Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

SECOND PARTY OPINIONIDEMITSU KOSAN CO.,LTD.
GREEN/TRANSITION BOND FRAMEWORK

Prepared by: DNV Business Assurance Japan K.K.
Location: Kobe, Japan
Date: 18 March 2022
Ref. Nr.: PRJN-334509-2022-AST-JPN

This report was prepared in the “Climate Transition Finance Model Project in
FY2021 (Investigation of ideal way of Transition Finance)” which is acommissioned project by the Ministry of Economy, Trade and Industry.

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Contents
Executive Summary

3

I. Introduction

6

II. Scope and Objectives

18

III. Responsibilities of Idemitsu Kosan and DNV

19IV. Basis of DNVʼs opinion

19

V. Work Undertaken

20

VI. Observations

21

VII. Assessment Conclusion

49

Schedule-1 Candidate Transition Loan Projects

51

Schedule-2 Climate Transition Finance Eligibility Assessment Protocol

52

Schedule-3 Green Bond (Transition Finance with specific use of proceeds) Eligibility Assessment
Protocol56

Schedule-4: Basic Guidelines on Climate Transition Finance Eligibility Assessment Checklist

61

Schedule-5 Eligibility Assessment for Green Bond Guidelines (Bonds with Specified Purpose forTransition Finance)

80

List of reference materials

91

Revision history
Revision
Number0

Issue Date
18 March 2022

Remarks
InitialDisclaimer
Our assessment relies on the premise that the data and information provided by Issuer to us as part of our review procedures have been provided in good faith.
Because of the selected nature (sampling) and other inherent limitation of both procedures and systems of internal control, there remains the unavoidable riskthat errors or irregularities, possibly significant, may not have been detected. Limited depth of evidence gathering including inquiry and analytical procedures andlimited 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 aperson or an entity may make based on this Statement.

Statement of Competence and Independence
DNV applies its own management standards and compliance policies for quality control, in accordance with ISO/IEC 17021:2011 - Conformity Assessment
Requirements for bodies providing audit and certification of management systems, and accordingly maintains a comprehensive system of quality control, including
documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. We
have complied with the DNV Code of Conduct1 during the assessment and maintain independence where required by relevant ethical requirements. This
engagement work was carried out by an independent team of sustainability assurance professionals. DNV was not involved in the preparation of statements ordata 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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Executive Summary
DNV Business Assurance Japan K.K. (hereinafter, "DNV") has been commissioned by Idemitsu
Kosan Co., Ltd. (hereinafter, "Idemitsu Kosan, "the Company") to evaluate the consistencyof the "Idemitsu Kosan Green/Transition Bond Framework" (hereinafter, "Framework") with
Climate Transition Finance Handbook (CTFH), Basic Guidelines on Climate Transition Finance(CTFBG), Green Bond Principles (GBP), and Green Bond Guidelines (GBGLs). The following isa summary of the assessment results of each four elements indicated in CTFH and GBP.

< Climate Transition Finance Assessment results>
Element 1: Issuerʼs climate transition strategy and governance
The purpose of Idemitsu Kosan's transition financing is to implement the transition planand change the business portfolio, striving toward carbon neutrality by 2050, and topromote its basic strategy towards 2030 and business strategies of each segment on thepathway to 2050 carbon neutrality. The Company is not only aiming to become carbon
neutrality (=net zero CO2 emissions) in terms of emissions from its own operations (Scope1+2) by 2050, but also contribute to CO2 emission reduction throughout entire value chain
by strengthening activities related to its diverse businesses of Idemitsu Group. Specifically,using the CNX (Carbon Neutral Transformation) concept, the Company promotes actions
both to strengthen existing business areas and to quickly establish new business areas.
The actions are aligned with the Japanese government commitment to achieve carbon
neutrality by 2050, and the transition pathways of Technology Roadmap (mainly, Oil Sector,
Chemical Sector, and Electric Power Sector) published by the METI. From the point of viewof governance, the specialized organizations have been set up to support key management
decisions in addressing climate change, and the Board of Directors can oversee theexecution of these decisions in monitoring, assessing and managing them. In advancing
specific initiatives, Idemitsu Kosan also proceeds with consideration for a just transition,
while placing importance on the concept of "truly inspired" in its corporate philosophy, thatis, “how often do we consider the countries and communities we touch, and how much
empathy do we have for the people living there?”
Element 2: Business model environmental materiality
Idemitsu Kosanʼs transition strategy (transition plan) is itself a business strategy to realize
the transformation of its business portfolio, as stated in the Basic Strategy toward 2030.
DNV has confirmed that its transition pathway is relevant to the key issues in businessmodel of the Company, particularly in addressing climate change. In developing thetransition plan and investment plan, Idemitsu Kosan also refers to several future scenarios
affecting climate change actions that are widely recognized internationally, such as the
IEA/SDS.

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Element 3: Climate transition strategy to be science-based including targets andpathways
Idemitsu Kosan's transition plan is aligned with the sector-specific roadmaps for transition
finance in the oil, chemical and electric power sectors. These roadmaps are based on theJapanese government's goal of achieving carbon neutrality by 2050, as well as sciencebased targets and pathways for transition with reference to various Japanese policies,
including the Strategic Energy Plan, and international scenarios, and are aligned with theParis Agreement. Idemitsu Kosan has set long-term targets (and indicator level) for CO2
emission reductions (reduction contributions) in line with each roadmap, as well as
medium-term targets on the pathway, with the intention of proceeding with the transition
plan in an integrated manner with Japan's energy policy. Considering the trend toward
decarbonization and other factors, the Company continues to consider businessenvironment scenarios as appropriate.
Element 4: Implementation transparency
In pursuing its transition plan, it is expected that Idemitsu Kosan properly explains its
investment plans to transition finance investors to ensure transparency to the extent
possible. The results and impacts of each eligible project category are monitored andreported using quantitative indicators, such as CO2 emissions/reduction contribution to theextent practicable, consistent with the overall goal. For negative impacts, the Company's
environmental impact assessment, risk management mechanisms, and compliance withenvironmental laws are considered. For impact on social aspects, the project is designed
to ensure a just transition, such as consideration of employment conditions.

< Green Bond Principles Assessment results>
Principle 1: Use of Proceeds
Idemitsu Kosan has established eligibility criteria for use of proceeds in its framework forthe purpose of selecting appropriate allocation of funds through transition finance. Itseligibility criteria define both green and transition projects that are consistent with use ofproceeds for climate transition finance funds. In addition to negative impact criteria, which
exclude transactions that cause unfair trade, human rights and other social issues, and theenvironment and other social issues, environmental and social issues of the individual
projects are considered appropriately.
Principle 2: Process for Project Evaluation and Selection
In the evaluation and selection of investment projects, Idemitsu Kosan has a process toevaluate risks in accordance with its own internal rules for investment management andto obtain investment decisions and approvals after deliberations at the Investment and
Finance Committee. In this process, the Company comprehensively assumes risk factors,
such as business plans, economic indicators including internal carbon pricing, naturalenvironmental risk, social risk, and transition risk, and examines countermeasures against

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risk at that point. In the evaluation and selection of green/transition projects, it is expected
to be followed by the Finance and Accounting Department, which selects eligible projects,
and the General Manager of the Department makes the final decision on nominatedprojects.
Principle 3: Management of Proceeds
Idemitsu Kosan plans to use the proceeds from the financing for new investments innominated projects or for refinancing. The status of the funds appropriation isdifferentiated between the amount appropriated to transition assets and the amountunappropriated through the Company's internal management system or a dedicated form.
Until the full amount of proceeds is allocated, the funds is managed in cash or cash
equivalents.
Principle 4: Reporting
Idemitsu Kosan plans to disclose the appropriation of funds on an annual basis until all
funds raised have been appropriated to eligible projects. The Company also discloses
environmental improvement effects, such as CO2 emission reductions/reduction
contribution, to the extent practicable. In the event of a major change in the appropriation
plan of procured funds or other significant events, Idemitsu Kosan discloses suchinformation in a timely manner.

Based on an assessment of Framework and other relevant documents and information
provided by the fundraiser, DNV has confirmed that Framework meets the criteria required by
the appropriate schemes and is eligible for transition finance. DNV also confirmed that theplanned transition bond is expected to be appropriately designed and implemented inconformance with Framework.

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I. Introductioni.

About the fundraiser
Overview
Idemitsu Kosan Co., Ltd. (hereinafter, "Idemitsu Kosan", the "Company", the"Fundraiser") is a major Japanese petroleum distributor that was founded in 1911 as anoil sales company. Idemitsu Kosan group consists of the company, 155 subsidiaries and
61 associated companies, which operates globally in five business segments: Petroleum,
Basic Chemicals, Functiona lMaterials, Power & Renewable Energy, and Resources. The
Idemitsu Group was established in 2019 through the integration of Idemitsu Kosan andShowa Shell Sekiyu.

