Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion

SECOND PARTY OPINIONDIAMOND ELECTRIC HOLDINGS CO., LTD.
SUSTAINABILITY FINANCE
ELIGIBILITY ASSESSMENT REPORT
Prepared by: DNV Business Assurance Japan K.K.
Location: Kobe, Japan
Date: 12 August, 2022
Ref. Nr.: PRJN-216421-2021-AST-JPN-02

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Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion

Contents
EXECUTIVE SUMMARY

3Ⅰ Introduction

5

Ⅱ Scope and Objectives

7

Ⅲ Responsibilities of Diamond Electric HD and DNV

9IV Basis of DNV’s opinion

10

V Work Undertaken

11

VI Findings and DNV’s opinion

12

Schedule-1 Diamond Electric HD Sustainability Warrant Sustainability Projects

22

Schedule-2 Diamond Electric HD

24

Sustainability Warrant Eligibility Assessment Protocol

SF-1 Use of proceeds

24SF-2 Process for Project Selection and Evaluation

26

SF-3 Management of Proceeds

27SF-4 Reporting

28

Revision
Rev. No.

Issue date0

26 Feb. 2021

Contents
Initial version issued
Updated the referenced standards to the latest version.

1

12 Aug. 2022

Added the installation of solar power at the company's own factory to theproject list.
Updated environmental benefits to the latest values.

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

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

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

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Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion

EXECUTIVE SUMMARY
Diamond Electric Holdings Co., Ltd (hereinafter “Diamond Electric HD”, or “Issuer”) was established in
Oct. 2019 with Diamond Electric Co., Ltd. (established in 1937) and Tabuchi Electric Co., Ltd.
(established in 1925). Diamond Electric HD’s main businesses segment are “Automotive device”,“Electric device” and “Energy solution”.
Diamond Electric HD updated its medium-long term plan and promotes “Connect vehicles and houses”
as new management vision. Diamond Electric HD establish the Sustainability Finance Framework(herein after “Framework”) to implement Sustainability Warrant includes DIAMOND＆ZEBRA
Sustainability Project (hereinafter “Sustainability Project”, see table below) which contributes to both
environmental and social, through utilizing renewable energy such as solar PVs to promote theachievement of the sustainable society as “Manufacturing company”.
Diamond Electric HD engages DNV business assurance Japan K.K. (hereinafter “DNV”) as external
reviewer to assess its eligibility of sustainability finance. DNV referred to 4 core components which arewidely recognized as basic requirements in the global capital market, such as Green Bond Principles(ICMA, 2021 hereinafter GBP), and Social Bond Principles (ICMA, 2021 hereinafter SBP) andSustainability Bond Guidelines (ICMA, 2021 hereinafter SBG) and assessed its eligibility. Following tableshows outlines of sustainability projects described in its framework.

No.

Sustainability Category
Green

SocialSustainability ProjectSDGs(1) Design, R&D and facility
expansion for next generation
power conditioner productionand electricity storage (for01

Renewable
Energy (Solar
PVs and
Electricity
Storage)residential use)Basic

expansion for tri-phase powerfor disasterconditioner production and(Electricity

electricity storage (for industrial

Storage anduse)Charging
system)02

Clear
Transportation(Chargingsystem of EV,
etc)(2) Design, R&D and facility

infrastructure(3) Installation of solar power
equipment at own factories, etc.
(1) Design, R&D and facility
expansion for V2H (Vehicle toHome) system

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7.Affordable and Clean Energy
9.Industry, Innovation andInfrastructure
11.Sustainable Cities andCommunities
13.Climate Action

Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion

Assessment summary against its 4 core components in the GBP and SBP are following.

1. Use of Proceeds:Proceeds raised from sustainability warrant would be fully allocated to thesustainability project as disbursement of both finance and refinance. Sustainability projects
are categorized renewable energy and clean transportation which contribute CO2 emission
reduction directly or indirectly. Sustainability projects are also categorized basic infrastructure(electricity) and also have social contribution when disaster occurs. Sustainability projects
contribute to both environmental and social issues and are exemplified project in GBP and
SBP.
2. Process for Project Evaluation and Selection:Sustainability project has been selected andevaluated based on the internal procedure of Diamond Electric HD, being considered above
mentioned principles, guidelines, laws and regulation, Diamond Electric HD environmental
policy. This process has been implemented by project division, technical headquarter, treasury
division and CFO, finally approved by CEO.
3. Management of Proceeds:The proceeds from the exercise of sustainability warrant will bedeposited into subaccount and managed with its identified project code by the relevant
division. The allocation status would be monitored quarterly. The unallocated proceeds would
be held as cash or cash equivalent. *Specific procedures of proceeds management fromwarrant is described in the section Ⅳ(3).
4. Reporting:Diamond Electric HD will disclose annual report/information on the Diamond Electric HD
website includes status of fund allocation, project progress and environmental/social impact,
at least once a year, considering its confidential information. These reporting items conform
against the requirements in GBP and SBP.
On the basis of the information provided by Diamond Electric HD and the work undertaken, it is DNV’sopinion that the Diamond Electric HD sustainability finance meets the criteria established in the
Protocol and that it is aligned with the stated definition or purpose of sustainability finance (warrant
and loan), which is to “enable capital-raising and investment for new and existing projects withenvironmental and social benefits”.

