry

New mega

V2H

Fuel cell

Fuel cell

Storage batteries Storage batteries
SurplusElectricity

Electricity
services

Energy-related services

Industrial use
photovoltaic power
generation
RE100

Launched a service that enables theintroduction of photovoltaic power
generation without initial investment
3-183

VPP control

Business
entityPrivate consumption

Housingwith photovoltaic
power generation

Storage batteries Existing mega

Public facilities

Promote regional energy optimization
by resolving technological andeconomic issues

42

Future: Building a Regional Energy Service Base

Step

2

3

5

4

Scenario

Local production andlocal consumption of energy
Automated EVs in 5G Era

ZEH

ZEB

Autonomous distributed
energy system
People-friendly andattractive mobile
systemRegional baseenergy services

Emergency assistancepower supply

Safe and secureenergy system even intimes of disasterP2P electricity transaction
Introduction ofcommunity EV
Mobility means that are friendly
to the elderly and the childrearing generation

3-184

Environment-friendly
lifestyle

To create diverse
businesses

Build regional energy service infrastructure
by linking many services

Other Sector

3-185

Practice Example

KYOCERA Corporation(Electronic Equipment)

Practice Example

Seven & i Holdings Co., Ltd.
(Retailing)

Practice Example

Lion Corporation(Consumer Products)

42

Scope of this analysis
The scope of consideration is Seven-Eleven Japan, which accounts for 60%
of consolidated operating income
Seven & i Holdings Co., Ltd.
Consolidated Operating Income
JPY411.5 billion

Corporate Profile: Seven-Eleven Japan(as of February 28, 2019)

Fiscal year ended in February, 2019

Seven-ElevenJapan
JPY245 billion
60%

Revenue fromoperations

Net Income

873,555 millions yen

153,233 millions yen

Operating Income

Total Store Sale inJapan

245,088 millions yen

4,898,872 millions yen

Ordinary Income

Number of Stores inJapan

252,917 millions yen

21,005 (as of July 31, 2019)

3-186

Assess materiality of climate-related risks and opportunities
Risks and opportunities at Seven-Eleven Japan are extracted from the items
listed in TCFD based on external views
Risks and Opportunities
in Seven Eleven Japan

Risks and Opportunities in TCFDClassifi
cation

TCFD Risks/Opportunities*

Carbon price

Energy-saving policy

Renewable energy subsidy policy
Changes in the energy mix
Industry/
MarketTechnologies

Energy Demand
Changes in important
products/prices
Spread of low-carbon
technologies
Dissemination of renewableenergy and energy-saving
technologies
Developing next-generation
technologies
Customer reputation change

Reputation

3-187

Changes in the investor's
reputation

Acute

Chronic

Increasing severity of
extreme weather conditions
Increase in the averagetemperature
Changes in rainfall andweather patterns
Rising sea level

External Views(Examples)
SASB
EBRD
Retail Industry Leaders
CDP

Classifi
cationPhysical risks andopportunities

Transition risks and opportunities

Fossil fuel subsidies

TCFD Risks/Opportunities

Transition risks and opportunities

Policies/
Regulation

Physical risks andopportunities

Carbon Emissions
Targets/Policies in Each Country

Clas
sific
ation

TCFD Risks/Opportunities
Carbon price
Policies/
Regulation

Technologies

Carbon Emissions
Targets/Policies in EachCountry
Efficiency of resources throughthe introduction of technology
Customer reputation change

Reputation

Changes in the investor's
reputation
Acute

Increasing severity of extreme
weather conditions
Changes in rainfall andweather patterns

Chronic

Rising sea level

Assess materiality of climate-related risks and opportunities
Assess the significance of risk and opportunity for Seven-Eleven Japan(Qualitatively)

Significance
level

Large

Significancelevel

MediumSmall

Significance
level

Small

[Transition risks and opportunities]
Carbon prices
National carbon* emissions targets and policies
Changing consumer reputation[Physical risks and opportunities]
Severity of extreme weather (acute)
Changes in precipitation and weather patterns (chronic)[Transition risks and opportunities]
Efficiency of resources through the introduction of technology[Physical risks and opportunities]
Rising sea level[Transition risks and opportunities]
Changes in investor's reputation

3-188

Identify and define range of scenarios
Consideration of 2030 society based on representative scientific scenarios 2°C
scenario and 4°C scenario
Multiple different forecasts are used, because accurate forecasts are almost impossible.
[Global Average Terrestrial Temperature Change (Difference from the 1986-2005 Average)](*)

4°C scenario

2030

2°C scenario

2030
3-189

Source: AR5 SYR chart, SPM. 6 IEA.

A world that continues
the current measuresagainst climate change.
Increased by 3.2-5.4
compared to preindustrial revolution

A world that adopts
strict climate change
countermeasures.
Increased by 0.92.3 compared topre-industrial
revolution

Definitions of worldview
Define a worldview based on scientific grounds such as IEA
Important items(Items of highsignificance)

Assumed parameter

Carbon price
Carbon prices,
national carbon
emissions targets
and policies

No introduction*

Target for GHG emissions

Diffusion of EV

Increasing severityof extreme weather Frequent heavy rains
conditions$100 per t-CO2

IEA

168 Million t-CO2$209/MWh

Ministry of the Environment$231/MWh

IEA

296.7 billion USD

Nielsen, etc.

Percentage of vehicles Percentage of vehicles
Percentage of
owned
owned
vehicles owned
0.3%
5%
39%
High uncertainty(frequency may decrease or remainunchanged; severity may increase)
2.5 days ofoccurrence

3.0 days of occurrence

2.5 days ofoccurrence

3.6 billion USD/ years

8 billion USD/ years

Not adopted at 2

Changes in rice (prime rice)
yields(Base year: 2012)

7% decrease

Increase in hot weather days

(Base year: 2019)+0.3 days per year

Increase in the amount ofelectricity used for airconditioning(Base year: 2016)

1.7 times

Flood damage

3-190

Not adopted at 4 C

128.5 billion USD

Frequency of typhoons andcyclones

Changes in rainfall
and weather
patterns2$216/MWh

Sales of sustainable
certification products

Source (excerpt)

4207.5 Million t-CO2

Electricity price

Changing
consumer
reputation

2030

At present

5% decrease

Next Generation Vehicle
Promotion Center
Japan Meteorological
Agency and the Ministry of
the Environment
Ministry of the EnvironmentC

WRI
Mitsubishi UFJ Researchand Consulting+0.05 days per year Ministry of the Environment
1.6 times

IEA

Identify and define range of scenarios (2°C, 2030)
Seven-Eleven Japan in 2°C scenario
Regulation are tightened, low and decarbonizing are advancing, and the transition risks are
increasing.
Introduction of a carbon tax and active promotion of energy-saving andrenewable energy policies
Companies are required to drastically reduce their CO2 emissions.

PolicyProcurement

Manufacture

Product planning and development

Increased temperatureadversely affects
growthGreat interest in
sustainable products

Developing low-carbon
products and services
Adoption of certified
products

Taxation on CO2 emissions and rising
electricity prices throughout the supply chain

Price increase

Logistics

Raw material priceincreases arelimited

Reducing plastic, reducing
packaging materials, andusing environmentallyconscious packaging
materials

Slight increase inlogistics delays anddisruptions

Eco-friendly
logistics

Marketing and sales
Effects of heavy
rain

3-191

Rivers and coastal areas

Expansion of
EV Charging
ServiceExpansion of the useof storage batteries
through the spreadof renewable energy

DisposalFluorocarbon-free
air-conditioning
and refrigeration
systems

Low-Carbon storesthrough energy
conservation inbuildings

Green Energy

Reduction of
the use ofplastics

Great interest in
sustainable products

Consumer

Reduction of carbon emissions atstores through energy
conservation in buildings

Identify and define range of scenarios (4°C, 2030)
Seven-Eleven Japan in 4°C scenario
Increase physical risks such as extreme weather
Energy-saving and renewable energy policies are not actively promoted(carbon tax not introduced)

PolicyProduct planning anddevelopment

Procurement
Increased temperatureadversely affects crop
growthManufacture

Cost increase

Interest in emergency
supplies and stockpiles
in addition tosustainable products

Logistics
Increase in logistics delays
and disruptions

Rising pricesof rawmaterials

CO2
CO2

DisposalMarketing and sales
Flood damage caused byheavy rain
Suspension ofoperations

Possibility ofa shortage ofmerchandise

CO2

ConsumerRivers and coastal areas

3-192

Expansion of role ofstorage batteries as
BCP countermeasures

Progress in BCP
measures atstoresInterest in emergency
supplies and stockpiles in
addition to sustainableproducts

Flood damage
caused by heavy
rain

Evaluate business impacts (2°C, 2030)*

We have picked up specific examples of risks and opportunities which wereassessed as significant and estimated their impact (based on business as
usual) .
Business impact of 2°C(100 millions
yen)

Positivefactors

Negativefactors
OperatingincomeCarbonprice

Electricity
expenses

Sales ofsustainableproducts

Transition risk

EV
Charging
Service

Negativefactors
Burden of Loss in sales
due toinsurancesuspension
premiums of operations

Increase inChanges in airrice cropconditioning
yieldsload

Total

Physical risk

Increased transition risks
Regulations are tightened, low-carbon and decarbonization are
advancing, and carbon taxes and electricity prices are rising.
3-193

Evaluate business impacts (4 , 2030)*

We have picked up specific examples of risks and opportunities whichwere assessed as significant and estimated their impact (based on
business as usual) .
Business impact of 4°C(100 millions
yen)

Positive factors
Negative factors

OperatingincomeCarbon priceSales ofsustainableproducts

Electricity
expenses

EV
Charging
Service

Burden of
insurance
premiums

Transition risk

Loss in sales
due tosuspension ofoperations

Changes inrice crop
yieldsPhysical risk

Increase inairconditioning
load

Total

Increased physical risks
Increase in insurance premiums and loss due to suspension ofoperations due to extreme weather.
3-194

Evaluate business impacts - flood risk assessment
The flood risk at the time of Arakawa collapse is assessed by using a
hazard map. Store damages in 8 wards of Tokyo located along
Arakawa river were evaluated.
*

8 wards of Tokyo (Adachi Ward,
Kita Ward, Katsushika Ward,
Edogawa Ward, Sumida Ward,
Itabashi Ward, Arakawa Ward, andKoto Ward) located in the Arakawa
Basin

Adachi Ward
Itabashi Ward
Kita Ward

Katsushika Ward
Arakawa Ward

Sumida Ward
Edogawa-ku
Koto Ward
Source: Prepared by Deloitte Tohmatsu based on Estimated inundation area of Arakawa floodin the river system (estimated maximum scale) (Left chart) and Koto 5 Wards Large-Scale Flood Hazard Map(right chart)

3-195

Evaluate business impacts - flood risk assessment
Percentage of stores that may have flood risk

Calculate the proportion of
stores that may be flooded*
by comparing domestic
store
locations with hazard maps

Increasing importance ofdisaster response

Source: Edited and processed by Deloitte on the basis of
the National Land Value Information Immersion Area Data
(2012) by the Ministry of Infrastructure, Land,Transport andTourism, Land Policy Bureau

3-196

Identify potential responses
Countermeasures to mitigate climate-related risks and expand opportunities
Items that have a major impact on Seven-Eleven Japan*
Carbon priceElectricity
expenses

Changing
consumer
reputation

Increasing
severity of
extreme weather
conditions

Changes in rainfall
and weather patterns

Reducing risks by promoting
GREEN CHALLENGE 2050
We, as Seven-Eleven Japan, will expand business
opportunities through our contribution to implementing various
measures at stores where can contact with customers
3-197

Other Sector
Practice Example

KYOCERA Corporation(Electronic Equipment)

Practice Example

Seven & i Holdings Co., Ltd.
(Retailing)

Practice Example

Lion Corporation(Consumer Products)

3-198

Scope of Scenario Analysis and Promotion Structure
Timeline: 2030
Target businesses: Oral care business and Fabric care business in Japan(Taking into account our core business and the impact of climate change)
2030
Domestic business
Risk[Scope of this investigation]
Mainly Oral Care Business
Fabric Care Business

Overseas businessNot considered

Opportunity

Promotion System: Internal Project
Corporate Planning Division (including IR), Accounting Division,
Marketing Division, and Purchasing Division, CSV Promotion
Department Environmental Strategy Office (Secretariat)
3-199

Step

2

3

4

5

Assess materiality of climate-related risks:
Transition Risk

Increases in production costs due to carbon taxes, changes in raw material
procurement regulations and prices, and changes in customer behavior can havesignificant financial consequences
Risk Item

Carbon tax
Carbonemissionstargets/
Policies ineach country
ContainersRawmaterials
procurement

Regulations
relating toland use

Steep risein prices

Changes in customer
behaviours
Changes in theinvestor's reputation

Blue: Risk,
Red: Opportunity

Business Impact

Assessment

Full-scale introduction of emissions trading and the application of carbon taxes by governments will increase theoperating costs of factories and increase expenditures

Large

The use of low-carbon energy will enable us to cope with future rises in carbon prices and reduce costs.
Introduction of regulations on plastic and other packaging materials and products in each country, incurring
response costs and increasing expenditures
Large

By making use of low-carbon, non-plastics products, it is possible to provide products that meet the ethical needsof consumers, thereby increasing corporate value and generating profits
If demand for raw materials for biofuels and petrochemical substitutes increases and competition arises with theuse of agricultural land to produce agricultural products, procurement costs for agricultural products (palm oil, etc.)
will increase and expenditures will increase
Although regulations are tightened as forest area decreases, by using sustainable paper products (certified paper) thatcomply with regulations,increase the sustainability of products and companies, and may contribute to increasing
corporate value and earnings

Large

Higher premium prices for certified palm oil (nuclear oil) and increased expenditures due to tighter regulations anddemand for biofuels
Costs associated with the switch to alternative raw materials are also incurred, resulting in an increase in expenditures

Large

In procuring palm oil, we can increase the sustainability of our products by helping themacquire RSPO certification
May contribute to enhancing corporate value and increasing earnings
As consumers become more aware of ethical consumption, demand for products using unsustainable plastics andpalm oil declines and profits decline
On the other hand, as consumers become more aware of the importance of ethical consumption, demand for watersaving products, non-plastics, and sustainable raw materials expands and revenues increase
If climate change is not addressed, the investor may have a poor impression, and there is a possibility that a high interest
rate may have to be charged for the issuance of corporate bonds. This may affect the BS due to the impairment of capital.

Large

Small

3-200

Step

Assess materiality of climate-related risks:
Physical risk

2

3

Rising average temperature, raw material prices, water stress, and extreme weather
events can have significant financial influence
Risk Item

4

5

Blue: Risk,
Red: Opportunity

Business impact

Assessment

Expenditures will increase due to higher operating and personnel costs resulting from increased energy costs andburdens on workers.

Increase in the averagetemperature

Higher average temperature will increase the number of laundry operations, while demand for laundry detergentsand antiperspirants will increase, leading to higher earnings.