Company philosophy
Idemitsu Kosan has set "Ningen-Soncho" that means having respect for human beings,
and the words of the founder as the Origin of Management. The Management Philosophy,"Truly inspired", is a simple phrase of the beliefs and ideals that convey “people-centred
management” since its founding. Idemitsu Kosan's purpose is to develop respected
personnel as its ultimate goal and continue fully leveraging the power of people tocontribute to society. By aiming a resilient corporate structure that can flexibly and nimbly
respond to any environmental change, Idemitsu Kosan will continue contributing therealization of a sustainable society.

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Idemitsu Kosanʼs Origin of Management and Management Philosophy

From Idemitsu Kosan Annual Report 2021

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Sustainability Policy
Idemitsu Kosan has formulated the Sustainability Policy to promote its sustainability
initiatives. This policy has been approved by the Board of Directors of Idemitsu Kosan(established on October 19, 2021).
Idemitsu Group Sustainability Policy

From Idemitsu Integrated Report 2021

Sustainability Promotion Structure
To conduct management from theperspective of sustainability, Idemitsu
Kosan established the Corporate
Sustainability
Department
tocoordinate and manage ESG issues
across departments, including climatechange and human rights.
Each ESG issue is overseen by adesignateddepartment,withits
progress reported to the Management
Committee by the director in charge ofFrom Idemitsu Integrated Report 2021
ESG. The Management Committee
discusses important policies and measures related to sustainability, reporting the deals
to the President and, when needed, the Board of Directors.

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Under this management structure, Idemitsu Kosan is committed to solving environmental
and social issues and strive to achieve sustainable growth of the company.

Materiality as a priority topic for management
Idemitsu Group believes that its mission is to continue supplying the energy underpinning
peopleʼs lifelines while contributing to the development of society. To this end, it has
identified six materiality issues that it should prioritize during the period of the Mediumterm Management Plan. Recently, the environmental burden of energy use has becomea major social issue, and the Company recognizes "harmony with the global environmentand society" as an important and urgent theme.
Idemitsu Groupʼs priority topics (materiality)

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From Idemitsu Integrated Report 2021

Materiality Identification Process
Idemitsu Kosan has defined a process for identifying materiality issues. The first step in
identifying materiality was to identify environmental and social issues that may be related
to Idemitsu Kosan's business activities, with reference to such international guidelines as
the GRI Standards and evaluation criteria of the SDGs and ESG evaluation organizations
for non-financial information disclosure (Step 1). Secondly, Idemitsu Kosan conducted awide-ranging survey to determine each issueʼs important to stakeholders, both internaland external (Step 2). And then, Idemitsu Kosan ensured that the results of theseevaluations were aligned with the Medium-term Management Plan, by verifying thepriority level and relevance of each issue (Step 3). Finally, the final decisions were madeafter discussions via the Management Committee chaired by the president (Step 4).
Idemitsu Groupʼs Materiality Identification Process

From Idemitsu Integrated Report 2021

Contributing to the achievement of the Sustainable Development Goals (SDGs)
In the process of identifying materiality
issues to strive as a priority topic for
management, Idemitsu Kosan consideredthat the impact on the SDGs through thepromotion of these initiatives is important,and the impact of any business activity
targeting materiality will, to varying degrees, extend to all the SDGs. Idemitsu Kosan
considered the fact that each SDG is interconnected. Idemitsu Kosan believes it canespecially contribute to the achievement of the following three SDGs through its businessactivities: Goal 7 (ensure access to affordable, reliable, sustainable and modern energy
for all), Goal 9 (develop resilient infrastructure, promote inclusive and sustainableindustrialization, and increase innovation), Goal 11 (make cities and human settlements
inclusive, safe, resilient and sustainable).

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In addition, its efforts toachieve these goals may
leadtoincreaseenvironmental burden in
the form of higher
resource
consumption
and GHG emissions. Recognizing that its business activities might impose a burden in thefive areas on the right and keep Idemitsu Kosan from achieving the goals, it recognizes
the necessity of making serious efforts to address this. Idemitsu Kosan is considering
measures to minimize or eliminate the negative impact of its operations on these social
issues. Specifically, it has set reduction targets for GHG emissions related to the use of
petroleum resources and the risk of climate change and is implementing measures toachieve them. The entire group of Idemitsu Kosan will also work together promote therecycling solar panels and petrochemical, including plastics.

Long-term Business Environment Assumption toward 2050 (addressing
Climate Change as a materiality issue)
Idemitsu Group recognizes that addressing climate change is one of the most important
issues to be tackled on a global scale and is making the most of the Group's assets toresolve the issue from both "mitigation" and "adaptation" perspectives. Specifically,
Idemitsu Kosan is analysing energy demand and climate change impacts in Japan and
the Asia Pacific region using multiple scenarios to identify risks and opportunities that
may arise in the future, assuming a business environment in 2050, and reflecting theresults in our business strategies and plans.
Long-term energy business environment scenarios towards 2050

From Idemitsu Kosan Medium-term Management Plan (FY2020-2022), May 11, 2021

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Corporate vision and basic strategy toward 2030
Idemitsu Kosan is seriously considering to changes in the business environment, including
climate change, while envisioning the above scenarios. At the same time, Idemitsu Kosan
believes that it is its responsibility to both fulfil its social mission of ensuring a stablesupply of the energy and contribute to the resolution of social issues and has set forth
this as its "Corporate vision for 2030", using the term "Your Reliable Partner for a Brighter
Future". In Corporate vision for 2030, Idemitsu Kosan will fulfil its three responsibilities
in the business domains of "Energy/material transition to a carbon neutral/circulatory
society", "Next generation mobility & community for an aging society", and "Advanced
materials to make it possible to overcome such challenges".
Corporate vision for 2030

From Idemitsu Integrated Report 2021

To realize "Corporate vision for 2030", Idemitsu Kosan has also established "Basicstrategies for 2030" and will implement the three basic strategies of engaging in ROIC
management, evolving the business platform, and creating an open, flat, and agile
corporate culture. Idemitsu Kosan uses internal carbon pricing for investment decisions
in ROIC management, and it is expected that the economic impact of GHG emissions will
be considered more than ever for the business strategies and investment planning.

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Basic strategy for 2030

Business strategy for 2030 and portfolio transformation for the future
In line with the basic strategy for 2030, Idemitsu Kosan is working on business strategies
for each segment organized in the table below.
Business strategy for 2030

From Idemitsu Kosan Sustainability Data Book 2021

The aim of this business strategy is to realize the 2030 vision and Idemitsu Kosanʼsportfolio transformation for 2050. First, through an "Energy/material transition”, Idemitsu
Kosan is shifting to new forms of energy, such as renewable energy, biomass, andsustainable fuels, with aiming low carbonization of its petroleum and basic chemicals
segments.

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In its new business areas of "Next-generation mobility & community" and "Advanced
materials", Idemitsu Kosan is making apollostation outlets a smart one-stop shops "Smart
Yorozuya" that will change the business model of service stations and lead to nextgeneration mobile services, such as EVs, and developing high performance material
products (lithium solid-state electrolytes) that can be directly used in EVs. Idemitsu Kosan
has declared that it will promote carbon neutrality towards 2050 by focusing on the newmarkets that will be created by the arrival of a carbon-neutral society, and by shifting its
business portfolio to mitigate climate change through value co-creation inside and outside
the company.
Portfolio transformation for the future

From Idemitsu Integrated Report 2021

Transition plan for achieving carbon neutrality
To realize this business portfolio shift, Idemitsu Kosan is working to supply the energy
and materials needed by customers and society by strengthening and expanding existing
business domains (saving energy and shifting to zero-emission electric power, offering
environmentally friendly products and services, and expanding renewable energy power)
and quickly establishing new business domains (expanding the sully of biomass fuels,
expanding circular businesses, and developing revolutionary technologies and adoptingthem). Idemitsu Kosan is taking actions to realize a carbon-neutral transformation (CNX)
concept through the addition of the six functions to its refineries and complexes and bypositioning them as new bases operating as low-carbon and resource-recycling energy
hubs.