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Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion

Ⅰ Introduction-1- Overview of the Issuer
Diamond Electric Holdings Co., Ltd (hereinafter “Diamond Electric HD”, or “Issuer”) wasestablished and listed with the first section of Tokyo Stock Exchange in 1st Oct. 2019 as
holding company of Diamond Electric Co., Ltd. (established in 1937) and Tabuchi
Electric Co., Ltd.
Diamond Electric HD’s main businesses segment are “Automotive device”, “Electric
device” and “Energy solution”. Diamond Electric HD holds unique technology of powertransformation and control technology of the electric device.

-2- ESG Initiatives of the Issuer and Sustainability Warrant
Diamond Electric HD has continued to promote the technology development in the fieldof aiming to streamline the efficient energy utilization and reduce CO2 emissions, basedon Diamond Electric HD’s management philosophy of “Contribute to the growth ofcustomers, building trust, and welfare of the society through products manufacturingbusiness”. Diamond Electric HD’s also has established social and environmental
activities, and environmental policy*1 to achieve circular economy by business activities
and production development aligning with management philosophy.
Diamond Electric HD joined RE100 on 1st Dec. 2021. They apply 100％ renewableenergy (electricity) to its global business activities by 2050 and take initiative to achieve
CO2 free products manufacturing*2。
Diamond Electric HD updated its medium and long term plant “DSA 2021 Re-Ignite theworld ” and established new management vision themed “Connect vehicles and houses”
and drive forward its business activities. Diamond Electric HD established Sustainability
Finance Framework (hereinafter, Framework) in order to fund to DIAMOND & ZEBRA
sustainability project (hereinafter sustainability project) which intends to contributes toboth environmental and social, through utilizing renewable energy such as solar PVs topromote the achievement of the sustainable society as “Manufacturing company”.
Diamond Electric HD would implement sustainability warrant based on the framework.

*1

Social and environmental activities, and environmental policy, Diamond Electric HD website:
https://www.diaelec-hd.co.jp/sustainability/environment-policy/ (CSR info.)*2

RE100, Diamond Electric HD website:https://www.diaelec-hd.co.jp/info/1951/*3

DSA 2021 Re-Ignite the world, Diamond Electric HD website:https://www.diaelechd.co.jp/ir/library/

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Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion-3- SDGs Initiatives of Issuer
Sustainability project implemented based on the Framework is considered to contributeto the renewable energy promotion, improve the resilience to the disaster which result
to support sustainable industrialization. These projects directly or indirectly contributeto the following Sustainable Development Goals (SDGs) set forth by the United Nations:*“ 7. AFFORDABLE AND CLEAN ENERGY” [7.2] [7.3]“ 9. INDUSTRY INNOVATION AND INFRASTRUCTURE” [9.2] [9.4]“11. SUSTAINABLE CITIES AND COMMUNITIES” [11.b]“13. CLIMATE ACTION” [13.1]
Diamond Electric HD SDGs Contribution
SDGs
Goals 7

AFFORDABLE AND CLEAN ENERGY
Ensuring access to cheap, reliable and sustainable modern energy for all

INDUSTRY INNOVATION AND INFRASTRUCTURE
Goals 9Build robust infrastructure, promote inclusive and sustainableindustrialization, and promote innovation

SUSTAINABLE CITIES AND COMMUNITIES
Goals 11Make cities and human settlements inclusive, safe, resilient andsustainable

Goals 13

CLIMATE ACTION
Take urgent measures to mitigate climate variability and its impacts＊ The relevance to SDGs is based on the reference to “Green, Social and Sustainability Bonds: A HighLevel Mapping to the Sustainable Development Goals” published by the International Capital Market
Association, or ICMA, which defines the Green Bond Principles (“GBP,” announced by ICMA in 2018). It
is a complemental explanation of the Green Equity Offering and is not directly defining its use ofproceeds.