Large

In some areas, a certain increase in temperature may contribute to increased crop productivity, leading to higher
production and lower raw material costs

Pests
Raw
materials
procurement AtmosphericCO2
concentrations
Increase

Water stress (drought)

3-201

Increasing
severity of
Floodextremeweather
conditions Heavy rains,(Direct/
typhoons andIndirect
stormseffects)

Large outbreaks of pests affect the production volume and price of plant-derived raw materials, increase raw
material costs, and increase expenditures
In some areas, a certain increase in temperature may contribute to a decrease in pests, leading to an increase inproduction and a decrease in raw material costs

MediumIncreased use of herbicides due to improved water efficiency and growth efficiency of weeds and increased
expenditure
On the other hand, increased crop growth potential and increased crop yields could lead to lower raw material
costs

MediumExpenditures increase due to a decrease in earnings associated with a decline in the quality of plant-derived raw
materials or an increase in raw material costs
Expenditure increases due to shortage of water supply due to drought, deterioration of water quality, and increasein operating costs
On the other hand, demand for water-saving products and products that do not require water may increase andprofits may increase

Large

Revenue declines due to delays or disruptions in logistics caused by climate events, etc.
In preparation for natural disasters such as floods, demand for specific products that provide clean and healthcare
in the event of a disaster may increase and earnings may increase

Large

Revenues and asset values will decrease due to damage to equipment caused by heavy rains, typhoons andstorms, and have an impact on infrastructure and business continuity (including transfer costs)
Large
The market for disaster prevention goods used for evacuation in the event of natural disasters such as largescale typhoons and concentrated torrential rains will expand, and profits will increase

Step

2

3

4

5

Identify and define range of scenarios:
Consider society in 2030 under two scenarios
Since there is no unified climate change scenario in the consumer goods industry and it is thoughtthat the influence of the average temperature change is large, we examined society in 2030 byusing the 2 C scenario (tightened regulation) and the 4 C scenario (business as usual).

[Global Average Terrestrial Temperature Change (Difference from the 1986-2005 Average)]()

The temperature will rise
3.2-5.4 C above preindustrial levels, unless
more rigorous measures
are taken.

4°C scenario

The temperature will rise
0.9-2.3 C above preindustrial levels, if strictmeasures are taken.

2°C scenario

2030
Source: AR5 SYR Diagram SPM.6

273

3-202

Step

2

3

4

5

Definition of each worldview based on scientificgrounds, etc. of the IEA, etc.
Risk Item

Assumed parameter

Current situation

2030
4

2

Carbon emission targets
and policies of eachcountry(A Carbon tax)

Carbon prices in each country(Not iintroduced at 4C)

10,900 Yen and tCO2

IEA WEO 2019

Carbon emission targets
and policies of eachcountry(Plastics)

Use rate of recycled plastics inequipment *1(Not iintroduced at 4

C)

14.0%

European plastics strategy

Changes in customer
behaviours

Sales of sustainable certified
products(Expand in the millennial
generation)(Expand among consumers
as a whole)

Deloitte Survey, Nielsen

Increase in the averagetemperature

+1.14

+1.02

Climate Change Knowledge
PortalDue to heat stress
Loss of labor productivity(Extract figures for eachregion)(Extract figures for eachregion)

ILO "Working on a warmer planet"

Probability of occurrence ofdrought (Water stress)(Extract figures for eachregion)(Extract figures for eachregion)WRI AQUEDUCT

4 times

2 times

Ministry of Land, Infrastructure,
Transport and Tourism,
Recommendation for Ideal FloodControl Plan Based on Climate
Change"Increase in the averagetemperature

Water stress (drought)

Frequency of flooding*2

Extreme weather conditions(flooding)

3-203

SourcePopulation affected by floods

0.704 million

1.03 million

1.154 million

WRI AQUEDUCT

Increasing number of days of
Increasing severity ofheavy rain per year
extreme weather conditions(heavy rain, storm,
typhoon)Number of typhoons occurring

4.0 days/year

4.0 days/year

4.2 days/year

Tokyo Regional MeteorologicalObservatory HP and Climate
Change Knowledge Portal(There are no clear figures, but the frequency of occurrence may be decreasing or
unchanged, and the severity may increase)*1 It is assumed that regulations similar to those in Europe will be applied to Japan.
* 2. Figures for 2040 are used as substitute for figures as of 2030.
* 3 Converted at $ 100 per tCO2, 109 ¥/US$

2

Step

Identify and define range of scenarios:
World View at 2°C @ 2030s

3

4

5

Raw material costs soar due to the introduction of regulations and certification
Growing environmental awareness and increased demand for ethical value-added products
Seller(Raw Material Suppliers)
Compliance with RSPO
certification,
Consideration of alternative
raw materials in anticipationof rising procurement costs
Increase in raw material
production and procurement
costs due to carbon
regulations
Increase in procurement
and manufacturing costs for
products using plastics due
to increasingly shift to recycledmaterials
Demand for raw materials toacquire RSPO certification
increased, and procurement
and manufacturing costs
increased
Increased temperatures leadto heat stress, rising laborcosts related to agriculture,and soaring prices fornatural raw materials (palmoil, etc.). There is a possibility
that production may decline
due to pests and changes invegetation areas

3-204

Dealing with plants andresource suppliers with highwater risk

Newcomer

Buyer(Consumer)

Entry and expansion of Loop and other recycle
industries
Other consumer goods manufacturers withcooling-effective products

Government
Compliance with regulations
related to GHGs, recycledplastics and palm oil

Provision of products in line withthe ethical orientation(RSPO certification, use ofrecycled plastic, etc.), expansionof stockpiled products fordisaster prevention

Expansion of stockpiled
products for disasterprevention
in line with the timing of thegovernment's stockpiling ofdisaster preparation sets

Consumer products industry
Reduction of CO2 emissions at
plantsR&D on recycled materials
Providing ethical productsw

Rising production, procurement, andtransportation costs due to soaring fuelprices and rising raw material prices
Active R&D activities for recycled materials(plastics, etc.)
Possibility of passing on cost increases
to recycled materials products as ethicalproducts

Demand for ethical raw
material-using products(RSPO certification, recycledplastics, etc.) increased due toincreased consumer
preference for ethicalmaterials.

Introduction of acarbon tax. Factories
that emit a large amountof CO2 are subject to theregulations

Demand for antiperspirants
is expanding gradually due
to the increase in midsummerdays. Potential growth indemand for household
fabric care products withmore frequency of laundry(Alternative)

Gradual increase in demandfor hand soap and otherproducts with fungicide effects

Changing containers and brushmaterials to biodegradable plastics

Increase in stockpiling fordisasters in households

Introduction ofregulation on the use ofrecycled plastics
Peat land developmentbanned.
Recommendation for
acquiring RSPO
certification when using
palm oil
Stockpiling of disasterprevention sets toenhance the facilities of
evacuation centers

Bio-plastics, Bio-degradable plastics
Air-conditioning clothes, highly deodorizing
clothes, and cooling sprays

Step

2

Identify and define range of scenarios:
Future Social Image under the 2°C Scenario

3

4

5

Raw material costs soar due to the introduction of regulations and certification-added products

Overseas
Increased raw material
costs due to RSPO
certification
Growing demand for RSPO
certified products due to
growing consumer preference
for ethical products

Domestic
Increased costs due tothe expansion ofcarbon taxes

Recommendationto acquirecertification
Ban on thedevelopment ofpeatlands

Development of laundrymachines that use small
amounts of detergents

CO2

Expansion of demand forwater-saving products

GHG reduction
requirements

Government

Consumer ethicalorientation expands

EthicalHigher farm labor costs
due to heat stress

Potential for production to
decline due to thegeneration of pests

Regulation on
plastics in theindustry

Local governments are
asked to expand theirstockpiles for disasters.

Increase in production costs forbottles due to regulations on
recycled plastic containers

Biodegradable plastics andbioplastics as alternative

Entry into the recycling
business for Loop, etc.

Expansion of stockpiling fordisasters in municipalities
and households

Possibility of changes in
production sites due to changes
in average temperature

Raw materials procurement
3-205

Processing

Sales and product use

Identify and define range of scenarios:
4°C Worldwide @ 2030s

2

Step

3

4

5

Low carbon/decarbonization trends weaken and physical risks increase
Increase in demand for certain products due to temperature increase
Seller(Raw Material
Suppliers)

Buyer(Consumer)

Newcomer
Entry of recyclers such as Loop
Manufacturers of consumer goods withproducts having cooling effects

Expanding demand for
products for daily use in the
midsummerand emergency supplies

Response to physical risks
at plants and suppliers

Raw material costs remainunchanged

Increased temperature leads
to heat stresses, rising laborcosts related to agriculture,and soaring prices for plantderived raw materials.
Potential for lower production
due to pest generation andchanges in vegetation areas

Demand for antiperspirants
expanded due to the increasein midsummer days. Potential
growth in demand forhousehold fabric care withmore frequency of laundry

Implement energy-saving measures asin the past (no major changes)
Emerging physical risks to thecompany's plants

Traditional portfolio

Regulations on carbon
tax and use of recycledplastics are notintroduced.

Demand for hand soaps andother products with fungicide
effects expanding

Responses to plants andresource suppliers with highwater risk
Physicalrisks materialized
Maintainffor some factories andsuppliers

Regulations are notadvancing as low
carbon/decarbonization
trends weaken andexternal pressures fromthe international
community weaken.

Interest in ethical products
increased among themillennial generation

Existing energy-saving measures
Response to Physical Risks at
Factories

RSPO Certification requiredfor domestic use palm oil

Expansion of reserve products
for disaster prevention in linewith the timing of thegovernment stockpiling disaster
preparation sets

Need for low-carbon, recycledmaterials, etc. are low

Consumer products industry

Assuming no shift to recycledmaterials

Government

Stockpiling of disasterprevention sets toenhance the facilities of
evacuation centers

Increase in stockpiling fordisasters in households(Alternative)
Air-conditioning clothes, highly deodorizing
clothes, and cooling sprays

3-206

Step

2

3

Identify and define range of scenarios:
Image of the future society of the 4°C scenario

45

Low carbon/ decarbonization trends weaken and physical risks increase
Increase in demand for certain products due to temperature increase
Overseas

Domestic
Increase in washing
opportunities due tohigher temperature

Raw materials fordomestic supplies
require RSPO
certification

Emerging physicalrisks at some factories
and suppliers

Expansion of use of
perspiration control
products such as
sprays and sheets

Government

Millennial generation s
increased emotional
orientation

EthicalHigher farm labor costs
due to heat stress

Potential for production to
decline due to thegeneration of pests

Implementation ofenergy-saving measures
as in the past
CO2

Possibility of changes in
production sites due to changes
in average temperature

3-207

Raw materials procurement

Processing

Local governments are
asked to expand theirstockpiles for disasters

Entry into therecycling businessfor Loop, etc.

Expansion of stockpiling fordisasters in municipalities
and households

Increased opportunities
for handwashing due tothe spread of infectious
diseases

Sales and product use

2

Step

3

4

5

Evaluate business impacts: Image
8 key driving forces* are set to estimate the impact on each of our businesses.
Factors affecting the company that havea large impact on the company's businessand are highly uncertain

Risk

Opportunity

Carbon tax
A

Operating revenues

Carbon price

Increased demand for
detergents andantiperspirants due totemperature increases

E

F

Increased demand fordisaster prevention goods

G

Increased demand forwater-saving products
due to water stressH

Expanded sales of
ethical products

CO2 emissions

Raw materials procurement

Sales

ExpensesC

B
Procurement costsof plastics

Procurement costs of
raw materials

Physical risk

D
Heavy rain

FloodsTyphoons

Water stress

Profit3-208

Evaluate business impact: Transition and Physical Risks

Step

2

3

4

5

Due to the difficulty of obtaining data, there are items that are limited to qualitative evaluations
Costs are expected to increase due to rising raw material prices caused by policy changes and risingtemperatures, and natural disasters such as typhoons

Risk Item

Carbon emission targets andpolicies of each country
Carbon emission targets andTransition policies of each country

Impact on business

Carbon tax

X.X billion yen

JPY 0 billion

, and

B

Cost increase at 2 due to introduction of recycledplastic regulations
It is assumed that the regulation for recycled plastics will
not be implemented at 4

X.X billion yen

JPY 0 billion

X.X billion yen

X.X billion yen

X.X billion yen

X.X billion
yen

Qualitative

Qualitative

X.X billion yen

X.X billion yen

Qualitative

Qualitative

Qualitative

Qualitative

Soaring feedstock costs

Palm oilAt 2 , stricter RSPO regulations tighten the supplydemand balance for certified oil and raise palm oil
procurement costs (transition risks)
At 4 , harvest volume increases with temperature
increase, supply-demand tightness does not progress,
and prices remain at the current level (physical risk)

Increase in the averagetemperature

Procurement price ofplant-derived raw
materials

Increase in procurement cost due to decrease incultivated area due to change in vegetation area ofvegetable raw materials

Increase in the averagetemperature

Procurement price of
natural raw materials

D
PhysicalIncreasing severity of extreme Damage to facilities,
risk
weather conditions
impact on infrastructure
Increasing severity of extreme Shutdown and damage toweather conditions
the supply chain
Drought damage

4

The effect of carbon tax is significant at 2
operating costs increase
In case of 4 , no carbon tax is included

C

Water stress

2

A

Plastics

risk

3-209

Business impact
on annual earnings

Decrease in cultivated area of natural crops and increasein procurement costs
Besides, the harvest volume of plant-based raw materials
in the sub-tropical region is expected to increase(qualitative assessment)
Increasing frequency of typhoons, storm surges, etc., is
expected to cause damage to plant facilities andinfrastructure and increase costs
Sales are expected to decline due to plant shutdowns orsuspension of product transportation (supply chain
breakdown) (qualitative assessment)
Water shortages are anticipated, leading to an increasein operating costs at production sites and a decline insales due to supply chain breakdowns(qualitative assessment)

Quantitative assessments are difficult, but qualitative assessments are conducted on important matters.

Step

2

3

4

5

Evaluate business impact: Opportunity
The 2 scenario has a greater impact on business profits than the 4 scenario, as the business impact is expected
to see an increase in sales of detergents and other products along with an increase in temperature, as well as anincrease in demand for disaster-prevention goods and water-saving products.

Risk Item

O
p
p
o
r
t
u
n
i
t
y

Business impact
on annual earnings

Impact on business

2

4

X.X billion yen

X.X billionyen

X.X billion yen

X.X billion
yen

Qualitative

Qualitative

Qualitative

Qualitative

Qualitative

QualitativeG

As the frequency of water shortages increases, consumer
demand for water-saving products increases, and sales ofwater-saving products are expected to increase (qualitative
assessment).

H

Increased consumer interest in ethical products (qualitative
assessment)

Qualitative

Qualitative

Increase in the
Increase in sales of detergents due to higher temperature
average
Sales of detergents
temperature
Increase in theSales of perspiration
Increase in sales of antiperspirants due to higher
average
E temperature
control products
temperature
Increase in the
Expansion of infectious diseases increases opportunities
forhandwashing and profits of hand soap are expected toaverage
Increase in infections
increase (qualitative assessment)
temperature
Increasing
severity of
Increase in demand for stockpiles (disaster prevention
Sales of disastergoods) at evacuation centers
extremeF (qualitative
prevention goods
assessment)
weather
conditions
Water stress(drought)

Water-saving products

Changes incustomer
behaviours

Ethical products

X.X billion
X.X
yen
billion yen

Total (transition risk, physical risk, opportunity)
3-210

Quantitative assessments are difficult, but qualitative assessments are conducted on important matters.

Step

2

3

4

5

Identify potential responses:
Proposed Future Countermeasures for Risks/Opportunities
Promoted along with LION Eco Challenge 2050 measures and sustainable raw material purchasing measures

3-211

Measures to Incorporate
Opportunities (Examples)

Item

Lion s Current Initiatives

Carbon priceCO2 emissions generated by each of departments
30% reduction by 2030 (vs. 2017)
Set the total amount and the target of zero
emissions by 2050.