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Idemitsu Kosan's CNX Concept

From Idemitsu Integrated Report 2021

In addition, Idemitsu Kosan has created the following transition plans for recycling, theuse of non-petroleum resources, and the transformation of the petroleum business. The
projects that require transition financing are included in these initiatives. Regarding these
initiatives, Idemitsu Kosan collaborate with communities and other companies to roll out
activities while receiving support from experts and national interests at home andoverseas.
Idemitsu Kosanʼs transition plan for achieving carbon neutrality

From Idemitsu Integrated Report 2021

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Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinioniii. About Transition Finance
Investment plan for carbon neutrality
Idemitsu Kosan is aiming to become a resilient company that can adapt flexibly to any
environmental change amid extreme uncertainties in the long-term operating
environment. Considering the climate change risk, Idemitsu Kosan has establishedinternal carbon pricing of investments related to new projects and decided to carry out
trial-basis investment studies that reference the economic impact of carbon dioxide (CO2)emissions. Based on this premise, it has created basic policies and corporate strategies
for 2030 in five segments (Petroleum, Basic chemicals, Functional materials, Power andrenewable energy, and Resource), and are planning strategic investments in its mediumterm management plan. Part of this investment plan is reflected in the use of proceeds
for Idemitsu Kosanʼs Green/Transition Bond that will be issued in line with theGreen/Transition Bond Framework.
Strategic investment plan in five segments in Medium-term Management Plan (FY2020-2022)

From Idemitsu Kosan Medium-term Management Plan (FY2020-2022), May 11, 2021

The Significance of Transition Finance and Idemitsu Kosanʼs Green/Transition
Bond Framework
Idemitsu Kosan's transition efforts are in line with the Japanese government's 2050
carbon neutrality declaration, the Strategic Energy Plan, and the METI's Transition
Roadmap for Oil Sector, Chemical Sector, and Electric Power Sector, respectively.
Idemitsu Kosan is convinced that the issuance of the Green/Transition Bond is positioned
as a fund procurement for the realization of a carbon-neutral society, and it will provide
an opportunity to communicate its efforts to stakeholders. Idemitsu Kosan plans to revise

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its long-term strategies, such as its energy business environment scenario and mediumterm management plan, as needed, in the event of major changes in the external
environment and other factors that were assumed.

Company name: Idemitsu Kosan Co., Ltd.
Framework Name: Idemitsu Kosan Green/Transition Bond Framework
Name of external review body: DNV Business Assurance Japan K.K.
Date of report: 18 March 2022

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II. Scope and Objectives
Idemitsu Kosan has commissioned DNV to assess the "Idemitsu Kosan Co., Ltd. Green/
Transition Bond Framework (hereinafter, the "framework"). Our objective has been to
implement an assessment on whether the framework meets the criteria established on CTFH,
CTFBG, GBP, and GBGLs to provide a second party opinion on the eligibility of the framework.
DNV, as an independent external reviewer, has identified no real or perceived conflict ofinterest associated with the delivery of this second-party opinion for Idemitsu Kosan.
In this report, no assurance is provided regarding the financial performance of the framework,
the value of any investments, or the long-term environmental benefits of the transaction.
(1) Scope of review*
The review assessed the following elements and confirmed their alignment with the gist of GBP/GBP:☒

Use of Proceeds☒

Process for Project Evaluation and Selection☒

Management of Proceeds☒

Reporting*The scope of review is to be applied as a part of the evaluation of the transition finance with use of proceeds*The four disclosure elements of CTFH and CTFBG are included in the scope of review(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 Climate Transition Finance Handbook (CTFH)*1

International Capital Markets Association (ICMA), 2020

2.

Basic Guidelines on Climate Transition Finance(CTFBG)*1

Financial Services Agency of Japan, Ministry of Economy,
Trade and Industry of Japan and Ministry of Environment ofJapan, 2021

3.

Green Bond Principles (GBP)*2

International Capital Markets Association (ICMA)

4.

Green Bond Guidelines (GBGLs)*2

Ministry of the Environment, 2020

*1 Climate Transition: The concept of climate transition focuses principally on the credibility of an issuerʼs climate change-related
commitments and practices (quoted and edited from CTFH and CTFBG)*2 It confirms compliance with the four core elements (use of proceeds, process for project evaluation and selection, management ofproceeds, and reporting) that must be met when implementing as a bond/loan that meets the four elements of transition and has a specificuse of proceeds (quoted and edited from CTFBG).

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III.

Responsibilities of Idemitsu Kosan and DNV

Idemitsu Kosan has provided the information and data used by DNV during the delivery of thisreview. DNV's second party opinion represents an independent opinion and is intended to
inform Idemitsu Kosan and other interested stakeholders in Idemitsu Kosan's green/transitionbond as to whether the established criteria have been met, based on the information provided
to us. In our work, we have relied on the information and the facts presented to us by Idemitsu
Kosan. DNV is not responsible for any aspect of the nominated projects and assets referred toin this opinion and cannot be held liable if estimates, findings, opinions, or conclusions areincorrect. Thus, DNV shall not be held liable if any of the information or data provided by
Idemitsu Kosan's management and used as a basis for this assessment were not correct orcomplete.

IV. Basis of DNVʼs opinion
To provide as much flexibility for the fundraiser, Idemitsu Kosan, as possible, we have adapted
our green and/or transition bond framework assessment methodologies, which incorporates
the requirements of the CTFH, CTFBG, GBP, and GBGLs, to create Climate Transition Finance
Eligibility Assessment Protocol for the framework (hereinafter, "Protocol"). Please refer to
Schedule-2. The Protocol is applicable to Idemitsu Kosan's framework under the CTFH, CTFBG,
GBP, and GBGLs.
Our Protocol includes a set of suitable criteria that can be used to underpin DNV's opinion. The
overarching principle behind the criteria is that a Climate Transition Finance should "provide
an investment opportunity with transparent sustainability credentials" and" enable financing
and investment for new or existing projects that provide environmental benefits."
As per our Protocol, the criteria against Idemitsu Kosan's framework to be reviewed is grouped
into the following elements, represented by the CTFH, CTFBG, GBP and GBGLs:(1) Four common components of transition financeElement 1: Issuer (Fundraiser)ʼs climate transition strategy and governance
The financing purpose should be for enabling a fundraiserʼs climate change strategy.

Element 2: Business model environmental materiality
The planned climate transition trajectory should be relevant to the environmentallymaterial parts of the fundraiserʼs business model.

Element 3: Transition is science-based including targets and pathway
Fundraiserʼs climate strategy should reference science-based targets and transition
pathways

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Element 4: Implementation transparency
Market communication in connection with the offer of a financing instrument which
has the aim of funding the fundraiserʼs climate transition strategy should also provide
transparency of underlying investment program(2) Four common components of a green/transition bond with use of proceedsPrinciple 1: Use of Proceeds
The Use of Proceeds criteria are guided by the requirement that a fundraiser oftransition finance with use of proceeds must use the funds raised to finance eligible
activities. The eligible activities should produce clear environmental benefits.

Principle 2: Process for Project evaluation and selection
The Project Evaluation and Selection criteria are guided by the requirements that afundraiser of a transition finance should outline the process it follows when
determining the eligibility of an investment using transition finance proceeds andoutline any impact objectives it will consider.



Principle 3: Management of Proceeds
The Management of Proceeds criteria is guided by the requirements that transition
finance should be tracked within the issuing organization, that separate portfolios
should be created when necessary and that a declaration of how unallocated funds
will be handled should be made.



Principle 4: Reporting
The Reporting criteria are guided by the recommendation that at least Sustainability
Reporting to the bond investors and loan lenders should be made of the use offinance proceeds, and that quantitative and/or qualitative performance indicators
should be used, where feasible.



Other: Review (External Review)
In cases where the fundraiser judges that an objective evaluation of its responses to
Principles 1 through 4 in (1) and (2) above is necessary, it is considered useful toutilize a review by an external organization. Reviews include "second party opinion,""verification," "certification," and "rating."

V. Work Undertaken
Our work constituted a comprehensive review of the available information, based on theunderstanding that this information was provided to us by the issuer in good faith. We havenot performed an audit or other tests to check the veracity of the information provided to us.
The work undertaken to form our opinion included:

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i. Pre-funding assessment
Creation of the fundraiser-specific Protocol, adapted to the purpose of transition finance,
as described above, and related to Schedule-2 of this report;

Assessment of documentary evidence provided by the fundraiser on the transition financeand supplemented assessment by comprehensive desktop research. These checks refer
to current assessment best practices and standards methodology;Discussions with the fundraiser, and review of relevant documentation;

Documentation of findings against each element of the criteria.

ii. Post-funding assessment (*not included in this report)
 Interviews with the fundraiser's managers and review of relevant document control
 Field research and (if necessary) Document creation of post-issuance assessment results

VI. Observations
DNVʼs findings and opinion are as described in (1) and (2) below:(1) Four common components of CTFH and CTFBG (disclosure elements)Element 1: Issuer (Fundraiser)ʼs climate transition strategy and governance
DNV has confirmed that the purpose of Idemitsu Kosan's green/transition bond financing
is consistent with its basic strategy towards 2030 and the business strategies itemized ineach business segment and is also in line with the vector of its efforts to realize a carbonneutral society in 2050. DNV also confirmed that an organization has been set up to leadthe carbon neutral initiative, and that an organizational structure (governance) has been
established to promote the initiative, monitor its progress, and ensure decision-making bymanagement. Details are as follows.