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Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion

Ⅱ Scope and Objectives
Diamond Electric HD established Framework with reference to the four core common elements
defined in Green Bond Principles (ICMA, 2021 hereinafter GBP), Social Bond Principles (ICMA,
2021 hereinafter SBP) and Sustainability Bond Guidelines (ICMA, 2021 hereinafter SBG) andrelevant guidelines when implementing the sustainability warrant.
The proceeds from the sustainability warrant are planned to be allocated to new or existing
investment or expenditure for the following Sustainability projects. Sustainability projects are
identified as representative green and social projects listed in GBP, SBP and related criteria, as
follows:<Green project category>
Project 01:”Renewable Energy”

Project 02:”Clean Transportation”<Social project category>
Project 01 and 02:Basic infrastructure (electricity supply when disaster)Page 7 of 28

Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion

DNV, as an external reviewer, evaluated the eligibility of the Framework with reference to GBP,
SBP and related criteria, as well as with assessment of the unique proceeds management fromthe sustainability warrant.
Diamond Electric HD commissioned DNV to conduct assessment for the Framework. The
purpose of the Framework assessment in DNV is to ensure that the Diamond electric HD and theframework meets the key requirements of the four core elements with reference to GBP, SBP
and related criteria described below and to provide a second party opinion on the eligibility of
the framework.
DNV declares that it has no interest in the facts and perceptions of Diamond Electric HD inproviding its second party opinion.
In addition, this report does not provide any guarantees regarding the financial performance of
new investment units to be issued through the sustainability warrant, the value of any
investments, or the long-term environmental and social benefits.
(1) Scope of review
The review assessed the following elements and confirmed their alignment with the GBP:☒

Use of Proceeds☒

Process for Project Evaluation and Selection☒

Management of Proceeds☒

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

Consultancy (incl. 2nd opinion)☐

Certification☐

Verification☐

Rating☐Other (please specify):(3) Standards/guidelines to be applied
No.

Standards/guidelines

Scheme owner

1.

The Green Bond Principles 2021, GBP

International Capital Market Association (ICMA)

2.

The Social Bond Principles 2021, SBP

International Capital Market Association (ICMA)

Applied level

The Sustainability Bond Guidelines
International Capital Market Association (ICMA)
Refer*1
2021, SBG
Green and Social Bonds: A High Level
4.
Mapping to the Sustainable
International Capital Market Association (ICMA)
Development Goals (June 2020)
Handbook Harmonized Framework for
5.
International Capital Market Association (ICMA)
Impact Reporting 2021
1
* : Refer ; Based on the DNV assessment protocol, DNV has evaluated the eligibility by referring to
the main requirements of the four core elements defined by the globally recognized GBP and others. At
this time, we considered the warrant-specific proceeds management and reporting.
3.

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Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion

Ⅲ Responsibilities of Diamond Electric HD and DNV
Diamond Electric HD has provided the necessary information and data to DNV to conduct thisreview process. DNV’s second party opinion represents an independent opinion and is intended
to inform Diamond Electric HD and other interested stakeholders in the sustainability warrant as
to whether it meets the criteria of widely recognized international principles/guidelines, basedon the information provided for DNV. In preparing this report, we have relied on the informationand the facts presented to us by Diamond Electric HD. DNV shall not be responsible for any
aspect of the candidate projects and assets referred to in this opinion and shall not be held
liable if estimates, findings, opinions or conclusions are inaccurate. DNV shall not be held liable
even if any of the information or data provided by NPR and used as a basis for this assessment
are not correct and/or complete.

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Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion

IV Basis of DNV’s opinion
To provide as much flexibility as possible to Diamond Electric HD, DNV has created specificsustainability warrant Assessment Protocol (the “Protocol”), taking into account requirementsof various standards such as GBP and SBP. The Protocol applies or refers four core elements
such as GBP and SBP.
The Protocol includes a set of suitable criteria that can be used to underpin its opinion. The
holistic principle behind the criteria is that the sustainability finance should “enable capitalraising and investments for new and existing projects to realize environmental and social
benefits.”
As per the Protocol, the evaluation criteria, with which the framework is under review, aregrouped into the following four elements:

Principle One: Use of Proceeds. The Use of Proceeds criteria are guided by therequirement that the issuer that established the framework must use the proceeds fromthe sustainability warrant which is exercised to eligible activities in framework. The
eligible activities should produce clear environmental and/or social benefits.

Principle Two: Process for Project Evaluation and Selection. The ProjectEvaluation and Selection criteria are guided by the requirements that an issuer of thesustainability warrant should outline the process it follows when determining eligibilityof an investment using Finance proceeds, and outline any impact objectives it willconsider.



Principle Three: Management of Proceeds. The Management of Finance Proceeds
criteria are guided by the requirements that a Finance should be tracked within theissuing organization, that separate portfolios should be created when necessary andthat a declaration of how unallocated funds (from exercise of warrant to disbursement
to the project) will be handled should be made.