Recycled plastics

Set a target to double the amount ofrecycled plastics and biomass plastics
used by 2030
Cooperation with TerraCycle to develop
toothbrush recycling program

Set further targets for reduction ofvirgin plastics from petrochemical
Conversion to a sustainable resource
circulation program

Steep risein the price ofraw materials(palm oil)Replace all palm oil derivatives from nocertified to RSPO certified products by 2020.
Formulation of sustainable raw material
procurement policy for 2030

Implement measures based on thecompany's own Sustainable Raw
Material Procurement Guidelines

N/A

Steep rise in
the price ofraw materials(other than palm oil)

N/A

Identification and monitoring of risks
associated with the procurement ofplant raw materials due to climatechangeN/A

Changes incustomer behavior

Establishment of in-house Lion Eco
Standards and labeling of EcoProducts

N/A

Expansion of Eco/Ethical Products
Promotion and educational
activities concerning eco/ethicalconsumption

Increasing severityin extreme
weather conditions

Carry out awareness-raising activities forhygiene and health care in the event of adisasterEstablishment of BCPs at business sites

Understand the impact on supply chain(raw material suppliers, transportationand delivery) and strengthencountermeasures

Expand sales of products fordisaster prevention

Risk Countermeasures (Example)

Introduction of renewable energy

N/A

Promoting cooperation with therecycling industry

Appendix.
Appendix1. Parameter list
Appendix2. Physical risk assessment tools
Appendix3. Examples of scenario analysis

Appendix.
Provide useful materials for scenario analysis based on supporting case studies

Appendix.
Appendix1. Parameter list
Appendix2. Physical risk assessment tools
Appendix3. Examples of scenario analysis

Appendix.
Provide useful materials for scenario analysis based on supporting case studies

4-1

[Summary of parameter list]
Partial excerpts on transition risk and physical risk parameters
Literature and Tools (List)

Literature and Tools (excerpt)

Parameters
4-8 ~ 4-21

IEA Energy Technology Perspectives (ETP) 20174-22 ~ 4-28

PRI The Inevitable Policy Response (IPR)

4-30 ~ 4-34

SSP (Shared Socioeconomic Pathways) Public Database Ver2.0

4-36 ~ 4-45

AQUEDUCT
Water Tool (WRI)

Parameters used in support cases

Transition risk

IEA World Energy Outlook (WEO) 2019

+

4-49

Physical risk

Physical risk assessment tools
referred in TCFD report

Physical risk tools used in the
project (excerpt)

Climate Change Knowledge
Portal (World Bank)
4-50

4-48

4-47

Climate Impact Viewer(AP-PLAT)(FY2019)

4-51

4-3
~4-6

Data on parameters as of February 2020
4-2

[Parameters referenced in support cases 1/4 ]Transition risk 1/2
ItemParameter

Carbon price

Carbon tax
Electricity price

Carbon emissions
targets/policies

Transition risk

Changes in theenergy mix

Changes inimportant products

SourceIEA WEO 2018,2019
PRI IPR FPS

Kagome, Kashima Construction, Calbee,
Seven & i HD, Chiyoda Corporation,
FUJIFILM HD and Furukawa Electric,
Meiji HD, Lion Corporation, and LIXIL

IEA WEO 2018

Kyocera, Seven & i Holdings, LIXIL

Target values for emissions

Ministry of the Environment's "Draft Japanese Commitments,"
Kajima Corp., Kyocera Corp., Seven & i"Toward Significant Reductions in Greenhouse Gases by 2050," HD, Chiyoda Corporation, FUJIFILM HD,
IEA ETP
Furukawa Electric Co., Ltd., LIXIL

Power Generation Mix (Japan)

IEA WEO2018,2019
PRI IPR FPS

Kajima Corporation, FUJIFILM HD,
Furukawa Electric Co., Ltd., Chiyoda
Corporation, LIXIL

Primary energy demand

IEA WEO2019PRI IPR FPS

Chiyoda Corporation

Final energy demand

IEA WEO2019

Chiyoda Corporation

LNG: pipeline ratio

IEA WEO2019

Chiyoda Corporation

Unit price of renewable energy
generation

IEA WEO2017

Kyocera and Furukawa Electric

Production of newsprint

IEA WEO2018

FUJIFILM HD

Rate of recycled aluminum
Production of aluminum

IEA WEO2018
IEA ETP2017

FUJIFILM HD and LIXILWorld Bank ," World Bank Commodities Forecast"

LIXIL

METI's Basic Energy ProgramKajima Corporation

Ministry of Economy, Trade and Industry, "Policy Trends for
Promoting ZEV and Related Budget Draft for FY2018"

LIXIL

Price of aluminum
ZEB target
ZEH introduction target

IEA ETP2017
Dissemination ofrenewable energy
and energy-saving
technologies

Reference: Companies referenced
parameters

ZEV ratio

Shared Socioeconomic Pathway 2: A middle-of-the-road

Seven & i HD, Chiyoda Corporation,
Development Bank of Japan, Furukawa
Electric

Increase in the amount ofelectricity used for airconditioning

Seven & i HD

World's storage capacity

Chiyoda Corporation and Furukawa
Electric

The parameters surveyed in the course of support program by the Ministry of the Environment are shown regardless of whether or not they are actually usedby each company.
4-3

[Parameters referenced in support cases 2/4 ]Transition risk 2/2
Item

Transition risk

Development of
next-generation
technologies

Parameter

Reference: Companies
referenced parameters

SourceCO2 recovery by CCSs

IEA WEO 2018

FUJIFILM HD

Hydrogen penetration rate

IEA WEO 2019
PRI IPR FPS

Chiyoda Corporation

CCU penetration rate

IEA WEO 2019
ICEF Roadmap

Chiyoda Corporation

Biomass production (primary energy)

SSP Public Database Version 2.0

Development Bank of Japan

Share of biomass in primary energy

SSP Public Database Version 2.0

Development Bank of Japan

Hydrogen-production (primary energy)

SSP Public Database Version 2.0

Development Bank of Japan

Share of hydrogen in primary energy

SSP Public Database Version 2.0

Development Bank of Japan

Production of renewable energy

SSP Public Database Version 2.0

Development Bank of Japan

Non biomass renewables's share in primaryenergySSP Public Database Version 2.0

Development Bank of Japan

CCSs' share of primary energy

SSP Public Database Version 2.0

Development Bank of Japan

Percentage of each energy (biomass, coal,oil, gas, fossil) in CCSs

SSP Public Database Version 2.0

Development Bank of Japan

Demand response capacity

IEA ETP 2017

KyoceraThe parameters surveyed in the course of support program by the Ministry of the Environment are shown regardless of whether or not they are actually usedby each company.

4-4[Parameters referenced in support cases 3/4 ]Physical risk 1/2
ItemParameter

SourceAverage temperature in Japan

Japan s weather at the end of the 21st Century (2015) by the
Ministry of the Environment and the Japan Meteorological Agency
Climate Change Knowledge Portal

Changes in tomato, carrots andorange yield
Increases in the averagetemperature

Population at risk for mosquitoborne infections in East Asia

Reference: Companies
referenced parameters
Kajima Corporation and Lion
Corporation-

KagomeMinistry of the Environment, Global Warming and Infectious
DiseasesNational Institute for Environmental Research on the Impact ofGlobal Warming on Infections

Meiji HD-

Number of outbreaks of waterborne
infections (diagnostics) (Asia)

Physical risk

Days of heavy rain (Japan)

Changes in rainfall andweather patterns

Amount of rainfall

Ministry of the Environment, Global Warming and Infectious
Diseases
Japan's Weather at the End of the 21st Century (2015) by the
Ministry of the Environment and the Japan Meteorological Agency
Ministry of the Environment, Ministry of Education, Culture, Sports,
Science and Technology, Ministry of Agriculture, Forestry and
Fisheries, Ministry of Land, Infrastructure, Transport and Tourism,
Meteorological Agency, "Observation and Prediction of Climate
Change and Integrated Impact Assessment Report 2018-Climate
Change and Its Impact in Japan"

Japan's Climate at the End of the 21st Century, Ministry of theEnvironment and the Japan Meteorological Agency, Observations
and Forecasts of Climate Change and Integrated Report on Impact
Assessments 2018-Climate Change and Its Impact in Japan.
Technical Review Committee on Flood Control Plans Based on
Climate Change Recommendations on Water Control Plans Basedon Climate Change

Changes in potato yield due to theimpact of climate change
Changes in oat yield due to theimpact of climate change

Meiji HD, Lion

Kagome, Kajima Corporation,
Seven & i HD,
FUJIFILM HD and Lion

Kagome, LIXIL

Calbee Corp.
-

Calbee Corp.

The parameters surveyed in the course of support program by the Ministry of the Environment are shown regardless of whether or not they are actually usedby each company.
4-5

[Parameters referenced in support cases 4/4]
Physical risk 2/2
Item

Sea level riseParameter

Magnitude of sea level rise

Rate of decline in laborproductivity due to heat stressPhysical risk

Deterioration of labor andconstruction conditions

Extreme heat (Japan)

Drought

Water stress

Changes in the marine
environment

Changes in fish catches ingeneralIncreasing extreme
weather conditions(typhoons, heavy rains,sediment, storm surges,
etc.)

Flood damage in urban areas
Flow rate
Frequency of floods

SourceReference: Companies
referenced parameters

Ministry of the Environment, Ministry of Education, Culture, Sports,
Science and Technology, Ministry of Agriculture, Forestry and
Fisheries, Ministry of Land, Infrastructure, Transport and Tourism,
Meteorological Agency, Observation and Prediction of Climate
Furukawa Electric and Meiji HD
Change and Integrated Impact Assessment Report 2018-Climate
Change and Its Impact in Japan
Japan Meteorological Agency
Past and Future Sea Level
Changes in the World
ILO, "Working on a warmer planet"

Kajima Corporation and Lion
Corporation

Ministry of the Environment press release (2014)
Academic paper "Anthropogenic-contribution-to-global-occurrenceof-heavy-precipitation-and-high-temperature-extremes" (2015)
Ministry of the Environment, Ministry of Education, Culture, Sports,
Science and Technology, Ministry of Agriculture, Forestry andCalbee, Seven&i HD
Fisheries, Ministry of Land, Infrastructure, Transport and Tourism,
Meteorological Agency, "Observation and Forecasting of Climate
Change and Integrated Impact Assessment Report 2018-Climate
Change and its Impact in Japan."
Kagome, Furukawa Electric, Lion
Calbee, Furukawa ElectricKajima Corporation
Ministry of Land, Infrastructure, Transport and Tourism, Proposals
LIXIL
for Flood Control Plans Based on Climate Change
Ministry of Land, Infrastructure, Transport and Tourism, Proposals Kyocera, Lion Corporation and
for Flood Control Plans Based on Climate Change
LIXIL

The parameters surveyed in the course of support program by the Ministry of the Environment are shown regardless of whether or not they are actually usedby each company.

4-6

IEA WEO, ETP
Report on transition scenarios published by the IEA

IEA World Energy Outlook 2019
IEA Energy Technology Perspectives 2017

What is the International Energy Agency (IEA)?
Organization established in 1974 after the first oil crisis to avert oil supply crises (to establish a stable energy
supply and demand structure) of the member countries.
The objective is to promote energy security through collective response by members to the physical disruptionsof oil supply.
Energy-related surveys, statistical compilation, and publication of various reports and books.
There are 30 members, including Japan.

World Energy Outlook (WEO)

A report on energy supply and demand published every
autumn.
World Energy Outlook includes medium and long-term
energy market forecasts.
Source: IEA website
4-7

Energy Technology Perspectives (ETP)

Describes the process of energy technology innovation.
Focusing on opportunities and challenges for expanding andaccelerating clean energy technologies.
Presenting more ambitious scenarios, ETP 2017 presents
three pathways for the energy sector towards 2060.

Parameters in IEA WEO 2019 1/14
CO2 emissions 1/3

IEA World Energy Outlook 2019

Timeframe
Category

Datasets

Past

Country/region
GlobalSeveral
areas

Japan

World energy-related CO2 emissions by fuel and scenario
Cumulative energy-related CO2 emissions (since 1890) and annual
emissions by fuel and scenario
Average CO2 emissions intensity of hourly electricity supply in India andthe European Union, 2018, and by scenario, 2040
Effects of including announced net-zero carbon pledges on CO2emissions in the Stated Policies Scenario
Installed power generation capacity by source and CO2 emissions fromelectricity generation in India in the Stated Policies Scenario and Cheap
Battery Case
Energy-related CO2 emissions and reductions by source in the
Sustainable Development Scenario
Average annual post-peak CO2 emissions reductions and power sector
mix in various WEO scenarios
CO2emissions

Energy-related CO2 emissions in the Sustainable Development Scenario
to 2050 and extended pathway to 2100
Electricity generation by source and carbon intensity of electricity in the
Sustainable Development Scenario
Energy-related CO2 emissions by region in the Stated Policies Scenario
Net-zero carbon or GHG emissions reduction announcements
Effects of including announced net-zero carbon pledges on CO2emissions in the Stated Policies Scenario
CO2 emissions reductions by measure in the Sustainable Development
Scenario relative to the Stated Policies Scenario
Global fossil fuel demand by CO2 content in the Sustainable
Development Scenario, 2018 and 2050
CO2 emissions in advanced and developing economies in the
Sustainable Development Scenario
Carbon emissions of different car powertrains by region
Savings in energy-related CO2 emissions in industry by measure andscenario

Source IEA World Energy Outlook 20194-8

Parameters in IEA WEO 2019 2/14
CO2 emissions 2/3

IEA World Energy Outlook 2019

Timeframe
Category

Datasets

Past

Emissions trajectories for total CO2 emissions in the Sustainable
Development Scenario and to limit warming to 1.5 C
Cumulative net-negative CO2 emissions between 2018 and 2100 in 1.5
scenarios assessed by the IPCC

C

Illustrative trajectory of energy-related CO2 emissions to achieve a 50%
chance of 1.5 C in advanced and developing economies
Locked-in emissions from international shipping and the maximum potential
remaining emissions from LNG
CO2 emissions reductions since 2010
Average cost of potential emissions savings from coal-to-gas switching in
the power sector, 2025
Potential CO2 savings from coal-to-gas switching at various gas prices
using existing power plants
Cumulative effects on electricity generation and emissions in Southeast
Asia of spending $5 billion in the power sector
CO2
emissions Growth in global GDP, coal demand and related CO2 emissions by
scenario
Indirect CO2 and methane emissions intensity from global coal supply,
2018
Indirect CO2 and methane emissions, and emissions intensities for the tenlargest coal producing countries, 2018
Lifecycle emission intensities of coal and natural gas used for heat andelectricity generation, 2018
Annual CO2 emissions from the power sector by scenario
CO2 intensity of electricity generation by region and scenario
Global CO2 emissions from existing coal-fired power plants by technology
with a 50-year lifetime in the Stated Policies Scenario
Cumulative CO2 emissions from existing coal-fired power plants byassumed lifespan, 2019-2040
Measures to reduce CO2 emissions from coal-fired power plants