Climate Transition Strategies: With the emergence of a carbon-neutral society,
Idemitsu Kosan has set out in its corporate vision for 20303 and basic strategy towards
2030 to transform its business portfolio to respond to the trend toward decarbonizationand mitigation of climate change, as well as to anticipate new markets that will be created.
Idemitsu Kosan has created the following transition plan to realize the transformation ofits business portfolio. Idemitsu Kosan is planning to finance by green/transition bonds toPage of 21 of 91

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implement specific initiatives. In developing its climate transition strategies and transition
plan, Idemitsu Kosan is keenly aware of the Japanese government's goal of achievingcarbon neutrality towards 2050, as well as its energy policy, including Japan's Strategic
Energy Plan. As a result, DNV confirmed that Idemitsu Kosan's Transition Plan is alignedwith the countermeasures in the roadmap for transition financing in the oil sector
published by the Ministry of Economy, Trade and Industry. DNV also confirmed that
Idemitsu Kosan's transition plan is consistent with the specific initiatives described in theroadmaps for each the chemical sector and electric power sector that were also released
by METI. In addition, DNV has confirmed that the individual projects, related to production
and supply of sustainable aviation fuel (SAF), are consistent with the basic approach topromoting the introduction of SAF, which is described in the "Schedule for the Promotionof Decarbonization of Aviation" (the technical roadmap for transition finance in Aviation
Sector) released by the Ministry of Land, Infrastructure, Transport and Tourism (MLIT).

Idemitsu Kosan's Climate Transition Strategy and METI's Technology Roadmap by Sector

1) Oil Sector

From Idemitsu Integrated Report 2021 and METI Roadmap for Oil Sector

2) Chemical Sector

From Idemitsu Integrated Report 2021 and METI Roadmap for Chemical Sector

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3) Electric Power Sector

From Idemitsu Integrated Report 2021 and METI Roadmap for Electric Power Sector

Governance structure to achieve carbon neutrality: Idemitsu Kosan has positioned“Safety, Health, and the Environment” as a management foundation and has establishedthe Safety and Environment Protection Headquarters to promote initiatives to secure andpreserve this foundation. The role of the headquarters is to determine the medium-term
management plan, the annual basic policies, and priority issues associated with health,safety, and the environment (HSE); to assess and evaluate performance through audits;and to maintain, review, and improve the Safety Management System and theEnvironmental Management System; and to instruct all department and major affiliatedcompanies on how to secure the management resources necessary to establish,
implement, maintain, and continually improve these Management System in order tomanage risks. The executive in charge of safety and environment (a Director) is appointed
by the President and Representative Director to serve as the General Manager of the
Safety and Environment Protection Headquarters, overseeing the headquarters as theindividual bearing the highest responsibility regarding safety, health, and the environment.
As a rule, the Safety and Environmental Protection Headquarters Meeting is held once a
year in December, where the Idemitsu Kosan's medium-term plan for the next fiscal year,
annual basic policies, priority issues, and other matters are decided based on a review ofthe previous year and consideration of social conditions surrounding safety, health, andthe environment. In addition, the Board of Directors receives reports from the businessexecutives and provides on environmental issues, including climate change.

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Positioning of the Safety & Environment Division within the corporate governancestructure and safety and environmental management system

From Idemitsu Kosan website

Climate change-related scenarios: Idemitsu Kosan evaluated the risks andopportunities associated with climate change using a scenario analysis approach to
examine the energy transition and its impact on the Company due to decarbonization,
advances in environmental technology, and social change. The scenario analysis covered
energy demand and climate change impacts in the Asia-Pacific region and assumed thebusiness environment in 2050.
For example, its scenario analysis for the Asia-Pacific region assumes: Scenario 1, "Squall,"in which high growth of Asian economies causes energy demand growth to outpace lowcarbon trends; Scenario 2, "Cloud," in which Asian economies slow and global
environmental issues are shelved; Scenario 3, "Prism," in which governments andbusinesses respond to stronger momentum to address environmental issues; and Scenario
4, "Azure," in which national governments promote decarbonization and economic
recovery focusing on green recovery from the COVID-19 disaster.

Internationally widely recognized scenarios to which each scenario referred
Scenario１ “Squall”: IEA, Current Policy Scenario
Scenario２ ”Cloud”: IEA, Stated Policy Scenario
Scenario３ ”Prism”: IEA, lies between the Stated Policy Scenario and Sustainable Development Scenario
Scenario４ “Azure”: IEA Sustainable Development Scenario

Idemitsu Kosan has been studying specific priority issues in its medium-term management
plan (FY2020~2022) announced in November 2019, with a strong focus on Scenario 3"Prism," which requires a stronger environmental response for the Company. However, inPage of 24 of 91

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May 2021, the Company announced a revision of its medium-term management plan,considering the accelerating pace of decarbonization due to the Japanese government's
declaration of carbon neutrality towards 2050, in addition to the significant changes in thebusiness environment due to the subsequent spread of the COVID-19. In addition to thefact that Scenario 3 "Prism" is not a scenario that will achieve the Paris Agreement target
and considering the current global trend of decarbonization that is about to acceleratesignificantly, the revised medium-term management plan indicates that the business willproceed with a strong recognition of the possibility of Scenario 4 "Azure" that meets the
2°C target of the Paris Agreement.

Long-term energy business environment scenarios toward 2050

From Idemitsu Kosan's Medium-term Management Plan Revision (FY2020~2022) (May 11, 2021)

Under the Scenario 4 "Azure", various countries cooperate to act and begin shifting thestructure of their energy systems to contain the global temperature rise to below 2°C by
the end of the century. In this scenario, for example, if fossil fuel use within the Asian
Pacific region peaks in 2025, Japanʼs domestic fossil fuel demand compared to 2019 canbe expected to decrease 30% by 2030, 60% by 2040, and 80% by 2050. Fiscal year 2022
is the final year of the current medium-term management plan, and business environment
scenarios will be examined again in the formulation of the next medium-term
management plan, considering the trend toward decarbonization and other factors.

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Climate Change-related risks and opportunities: Idemitsu Kosan examines the risks
and opportunities related to climate change that it may face based on scenario analysis.
Regarding transition risks, Idemitsu Kosan recognizes that the spread of electric vehicles
and changes in consumer awareness will lead to a decline in demand for fuel oil, as well
as a loss of reputation in the fossil fuel business. On the other hand, regarding
opportunities, Idemitsu Kosan recognizes the contribution to the realization of a lowcarbon society and the expansion of business opportunities, such as the growing demand
for renewable energy and environmentally friendly products. Idemitsu Kosan and its groupcompanies aim to transform its business portfolio to become a resilient corporate entity
by addressing these risks and strengthening business initiatives to capture opportunities.
Climate Change-related risks and opportunities
Classification
Transition
risks

Matters to be evaluatedDecline in demand for petroleum
products due to the spread of EVs andchanges in consumer awarenessResponses and initiatives▪ Market monitoring and the establishmentof optimal production, supply, and sales
systems▪ Departure from the business portfolio
depending on fossil fuelDecline in energy prices due totechnological advances▪ Strengthening of the competitiveness ofthe entire supply chain

Possibility of divestment of the coalbusiness▪ Development of black pellets andbiomass co-firing technology

Decline in the reputation of the oil and▪ Strengthening of external engagement

coal businesses
Physical risks

Introduction of carbon pricing▪ Internal discussions of carbon pricing

Suspension of equipment operation and▪ Reinforcement of equipment

production sites damage due tomaintenance and strengthening of theabnormal rainfall and others

supply chain

Impact of sea-level rise on
manufacturing and distribution bases
Opportunities

Expanding demand for renewableenergy▪ Measures such as reinforced seawall andrelocation of control rooms▪ Development of renewable energy
sources in Japan and overseas

Strengthening of IMO (International
Maritime Organization) regulations
Increasing demand for environmentally▪ Efficiency improvement andreinforcement of refinery facilities▪ R&D and overseas expansion offriendly products with low

lubricants for electric vehicle units,environmental impact

advanced greases, and biologicalpesticides

Increasing demand for energy-saving
materials▪ Development of applications for next
generation materials andcommercialization of all solid-statelithium-ion battery materials

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Development of distributed energy
resource systems▪ Development of and entry into VPP(Virtual Power Plant) control services

Development of the circular economy▪ Development of recycling technologies
for waste plastics, solar panels, carbon,
etc.