Principle Four: Reporting. The Reporting criteria are guided by the recommendationthat at least Sustainability Reporting to the sustainability warrant investors should bemade of the use of bond proceeds and that quantitative and/or qualitative performanceindicators should be used, where feasible.

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Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion

V Work Undertaken
Our work constituted a high level of review of the available information, based on theunderstanding that this information was provided to us by the Issuer in good faith. We have not
performed an audit or other tests to check the veracity of the information provided to us. The
work undertaken to form our opinion included:

Assessment of Sustainability Finance:Creation of the Issuer-specific Protocol, adapted to the purpose of the sustainability
warrant, as described above and in Schedule-2 to this Assessment.



Assessment of documentary evidence provided by the Issuer on the sustainability
warrant and supplemented assessment by a high-level desktop research. These checks
refer to current assessment best practices and standards methodology;Discussions with the Issuer, and review of relevant documentation;

Documentation of findings against each element of the criteria.

Periodic (Annual) Review: *not included in this report







Evaluation of the supporting documents provided by the Issuer related to thesustainability warrant, high level desktop surveys, document reviews, and interviews
with key personnel of the issuer. These checks refer to current assessment best practices
and standard methodologies.
Discussion with the Issuer management and review of relevant documentation.
Field survey and inspection, if required.
Review of the nominated projects and assets as described in Schedule 2 as at the time of
periodic assessment
Documentation of findings for Periodic assessment as detailed in this document.

Our opinion in a following section is a summary of the work undertaken above.

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Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion

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

(1) Use of Proceeds
DNV has confirmed that the net proceeds raised by the sustainability warrant is planned to
be allocated to the nominated sustainability projects (table-1) related expenditure*1 as new
finance or refinance that meet the representative green and social project category in GBP
and SBP criteria below:
It is expected that both environmental and social benefit are provided through thesustainability projects which reduce CO2 emission reduction ascribed to the electricity
consumption by efficient renewable energy utilization and supply electricity when disasteroccurs.
*The proceeds amount from the warrant depends on the timing of each exercise of the warrant. Fullamount of the proceeds from the warrant is determined sum amount of the exercise of the warrant fromthe first exercise to final.

<Green project category>
Project 01:”Renewable Energy”(Project related to the Solar PVs and electricity storage system)

Project 02:”Clean Transportation”(Project related to the charging system for EV,etc. )<Social project category>
Project 01 and 02:Basic infrastructure (electricity supply when disaster)(Project related to the electricity storage system and charging system)

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Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion

The sustainability projects include renewable energy, clean transportation and their support
system (electricity storage system). The sustainability projects clearly align with “6thStrategic Energy Plan” (Oct. 2021) and its various national measures. The sustainability
projects (power conditioner, electricity storage system and V2H system for residential andindustrial use including connecting to the EV) support the achievement of the national
measures directly and indirectly.
Moreover, electricity storage system support not only efficient renewable energy utilizationand clean transportation but also can be utilized back up electricity for power source
when/where disaster occurs. It is considered as sustainability (green+social) project whichusually contributes environmental impact, and in the case of emergency due to the disaster,
contributes social impact.
Diamond Electric HD aims to convert 100% of the electricity used at its factories torenewable energy in the future by installing and expanding solar power generation facilities
there. By using its own brand of industrial three-phase power conditioners and energy
storage systems at its own factories, it will be able to use electricity generated by solar
power even after daylight hours and achieve 100% renewable energy. This project is
expected to contribute to the achievement of RE100, of which Diamond Electric HD is amember. The implementation of green/social projects that use clean energy of solar power
to produce power conditioners and energy storage systems can be regarded as an ideal
form of ESG financing.
*1:6th Strategic Energy Plan: Ministry of Economic, Trade and Industries, Agency for Natural Resources
and Energy

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Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion

Table-1 Sustainability project(details are shown in Schedule-1)
No.

Sustainability Category
Green

01

Renewable
Energy (Solar
PVs and
Electricity
Storage)

02

Clear
Transportation(Chargingsystem of EV,
etc)

SocialBasicinfrastructure fordisaster(Electricity Storage
and Charging
system)Sustainability Project

Sustainability Project
Outlines(1) Design, R&D and facility
expansion for next generation
power conditioner productionand electricity storage (forresidential use)

- Effective utilization of renewable energy- Design, R＆D and facility expansion, etc.
for next generation power conditioner
production and electricity storage forthe society which interconnects thegrids and individual power sources(2) Design, R&D and facility
expansion for tri-phase power
conditioner production andelectricity storage (forindustrial use)(3) Installation of solar power
equipment at own
factories, etc.