Source IEA World Energy Outlook 2019
4-9

Country/region
GlobalSeveral
areas

Japan

Parameters in IEA WEO 2019 3/14
CO2 emissions 3/3, Energy demand 1/4

IEA World Energy Outlook 2019

Timeframe
Category

Datasets

Past

Country/region
Severalareas

GlobalJapan

Reducing CO2 emissions from existing coal-fired power capacity bymeasureInstalled capacity by source and CO2 emissions from electricity
generation in India in the Stated Policies Scenario and Cheap
Battery Case
CO emissions reductions resulting from material demand
CO2
reductions for steel, cement and aluminium
emissions
Impact of energy efficiency on CO emissions from electricity
supply in the Sustainable Development Scenario, 2040
Installed CCGTs equipped with CCUS and emissions
avoided in the Sustainable Development Scenario
Avoided CO2 emissions due to the deployment of offshore wind in
the Stated Policies and Sustainable Development scenarios
World primary energy demand by fuel and related CO2 emissions
by scenario
World primary energy demand by fuel and scenario
Total primary energy demand by region and scenario
Change in energy demand and average annual GDP growth rate byregion in the States Policies Scenario,2018-2040
Final energy consumption by sector, fuel and scenario
EnergydemandChange in final energy consumption by sector 2000-2018 and by
scenario to 2040
World electricity generation by fuel, technology and scenario
Change in fossil fuel production and demand in selected regions in
the Stated Policies Scenario, 2018-2040
Net oil and gas imports to Asia by scenario
Net import (shaded) and export shares by fuel, region and scenario
US tight oil production and assumed resources in the announced
policies scenarios of the WEO-2018 and WEO-2019

Source IEA World Energy Outlook 20194-10

Parameters in IEA WEO 2019 4/14
Energy demand 2/4

IEA World Energy Outlook 2019

Timeframe
Category

Datasets
Differences in oil supply and power generation in the announced policies
scenarios of the WEO-2019 and WEO-2018
Tight oil and shale gas output in the United States, 2010-2018, and in theStated Policies Scenario
Total final consumption by sector and fuel in the Sustainable Development
Scenario
Oil demand in transport by mode (left) and change in transport energy use by
scenario in 2050 relative to today
Change in energy demand by end-use in the buildings sector in the
Sustainable Development Scenario relative to the Stated Policies Scenario,
2050
Change in oil demand, supply and net trade position in the Stated Policies
Scenario, 2018-2040
Global oil demand and production by scenario

EnergydemandOil demand by region and scenario
Change in oil demand by region in the Stated Policies Scenario
Annual average change in global oil demand by sector in the Stated Policies
Scenario
Oil production by type in the Stated Policies Scenario
Composition of global production in the Stated Policies Scenario
World liquids demand by scenario
Oil net imports and import dependency in selected developing Asian
economies in the Stated Policies Scenario
Major exporters and importers of crude oil traded via the Strait of Hormuz,
2018
Oil and gas trade volumes via major chokepoints in the Stated Policies
Scenario
Crude oil quality of selected producers and refiners, 2018
Global gas demand, production and trade by scenario

Source IEA World Energy Outlook 2019
4-11

Past

Country/region
GlobalSeveral
areas

Japan

Parameters in IEA WEO 2019 5/14
Energy demand 3/4

IEA World Energy Outlook 2019

Timeframe
Category

Datasets

Past

Country/region
GlobalSeveral
Japan
areas

Change in gas demand by region and scenario, 2018-2040
Gas demand by region and scenario
Change in gas supply and demand in developing Asian markets in the Stated
Policies Scenario, 2018-2040
Annual average change in gas demand and production in selected regions in theStated Policies Scenario, 2018-2040
LNG trade volumes by contract type and assumed oil indexation levels in the Stated
Policies Scenario
Change in gas and coal demand by scenario, 2018-2040
Global coal demand by scenario
Global coal demand, production and trade by scenario
Coal demand by region and scenario
Global coal demand by key sector and scenario
EnergydemandShare of global coal demand by sector and scenario
Global industrial use of energy by fuel and scenario
Industrial use of energy by fuel and key sub-sector in China in the Stated Policies
Scenario
Change in heat demand by temperature in China in the Stated Policies Scenario,
2018-2040
Global electricity demand and generation by scenario
Electricity demand by region and scenario
Per capita electricity demand and share of electricity in total final consumption inadvanced and developing economies
Electricity demand by sector and scenario
Electricity demand growth by end-use and scenario in advanced and developing
economies, 2018-2040
Growth in electricity demand and flexibility needs by selected region and scenario,
2018-2040

Source IEA World Energy Outlook 2019
4-12

Parameters in IEA WEO 2019 6/14
Energy demand 4/4

IEA World Energy Outlook 2019

Timeframe
Category

Datasets
World renewable energy demand by scenario
Renewable energy in total primary energy demand by category and region in theStated Policies Scenario, 2018 and 2040
Demand for key materials in the Stated Policies Scenario
Average hourly electricity supply and demand in China in the Sustainable
Development Scenario, 2040
Global biogas demand in the Sustainable Development Scenario
Change in global gas demand in the Sustainable
Development Scenario, 2010-2040
Monthly electricity and natural gas use in Europe and the United States
Global final energy consumption in industry and buildings in the Future is Electric
Scenario

EnergydemandChange in natural gas demand in selected regions in the Sustainable Development
Scenario
Historic global annual demand for hydrogen
Estimated tolerance to hydrogen blend shares of selected elements of existing gas
distribution networks
Current limits on hydrogen blending in natural gas networks and gas demand per
capita in selected locations
Biomethane production and share of total biogas production that is upgraded inselected regions, 2017
Biomethane consumption by sector and region in the Stated Policies Scenario
Biomethane consumption by sector and region in the Sustainable Development
Scenario
Low-carbon hydrogen and biomethane injected into gas grids in the Sustainable
Development Scenario

Source IEA World Energy Outlook 2019
4-13

Past

Country/region
GlobalSeveral
Japan
areas

Parameters in IEA WEO 2019 7/14
Energy mix 1/2

IEA World Energy Outlook 2019

Timeframe
Category

Datasets

Past

Country/region
GlobalSeveral
Japan
areas

Share of renewables in total capacity additions by region and scenario, 20192040
Global installed power generation capacity by scenario
Reducing CO2 emissions from existing coal-fired power capacity by measure
Average annual capacity factors for various power generation technologies byregion/country
Electricity access by sub-Saharan region in the Stated Policies Scenario
Operational nuclear power capacity in advanced economies absent further
investment
Primary energy mix and fuel use by sector in the Sustainable Development
Scenario, 2018 and 2050
Global industrial energy use by fuel (left) and energy mix for selected subsectors (right)
Energymix

Energy mix in industrial use for selected regions, 2018
Global power capacity by source in the Stated Policies Scenario
Global electricity generation by source and scenario
Global electricity generation mix by scenario
Global power generation capacity by source and scenario
Renewables share in capacity additions by region in the Stated Policies andSustainable Development scenarios, 2019-2040
Electricity generation by region in the Stated Policies (STEPS) andSustainable Development (SDS) scenarios
Global coal-fired power capacity by plant age, 2018
-fired power capacity by age and phase-out plan
Sources of flexibility by region in the Stated Policies Scenario
Energy intensity improvement and renewables share of total final consumption
by scenario
Year-on-year changes in the share of global energy consumption covered bymandatory efficiency standards by selected end-uses

Source IEA World Energy Outlook 2019
4-14

Parameters in IEA WEO 2019 8/14
Energy mix 2/2

IEA World Energy Outlook 2019

Timeframe
Category

Datasets

Past

Country/region
GlobalAnnual offshore wind capacity additions by region, 2010-2018
Offshore wind installed capacity and share of electricity supply bycountry, 2018
Indicative annual capacity factors by technology and region
Simulated average weekly capacity factors for new offshore wind andsolar PV projects by region
Range of simulated hour-to-hour variations in output for new projects bytechnology, 2018
Projected global offshore wind capacity and share of electricity supply
by scenario
Installed capacity of offshore wind by region and scenario
Energy mix Outlook for offshore wind in the European Union, 2018-2040
Outlook for offshore wind in China, 2018-2040
Outlook for offshore wind in the United States, 2018-2040
Regional average annual capacity factors for new projects
Energy value by technology and region relative to average wholesale
electricity price in the Stated Policies Scenario
Average capacity credit by technology and region in the Stated Policies
Scenario
Average simulated capacity factors for offshore wind worldwide
Offshore wind capacity needed to produce 1 Mt of hydrogen
Share of potential cross-border connection projects developed by casein Europe to 2030

Source IEA World Energy Outlook 2019
4-15-

Several
Japan
areas

Parameters in IEA WEO 2019 9/14
Price of key commodities/products

IEA World Energy Outlook 2019

Timeframe
Category

Datasets

Past

Country/region
GlobalSeveral
Japan
areas

Supply costs of natural gas, biomethane and hydrogen in the Sustainable
Development Scenario, 2018 and 2040
Evolution of debt risk premiums for solar PV and wind in India and sensitivityof solar PV LCOE 2018 to debt financing
Evolution of capital costs of solar PV in the Stated Policies and Sustainable
Development scenarios
Global oil demand and crude oil price by scenario
Domestic natural gas production costs, LNG import prices and industry gas
prices in developing Asian import markets, 2018
Capital costs of liquefaction projects
Investment cost ranges for liquefaction capacity and long-run marginal costsin the Stated Policies Scenario, 2018-2040
Fuel cost competitiveness of small-scale LNG versus oil products forstationary uses, 2018
Price of key Residential electricity prices in selected regions by scenario
commodities
Sensitivity analysis of residential electricity prices by scenario, 2040
/products
Household energy bill by fuel, 2018 and 2040 by scenario
Battery storage capital costs and installed capacity by scenario
Average hourly CO emissions intensity, electricity demand and wholesale
electricity prices in India and the European Union
Cost curves of potential global biogas supply by feedstock
Cost of using the least expensive biomethane to meet 10% of gas demandand natural gas prices in selected regions, 2018
Marginal abatement costs for global biomethane potential with and without
credit for avoided methane emissions, 2018
Growing markets and falling costs for offshore wind in the Stated Policies
Scenario
Offshore wind indicative shares of capital costs by component and levelised
cost of electricity for projects completed in 2018
Historical LCOE of offshore wind and strike prices in recent auctions in
EuropeSource IEA World Energy Outlook 2019
4-16

IEA World Energy Outlook 2019
Parameters in IEA WEO 2019 10/14
Price of key commodities/products, Predictions on production and sales 1/2
Timeframe
Category

Datasets
Cumulative capital spending on offshore wind, gas- and coalfired capacity
worldwide by scenario, 2019-2040
Capital costs of offshore wind projects excluding transmission, historicaland projects in development

Price of key Indicative upfront capital cost for high-voltage transmission cables by typecommodities/ and distance from shore
products
Regional average annual O&M costs for new projects
Offshore wind: indicative nominal cost of debt in Europe (left) and LCOE
sensitivity analysis to cost component changes (right)
LCOEs for new offshore wind projects in the European Union, China andthe United States, 2018-2040
Leading market players in the offshore wind industry, 2018
Leading manufacturers of offshore wind turbines, 2018
Urban population and cement demand growth in China (historical) India(Stated Policies Scenario) and Africa (Africa Case)
Non-OPEC oil production in the Stated Policies Scenario
OPEC oil production in the Stated Policies Scenario
Refining capacity and runs by region in the Stated Policies Scenario
Oil trade by region in the Stated Policies Scenario
Predictions
Cumulative oil and natural gas supply investment by region in the Statedon production Policies Scenario, 2019-2040
and sales
Share of SUV sales in key car markets
Historical global trends in car sales by size
Passenger car sales in the Stated Policies Scenario
Share of SUVs in total sales and oil demand in the Stated Policies
Scenario and two cases examining differences in the SUV market
US tight crude oil production in the Stated Policies Scenario
Year-on-year growth from new wells and underlying declines from existingwells in the Stated Policies Scenario

Source IEA World Energy Outlook 2019
4-17

Past

Country/region
GlobalSeveral
areas

Japan

Parameters in IEA WEO 2019 11/14
Predictions on production and sales 2/2, Efficiency

IEA World Energy Outlook 2019

Timeframe
Category

Datasets

Past

Country/region
GlobalSeveral
Japan
areas

Change in global oil production by type, 2008-2018
Net income from oil and gas production in selected producer economies in theStated Policies Scenario
Change in gas supply balance by region in the Stated Policies Scenario, 20182040
Natural gas production by region in the Stated Policies Scenario
Natural gas trade by region in the Stated Policies Scenario
Natural gas net trade by region in the Stated Policies Scenario
Use of associated gas by region, 2018
Associated gas volumes in the total output from oil fields, 2018
Associated and non-associated gas production in selected countries in thePredictions Middle East in the Stated Policies Scenarioon
Associated gas production in the United States in the Stated Policies Scenario,
production 2010-2025
and sales
Natural gas demand and production in Brazil in the Stated Policies Scenario
Change in global gas and oil production in the Sustainable Development
Scenario
Coal production by region in the Stated Policies Scenario
Share of coal production by key country in the Stated Policies Scenario
Coal trade by region in the Stated Policies Scenario
Top-ten global coal producing companies
Global coal production by type in the Stated Policies Scenario
Material demand worldwide by scenario and end-use
Power sector demand for steel, cement and aluminium by scenario
Biogas production by region and feedstock, 2017
Changes in the average efficiency and economics of US tight oil production,
2012-2018
Efficiency

Summary of material efficiency strategies in the Sustainable Development
Scenario
EV charging patterns and average hourly CO emissions intensity of electricity
in the European Union in the Sustainable Development Scenario, 2040

Source IEA World Energy Outlook 20194-18

Parameters in IEA WEO 2019 12/14
Technology, Policy, Other 1/3

IEA World Energy Outlook 2019

Timeframe
Category

Datasets

Past

Examples of technologies that scale from low levels today to over 3%market share in the Sustainable Development Scenario
Low-carbon technologies by unit size and average annual installations in
the Sustainable Development Scenario
Technology

Global sustainable technical potential of biomethane
Evolution of the largest commercially available wind turbines
Ratio of technical potential to domestic electricity demandby region in the Stated Policies Scenario, 2040
Regional technical potentials for offshore wind
Offshore wind potential supply curves by region
Policies targeting at least 10 GW of offshore wind by 2030

PolicyPolicy targets for offshore wind in the European Union-Year Plan
Offshore wind targets and support policies in the United States
Offshore wind: average distance from shore by country
Evolution of offshore wind competitiveness: value-adjusted LCOEs bytechnology and region in the Stated Policies Scenario
Rise in the number of hours of cross-border grid congestion with theaddition of a 12 GW hub in the North Sea
Global offshore wind capital spending and potential synergies with
offshore oil and gas activities

Other

Global average annual energy investment by type and scenario
Global average annual energy supply investment by type and scenario
Estimated value of subsidies to fossil fuel consumption, renewables andelectric vehicles, and carbon pricing, 2010-2018
Energy investment indicators by economy and scenario
Key energy indicators in the Sustainable Development and Stated
Policies scenarios
Pathways to universal access in the Sustainable Development Scenario

Source IEA World Energy Outlook 2019
4-19

Country/region
GlobalSeveral
areas

Japan

Parameters in IEA WEO 2019 13/14
Other 2/3

IEA World Energy Outlook 2019

Timeframe
Category

Datasets

Past

Country/region
GlobalSeveral
areas

Japan

Global premature deaths attributable to air pollution
Average annual energy investment in the Sustainable Development
Scenario, 2014-2018 and 2019-2050
Average annual upstream oil and gas investment in the Stated Policies
and Sustainable Development scenarios
Population without modern energy access and premature deaths due to
air pollution in the Stated Policies Scenario, 2018 and 2050
Financial flows in energy investment
Key financing issues in the Sustainable Development Scenario
Sensitivity of US tight crude oil production in 2030 to technical andeconomic uncertainties
Seaborne crude oil trade by route in the Stated Policies Scenario
Cumulative coal supply investment by region in the Stated Policies
Scenario, 2019-2040 ($2018 billion)
Coal supply investment
Other