Advent of the MaaS (Mobility as aService) society▪ Development leveraging the existing
refuelling network and entry into ultracompact EVs

Development of natural gas resources▪ Shifting focus from oil to gas

From Idemitsu Kosan website

Transition pathway: Idemitsu Kosan aims to achieve carbon neutrality (net zero CO₂emissions) for emissions from its own operations (Scope 1 + 2) by 2050, as a long-term
goal.
Transition pathway toward carbon neutrality by 2050

From Idemitsu Integrated Report 2021

As an interim target, Idemitsu Kosan has set a management target of ▲4 million tons forthe reduction of CO₂ emissions in FY2030, taking into account the actual reduction of ▲1.36 million tons in FY2020 (Scope 1+2), with FY2017 as the base year. Idemitsu Kosan
has confirmed that this interim target is set to be on track toward the long-term goal.

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FY2030 Management Targets

From Idemitsu Integrated Report 2021

Roadmap by Sector: Idemitsu Kosan's transition strategy is based on the Roadmap for“Transition Finance” in Oil Sector" (hereinafter, "Oil Sector Roadmap") and "Electric Power
Sector Transition Roadmap" (hereinafter, "Electric Power Sector Roadmap") published by
METI in February 2022, as well as We have confirmed that the measures are consistent
with the specific measures described in the "Technology Roadmap for "Transition Finance"
in Chemical Sector" (hereinafter, "Chemical Sector Roadmap"), also published by the
Ministry of Economy, Trade and Industry in December 2021.
The Oil Sector Roadmap is designed to be consistent with the national emission reduction
targets (NDCs) established under the Paris Agreement, the Green Growth Strategy, andthe R&D and social implementation plans in the Green Innovation Funds. The Oil Sector
Roadmap states that transition pathways can vary depending on individual country
circumstances, and that transition efforts in Japan should be integrated with the Japanese
government's energy policy, including the Strategic Energy Plan. The Oil Sector Roadmap
provides a broad picture of transitions in the oil sector and serves as a useful guide forcompanies when evaluating the appropriateness of their transition strategies. In thisregard, DNV has confirmed that Idemitsu Kosan's business (transition) strategy andspecific measures (e.g., energy saving, renewables, biofuels, SAF, ammonia supply chain,
waste plastic recycling, etc.) are integrated and consistent with the objectives of the Oil
Sector Roadmap, namely, the national energy policy. The company.
And the Chemical Sector Roadmap indicates that a product that contributes to thedecarbonization of other industries (e.g., lithium-ion batteries for EVs, in automotive
industry) could be eligible for transition financing, which is consistent with Idemitsu
Kosan's development of functional materials products. The Chemical Sector Roadmap also
includes measures for energy savings and higher efficiency in naphtha cracking, which isconsistent with Idemitsu Kosan's "Deepen the integration of refining and petrochemical
production," in other words, energy savings and higher efficiency in refineries and otherproduction systems.

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Furthermore, the Electric Power Sector Roadmap said that “it is important to promote
initiatives such as zero-emission thermal power generation (hydrogen, ammonia, biomass
co-firing, dedicated firing/CCUS, etc.)." DNV has confirmed that this is in line with Idemitsu
Kosan's efforts to provide low-carbon solutions through coal-fired power generation.
In addition, DNV has confirmed that the individual projects, related to production andsupply of sustainable aviation fuel, are consistent with the basic approach to promoting
the introduction of SAF, which is described in the "Schedule for the Promotion of
Decarbonization of Aviation" (the technical roadmap for transition finance in Aviation
Sector) released by the Ministry of Land, Infrastructure, Transport and Tourism (MLIT).

Environmental and social impacts other than climate change: DNV has confirmedthat Idemitsu Kosan recognizes that petroleum is an essential energy source for people's
daily lives and economic activities, and that the petroleum refining industry plays a central
role in the stable supply of petroleum in Japan. In terms of just transition, DNV has
confirmed that the "Smart Yorozuya" concept and the conversion to a CNX center ensurethat the project will not result in the loss of jobs. In advancing specific initiatives, Idemitsu
Kosan also proceed with consideration for a just transition, while placing importance on
the concept of "truly inspired" in its corporate philosophy, that is, “how often do we
consider the countries and communities we touch, and how much empathy do we havefor the people living there?”

Responding to significant changes in the external environment: DNV has confirmedthat Idemitsu Kosan plans to revise its own energy business environment scenarios,
medium-term management plans, and other long-term strategies as needed in the eventof major changes in the external environment or other factors that were assumed.
Regarding scenario analysis, as mentioned above, we plan to begin reviewing Scenario 4"Azure", referring to IEA's SDS, for the next medium-term management plan, with astrong recognition of the possibility of meeting the 2°C target of the Paris Agreement.

 Element 2: Business model environmental materiality: DNV has confirmed that
Idemitsu Kosan has planned business strategy as a transition strategy and that thetransition trajectory relates to an important part of the issuer's business model in termsof environmental aspects, particularly climate change response. It also considered several
future scenarios affecting climate change response. Details are as follows.

Environmental material issues (materiality): Idemitsu Kosan has selected six
materialities to be prioritized through an internal process to identify critical issues(materiality). In terms of the environment, the fourth materiality is "Harmony with the
Global Environment and Society," as the environmental burden of energy use has become

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Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opiniona major social issue in recent years, and we recognize that addressing climate change is
an important and urgent theme.
Materiality Issues that Idemitsu Group Should Prioritize

From Idemitsu Integrated Report 2021

Climate change-related scenario and disclosure based on TCFD recommendations:
Idemitsu Kosan examines the risks and opportunities associated with climate change using
a scenario analysis approach that considers multiple future scenarios for the energy
transition and its impact on the Company due to decarbonization, advances inPage of 30 of 91

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environmental technology, and social change. Idemitsu Kosan also declared the support
for recommendations issued by the Task Force on Climate Financial Disclosures (TCFD)
and became a TCFD signatory in February 2020, confirming that the climate change
response, including scenario analysis in Idemitsu Group, has been implemented in linewith the TCFD recommendations and appropriately disclosed to stakeholders using the
TCFD framework.

Element 3: Science-based climate transition strategies, including goals andpathways
DNV has confirmed that Idemitsu Kosan's transition strategy is based on science-based
goals and pathways for transition. Details are as follows:

Scientific Basis/Harmonization with the Paris Agreement: Idemitsu Kosan is strongly
aware of the alignment with the Oil Sector Roadmap published by the Ministry of Economy,
Trade and Industry as a precondition for constructing the Transition Strategy. This
roadmap is based on the Japanese government's approach of aiming for carbon neutrality
in 2050 and a 46% reduction in greenhouse gas emissions in 2030 compared to the fiscal
2013 level, which is consistent with the Paris Agreement. It is also positioned as atechnology roadmap that outlines specific measures such as steady low carbonization
through energy savings and fuel switching promotion, decarbonization through reform ofrefining processes and introduction of innovative technologies such as CCS and CCU, anda shift to a supply system of decarbonized fuels such as synthetic fuels. Idemitsu Kosan'stransition plan is consistent with these measures in the roadmap. DNV also confirmed that
Idemitsu Kosan's transition plan is consistent with the specific measures in both theChemical Sector Roadmap and the Electric Power Sector Roadmap, which were also
published by the METI.

CO2 Emission Reductions Image (Idemitsu Kosan and METI Roadmap)

From Idemitsu Integrated Report 2021 and METIʼs Transition Finance Oil Sector Roadmap

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Climate Change Mitigation: DNV has confirmed that Idemitsu Kosan is aware of theoverwhelmingly large emissions from its supply chain, especially use of sold products,(Scope 3) compared to direct emissions from refineries, offices, and factories (Scope 1)
and indirect emissions derived from purchased electricity and other sources (Scope 2).
Therefore, Idemitsu Kosan isworkingtoreducetheenvironmental impact of its
business activities, including
more efficient energy use, tocontribute to the reduction of
CO2 emissions throughout thevalue chain, including Scope 3,
in addition to Idemitsu Kosan
Group's Scope 1 and 2
reductions.
Idemitsu Sustainability Report 2021

Reduce CO2 emissions throughout the entire value chain: DNV has confirmed that
Idemitsu Kosan has a large amount of value chain CO2 emissions (Scope 3) compared toits own CO2 emissions (Scope 1+2) and, from the perspective of global GHG reduction,that Idemitsu Kosan recognizes the importance of contributing to the reduction of Scope
3 emissions in the entire value chain while accurately understanding customer needs, inaddition to reducing its own emissions.

Examples of various business value chains and their contribution to CO2 reduction

From Idemitsu Kosan website

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Medium- and long-term CO2 reduction targets (Scope 1+2) and monitoring
indicators (target Scope 1, 2, and 3): In promoting CO2 reduction, Idemitsu Kosan
places importance on contributing to the three aspects of the environment, society, andthe economy. Based on this concept, we confirmed that Idemitsu Group has establishedthe following three indicators to evaluate and manage its CO2 emission reduction efforts.