- Effective utilization of renewable energy- Design, R&D of systems with power
capacity and output for electricity blackout, expansion of production facilities,
etc.
- Effective utilization of renewable energy- Installation, expansion, etc. of systems
with power capacity and output forelectricity black-out- Achievement of production of clean
products that contribute todecarbonization using clean (renewable)energy- Effective utilization of renewable energy- Design, R&D, expansion of production
facilities, etc. of the infrastructure
products for a disaster(1) Design, R&D and facility
expansion for V2H (Vehicle toHome) system

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Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion

Use of proceeds categories as per GBP:☒

Renewable energy☐

Energy efficiency☐

Pollution prevention and control☐

Sustainable management of living natural☐

Terrestrial and aquatic biodiversity☒

Clean transportation

Sustainable water management☐

Climate change adaptation

Eco-efficient products, production technologies☐

Other (please specify):

resources
conservation☐☐and processes☐

Unknown at Sustainability finance issuance but currently expected to conform with GBP categories,
or other eligible areas not yet stated in GBPs

Use of proceeds categories as per SBP:☒

Affordable basic infrastructure☐

Access to essential services☐

Affordable housing☐

Employment generation (through SME☐

Food security☐

Socioeconomic advancement and☐Unknown at issuance but currently expected to☐

Other (please specify): issuer applies thefinancing and microfinance)
empowerment
conform with SBP categories, or other eligible
areas not yet stated in SBPs

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SBP

Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion(2) Process for Project Evaluation and Selection
DNV has confirmed that the nominated sustainability projects described in the Schedule-1 is inline with issuer’s management philosophy and environment and social initiatives.
Sustainability project has been selected and evaluated based on the internal procedure of
Diamond Electric HD, being considered above mentioned principles, guidelines, laws andregulation, Diamond Electric HD environmental policy. This process has been implemented byproject division, technical headquarter, treasury division and CFO, finally approved by the CEO.
Diamond Electric HD established the process for project evaluation and selection as internal
documents.
Sustainability projects (Design, R&D, Facilities and warehouses expansion) would be
implemented in the issuer’s property. Therefore, negative impact to environment is limited toadditional energy consumption (indirect CO2 emission using electricity) due to the products
manufacturing activities. Diamond Electric HD measures and plans it through joining RE100 to
reduce CO2 emission reduction, compliance the environmental law, group environmental policy
and activities aligns ISO 14001 (Environment Management System) certification to mitigate
negative impact to environment. DNV resulted that the sustainability projects would present a
low risk of environmental and social impact.

Evaluation and Selection☒

Credentials on the issuer’s green and☒social objectives☒

projects fit within defined categories

Defined and transparent criteria for☒

projects eligible for Social Bond

Documented process to identify andmanage potential ESG risks associated withproceeds☒

Documented process to determine thatthe project

Summary criteria for project evaluation☐

Other (please specify):

and selection publicly available

Information on Responsibilities and Accountability:☒

Evaluation / Selection criteria subject☒

In-house assessment

to external advice or verification☐

Other (please specify):

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Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion(3) Management of Proceeds
DNV has reviewed and confirmed evidence and information showing how the Diamond
Electric HD traces/manages the proceeds from sustainability warrant, from exercise of
warrant to the time of disbursement. the DNV has confirmed that the Issuer would allocate
the proceeds to the sustainability project appropriately and promptly.
Full amount of the proceeds from the warrant is determined sum amount of the exercise of
the warrant from the first exercise to final. Diamond Electric HD intends to allocate theproceeds to the sustainability project in 2 years from the time of final exercise of warrant.
The proceeds from the exercise of sustainability warrant will be deposited into subaccountand managed with its identified project code by the relevant division. The allocation status
would be monitored quarterly. The unallocated proceeds would be held as cash or cash
equivalent.
Note that, as stated above, DNV provides no assurance regarding the financial performanceof the Finance, the value of any investments in the Finance, or the long-term environmental
benefits of the transaction.
Specific aspects of warrant in this Finance are described details below.

<Note> Finance (warrant) specific aspects
Whether Diamond Electric HD would receive proceeds upon exercise of warrants and its timing will
depend on a judgement by the warrant holder, and also strike price of warrants can be reset.
Therefore, the amount of funds to be raised and its timing is not fixed at this point, and there could be adiscrepancy between the expected and actual amount and timing.
If Diamond Electric HD cannot raise enough funds or there is a shortfall for payment due, Diamond
Electric HD will make up necessary funds by using loan from this sustainability finance or cash in handor bank loans among other means. Diamond Electric HD will apply funds raised from exercise of
warrants on each use of proceeds as each payment is due.