Selected financial and investment institutions committed to reduce or end
involvement in coal supply and coal-fired power
Return on invested capital and after-tax weighted average cost of capitalfor selected coal companies
Depth of coal production in selected countries, 2018
Global annual average power sector investment, historical and by
scenario, 2019-2040
Average annual power sector investment by region, 2019-2040
Value-adjusted levelised cost of electricity by technology in selected
regions in the Stated Policies Scenario, 2020-2040
SO2, NOX and PM2.5 emissions in the power sector by region andscenario, 2018-2040
Value-adjusted LCOE for select power technologies in India in the Stated
Policies Scenario
Key indicators by scenario
Energy intensity of GDP by scenario

Source IEA World Energy Outlook 2019
4-20

Parameters in IEA WEO 2019 14/14
Other 3/3

IEA World Energy Outlook 2019

Timeframe
Category

Datasets
Annual average investment in energy efficiency in selected regions by
scenario
Global annual average investment in renewables by scenario

Other

Per capita material consumption and GDP for selected countries, 20002017
Average annual investment in LNG and gas pipeline infrastructure in the
Sustainable Development Scenario
Alternative supply routes to produce low-carbon gases
Global offshore wind capital spending and potential synergies with offshore
oil and gas activities

Source IEA World Energy Outlook 2019
4-21

Past

Country/region
GlobalSeveral
areas

Japan

Parameters in IEA ETP 2017 1/7
Energy demand

IEA Energy Technology Perspectives 2017

Timeframe
Category
Energydemand General

Datasets

Country / region
GlobalSeveral
areas

Japan

Total final industrial energy consumptions by region
Final electricity demand by sector and region, 2014-60

PrimaryenergyGlobal primary energy demand (Biomass and waste, Hydro, Other renewables,
Nuclear, Natural gas, Oil, Coal)

Final energy

Final energy demand industry sector (Oil, Coal, Natural gas, Electricity, Heat,
Biomass and waste, Hydrogen)

RenewableenergyBioenergy in final energy consumption by end use

Power supply Fuel input electricity and heat generation
Final energy demand (Transport, Residential, Services, Agriculture, Fisheries andforestry)
Cement production energy use, Energy intensity and direct CO2 emissions intensityof global cement production
Sector-wide energy consumption and CO2 emissions
Energy intensity development under current regulation and 2DS Energy intensity in
2DS, Energy intensity with EEDI
Final energy use by fuel and per person
Global direct CO2 emissions and process energy intensities of primary chemicals
Global energy intensity and direct CO2 emissions of crude steel production
Bus and rail activity by scenario and passenger transport activity by mode, 2015-60

Specific
sectorEnergy intensity improvements in global aviation by scenario
Floor area additions to 2060 and share of additions built by 2035 for selected regions(Non-residential, Residential)
Final energy demand (Oil, Coal, Natural gas, Electricity, Heat, Biomass and waste,
Hydrogen)
Cumulative energy savings by end use relative to the RTS
Passenger/Freight transport final energy consumption
Energy demand (Space heating, Water heating, Space cooling, Lighting/Appliancesand miscellaneous equipments, Cooking)Residential - Total final energy consumption by end-use
Energy demand (Cement, Chemicals and petrochemicals, Iron and steel, Pulp andpaper, Aluminum)

Source IEA Energy Technology Perspectives 2017

4-22

IEA Energy Technology Perspectives 2017
Parameters in IEA ETP 2017 2/7
Energy mix, Price of key commodities/products, Macroeconomic Variables,
Demographic variables, Efficiency
Timeframe
Category
Energy mix

Datasets

Country / region
GlobalSeveral
areas

Japan

Final energy demand in the RTS and 2DS, 2014-60 Biomass andwaste, Natural gas, Electricity, Commercial heat, Oil, Coal, Other,
Renewable share, Low-carbon share)
Renewable Bioenergy use and CO2 capture in the RTS, 2DS and B2DS
energy(Power, Fuel Tranformation, Agriculture, Buildings, Industry, Transport,%BECCS)
Tracking by technology and region (Solar PV, Hydropower, Bioenergy,
CSP, Onshore wind, Offshore wind, Geothermal, Ocean)Price of key
commodities/
products

PowersupplyPower generation fuel mix by scenario, 2014 and 2060
(Fossil w/o CCS, Fossil with CCS, Nuclear, Bioenergy with CCS,
Renewables)

Nuclearpower

Nuclear electricity generation, Capacity additions and reactors underconstructionPowersupplyCoal capacity development(Subcritical, Supercritical, Ultra-supercritical)

Specific
sectorInvestment needs in the power sector

Fossil-fuel Fossil fuel prices by scenario

Macroeconomic
GDP
Variables
Demographic
variables
Efficiency

Role of transport biofuels - final energy demand in the 2DS

Renewable
Solar PV LCOE and contract prices
energyGeneralGlobal GDP, primary energy demand and CO2 emissions
Real GDP growth projections in ETP 2017 (assumed identical acrossscenarios)
Population projections used in ETP 2017 (millions)
Natural gas-fired power technology intensity
Builings energy use and intensity per m2 since 1990

Efficiency

Global fleet average and new-build plants emissions
Global fleet average and new-build plants emissions
Cost components in battery storage in the scenarios
Battery scale-up in the 2DS and B2DS

4-23

Source IEA Energy Technology Perspectives 2017

Parameters in IEA ETP 2017 3/7
Technology, CO2 emissions

IEA Energy Technology Perspectives 2017

Timeframe
Category
Technology General
CCS

Datasets

Country / region
Severalareas

GlobalJapan

Development of storage technologies in the scenarios
Globally installed electricity storage (GW)
Global CO2 captured and stored in the chemicals andpetrochmicals/ iron and steel/cement subsector by scenario
Share of CCS in power generation and capacity - B2DS
Share of CCS in industrial production
CO2 captured, BECCS

Specific
sectorGlobal technology penetrations in LDV stock by scenario, 2015-60
Comparative cost of PLDV technologies by country/region in the
RTS and B2DS, 2015 and 2060
Model shift from aviation to HSR, RTS and B2DS
Deployment rates for renwables-based power technologies in the
B2DS

Investment Investment needs by scenario, 2017-60
Buildings investment to 2060 and share of total B2DS investmentby key region
CO2
emissions

CCS

Sector-wide energy consumption and CO2 emissions
International well-to-wake shipping CO2-eq emissions trajectories
Global direct CO2 emissions and process energy intensities ofprimary chemicals by scenario

Specific
sectorEnergy intensity and direct CO2 emissons of crude steel/global
cement production
WTW GHG emissions reductions by transport mode andscenario, 2015 60
Direct CO2 emissions (Mt CO2)
Well-to-wheel emissions by mode
Buildings - Total emissions by end-use

Source IEA Energy Technology Perspectives 2017
4-24

IEA Energy Technology Perspectives 2017
Parameters in IEA ETP 2017 4/7
Predictions on production and sales, Carbon pricing
Timeframe
Category
Predictions
on
production
and sales

Datasets
Vehicle sales and technology shares in 2015 and 2060 in the RTS
and B2DS , Light-duty vehicles (Gasoline internal combustion
engine, Diesel combustion engine, Compressed natural gas/
Liquified petroleum gas, Hybrids, Electric & fuel cell vehicles)
Share of 2-wheelers in major Asian regions and the OECD averagein the B2DS, 2015-60
Passenger kilometers
Freight tonne kilometers
Global material production projections in the RTS and B2DS

Specific
sectorCrude steel/HVC production by process route, scenario and region
Production and energy intensity for primary chemicals
Global HVC/ammonia/methanolproduction by process technology inthe B2DS
Global hot metal production in the iron and steel subsector byprocess technology in the B2DS, Hot metal production in the ironand steel subsector by process route and region
Average CO2 intensity of electricity producation and primaryalumnium production
Production of pulp, paper and paperboard
Product mix of pulp production by region and scenario
Energy mix of pulp and paper production and CO2 intensity

Renewable
Global biofuels productionenergyCarbonpricing

CO2 price

CO2 price in selected regions by scenario

Source IEA Energy Technology Perspectives 2017, IEA World Energy Outlook 2017
4-25

Country / region
GlobalSeveral
areas

Japan

Parameters in IEA ETP 2017 5/7
Energy demand

IEA Energy Technology Perspectives 2017

Timeframe
Category
EnergydemandGeneralCoal

Datasets

Country / region
Severalareas

GlobalJapan

Evolution of electricity demand
Incremental coal demand by key sector and region
Coal , Oil and liquids, Fossil fuel, Natural gas demand

Fossil-fuelOil and total liquids demand and supply, Change in global oil productdemand for petrochemical feedstock
Difference in oil demand by sector in the Low Oil Price Case relative
to the New Policies Scenario
Global liquefaction capacity and demand
Key natural gas demand growth centres, additional use in the New
Policies Scenario,

Gas
Coal, Gas

Share of coal consumption by technology in electricity
World renewable energy consumption

Renewable
Renewable energy use by sector from a consumer perspective andenergyby region
Heat

Growth in global industrial heat demand by temperature level,
Change in global industrial heat supply mix by temperature level

Electricity

Electricity demand by regionPowersupplyEnergy demand(TPED, Power generation, Other energy sector, TFC,
Industry, Transport, Buildings, Other)

EnergyaccessElectrification rate

PrimaryenergyFinalenergySpecific
sectorPopulation without access to electricity
World primary energy demand by fuel and scenario
Global primary energy demand(Coal, Oil, Gas, Other renewables,
Bioenergy, Nuclear)
Average annual global energy efficiency and renewables investments
Avoided final energy demand in 2040 due to energy efficiency
policies by fuel, sector and region
Residential LED stock and lighting electricity demand in the New
Policies Scenario
Global road freight fuel demand by vehicle category

Source IEA Energy Technology Perspectives 2017, IEA World Energy Outlook 2017
4-26

IEA Energy Technology Perspectives 2017
Parameters in IEA ETP 2017 6/7
Energy mix, Price of key commodities/products, Efficiency, Technology(1/2)
Timeframe
Category
Energy mix

PowersupplyDatasets
Electricity generation(Total generation, Coal, Oil, Gas, Nuclear,
Renewables)
Offshore electricity generation

Electrical capacity(Total capacity, Coal, Oil, Gas, Nuclear, Renewables)
Power plant Cumulative power plant capacity retirements by region and source in the
New Policies Scenario, 2017-2040 (GW)
Nuclearpower

Top-five regions by installed capacity of nuclear power plants

CCS

Power generation by source and installed capacity
Cumulative global energy investment by scenario

Investment

Average annual offshore energy investment
Cumulative investment needs by sector in the New Policies
and Sustainable Development Scenarios, 2017-2040

Price of key
commodities/ Coal
products

Steam coal prices by key region in the New Policies Scenario

Efficiency

Global energy intensity reduction

Average FOB cash costs for global seaborne steam coal trade andEvolution of global average cost for utility-scale solar PV, Evolution of
global average cost for EV battery
Efficiency

Powertrain cost comparison of conventional and electric cars
Potential additional impact of material efficiency improvements on oil
demand for plastics production
Historical and projected levelised costs of electricity improvements on oil
demand for plastics production

Technology

Coal, Gas

Delivered cost of coal and natural gas to different power systems in the
United States

Fossil-fuelDeepwater and ultra-deepwater production by region in the New Policies
Scenario

Source IEA Energy Technology Perspectives 2017, IEA World Energy Outlook 2017
4-27

Country / region
GlobalSeveral
areas

Japan

Parameters in IEA ETP 2017 7/7
Technology(2/2), Policy, CO2 emissions,
Predictions on production and sales

IEA Energy Technology Perspectives 2017

Timeframe
Category
Technology

Gas

Datasets

Country / region
GlobalSeveral
areas

Japan

Average costs of resources developed in the New Policies
Scenario by year and average Henry Hub price
Estimated average time to procure an extra 10% of LNG import
volumes by selected importer

Renewable Average annual global energy efficiency and renewables
energyinvestments
Investment Cumulative oil and gas supply investment by region
PolicyPolicySpecific
sectorSubsidy

Cross-cutting policy assumptions by scenario for selected
regions
Selected recent initiatives for electric mobility
Recent developments in regional power sector policies includedin the New Policies Scenario
Estimated value of global fossil-fuel consumption subsidies

Renewable Share of supported wind and solar PV generation by mechanism
energytype
Final energy

Share of global final energy consumption covered by mandatory
efficiency regulations by sector

Renewable Selected renewable energy targets proposed or introduced
energysince mid-2016
CO2 emissions

Gas

Predictions on Coal
production and Fossil-fuel
sales
Power
supplySpecific
sectorAverage CO2 emissions intensity of electricity generation in
selected regions
World coal demand, production and trade
Changes in oil production by region
Offshore oil and gas production
Deployment levels of electric cars
Deployment levels of solar PV

Source IEA Energy Technology Perspectives 2017, IEA World Energy Outlook 2017
4-28

PRI The Inevitable Policy Response
PRI IPR
Scenarios for possible short-term climate policies released by the PRI in
September 2019

The International Principles for Responsible Investment (PRI) is an initiative by global
investors to incorporate ESG issues into investment decisions and actions asshareholders, improve long-term investment performance, and better fulfill fiduciary
responsibilities.
The PRI launched The Inevitable Policy Response (IPR) as a project for investors to
prepare for possible short-term climate-related policy risks. As part of the project,
Forecast Policy Scenario scenarios have been developed to depict the impact on
2025-2050 of policies expected to be released between 2023 and 2025.
Scenarios include the perspectives of how will the economy be affectwhich
sectors are most exposed to risk, and which asset classes are affected.