Environmental, Social and Economic Contributions① Contributing to the Environment: Reduce environmental impact throughbusiness activities such as more efficient energy use.
② Contributing to Society: Supply lower-carbon energy with a view totransitioning to a low-carbon society in the future.
③ Contributing to the Economy: To secure earnings and enhance corporate
resilience while transforming our business portfolio.

Three indicators

In this assessment, DNV has confirmed Indicators 1 and 2 from the perspective ofalignment with the Basic Guidelines on Climate Transition Finance as follows:

Indicator 1: Target value for reduction in CO2 emissions (Scope 1 and 2): Idemitsu
Kosan has set a goal of becoming carbon neutral (= net zero CO2 emissions) in 2050 for
CO2 direct and indirect emissions (Scope 1+2) from its own operations. As a milestone, it
has also set a target of reducing CO2 emissions for the entire group (Idemitsu Kosan +consolidated companies + group affiliates) by 4 million tons by FY2030 (compared to
FY2017), which is disclosed as part of the management targets for FY2030.

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CO2 emission reductions target (Scope 1+2)
Scope

Medium-term Target（FY2030）

Long-term Target（FY2050）

Scope1+2- 4 million tons CO2(Compared to FY2017)

Carbon Neutrality(net zero CO2 emissions)

Details of CO2 reduction targets (Scope 1+2)

From Idemitsu Integrated Report 2021

Indicator 2: Monitoring Indicator for low carbon level of supplied energy (Scope
1,2 and 3): In addition to its own emission reduction targets (contribution to theenvironment), Idemitsu Kosan has established monitoring indicators for low-carbon levelof supplied energy as it believes important to contribute to society by supplying lowercarbon energy in anticipation of the transition to a low-carbon society in the future. In
setting this indicator, the importance of not only reducing its own direct and indirectemissions (Scope 1 and 2) and emissions throughout its own value chain (Scope 3), butalso increasing its contribution to the reduction of others is taken into consideration. In
other words, Idemitsu Kosan recognizes that it is necessary to consider the amount of
reduction contribution in Indicator 2, to promote this type of activity for initiatives that are
not part of its own value chain but are expected to contribute to Idemitsu Group reduction.
DNV has confirmed that Idemitsu Kosan has set parameters that indicate the amount ofcontribution to CO2 reduction based on this concept.

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In other words, DNV confirmed that Idemitsu Kosan has used this monitoring indicator to
set a 30% reduction in the low-carbon level of supplied energy (compared to FY 2017) for
Scope 1, 2, and 3 as an indicator level for FY 2050 from a long-term perspective.
DNV also confirmed that medium-term indicator level for 2030 is set for each individual
project.

Low carbon level of supplied energy (Scope 1, 2, 3)
Scope2050 Indicator Level

Scope1、2、3

Down 30% (compared to FY 2017)

Details of low carbon level of supplied energy (Scope 1, 2, 3)

From Idemitsu Integrated Report 2021

CO2 reduction contribution: Regarding the amount of CO2 reduction contribution,
when Idemitsu Kosan introduces a new product or service to society that contributes to
CO2 emission reductions (reduces fossil fuel consumption), Idemitsu Kosan considers
that the amount of CO2 reduction contribution is recorded and evaluated by the fossil
fuel supplier of the user of such products and services as (a) in the case of theCompany, as a reduction in its Scope 3 emissions, and (b) in the case of othercompanies, as an increase in their contribution to the reduction of emissions (reduction
contribution). Idemitsu Kosan believes that the two are equivalent in terms of Idemitsu

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Kosanʼs contribution to global CO2 reductions, so Idemitsu Kosan has added the amountof CO2 reduction contribution to the numerical calculation of Indicator 2, the monitoring
indicator, as a parameter in its own calculations.
Characteristics of CO₂ emissions throughout the value chain

From Idemitsu Kosan's Medium-term Management Plan Revision (FY2020~2022) (May 11, 2021)

2030 target for Scope 3 emission reductions No.1 (renewable energy)
In pursuit of a lower-carbon energy supply,
Idemitsu Group operates solar, geothermal,
biomass, and wind renewable energy power
plants overseas in Vietnam and other countries,
and in Niigata, Oita, Kanagawa, Aomori, andother locations in Japan. Idemitsu Kosan has
set a target of 4 GW (4 million kW) of total
renewable energy development in Japan andabroad in 2030 as part of its Basic Policies for2030, for the expansion of renewable energy
source development of solar power, wind
power, and biomass, and is promoting efforts
to achieve this goal.

From Idemitsu Kosan website

2030 target for Scope 3 emission reductions No.2 (SAF)
Idemitsu Kosan has participated in an initiative to revitalize local communities throughCO₂ resources, with the production of sustainable aviation fuel (SAF) as a key initiative.
As part of this initiative, Idemitsu Kosan has set a target of 100,000 kL per year for thestart of supply in 2025. This is consistent with the direction of the Ministry of Land,
Infrastructure, Transport, and Tourism's Transition Roadmap for Aviation Sector, releasedin December 2021, which promotes the introduction of SAF.
Implementing the SAF business

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From Idemitsu Kosan's Medium-term Management Plan Revision (FY2020~2022) (May 11, 2021)

2030 target for Scope 3 emission reductions No.3 (Black Pellet)
Idemitsu Kosan is developing black pellets, a biomass fuel made from wood that has beencrushed, dried, roasted, and semi-carbonized. Since black pellets can be handled in thesame way as coal, replacing coal fuel in coal-fired power plants is expected to reduce CO2
emissions. Idemitsu Kosan has conducted co-firing tests using black pellets and has
confirmed that it is possible to replace coal by up to 35%. After commercialization of
120,000 tons per year in 2022, Idemitsu Kosan aims to expand its supply system of
producing black pellets to 2 million tons by 2030.

 Element 4: Implementation Transparency
DNV has confirmed that as Idemitsu Kosan moves forward with its transition strategy, it
expects its investment plans to be properly explained to green/transition bond investors
and to be as transparent as possible. Details are as follows:

Investment Plan: Idemitsu Kosan plans to make a cumulative total of 570 billion yen incapital investment (strategic investment + operation and maintenance investment) in thecurrent medium-term management plan (FY2020-FY2022). Idemitsu Kosan considers¥270 billion of this amount to be a financial resource to be allocated to strategic

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investments for future business portfolio transformation. DNV confirmed that this strategic
breakdown of capital investment is consistent with Idemitsu Kosan's business strategy
and transition plan.
Targets during the Medium-term Management Plan Period (FY2020-2022)

From Idemitsu Integrated Report 2021

The strategic investment plan for this portfolio transformation is expected to incorporate
not only R&D directly related to carbon neutrality, but also as many other necessary costs
and investments as possible, including M&A and dismantling and removal costs of old
facilities that indirectly contribute to carbon neutrality. DNV has confirmed that thegreen/transition bonds to be issued will allow for a distinction to be made between
expenditures in the normal course of business and expenditures related to green/transition
projects, based on the eligibility criteria for use of the proceeds.

Outcomes and Impacts: DNV has confirmed that Idemitsu Kosan ensures the direct
deliverables and results (outputs) obtained in the individual projects that comprise theinvestment plan are consistent with the overall goals. Also, Idemitsu Kosan ensuresmonitoring and reporting on each project using quantitative indicators such as CO2
emissions/reduction contribution for each qualifying criterion, to the extent practicable.
Regarding negative impacts, DNV has confirmed that Idemitsu Kosan can adequately
address the environmental aspects of the project by complying with national laws such as
the Environmental Impact Assessment Law or the laws of the country concerned in thefirst place. From a standpoint of a just transition, DNV also confirmed that Idemitsu Kosan

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is promoting "Smart Yorozuya" concept for service station and establishing a CNX Center
under the Origin of Management "Ningen-Soncho", means having respect for people, andthe Management Philosophy "Truly inspired," which are the starting points of its
management. DNV has also confirmed that Idemitsu Kosan has particularly taken negative
impacts on employment into consideration seriously, to avoid loss of jobs or other related
impacts due to promotion of the projects.