Tracking of proceeds:☒

Sustainability Finance proceeds segregated or tracked by the issuer in a systematic☒manner
Disclosure of intended types of temporary investment instruments for unallocated☐proceeds
Other (please specify):

Additional disclosure:☐

Allocations to future investments only☒

Allocations to both existing and future☐

Allocation to individual disbursements☐

investments
Allocation to a portfolio of disbursements☐

Disclosure of portfolio balance of☐

Other (please specify): The amount of

unallocated proceeds

existing and new investments and loans inprojects eligible for green bond allocations
will be disclosed in the annual report.

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Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion(4) Reporting
DNV has confirmed that the Diamond Electric HD would report to stakeholders the specificinformation required by the GBP, SBP and related criteria annually in the issuer’s website till theproceeds allocation and manufacturing facility installation & start operation are completed.
The reporting includes description of the allocation and management of the proceeds, projectlists and their progress, as well as the associated qualitative and quantitative environmental andsocial impact for each sustainability projects with considering those confidentially.
DNV confirmed the Diamond electric HD has established the appropriateness of the process of
estimation of CO2 emission reduction which is disclosed as environmental impact.

-1- Fund Allocation and management of the proceeds(1) Proceeds amount (sum of the exercise of warrant) and allocation amount(2) Balance of the proceeds (unallocated amount)(3) Refinance amount (or share)-2- Project progress(1) Project progress which fund allocated (e.g. facility installation progress, operation plan)-3- Environmental and social impact(1) Project-01(1):Design, R＆D and facility Expansion for next generation power
conditioner production and electricity storage(for residential use)
 CO2 emission reduction (t-CO2/y) and electricity storage capacity (kW) based on
the production plan(2) Project-01(2):Design, R＆D and facility Expansion for tri-phase power
conditioner production and electricity storage(for industrial use)
① CO2 emission reduction (t-CO2/y) and electricity storage capacity (kW) based on
the production plan
(3) Project-01(3):Installation of solar power equipment at own factories, etc.
① CO2 emission reduction (t-CO2/y) by installing solar power generation facilities,etc.
(4) Project-02(1):Design, R＆D and facility Expansion for V2H（Vehicle to Home）
system① CO2 emission reduction (t-CO2/y) and electricity storage capacity (kW) based on
the production plan

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Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion

Note that, Diamond Electric HD engages DNV as external reviewer to conform its eligibility assustainability warrant with integrity and objectivity till fund allocation and project completion. It
can be flexibly judged due to the fund allocation and project progress.

Use of proceeds reporting:☒

Project-by-project☐

On a project portfolio basis☐

Linkage to individual finance☐

Other (please specify):☒‘Finance’ financed share of total investment

Information reported:☒

Allocated amounts☐

Other (please specify): total exercised warrant amount at the annual report

Frequency:☒

Annual☐Semi-annual☒

Other (please specify): until completion of fund allocation and project

Impact reporting (environmental benefits):☒

Project-by-project☒

On a project portfolio basis☐

Linkage to individual finance☐

Other (please specify):☐

Semi-annual

Frequency:☒

Annual☐Other (please specify):

Information reported (expected or ex-post): Green benefit☒

GHG Emissions / Savings☒☒

Other ESG indicators (please specify): production plan and total capacity of electricity storage with

Energy Savings

considering confidential information

Information reported (expected or ex-post): Social benefit☐☐ Number of beneficiaries

Target populations☒ Other ESG indicators (please specify): production plan and total capacity of electricity storage
with considering confidential information

Means of Disclosure☐

Information published in financial report☐

Information published in sustainability report☐

Information published in ad hoc documents☒

Other (please specify): Issuer’s website☐

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

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Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion

Assessment Conclusion
On the basis of the information provided by Diamond Electric HD and the work undertaken, it is
DNV’s opinion that the Diamond Electric HD sustainability finance (sustainability warrant) meetsthe criteria established in the Protocol and that it is aligned with the stated definition or purposeof sustainability finance, which is to “enable capital-raising and investment for new and existing
projects with environmental and social benefits”.

DNV Business Assurance Japan K.K.
12 Aug. 2022

Mark Robinson

Naoki Maeda

Manager, Sustainability Services

Managing Director

DNV Business Assurance, Australia

DNV Business Assurance Japan K.K.

Masato Kanedome

Jun Chokai

Project Leader

Assessor

DNV Business Assurance Japan K.K.

DNV Business Assurance Japan K.K.

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

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

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Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion

Schedule-1 Diamond Electric HD Sustainability Warrant Sustainability Projects
Sustainability CategoryNo.