PRI: The Forecast Policy Scenario (FPS)
Hypothetical policy for the 8 items

Sources: PRI Awareness Working Group, "Introduction of ESG Investment Standards" (2013), "The Inevitable Policy Response : Policy Forecasts", PRI (2019.9)
4-29

Parameters in PRI IPR 1/5
Carbon pricing, Energy demand

PRI The Inevitable Policy Response

Datasets

Country / region
Unit

#1

Timeframe#2

Carbonpricing

Several
areas

Japan

Corresponding
page
PolicyForecasts

Carbon pricing

US$

Coal demand by sector (Electricity, Industry, Other)million tonnes
coal per year

/ '25 / '30 / '35 / '40 / '45 / '50

p.27, 52

Oil demand by sector (Transport, Industry, Buildings, Other)

MMbbl/d/ '25 / '30 / '35 / '40 / '45 / '50

p.28, 46

Gas demand by sector (Electricity, Buildings, Industry, Other)bcm per year

/ '25 / '30 / '35 / '40 / '45 / '50

p.30, 55

/ '25 / '30 / '35 / '40 / '45 / '50

p.34, 67

Industry fuel mix (Coal (unabated) , Coal CCS, Gas (unabated),
EJ per year
Gas CCS, Oil, Biomass, Heat, Electricity, Hydrogen)Hydrogen contribution of energy demand in hard-to abate
sectors (Iron and steel, Non-metallic minerals, Chemicals)(Hydrogen, Other fuels)%

Biomass Availability

EJ

p.35, 71

Primary energy demand (Coal, Oil, Natural Gas, Biomass, Other
EJ per year
low-carbon)

EnergydemandGlobal/ '25 / '30 / '35 / '40 / '45 / '50

p.39, 74, 84/ '25 / '30 / '35 / '40 / '45 / '50

p.44

Primary energy demand (Coal, Oil, Natural Gas, Biomass, Other
low-carbon)(IPR FPS, IEA NPS, IEA SDS, Shell Sky, Statkraft
EJ per year
Scenario)

p.45

Oil use by sector, FPS and comparator scenarios (Transport,
Industry, Buildings, Total, Other) (IPR FPS, IEA SDS, Shell Skye, MMbbl/d
BP Energy Outlook, OPEC Reference case)p.47

Coal demand by sector, IPR FPS vs comparators (Electricity,
million tonnes
Industry, Other, Total) (IPR FPS, IEA NPS, IEA SDS, Shell Sky) coal per year

p.53

Coal demand by industry sector (Non-metallic minerals, Iron andmillion tonnes
steel, Chemical and petrochemical, Pulp and paper, Non-ferrous
coal per year
metals, Autogeneration, Other industry)p.54

Gas use by sector, FPS and comparator scenarios (Electricity,
Buildings, Industry, Other) (IPR FPS, IEA NPS, IEA SDS)

p.56

bcm per year

Sources
4-30

Parameters in PRI IPR 2/5
Energy mix 1/2

PRI The Inevitable Policy Response

Datasets#1

Country / region
Unit#2Electricity generation by fuel (Low-carbon, Gas, Coal)

Timeframe

Several
areas

Japan

Correspondingpage%/ '25 / '30 / '35 / '40 / '45 / '50

p.27, 52

Electricity generation mix (Coal ,Coal CCS, Oil, Gas, Gas CCS, Biomass,%
Biomass w/CCS, Nuclear, Hydro, Solar, Wind)/ '25 / '30 / '35 / '40 / '45 / '50

p.31,48

Electricity generation, IPR FPS vs comparators (Coal, Coal CCS, Oil, Gas,
ThousandGas CCS, Biomass, Biomass with CCS, Nuclear, Hydro, Solar, Wind,
TWh
Other low-carbon) (IPR FPS, IEA NPS, IEA SDS, BNEF NEO)

p.49

Generation mix (Western Europe) (Coal, Coal CCS, Oil, Gas, Gas CCS,
Biomass, Biomass with CCS, Nuclear, Hydro, Solar, Wind, Other lowcarbon)TWh/ '30 / '40 / '50

p.50

Generation mix (United States) (Coal, Coal CCS, Oil, Gas, Gas CCS,
Biomass, Biomass with CCS, Nuclear, Hydro, Solar, Wind, Other lowcarbon)TWh/ '30 / '40 / '50

p.50

Generation mix (China) (Coal, Coal CCS, Oil, Gas, Gas CCS, Biomass,
Biomass with CCS, Nuclear, Hydro, Solar, Wind, Other low-carbon)TWh/ '30 / '40 / '50

p.50

TWh

/ '30 / '40 / '50

p.51

Generation mix (India) (Coal, Coal CCS, Oil, Gas, Gas CCS, Biomass,
Energy Biomass with CCS, Nuclear, Hydro, Solar, Wind, Other low-carbon)
Generation mix (Japan) (Coal, Coal CCS, Oil, Gas, Gas CCS, Biomass,
mix
Biomass with CCS, Nuclear, Hydro, Solar, Wind, Other low-carbon)TWh/ '30 / '40 / '50

p.51

Generation mix (Canada) (Coal, Coal CCS, Oil, Gas, Gas CCS, Biomass,
TWh
Biomass with CCS, Nuclear, Hydro, Solar, Wind, Other low-carbon)/ '30 / '40 / '50

p.51

Generation mix (Australia) (Coal, Coal CCS, Oil, Gas, Gas CCS, Biomass,
TWh
Biomass with CCS, Nuclear, Hydro, Solar, Wind, Other low-carbon)/ '30 / '40 / '50

p.51/ '25 / '30 / '35 / '40 / '45 / '50

p.58

Nuclear generation

Thousand
TWh

Nuclear generation by region, 2020 and 2050 (Western Europe, UnitedStates, Australia, Canada, China, India, Japan, World)

TWh per year

World nuclear generation in 2040, IPR FPS vs comparators (IPR FPS,IEA NPS, IEA SDS, BNEF NEO)

TWh per year

Gas generation by region, 2020 and 2050 (United States, China, Western
TWh per year
Europe, Japan, India, Australia, Canada, World)
World gas generation in 2040, IPR FPS vs comparators (IPR FPS, IEA
NPS, IEA SDS)

Sources
4-31

GlobalTWh per year

,

p.59
p.59

,

p.60
p.60

PRI The Inevitable Policy Response
Parameters in PRI IPR 3/5
Energy mix 2/2, Price of key commodities/products, Policy 1/2
Datasets#1

Energy mix

Country / region#2

Timeframe

GlobalSeveral
areas

Japan

Corresponding
page

Coal generation by region (China, USA, India, Western Europe,
Australia, Japan, Canada, ROW)

TWh peryear

Coal generation by region (China, USA, India, Western Europe,
Australia, Japan, Canada, ROW)

TWh peryear

p.61

Industry fuel mix, IPR FPS and comparator scenarios (Coal(unabated) , Coal CCS, Gas (unabated), Gas CCS, Oil, Biomass,Heat, Electricity, Hydrogen) (IPR FPS, IEA NPS, IEA SDS)

%

p.68

Iron and steel sector energy mix (Coal (unabated) , Coal CCS, Gas(unabated), Gas CCS, Oil, Biomass, Heat, Electricity, Hydrogen)(IPR FPS, IEA NPS, IEA SDS)

EJ per year

/ '25 / '30 / '35 / '40 / '45 / '50

p.69

Cement sector energy mix (Coal (unabated) , Coal CCS, Gas(unabated), Gas CCS, Oil, Biomass, Heat, Electricity, Hydrogen)(IPR FPS, IEA NPS, IEA SDS)

EJ per year

/ '25 / '30 / '35 / '40 / '45 / '50

p.69

Biomass demand by sector (Industry, Agriculture, Electricity,
Transport)

EJ per year

/ '30 / '40 / '50

p.72

CCS power generation in the SDS scenario (Coal with CCS, Gas
with CCS, Share of CCS)

TWh, %/ '25 / '30 / '35 / '40

p.73

Coal-fired power generation in the SDS scenario (Coal with CCSChina, Coal with CCS-ROW, Coal total)TWh/ '25 / '30 / '35 / '40

p.73

Zero-carbon power, Nuclear capacity and renewable power
generation

TWh

Price of key Food Price Index (2020=100)
commodities Share of food in household expenditure/products
Bioenergy Price Index (2020=100)

PolicyUnit/ '30 / '40 / '50

p.61

Policy Forecasts(Index)/ '25 / '30 / '35 / '40 / '45 / '50

p.38, 82%

/ '25 / '30 / '35 / '40 / '45 / '50

p.38, 82

(Index)/ '25 / '30 / '35 / '40 / '45 / '50

p.39, 74, 84

phase-out of coal in electricity globally-

Policy Forecasts

ICE sales bans-

Policy Forecasts

Carbon Capture and Storage (CCS) and industry decarbonisation-

Policy Forecasts

Energy efficiency-

Policy Forecasts

Afforestation and reforestation

Mha

Policy Forecasts

Restoration of degraded Land

Mha

Policy Forecasts

Soil sequestration-

Policy Forecasts

Sources
4-32

Parameters in PRI IPR 4/5
Policy 2/2, CO2 emissions

PRI The Inevitable Policy Response

Datasets#1

PolicyCO2emissions

Sources
4-33

Country / region
Unit

#2

Timeframe

GlobalSeveral
areas

Japan

Corresponding
page

Dietary shifts-

Policy Forecasts

Mitigation potential

GtCO2e/yr

Policy Forecasts

Productivity-

Policy Forecasts

Enabling the Green Economy
Global energy-related CO2 emissions (IPR FPS, IEA NPS, IEA SDS,
GtCO2
/ '25 / '30 / '35 / '40 / '45 / '50
IPCC P1)
Global GHG Emissions (Land CO2, Land CH4, Land N2O, Industrial/ '25 / '30 / '35 / '40 / '45 / '50
Process CO2, Energy net CO2 emissions , CH4 from gas production, GtCO2e
Total)/ '25 / '30 / '35 / '40 / '45 / '50
Global energy-related CO2 emissions (IPR FPS, IEA NPS, IEA SDS) GtCO2
Global GHG Emissions (Land CO2, Land CH4, Land N2O, Industrial
Process CO2, Energy net CO2 emissions , CH4 from gas production, GtCO2 2020-2100 (every 5 years)
Total)
Land use GHG emissions (CO2, CH4, N2O, Total Baseline Gt
GtCO2e 2020-2100 (every 5 years)
CO2e/year)(IPR FPS)
GtCO2e/ '25 / '30 / '35 / '40 / '45 / '50
Global GHG emissions (IPR SPF, IPCC P1, IPCC P2)
CO2 emissions by sector in 2040 (Power) (Low-carbon generation,
GtCO2
Total electricity demand)
CO2 emissions by sector in 2040 (Transport) (Low carbon fuel share,
GtCO2
Total fuel demand)
CO2 emissions by sector in 2040 (Industry) (Low carbon fuel share,
GtCO2
Total fuel demand)
CO2 emissions by sector in 2040 (Buildings) (Low carbon fuel share,
GtCO2
Total fuel demand)
Energy CO2 emissions by fuel (Coal, Oil, Natural Gas, Fossil CCS,
GtCO2 2020-2100 (every 5 year)
Biomass CCS, Net CO2)
Emissions captured globally per year (Power (fossil), Power (biomass),
GtCO2/ '30 / '40 / '50
Industry) (IEA 2C, IEA B2C, IPCC 2C avg, IPCC 1.5 avg, Shell Sky)
Regional land use emissions (Australia, Canada, Developing East
Asia, United States, Western Europe, Africa, Brazil, Central and South GtCO2e// '25 / '30 / '35 / '40 / '45 / '50
year
America, Middle East, Mexico, China, Eurasian Economic Union,
Former Soviet Union, India, Other developing Asia)

Policy Forecasts
p.15
p.18, 88
p.19
p.20
p.21, 79
p.22, 89
p.26
p.26
p.26
p.26
p.36, 90
p.75

p.80

Parameters in PRI IPR 5/5
Predictions on production and sales, OtherCountry / region

Datasets#1

ICE passenger vehicles
Predictions on
Passenger vehicles stock by powertrain, IPR FPS and BNEF
production
scenarios (ICE, ULEV)
and sales

Corresponding
page

Unit

Timeframe

milion vehicles/ '25 / '30 / '35 / '40 / '45 / '50

p.28, 63

billion/ '25 / '30 / '35 / '40 / '45 / '50

p.29, 46#2
Passenger vehicles by powertrain (ICE, ULEV)%

GlobalSeveral
areas

Japan

p.64

Truck travel by powertrain (ICE, ULEV)

Billion vehicle km

Trucks stock share by powertrain, IPR FPS and BNEF
scenarios%

Cumulative afforested landMha

/ '25 / '30 / '35 / '40 / '45 / '50

p.40, 81

Total Forest LandMha

/ '25 / '30 / '35 / '40 / '45 / '50

p.40, 81

Crop Yields

tDM/ha/ '25 / '30 / '35 / '40 / '45 / '50

p.41

Irrigated areaMha

/ '25 / '30 / '35 / '40 / '45 / '50

p.41/ '25 / '30 / '35 / '40 / '45 / '50

p.83/ '25 / '30 / '35 / '40 / '45 / '50

p.85/ '25 / '30 / '35 / '40 / '45 / '50

p.86

Regional food price indices (2020=100) Australia, Canada,
Developing East Asia, United States, Western Europe, Africa,
Brazil, Central and South America, Middle East, Mexico, China, (Index)
Eurasian Economic Union, Former Soviet Union, India, Other
developing Asia)
Irrigated area by region (Australia, Canada, Developing East
Asia, United States, Western Europe, Africa, Brazil, Central and
Mha
South America, Middle East, Mexico, China, Eurasian Economic
Union, Former Soviet Union, India, Other developing Asia)
Total cropland by region (Australia, Canada, Developing East
Asia, United States, Western Europe, Africa, Brazil, Central and
Mha
South America, Middle East, Mexico, China, Eurasian Economic
Union, Former Soviet Union, India, Other developing Asia)

Other

PRI The Inevitable Policy Response/ '25 / '30 / '35 / '40 / '45 / '50

p.65
p.66

Sources
4-34

SSP Public Database Version2.0
SSP
SSPs are developed as socioeconomic scenarios based on recent policies
and socioeconomic conditions

Outline of Shared Socioeconomic Pathways
National Institute for Environmental Research (Japan), PNNL (United States), PBL (Netherlands), IIASA(Austria), and PIK (Germany) to develop SSPs based on the issues of SRES, an existing socioeconomic
scenario for evaluating climate change *1.
SPES had an older base year (1990) and failed to reflect recent policies.
SSPs are developed considering recent changes in external environments such as policies,
demographics, GDPs, and the increase in urbanization *2, and as scenarios related to existing

5 SSP Scenario Structures
Scenario-Summary *3

SSP

Scenario

SSP1

Sustainability

Scenarios that envisage both international mitigation
and adaptation measures related to climate change

SSP2

Middle of the Road

Scenario based on the assumption that current
socioeconomic growth will continue

SSP3

Regional Rivalry

A scenario in which countries are segmented and it isdifficult to implement international mitigation andadaptation measures

SSP4

Inequality

Scenario that assumes an expanding disparity in theinternational economy and society

SSP5

Fossil-fueled
Development

Scenario that assumes the development of theinternational community by relying on fossil fuels* 1: https://www.nies.go.jp/whatsnew/20170221/20170221.html *2:https://unfccc.int/sites/default/files/part1_iiasa_rogelj_ssp_poster.pdf* 3:https://www.carbonbrief.org/explainer-how-shared-socioeconomic-pathways-explore-future-climate-change

4-35

Parameters in SSP Public Database Version2.0 1/10
IAM Scenarios model: GDP, Population, Primary Energy,
Secondary Energy (Electricity)
Category
Large

Medium

Unit

Small

GDP

SSP
SSP1 SSP2 SSP3 SSP4 SSP5

SSP Public Database Version2.0

RemarkbillionUS$2005/yr

GDP PPPPopulation Population

millionPrimary Energy/Energy

Secondary Energy(Electricity)

Total

EJ/yr

Biomass(Total / Traditional / with CCS/
without CCS)

EJ/yr

Some data about CCS and Traditional
biomass are not available

Coal (Total / with CCS /without CCS)

EJ/yr

Some data about CCS is not available

Oil (Total / with CCS / wihout CCS)

EJ/yr

Some data about CCS is not available

Gas (Total / with CCS/ without CCS)

EJ/yr

Some data about CCS is not available

Fossil (Total , with CCS, wihout CCS)

EJ/yr

Some data about CCS is not available

Nuclear

EJ/yr

Non-Biomass Renewables

EJ/yr

Hydro

EJ/yr

Geothermal

EJ/yr

Other

EJ/yr

Solar

EJ/yr

Wind

EJ/yr

Secondary Energy Trade

EJ/yr

Total

EJ/yr

Biomass(Total / with CCS/ without CCS)

EJ/yr

Some data about CCS is not available

Coal (Total / with CCS /without CCS)