(2) Four common elements of a green/transition bond, with use of proceeds
instruments
 Principle 1: Use of Proceeds
DNV has confirmed that the funds to be raised by the green/transition bonds to be issued
by Idemitsu Kosan will be used for the construction, installation, operation, andmaintenance of Idemitsu Kosan Group projects. DNV has also confirmed that the funds
raised are planned to be used for newly financing and/or refinancing of these projects.
Details are as follows
Eligible Criteria: DNV has confirmed that the following projects are eligible for the useof Climate Transition Financing.
Green/Transition Projects
Project Category

Eligibility Criteria

Alignment with
SDGs *1

Power and Renewable Energy

Projects related to the development,

Goals 7, 9, 11, 13

construction, operation, renovation, andGreen Bond Principles

other related expenditures for renewable

1) Renewable energy

energy (biomass, geothermal, solar, wind)(Environmental objective: climate

power generation facilities

change mitigation)
Distributed energy

Projects related to the development,

Goals7、9、11、13

construction, operation, renovation, andGreen Bond Principles

other related expenditures of facilities for

1) Renewable energy

distributed energy

2) Energy conservation(Environmental objective: climatechange mitigation)
Development of functional material

Projects related to lithium solid electrolyte

products

development, production, R&D and otherrelated expenditures (electric vehicles (EV))

Green Bond Principles
6) Clean transportation

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Goals7、9、11、13

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion(Environmental objective: climatechange mitigation)

Turning into “Carbon Neutral

Projects on the construction of a waste

Transformation Centers"

plastic recycling chain (manufacturing ofGoals8、11、12

chemicals)
Green Bond Principles

Projects related to the development and(9) Businesses related topromotion of circular business

Goals8、11、12

environmentally friendly products
and environmentally friendly
manufacturing technologies andprocesses(Environmental objective: climatechange mitigation)

Transition Projects
Project Category

Eligibility Criteria

Alignment with
SDGs *1

Smart One-Stop Shops

Projects on manufacturing and sales of ultra-

Goals7、9、11、13

compact EVs
Projects related to MaaS services

Goals7、9、11

Projects related to service station logistics

Goals3、7、9、11、

bases, unmanned delivery, drone pesticide13

spraying, day services, etc.
Turning into “Carbon Neutral

Projects on SAF (Sustainable Aviation Fuel)

Transformation Centers"

production and supply
Projects on building CO₂-free ammonia

Goals7、9、13
Goals7、9、13

supply chain for power generation andindustrial sectors
Low-carbon solution for replacing

Projects on production, sales, and R&D of

coal-fired power generation

black pellets (with an eye on increasing theGoals7、9、13

ratio of mixed firing and dedicated firing)
Energy saving

Projects on Energy Saving Investment inGoals7、9、13

Refineries and Complexes*1: Goal 7: "Affordable and clean energy"; Goal 8: "Decent work and economic growth"; Goal 9: "Industry, innovation andinfrastructure "; Goal 11: "Sustainable cities and communities"; Goal 12: "Responsible consumption and production"; Goal
13: "Climate action".

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Exclusion Criteria: DNV has confirmed that Idemitsu Kosan has established Exclusion
Criteria whereby funds raised through Green/Transition Bonds will not be used for projects
related to the following, and that this is appropriate for the purposes of the Principles andGuidelines.
••

Unfair transactions that do not comply with the laws and regulations of thecountry, such as bribery, corruption, blackmail, embezzlement, etc
Transactions that can cause social problems relate to human rights and theenvironment

Impacts on environment, including climate change: DNV has confirmed that Idemitsu
Kosan has been proceeding with the procedures in accordance with the national
environmental assessment laws or the relevant laws and regulations for environmental
and social impact assessment in the country concerned for the projects that are assumed
to be eligible for the use of the proceeds.

Impacts on society: DNV has confirmed Idemitsu Kosan has established its own
Sustainable Procurement Guidelines (November 2021) as a framework for sustainableprocurement that addresses environmental and social issues and confirmed that there are
initiatives to promote self-assessment and analysis, feedback, dialogue, and improvement
among major suppliers. Based on Idemitsu Kosan's approach of promoting sustainableprocurement throughout the entire supply chain, we aim to achieve a triple win for society,suppliers, and Idemitsu Kosan.

Idemitsu Kosan's Approach to Promoting Sustainable Procurement

From Idemitsu Kosan website

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Example of project (black pellets): Blackpellets, which are nominated as one of use of theproceeds, are a biomass fuel that can be handled
in the same way as coal and replacing coal fuelfor thermal power generation with black pellets
will help reduce CO2 emissions. In addition toestablishing co-firing technology for black pellets
and moving to commercialization as soon as
possible to ensure energy transition in coal-fired
power plants, Idemitsu Kosan is also looking tofurther improve the co-firing rate and continue
research and development for dedicated firing in
From Idemitsu Integrated Report 2021
the medium to long term. In terms ofenvironmentalandsocialconsiderations,
Idemitsu Kosan plans to use wood that meets sustainability standards for the wood pellets
that will be used as raw material for the black pellets.

Example of project (energy savings at refineries and petrochemical plants):
Idemitsu Kosan has stated thatits strength lies in its integrated
operations in the petroleum
refining
andpetrochemicalindustries, and in its mediumterm management plan, theCompany promotes structuralreforms to stabilize its earnings
base. As one of the measures,
Idemitsu
Kosan
plans
to
improvetheefficiency
ofproduction facilities at ourrefineries and petrochemical
From Idemitsu Integrated Report 2021
plants nationwide.
For example, at the Tokuyama Complex, one of Idemitsu Kosanʼs major production bases,
it plans to contribute to an annual reduction of approximately 16,000 tons of CO2
emissions by stopping the operation of an old naphtha cracking furnace and installing a
new high-efficiency naphtha cracking furnace, thereby achieving an energy saving effectof approximately 30% compared with the previous system. The renewal of this equipment
is being carried out using the Ministry of Economy, Trade, and Industry's "Supporting
Funds for Energy Conservation Investment Promotion", which supports energy savings at
the petrochemical plant. By promoting energy savings through the renewal of these

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facilities, Idemitsu Kosan will strive to reduce the environmental impact of its businessactivities and contribute to the formation of local communities where the global
environment and economy are in harmony.

 Principle 2: Process for Project Evaluation and Selection
DNV has confirmed through the review that Idemitsu Kosanʼs process for evaluating andselecting projects for investment involves risk assessment in accordance with its own
internal rules for investment management, and that its investment decisions andapprovals are made after deliberation by the Investment and Finance Committee, aspecialized committee. In the evaluation and selection of green/transition projects, DNV
has also confirmed that, after going through the above process, the Finance andAccounting Department is expected to select the eligible projects and the Director of the
Finance and Accounting Department is expected to make the final decision on the eligible
projects.
• Specifically, the project drafting department organizes the outline of the investment
plan and points to be discussed in accordance with the "Investment and FinanceCommittee Operating Bylaws" and other relevant regulations, along with the"Investment Drafting Form. In addition to the business plan and economic indicators(including internal carbon pricing), this drafting document has a comprehensive
format to examine countermeasures, through assuming risk factors such as naturalenvironmental risks (climate change, use of land, water, and natural resources),social issue risks (unfair labour practices, human rights violations, unfair trade),transition risks, and other risks at that point.
• The Corporate Sustainability Department is responsible for cross-functional
involvement and oversight of ESG issues. In the management and implementationof projects, the lead department promotes resolving each ESG issue. The progressof the project is reported to the Management Committee through the Director in
charge of ESG.
• Investment deliberations are conducted by the Investment and Finance Committee,
consisting of the Director of the Corporate Planning Department (Chairman), theDirector of the Finance and Accounting Department, and the Director of the Legal
Department. Through this decision-making process, the Finance & Accounting
Department selects eligible projects based on a risk assessment. Finally, the Directorof the Finance and Accounting Department is expected to make the final decision on
the nominated projects.

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Evaluation and selection☒.

Conforms to the issuerʼs achievement of☒.

Documented process to determine that projects

environmental contribution goals☒.

fit within defined categories

The project is eligible for use of proceeds☒.

Documented process to identify and manage

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

ensured.
☐The project is evaluated and selected☐

Other (please specify):

based on the published standard summary

Information on Responsibilities and Accountability☒.

Evaluation / Selection criteria subject to☒.

In-house assessment

external advice or verification☐

Other (please specify):

 Principle 3: Management of Proceeds
DNV has confirmed that Idemitsu Kosan plans to use the proceeds for new financing or
refinancing of nominated projects in a timely manner after the financing. For regularinvestment projects, Idemitsu Kosan manages the decision-making basis and theinvestment amount on a quarterly basis on a project-by-project basis until the full capital
expenditure is completed, in accordance with the Group Accounting Rules and the Group
Financial Rules, which are internal regulations.
DNV has also confirmed that Idemitsu Kosan's management of unappropriated proceeds
can track them in an appropriate manner that financial data is organized in a spreadsheet
and other formats and is managed by delegated personnel. For the current three years,
cash and cash equivalents at the end of the period were well more than the amount ofgreen/transition bonds expected to be issued at the time of DNVʼs assessment, andtherefore it is also expected to remain at this level in the future.