Sustainability Project
Green

01

Sustainability Project outlines(Outline, Location, Plan, CO2 emission reduction)<Location>
Design, R&D : Osaka-city (Tabuchi electric Co., Ltd)
Production : Otawara-city, Tochigi (Tabuchi Electronics Industry Co., Ltd)SocialRenewable

Basic
infrastructure

Energy(Solar PVs andfor disaster(Electricity

Electricity
Storage)

Storage andCharging
system)(1) Design, R&D and
facility expansion fornext generation power
conditioner productionand electricity storage(for residential use)

<Outline>-

Effective utilization of renewable energy
Design, R＆D and facility expansion, etc. for next generation power
conditioner production and electricity storage for the society whichinterconnects the grids and individual power sources<Plan, CO2 emission reduction and Storage capacity>- FY2022, approx. 179,922t-CO2/year (based on the production plan)and 350MWh(2) Design, R&D and
facility expansion for
tri-phase power
conditioner productionand electricity storage(for industrial use)

<Outline>-

Effective utilization of renewable energy
Design, R&D of systems with power capacity and output forelectricity black-out, expansion of production facilities, etc.

<Plan, CO2 emission reduction and Storage capacity >- FY2024, approx. 92,444t-CO2/year (based on the production plan)and 365MWh

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Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion<Outline>(3) Installation of solar
power equipment at
own factories, etc.

- Effective utilization of renewable energy- Installation, expansion, etc. of systems with power capacity and output
for electricity black-out- Achievement of production of clean products that contribute todecarbonization using clean (renewable) energy<CO2 emission reduction>- 1,000t-CO2/year (based on the installation of solar power generation
facilities, etc.)

02

Clear
Transportation(Charging system
of EV, etc)

(1) Design, R&D and
facility expansion forV2H (Vehicle to Home)
system<Outline>-

Effective utilization of renewable energy
Design R&D, expansion of production facilities, etc. of theinfrastructure products for a disaster<Plan, CO2 emission reduction and Storage capacity >- FY2022, 5,400t-CO2/year (based on the production plan) and
15MWhPage 23 of 28

Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion

Schedule-2 Diamond Electric HD Sustainability Warrant Eligibility Assessment Protocol
Following check list SF*-1 ~ SF-4 are based on DNV’s Finance eligibility assessment protocol referred to 4 core components of GBP, SBP
and related criteria. *SF; Sustainability Finance. Sustainability finance is regarded as sustainability warrant.

SF-1 Use of proceeds
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

1aType of Finance

The Finance must fall in one of thefollowing categories, as definedsuch as the Green Bond Principles:Sustainability Use of Proceeds
FinanceSustainability Use of Proceeds
Revenue Finance
Sustainability Project Finance
OthersDocument reviewed :- Sustainability
Finance Framework(hereinafter
Framework)
Discussions with
Diamond Electric HD
management

The reviewed evidence confirms that the sustainability warrant falls in
the category:

The cornerstone of a Finance is theutilization of the proceeds of thebond which should beappropriately described in the legal
documentation for the Finance.

Document reviewed :- Framework- Timely disclosure
document
Discussions with
Diamond Electric HD
management

DNV confirmed, As identified project list in Framework, the purpose of
the sustainability warrant is to use the proceeds to eligible projects
falling under the following categories as representative project category
in GBP, SBP and related criteria.
These information will be described in the Timely disclosure document
and disclosed.

1b

Sustainability(Green and Social)
Project Categories• others-> Diamond Electric HD executes the finance from the proceed byexercise of sustainability warrant based on the Framework (which
defines environmental and social eligible projects (sustainability
projects), project evaluation and selection, management of proceeds
and reporting)

Environmental Impact (Green)- ”Renewable Energy”(Project related to the Solar PVs and electricity
storage system)- ”Clean Transportation” (Project related to the charging system for
EV,etc. )Social Impact (Social)

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Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings- Basic infrastructure (electricity supply when disaster, Project
related to the electricity storage system and charging system)

1c

Green and Social
benefits

All designated Sustainability
Project categories should provide
clear greenly and sociallysustainable benefits, which, where
feasible, will be quantified orassessed by the issuer.

Document reviewed :- Framework
Discussions with
Diamond Electric HD
management

DNV confirmed that sustainability projects contribute CO2 emission
reduction as green benefit and supply electricity when disaster occurs
as social benefit. Since quantification of the benefits(impact) from the
projects depend on the operation condition, DNV understands that it isdifficult to evaluate directly its quantitative benefit. Therefore, DNV
confirmed that issuer evaluate environmental and social benefit
quantitatively based on the products and system specification and theirproduction plan. These are considered confidential information
DNV assessment concluded that these projects and assets would
present a low risk of environmental and social impact by considering
followings ;- Join to the RE100- Compliance of environmental law and regulation, issuer’s
environmental policy- ISO14001(environmental Management System)

1d

Refinancing share

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

Document reviewed :- Framework
Discussions with
Diamond Electric HD
management

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DNV confirmed, in case that proceeds allocates as refinance, Diamond
Electric HD will be disclosed in its annual report (fund allocation
section).
Reporting includes the refinance amount or share information aspractically possible.

Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion

SF-2 Process for Project Selection and Evaluation
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

2aInvestmentdecision
process

The issuer of a Finance should outline thedecision-making process it follows to determine
the eligibility of projects using Finance proceeds.
This includes, without limitation:• A process to determine how the projects fit
within the eligible Sustainability (green andsocial) Projects categories;• The criteria making the projects eligible forusing the Finance proceeds; and・ • The environmental and social sustainability
objectives
In addition to information disclosed by an issuer
on its Financeprocess, criteria and assurances, Financeinvestors may also take into consideration thequality of the issuer’s overall framework andperformance regarding green and social
sustainability.

Document reviewed :- Framework
Discussions with Diamond
Electric HD management

DNV confirmed that the issuer has set out the following
criteria for project selection as per the Framework,:

Document reviewed :- Framework- Diamond Electric HD web site
(CSR information)
Discussions with Diamond
Electric HD management

DNV reviewed and notes that sustainability projects inthe sustainability warrant align with Diamond ElectricHD’s “Social and Environmental Activity” and“environment policy”
Sustainability projects are also linked with SDGs, and thesustainability of diamond electric HD business activities
related to the environment and social. is taken into
accounts.

2b

Issuer’s
environmental, social andgovernanceframework

Page 26 of 28- Project evaluation:Project division, Technicalheadquarter and treasury division confirms against
GBP, SBP and related criteria- Project selection : CFO selects the projects anddecided by CEO

Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion

SF-3 Management of Proceeds
Ref.

Criteria

3a

Tracking
procedure-1

3b

Tracking
procedure-2

3c

Temporaryholdings

Requirements

Work Undertaken

DNV Findings

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

Document reviewed :- Framework- (Proceeds management
practice)
Discussions with Diamond
Electric HD management

The evidence and information reviewed shows how
Diamond Electric HD plans to trace the proceeds fromthe time of exercise of warrant. DNV confirmed
Diamond Electric HD prepare subaccount for the depositof the proceeds and manage as per its proceeds
management practice which can identify the project anddisbursed in accordance with the obligations.

So long as the Finance outstanding, the balanceof the tracked proceeds should be periodicallyreduced by amounts matching eligible
sustainability investments made until green andsocial benefit appearance or completion ofproceeds allocation.

Document reviewed :- Framework- (Proceeds management
practice)
Discussions with Diamond
Electric HD management

The evidence and information reviewed shows that
Diamond Electric HD plans to manage the proceeds with
its unique project code set by the project division andthey disburse to the sustainability project then report tothe treasury division. Treasury division confirm thefunds allocation and unallocation status quarterly.

Pending such investments or disbursements toeligible Sustainability Projects, the issuer shouldmake known to investors the intended types of
temporary investment instruments for thebalance of unallocated proceeds.

Document reviewed :- Framework- (Proceeds management
practice)
Discussions with Diamond
Electric HD management

DNV confirmed that unallocated proceeds (fromexercise of warrant to the time of disbursement) will be
managed as cash or cash equivalents, monitoring bytreasury division quarterly.

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Diamond Electric Holdings Co., Ltd. Sustainability Finance Eligibility - Second Party Opinion

SF-4 Reporting
Ref.

Criteria

4aPeriodical
reporting

Requirements

Work Undertaken

DNV Findings

In addition to reporting on the use ofproceeds and the temporary investment of
unallocated proceeds, issuers should
provide at least annually a list of projects
to which Finance proceeds have been
allocated including- when possible with regards toconfidentiality and/or competitive
considerations- a brief description of the projects andthe amounts disbursed, as well as the
expected greenly and sociallysustainable impact.

Document reviewed :- Framework
Discussions with Diamond
Electric HD management

DNV has confirmed that the Diamond Electric HD would reportto stakeholders the specific information required by the GBP,
SBP and related criteria annually in the issuer’s website till theproceeds allocation and manufacturing facility installation &start operation are completed.
The reporting includes description of the allocation andmanagement of the proceeds, project lists and their progress,
as well as the associated qualitative and quantitativeenvironmental and social impact for each sustainability
projects with considering those confidentially.
-1- Fund Allocation and management of the proceeds(1) Proceeds amount (sum of the exercise of warrant)
and allocation amount(2) Balance of the proceeds (unallocated amount)(3) Refinance amount (or share)-2- Project progress(1) Project progress which fund allocated (e.g. facility
installation progress, operation plan)-3- Environmental and social impact(common items for 3 projects)(1) CO2 emission reduction (t-CO2/y) and electricity
storage capacity (MWh) based on the production plan(2) CO2 emission reduction (t-CO2/y) by installing solar
power generation facilities, etc.

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