EJ/yr

Some data about CCS is not available

Oil

EJ/yr

Gas (Total / with CCS/ without CCS)

EJ/yr

Geothermal

EJ/yr

Hydro

EJ/yr

Non-Biomass Renewables

EJ/yr

Nuclear

EJ/yr

Solar

EJ/yr

Wind

EJ/yr

Some data about CCS is not available

Listed parameters that is capable of extracting global data
Listed parameters from 2005, ever 5 years between 2015~2100

Source SSP Public Database Version 2.0
4-36

SSP Public Database Version2.0
Parameters in SSP Public Database Version2.0 2/10
IAM Scenarios model : Secondary energy, Final energy, Energy service
Category
Large

MediumSecondary Energy (Gases)

Secondary Energy (Heat)
Secondary Energy(Hydrogen)

Small

Unit

Total

EJ/yr

Biomass

EJ/yr

Coal

EJ/yr

Natural Gas

EJ/yr

Total

EJ/yr

Geothermal

EJ/yr

Total

EJ/yr

EJ/yr

Biomass(Total / with CCS/ without CCS) EJ/yr
EJ/yr
Secondary Energy (Liquids) Coal (Total / with CCS /without CCS)
Gas (Total / with CCS/ without CCS)

EJ/yr

Oil

EJ/yr

Final Energy (Solids)

Final Energy
Energy Service(Transportation)

Total

EJ/yr

Electricity

EJ/yr

Gases

EJ/yr

Heat

EJ/yr

Hydrogen

EJ/yr

Liquids

EJ/yr

Solar

EJ/yr

Total

EJ/yr

Biomass (Total, Traditional)

EJ/yr

Coal

EJ/yr

Industry

EJ/yr

Residential and Commercial

EJ/yr

Transportation

EJ/yr

Freightbn tkm/yr

Passengerbn pkm/yr

Source SSP Public Database Version 2.0
4-37

Some data about CCS is not available

EJ/yr

Secondary Energy (Solids)

Final Energy

RemarkBiomass(Total / with CCS/ without CCS) EJ/yr
EJ/yr
Electricity
Total

EnergySSP
SSP1 SSP2 SSP3 SSP4 SSP5

Some data about Traditional biomass is not available

Listed parameters that is capable of extracting global data
Listed parameters from 2005, ever 5 years between 2015~2100

SSP Public Database Version2.0
Parameters in SSP Public Database Version2.0 3/10
IAM Scenarios model Land Cover, Emissions(unharmonized)
Category
Large

MediumLand Cover

Built-up Area

million ha

Croplandmillion ha

Forestmillion ha

Pasturemillion ha

SSP
SSP1 SSP2 SSP3 SSP4 SSP5

RemarkMt BC/yr

BC
CH4

Total

Mt CH4/yr

Fossil Fuels and Industry

Mt CH4/yr

Land Use

Mt CH4/yr
Mt CO/yr

CO
CO2

Mt CO2/yr

Total

Mt CO2/yr

CO2 (Carbon Capture and Total
Storage)
Biomass
Emissions (unharmonized)

Unit

Small

CO2

Mt CO2/yr

Fossil Fuels and Industry

Mt CO2/yr

Land Use

Mt CO2/yr
Mt CO2-equiv/yr

F-Gases

Mt CO2-equiv/yr

Kyoto Gases
N2O

Total

kt N2O / yr

Land Usekt N2O / yr

NH3

Mt NH3/yr

NOx

Mt NO2/yr

OC

Mt OC/yr

SulfurMt SO2/yr

VOC

Mt VOC/yr
Listed parameters that is capable of extracting global data
Listed parameters from 2005, ever 5 years between 2015~2100

Source SSP Public Database Version 2.0
4-38

Parameters in SSP Public Database Version2.0 4/10
IAM Scenarios model Emissions (harmonized), Climate
Category
Large

MediumTotal

Mt CH4/yr

Fossil Fuels and Industry

Mt CH4/yr

Land Use

Mt CH4/yr

Emissions (harmonized)

Total

Mt CO2/yr

Fossil Fuels and Industry

Mt CO2/yr

Land Use

Mt CO2/yr

F-Gases

Mt CO2-equiv/yr

Kyoto Gases

Mt CO2-equiv/yr

N2O

kt N2O/yr

NH3

Mt NH3/yr

NOx

Mt NO2/yr

OC

Mt OC/yr

SulfurMt SO2/yr
Mt VOC/yr

VOC
Concentration

ClimateForcing

Temperature

Remark

Mt CO/yr

CO
CO2

SSP
SSP1 SSP2 SSP3 SSP4 SSP5

Mt BC/yr

BC
CH4

Unit

Small

SSP Public Database Version2.0

CO2

ppm

CH4

ppb

N2O

ppb

Total

W/m2

CO2

W/m2

CH4

W/m2

N2O

W/m2

Kyoto Gases

W/m2

F-Gases

W/m2

Aerosol

W/m2

Global Mean
Listed parameters that is capable of extracting global data
Listed parameters from 2005, ever 5 years between 2015~2100

Source SSP Public Database Version 2.0
4-39

SSP Public Database Version2.0
Parameters in SSP Public Database Version2.0 5/10
IAM Scenarios model Agricultural/Economic/Technological Indicators
Category
Large

MediumDemandAgricultural Indicators
Production

Economic Indicators

Technological
Indicators

Unit

Small
Crops

million t DM/yr

Crops (Energy)

million t DM/yr

Livestock

million t DM/yr

Crops (Energy)

million t DM/yr

Crops (Non-Energy)

million t DM/yr

Livestock

million t DM/yr

SSP
SSP1 SSP2 SSP3 SSP4 SSP5

Remarkbillion US$2005/yr

Consumption

US$2005/t CO2

Price (Carbon)

Capacity (Electricity)

Total

GW

Biomass

GW

Coal

GW

Gas

GW

Geothermal

GW

Hydro

GW

Nuclear

GW

Oil

GW

Other

GW

Solar (Total, CSP, PV) GW

Some data about CSP and PV is notavailable

Wind (Total, Offshore,
Onshore)Some data about Offshore and Onshore
is not available

GW

Listed parameters that is capable of extracting global data
Listed parameters from 2005, ever 5 years between 2015~2100

Source SSP Public Database Version 2.0
4-40

Parameters in SSP Public Database Version2.0 6/10
CMIP6 Emissions model: BC, C2F6, CF4, CH4
Category
Large

BC

MediumAgricultural Waste Burning

Mt BC/yr

Aircraft

Mt BC/yr

Energy Sector

Mt BC/yr

Forest Burning

Mt BC/yr

Grassland Burning

Mt BC/yrIndustrial Sector

Mt BC/yrInternational Shipping

Mt BC/yrPeat Burning

Mt BC/yr

Residential Commercial Other

Mt BC/yr

Transportation Sector

Mt BC/yr

Total

Mt BC/yr

Waste

Mt BC/yr

SSP
SSP1

SSP2

SSP3

SSP4

SSP5

Remark

kt C2F6/yr
kt CF4/yr

C2F6
CF4

CH4

Unit

SSP Public Database Version2.0

Agricultural Waste Burning

Mt CH4/yr

Agriculture

Mt CH4/yr

Energy Sector

Mt CH4/yr

Forest Burning

Mt CH4/yr

Grassland Burning

Mt CH4/yr

Industrial Sector

Mt CH4/yr

International Shipping

Mt CH4/yr

Peat Burning

Mt CH4/yr

Residential Commercial Other

Mt CH4/yr

Transportation Sector

Mt CH4/yr

Total

Mt CH4/yr

Waste

Mt CH4/yr
Listed parameters that is capable of extracting global data
Listed parameters from 2005, ever 5 years between 2015~2100

Source SSP Public Database Version 2.0
4-41

Parameters in SSP Public Database Version2.0 7/10
CMIP6 Emissions model CO2, CO, HFC, N2O
Category
Large

CO2

CO

MediumUnit

AFOLU
Aircraft

Mt CO2/yr

Energy Sector

Mt CO2/yr

Industrial Sector

Mt CO2/yr

International Shipping

Mt CO2/yr

Residential Commercial Other
Solvents Production andApplication
Transportation Sector

Mt CO2/yr

Total

Mt CO2/yr

Waste

Mt CO2/yr

Agricultural Waste Burning

Mt CO/yr

Aircraft

Mt CO/yr

Energy Sector

Mt CO/yr

Forest Burning

Mt CO/yr

Grassland Burning

Mt CO/yrIndustrial Sector

Mt CO/yrInternational Shipping

Mt CO/yrPeat Burning

Mt CO/yr

Residential Commercial Other

Mt CO/yr

Transportation Sector

Mt CO/yr

Total

Mt CO/yr

Waste

Mt CO/yr

SSP
SSP1

SSP2

SSP3

SSP4

SSP5

SSP Public Database Version2.0

Remark

Mt CO2/yr

Mt CO2/yr
Mt CO2/yr

HFC

Mt CO2-equiv/yr

N2O

kt N2O/yr
Listed parameters that is capable of extracting global data
Listed parameters from 2005, ever 5 years between 2015~2100

Source SSP Public Database Version 2.0
4-42

Parameters in SSP Public Database Version2.0 8/10
CMIP6 Emissions model NH3, NO2
Category
Large

NH3

NO2

MediumUnit

Agricultural Waste Burning

Mt NH3/yr

Agriculture

Mt NH3/yr

Aircraft

Mt NH3/yr

Energy Sector

Mt NH3/yr

Forest Burning

Mt NH3/yr

Grassland Burning

Mt NH3/yr

Industrial Sector

Mt NH3/yr

International Shipping

Mt NH3/yr

Peat Burning

Mt NH3/yr

Residential Commercial Other

Mt NH3/yr

Transportation Sector

Mt NH3/yr

Total

Mt NH3/yr

Waste

Mt NH3/yr

Agricultural Waste Burning

Mt NOx/yr

Agriculture

Mt NOx/yr

AircraftEnergy Sector

Mt NOx/yr

Forest Burning

Mt NOx/yr

Grassland Burning

Mt NOx/yr

Industrial Sector

Mt NOx/yr

International Shipping

Mt NOx/yr

Peat Burning
Residential Commercial Other

Mt NOx/yr
Mt NOx/yr

Transportation Sector

Mt NOx/yr

Total

Mt NOx/yr

Waste

Mt NOx/yr

SSP
SSP1

SSP2

SSP3

SSP4

SSP5

SSP Public Database Version2.0

RemarkMt NOx/yr

Listed parameters that is capable of extracting global data
Listed parameters from 2005, ever 5 years between 2015~2100

Source SSP Public Database Version 2.0
4-43

Parameters in SSP Public Database Version2.0 9/10
CMIP6 Emissions model OC, SF6, Sulfur
Category
Large

OC

MediumAgricultural Waste Burning

Mt OC/yr

Aircraft

Mt OC/yr

Energy Sector

Mt OC/yr

Forest Burning

Mt OC/yr

Grassland Burning

Mt OC/yrIndustrial Sector

Mt OC/yrInternational Shipping
Peat Burning

Mt OC/yr

Residential Commercial Other

Mt OC/yr

Transportation Sector

Mt OC/yr

Total

Mt OC/yr

Waste

Mt OC/yr

Agricultural Waste Burning

kt SF6/yr
Mt SO2/yr

Aircraft

Mt SO2/yr

Energy Sector

Mt SO2/yr

Forest Burning

Mt SO2/yr

Grassland Burning

Mt SO2/yr

Industrial Sector

Mt SO2/yr

International Shipping

Mt SO2/yr

Peat Burning

Mt SO2/yr

Residential Commercial Other

Mt SO2/yr

Transportation Sector

Mt SO2/yr

Total

Mt SO2/yr

Waste

Mt SO2/yr

SF6

Sulfur

Unit

SSP
SSP1

SSP2

SSP3

SSP4

SSP5

SSP Public Database Version2.0

RemarkMt OC/yr

Listed parameters that is capable of extracting global data
Listed parameters from 2005, ever 5 years between 2015~2100

Source SSP Public Database Version 2.0
4-44

Parameters in SSP Public Database Version2.0 10/10
CMIP6 Emissions model VOC
Category
Large

VOC

MediumUnit

Agricultural Waste Burning

Mt VOC/yr

Aircraft

Mt VOC/yr

Energy Sector

Mt VOC/yr

Forest Burning

Mt VOC/yr

Grassland Burning

Mt VOC/yr

Industrial Sector

Mt VOC/yr

International Shipping

Mt VOC/yr

Peat Burning

Mt VOC/yr

Residential Commercial Other

Mt VOC/yr

Solvents Production and Application

Mt VOC/yr

Transportation Sector

Mt VOC/yr

Total

Mt VOC/yr

Waste

Mt VOC/yr

SSP
SSP1

SSP2

SSP3

SSP4

SSP5

SSP Public Database Version2.0

RemarkListed parameters that is capable of extracting global data
Listed parameters from 2005, ever 5 years between 2015~2100

Source SSP Public Database Version 2.0
4-45

Appendix.
Appendix1. Parameter list
Appendix2. Physical risk assessment tools
Appendix3. Examples of scenario analysis

Appendix.
Provide useful materials for scenario analysis based on supporting case studies

4-46

Physical risk assessment tools referred in TCFD report
Tools at a global level
WRI Aqueduct Atlas

Risk mapping tool that helps companies, investors, governments, and other users understand where andhow water risks and opportunities are emerging worldwide

WBCSD Water Tool

A multifunctional resource for identifying corporate water risks and opportunities, including a workbook, amapping functionality, and Google earth compatibility
Organizations can compare sites based on water availability, sanitation, population, and biodiversity

Global Agro- Ecological Zones

Based on he Global Agro-Ecological Zones (GAEZ) methodology for assessing agricultural resources
and potential
Users can understand forecast changes in yields, production, and other outputs due to climate change.

Tools at a local / national level
UK Climate Impact
Programme

Gathered historical climate records and future climate projections
Climate projections cover low-, medium- and high- emissions scenarios and can be viewed through an
online user interface and associated briefing report

US Interagency Archive ofDownscaled Climate Data andInformation

Provides an archive of simulated historical and future climatology and hydrology
Maintained at Lawrence Livermore National Lab by a consortium of federal and non-federal partners..
Information available from this archive is free and open to all

Management and Impacts of
Climate Change (France)

Meteo-France is the primary provider of climate projections out to 2100, covering temperature,
Projections are provided for the medium term (2021-2050) and long term (2071-2100)

Similar resources are available in other countries including, but not limited to, Australia, Canada, Germany, Japan, the Netherlands, and South Africa
Source
4-47

-

-29

Physical risk tools used in this project (excerpt)#1

Issuing agency

World Resources
Institute (WRI)

Tool name

URL

Subject Area

Explanation Related
Page

Aqueduct Water Tool

https://www.wri.org/aqueduct

Global4-49

2 AP-PLAT

Climate Impact Viewer

https://adaptationplatform.nies.go.jp/en/ap-plat/

Asia

4-51

3 World Bank

Climate Change
Knowledge Portal

http://sdwebx.worldbank.org/clim
ateportal/

Global4-50

http://climateadapt.eea.europa.eu/

Europehttp://www.ipcc-data.org/

GlobalEuropean Climate
4 European Commission Adaptation Platform(Climate-ADAPT)

5 IPCC TGICA

IPCC Data Distribution
CentreEuropean Adaptation
Platform

Database of theIntergovernmental
Panel on Climate
Change (IPCC)

4-48

WRI AQUEDUCT Water Risk Atlas

AQUEDUCT Water Risk Atlas (WRI)
AQUEDUCT Water Risk Atlas
IssuingagencyWorld Resource Institution

Indicators

Scenario

Pessimistic / Business as usual /Optimistic

Indicators (Baseline)

Timeframe

Baseline / 2030~2040

Physical risks(quantity)

Water stress
Water Depletion
Interannual Variability
Seasonal Variability
Groundwater Table Decline
Riverine flood risk
Coastal flood risk
Drought Risk

Physical risks(quality)

Untreated Connected Wastewater
Coastal Eutrophication Potential

Regulatory andreputational risk

Unimproved / No Drinking Water
Unimproved / No Sanitation
Peak RepRisk Country ESG Risk Index
Indicators (2030-2040)

Water StressSeasonal Variability
Water Supply
Water Demand
Source AQUEDUCT Water Risk Atlas https://www.wri.org/applications/aqueduct/water-riskatlas/#/?advanced=false&basemap=hydro&indicator=w_awr_def_tot_cat&lat=30&lng=80&mapMode=view&month=1&opacity=0.5&ponderation=DEF&predefined=false&projection=absolute&scenario=optimistic&scope=baseline&timeScale=annual&year=baseline&zoom=34-49

World Bank Climate Change Knowledge Portal

Climate Change Knowledge Portal (World Bank)
Climate Change Knowledge Portal
IssuingagencyWorld Bank

Scenario

RCP2.6 / 4.5 / 6.0 / 8.5

Indicators (excerpt)
Category

Timeframe

2020-2039 / 2040-2059 / 2060-2079/
2080-2099

Essential Climate Variables

Temperature Indicators

Precipitation Indicators
Source World Bank, Climate Change Knowledge Portal
https://climateknowledgeportal.worldbank.org/country/japan/climate-dataprojectionsl

Agriculture Indicators

Monthly Temperature
Monthly Maximum Temperature
Monthly Minimum Temperature
Monthly Precipitation
Maxima of Daily Tmax
Minima of Daily Tmin
Summer Days (Tmax > 25 )Tropical Nights (Tmin > 20 )Frost Days (Tmin < 0 )Ice Days (Tmax < 0 )Hot Day (Tmax > 35 )Hot Day (Tmax > 40 )Heat Index 35
Days with Rainfall > 20mm
Maximum Monthly Rainfall (10-yr RL)
Maximum Monthly Rainfall (25-yr RL)
Days with Rainfall > 50mm
Rainfall of Very Wet Days
Maximum Daily Rainfall
Maximum 5-day Rainfall
Maximum Daily Rainfall (10-yr RL)
Maximum 5-day Rainfall
Maximum daily Rainfall (25-yr RL)
Maximum 5-day Rainfall (25-yr RL)
Growing Season Length
Days of Consecutive Dry Spell
Days of Consecutive Wet Spell
Rainfall Seasonality

4-50

AP-PLAT Climate Impact Viewer

Climate Impact Viewer (AP-PLAT)
Climate Impact Viewer
IssuingagencyAP-PLAT

Scenario

RCP2.6 / 4.5 / 6.0 / 8.5

Timeframe

Current / Mid of 21th century /End of 21th century

Indicators
ClimateTemperature
Precipitation

Water resources

Falkenmark Index

Vegetation

Net Primary Production
Vegetation carbon
Soil carbon pool
Net Biome Production
Soil erosion
Fire
Heat stress

Source https://a-plat.nies.go.jp/ap-plat/asia_pacific/index.html
4-51

Appendix.
Appendix1. Parameter list
Appendix2. Physical risk assessment tools
Appendix3. Examples of scenario analysis

Appendix.
Provide useful materials for scenario analysis based on supporting case studies

4-52

Extract examples of the disclosure of scenario analysis that can be used
as reference for further implementation
Analysis stepStage

Examples of disclosure

Prep

2

3

4

For beginning
How the subjects for analysis are
scenario analysis chosen

Mitsubishi Corporation (Example

Assessmateriality ofclimate-relatedrisks

Mitsubishi Corporation (Example -2)
Sekisui Chemical Co., Ltd. (Example -1)
JFEHD (Example -1)

Identify anddefine range of
scenarios

Stage2
How the risks and opportunities
associated with transition / physical risks
are describedStage1

Which scenarios are used

Stage2

Evaluatebusiness impacts How the business impacts aredescribed

5

Identify potential
responses
4-53

Sekisui Chemical Co., Ltd. (Example
BP (Example I)
Downer Group (Example II)

Hitachi, Ltd. (Example-2)

Atlantica Yield(Example III)
BHP (Example IV)
South32 (Example V)

Mitsubishi Corporation(Example -3)
JFEHD (Example -2)
Kirin HD (Example )Stage2

How resilience against climatechange is described-1))

[Example-1: Mitsubishi Corporation]

Mitsubishi Corporation selects the subjects of analysis from the sectors of businessthat has a large financial / non-financial impact and from TCFD recommendations
Company nameand sector

Mitsubishi Corporation

Trading company

Choose subjects for analysis
Scenario analysis chooses industries in which businesses with significant financial and non-financial impacts belong.
Furthermore, based on TCFD Recommendations, industries belonging to 4 sectors (energy, transportation, materials andbuildings, agriculture, food and forestry products) that are considered to have particularly large impacts on climate change
are selected as target industries.

Source:ESG DATA BOOK 2019

4-54

[Example -2: Mitsubishi Corporation]
Mitsubishi Corporation assesses the significance of risks on a 3-point scale by multiplying
the impact on demand and the impact on earnings. Also conducted risk assessments related
to the value chain
Company nameand sector

Mitsubishi Corporation

Trading company

Assess materiality of climate-related risks
Identify businesses with financial and non-financial
significance
Extract climate-related opportunities and risks under a 2 C
scenario for each element of the industry value chain
In the future, company plan to confirm the impact on each of
our businesses, and to consider how to monitor them(including identifying indicators and setting targets), as well
as strategies and risk management methods
Description about risk analysis in the value chain(Integrated report 2019)

Sources:
4-55

ESG DATA BOOK 2019

Integrated Report 2019

Each risk and opportunity is divided intoandand the impact of climate change
is plotted and classified into large, medium, and small

[Example-3: Mitsubishi Corporation]

Mitsubishi Corporation conducts qualitative business impact evaluation
Company nameand sector

Mitsubishi Corporation

Trading company

Evaluate business impacts

Demand forecasts obtained from objective data (IEA
WEO, ETP) are presented qualitatively
Qualitatively describes the company's generalperception of business environment based on
demand forecasts
Qualitatively describes the impact analyses onthebusiness based on the businessclimate perception for the two scenarios of
NPS/RTS scenario (scenario based on the targets
set under the current Paris Agreement) and the2 C scenario (scenario with a 2DS/SDS of 2 Cor less)
Based on this, the company's policies and initiatives
are described

Source:ESG DATA BOOK 2019

4-56

[Example-1: Sekisui Chemical]

Sekisui Chemical conducted detailed risk analysis and deliberation on
countermeasures
Company nameand sector

Sekisui Chemical Co., Ltd.

Materials and Buildings(Chemicals)

Assess materiality of climate-related risks

Risk assessments were conducted in 5 areas, taking into
account financial impact and business growth potential.
The time horizon, which is expected to be affected, isalso mentioned
Describes the expected impact of each item in detail,although it is qualitative

Source:4-57

[Example-2: Sekisui Chemical]

Sekisui Chemical sets specific original scenarios when identify and definea range of scenarios
Company nameand sector

Sekisui Chemical Co., Ltd.

Materials and Buildings(Chemicals)

Identify and define range of scenarios
Assuming four unique scenario-based societies
Analyses are based on two axes: climate change scenario (2transition to centralized or dispersed

C scenario: RCP2. 6, 4C scenario: RCP8. 5),

social system

Source: Sekisui Chemical Integrated Report 2019
4-58

[Example-1:JFE Holdings]

JFE Holdings conducts risk assessments incorporating impact andexternal perspectives
Company nameand sector

Materials and Buildings(Iron and steel)JFE Holdings
Assess materiality of climate-related risks

Selection of risk and opportunity factors that affect business in two stages
After getting a comprehensive overview of the factors in the value chain, consider the degree of impact on the factors andstakeholder expectations and concerns, and identify the factors considered to be important
Evaluation of risk and opportunity factors based on the 2Source: JFE GROUP REPORT 2019 - Integrated Report 4-59

C and 4

C scenarios

[Example-2:JFE Holdings]

JFE Holdings conducts detailed business impact evaluation (qualitative)
Company nameand sector

Materials and Buildings(Iron and steel)JFE Holdings
Evaluate business impacts

Qualitatively (with arrows) assess identified risk and opportunity factors
Detailed descriptions are provided, and stakeholders' perspectives on the group are also mentioned

Source: JFE GROUP REPORT 2019 - Integrated Report 4-60

[Example: Kirin Holdings]

Kirin quantitatively describes the yield of major agricultural productsCompany nameand sector

Kirin Holdings

Agriculture, food andforestry products (Foods)

Impact evaluation on yields of major agricultural products

The quantitative changes in the yields of major
agricultural products (barley, hops, tea leaves, wine
grapes, coffee beans, and corn) in the major regions(the United States, Asia, Europe, Africa, and Oceania)
under the 4 C scenario in 2050 are described

Source: Kirin Group Environmental Report 20194-61

[Example: Kirin Holdings]

Kirin qualitatively describes the impact assessment of water stressCompany nameand sector

Kirin Holdings

Agriculture, food andforestry products (Foods)

Impact evaluation of water stress in primary production areas
Water stress in primary agricultural land in 2040 and indication of each agricultural product procured
Using the WRI heat map, the areas with high impact of water stress are shown qualitatively

Source: Kirin Group Environmental Report 2019
4-62

[Case

: Kirin Holdings]

Kirin quantitatively describes the impact assessment of carbon pricing
Company nameand sector

Kirin Holdings

Agriculture, food andforestry products (Foods)

Impact evaluation of carbon pricing
Regarding the impact evaluation under the 2 C and 4 C scenarios for carbon pricing in 2030, the impacts in thecase of tackling and not tackling GHG reduction targets are quantitatively described

Source: Kirin Group Environmental Report 20194-63

[Example: Hitachi, Ltd.]

Hitachi, Ltd. summarizes the business environment for each scenario and division,and describes how to respond to future business risks and business opportunities
Company nameand sector

Hitachi, Ltd.

Electric and Electronic

Identify potential responses
Describes the business environment for the five businesses (railway systems, automotive systems, water systems, power
generation and power grids, and IT systems) in each scenario (2 C and 4 C), as well as related responses and business
opportunities

Source: Hitachi, Ltd. Sustainability Report 2019
4-64

[Case I: BP]

Analyzes global trends in energy supply and demand, and refers totechnologies required to achieve the 2 target by sector
Country Name
Company name and sector

United Kingdom

BP

EnergyIdentify and define range of scenarios for each sector
Analysis of global energy supply and demand trends (by region and fuel) by 2040, based on four scenarios
Evolving transition (ETs): Based on scenarios in which policies, regulations, and technological developments move in the same way as inrecent years.
In addition, the RT scenario based on the 2 C target, the ME scenario in which energy demand increases, and the LG scenario in which
globalization slows down are set
Quantitatively describe the technologies and countermeasures required to achieve the 2 C target and the reduction effects for each sector(industry, construction, transportation, electricity)
Technologies and measures for each sector and CO2 reductions (emissions)
under the ET scenarios
Transport

Detailed examples of next-generation technologies that contribute to reducing emissions in each sector
Source: BP "Energy Outlook 2019 edition"
4-65

[Case II: Downer Group]

SSPs are used as scenarios in the Downer Group, a
construction/infrastructure-related company
Country Name
Company name and sector

Australia

Construction andinfrastructure

Downer Group

Identify and define range of scenarios
In addition to RCPs, range of scenarios including SSPs (Shared Socio-economic Pathways)
Scenario analyses were conducted based on four scenarios: Sustainability (2 C + SSP1 (sustainable scenario)),
Follower (2 C + SSP4 (gap scenario)), Fossil Fuel development (4 C + SSP5 (fossil-fuel-dependent development
scenario)), and Global decline (4 C + SSP3 (regional segmentation scenario)).
The results of the scenario analysis are as follows
Downer strategies are resilient in all scenarios
Significant opportunities in scenarios below 2 C
To this end, significant decarbonization needs to be advanced by 2030

Definition of 4 Scenarios Using SSPs

Source: "Downer Annual Report 2019"
4-66[Case III: Atlantica Yield]

Estimates the quantitative business impact of changes in climate patterns andtemperature increases on the company
Country Name
Company name and sector

Spain

Atlantica Yield

Cost increase due to changes inclimate patterns

Cost increase
due to higher temperature

Changes in climate patterns reduce
rainfall and reduce the amount ofwater stored in the aquifer
Need to expand water purification
facilities in-house, and consumptionof chemicals for water purification will
increase by 10% per year

Estimated annual reduction of 0.040.21% in the company's turbine
efficiency when temperature rises by
1 C

Business impact

Business impact

Annual cost increase of
USD 800,000

Annual cost increase of
USD 300,000

Power & Utility

Increase in costs of solar andwind power generation due tohigher temperature
In the case of solar power generation,
it is estimated that the module
efficiency will decrease by 0.39% due
to a temperature increase of 1 C
In wind power generation, the air
density decreases by 0.34% when thetemperature rose by 1 C. Annual
power generation is estimated todecrease by 1.2GWh
Business Impact (Solar)
Annual cost increase of
USD 50,000
Business impact(wind power generation)
Annual cost increase of
USD 100,000

Source: Atlantica ESG Report 2018 (Atlantica Yield)
4-67

[Case IV: BHP]

BHP uses arrows to evaluate the possible impact on each commodity priceduring the transition to the 2 C scenario
Country Name
Company name and sector

Australia

BHP

MiningBusiness impact evaluation
Evaluation of the impact of transition to a 2
for each commodity

C scenario

Analyze four scenarios: New Gear (a scenario in which
innovation brings about gradual economic development indeveloped countries); Closed Doors (a scenario of low-growtheconomic policies due to nationalism and protectionism, etc.);
Global Accord (a scenario in which technological development
is proceeding while coordinating toward a 2 C target); andTwo Giants (a scenario in which technological growth iscentered around the United States and China)
To analyze the impact on prices of commodities over the next
10 years (as of 2016) that could occur in transitioning to thebaseline Global Accord scenarios
6 types of commodities: thermal coal, gas, metallurgical coal,oil, copper, iron ore

Source: BHP "Climate Change ; Portfolio Analysis Views after Paris"
4-68[Example V: South32]

Assessment of risk significance by value chain and business impact
evaluation by site
Country Name
Company name and sector

Australia

Impact Assessment by Value Chain
Evaluation of the risk of climate change in the
Mozambique aluminum mining business isqualitatively listed by direct operation, supply chain,and employee health impact (see example below)
In addition, the company assesses the degree ofresilience to risk items on a 5-point scaleSouth32

MiningBusiness Impact Evaluation by Site
Qualitatively analyze the impact of the company's
climate change by site (Australia, South Africa,
Mozambique, Colombia) (example below)

Business Impact Assessment in Northern Australia

Business Impact Evaluation in South Africa

Source:4-69

Our Approach to Climate Change 2019

Ministry of the Environment, Government of Japan
Climate Change Policy DivisionThis report is supported by Deloitte Tohmatsu Consulting LLC.