Tracking of Proceeds:☒

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

☐

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

Other (please specify): Unallocated proceeds are managed in cash or cash equivalents

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Additional disclosure:
Allocations to future investments only☐☒

Allocations to both existing and future
investments☒

Allocation to individual disbursements☐

Allocation to a portfolio of disbursements☐

Disclosure of portfolio balance of☐

Other (please specify):

unallocated proceeds

 Principle 4: Reporting
DNV has confirmed that the following indicators and project summaries are reported atleast annually on its website to the extent practicable until the proceeds have been
appropriated.

The main reporting items are as follows.
<Status of appropriation of funds>•

Amount of proceeds allocated•Amount of unappropriated proceeds raised•

Amount of proceeds raised to be used for refinancing<Environmental benefits>
Green/Transition Projects
Project Category
Power and Renewable energy

Eligibility Criteria

Impact Metric

Projects related to the• Installed capacity (MW)development, construction,• Actual power generation (kWh)Green Bond Principles

operation, renovation, and other• Amount of CO₂

1) Renewable energy

related expenditures for renewablereduction/reduction(Environmental objective:

energy (biomass, geothermal,

contribution (t-CO₂)

climate change mitigation)

solar, wind) power generation
facilities

Distributed energy

Projects related to the• Amount of CO₂

development, construction,

reduction/reduction

Green Bond Principles

operation, renovation, and othercontribution (t-CO₂)

1) Renewable energy

related expenditures of facilities for2) Energy conservation

distributed energy(Environmental objective:
climate change mitigation)

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project

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Development of functional

Projects related to lithium solidmaterial products

electrolyte development,• The progress of the eligible
project

production, R&D and other related
expenditures (electric vehicles (EV))

Green Bond Principles
6) Clean transportation(Environmental objective:
climate change mitigation)
Turning into "Carbon Neutral

Projects on the construction of aTransformation Centers"

waste plastic recycling chain

Green Bond Principles(manufacturing of chemicals)(9) Businesses related to

Projects related to the development

environmentally friendly

and promotion of circular business• The progress of the eligible
project• The progress of the eligible
project

products and environmentallyfriendly manufacturing
technologies and processes(Environmental objective:
climate change mitigation)

Transition Projects
Project Category
Smart One-Stop Shops

Eligibility Criteria
Projects on manufacturing and sales ofultra-compact EVs
Projects related to MaaS services

Impact Metric• The progress of the eligible
project• The progress of the eligible
project

Projects related to service station
logistics bases, unmanned delivery,• The progress of the eligible
project

drone pesticide spraying, day services,
etc.
Turning into "Carbon

Projects on SAF (Sustainable Aviation• Product production (KL)Neutral Transformation

Fuel) production and supply• Amount of CO₂ emission

Centers"

reduction/reduction
contribution (t-CO₂)• The progress of the eligible
project
Projects on building a CO₂-free ammonia
supply chain for power generation and• The progress of the eligible
project

industrial sectors
Low-carbon solutions for

Projects on production, sales, and R&D

replacing coal-fired powerof black pellets (with an eye on

reduction/reduction

generation

increasing the ratio of mixed firing andcontribution (t-CO₂)

dedicated firing)• Amount of CO₂ emission• The progress of the eligible
project

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Energy saving

Projects on Energy Saving Investment in
Refineries and Complexes• The progress of the eligible
project

Use of Proceeds reporting:☒

Project-by-project☒

On a project portfolio basis☒

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

Percentage of the total investment amountInformation reported:☒

Allocated amounts

that is used for transition financing☐

Other (please specify):

Frequency:☐

Annual☐Other (please specify):☐

Semi-annual

Impact reporting (Environmental Impact):☒

Project-by-project☐

Project portfolio (Project Category basis)☐

Linkage to individual bond(s)☐OthersFrequency:☒

Annual☐Other (please specify):☐

Semi-annual☐

Energy savings

Information reported (expected or ex-post):☒

CO2 Emissions / Savings☐

Other ESG indicators (please
specify):

Means of Disclosure☐

Information published in financial report☐

Information published in sustainability report☒

Other (please specify): Disclosed on the(Integrated Report)☐

Information published in ad hoc documents

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

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 Other: Review (External Review)
Idemitsu Kosan utilizes external reviews by DNV to determine the consistency of theGreen/Transition Bond Framework and to enhance objectivity. DNV assessed theGreen/Transition Bond Framework and the nominated projects to be funded by this bondto confirm that they are consistent with all the CTFH, CTFBG, GBP, and GBGLs, andprovided a second party opinion on their eligibility to transition bond. DNV, as anindependent external review organization, has no interest in the facts or perceptions ofIdemitsu Kosan in providing a second party opinion.

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VII.

Assessment Conclusion

Based on the information provided by Idemitsu Kosan and the work undertaken, it is DNV'sopinion that Idemitsu Kosan's framework and transition finance executed by theframework meets requirements in the eligibility assessment protocol and are consistent
with the definition and purpose of Climate Transition Finance, which is to "provide aninvestment opportunity with transparent sustainability credentials" and" enable financing
and investment for new or existing projects that provide environmental benefits."

DNV Business Assurance Japan K.K.

18 March 2022

Mark Robinson

Naoki Maeda

Manager, Sustainability Services

Managing Director

DNV Business Assurance, Australia

DNV Business Assurance Japan K.K.

Masato Kanedome

Koichiro Tanabe

Project Manager

Lead Assessor

DNV Business Assurance Japan K.K.

DNV Business Assurance Japan K.K.

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About DNV
Driven by our purpose of safeguarding life, property, and the environment, DNV enables organisations to advance thesafety and sustainability of their business. Combining leading technical and operational expertise, risk methodology andin-depth industry knowledge, we empower our customers' decisions and actions with trust and confidence. We
continuously invest in research and collaborative innovation to provide We continuously invest in research andcollaborative 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
Our statement represents an independent opinion and is intended to inform the Issuer management and the SecondParty Opinion Providers, DNV: The management of Issuer has provided the information and data used by DNV during thedelivery of this review. Our statement represents an independent opinion and is intended to inform the Issuer
management and other interested stakeholders in the Bond as to whether the established criteria have been met, basedon DNV: The management of the Issuer has provided the information and data used by DNV during the delivery of thisreview. Our statement represents an independent opinion and is intended to inform the Issuer management and otherinterested stakeholders in the Bond as to whether the established criteria have been met, based on the information
provided to us. In our work we have relied on the information and the facts presented to us by the Issuer. DNV is not
responsible for any aspect of the nominated assets referred 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 theIssuer's management and used as a basis for this assessment were not correct or complete

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Schedule-1 Candidate Transition Bond Projects
The projects listed in the table are candidate eligible projects that have been assessed for eligibility at the time of the pre-financing assessment.
Under the Transition Bond Framework, bonds will be made exclusively to these eligible project candidates and will be reported in the prefinancing or post-financing reporting.
Project Category

Eligibility Criteria
Green/Transition Projects

Power and Renewable energy

Remarks• Issue format:

Projects related to the development, construction, operation, renovation, and other related

Transition bondexpenditures for renewable energy (biomass, geothermal, solar and wind) power generation(planned)• Amount of bonds

facilities
Projects related to the development, construction, operation, renovation, and other related

to be issued: 20

expenditures of facilities for distributed energy

billion yen

Development of functional

Projects related to lithium solid electrolyte development, production, R&D and other related(planned)materials

expenditures (electric vehicles (EV))

Turning into “Carbon Neutral

Projects on the construction of a waste plastic recycling chain (manufacturing of chemicals)

Transformation Centers"

Projects related to the development and promotion of circular businessDistributed energy

Transition Projects
Smart One-Stop Shops

Projects on manufacturing and sales of ultra-compact EVs
Projects related to MaaS services
Projects related to service station logistics bases, unmanned delivery, drone pesticide spraying, dayservices, etc.

Turning into “Carbon Neutral

Projects on SAF (Sustainable Aviation Fuel) production and supply

Transformation Centers"

Projects on building a CO₂-free ammonia supply chain for power generation and industrial sectors

Low-carbon solutions for replacing

Projects on production, sales, and R&D of black pellets (with an eye on increasing the ratio of mixed

coal-fired power generation

firing and dedicated firing)

Energy saving

Projects on Energy Saving Investment in Refineries and Complexes

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Schedule-2 Climate Transition Finance Eligibility Assessment Protocol
The checklists (1〜4) below are DNV evaluation procedures created for eligibility assessment based on the disclosure requirements of CTFH and CTFBG.
The "confirmed documents" in the Work Undertaken include public or private documents (materials inside the issuer), etc., and are provided by Idemitsu
Kosan as evidence of eligibility judgment for DNV.
*The terms "Issuer" and "Investor" may be replaced as "Borrower/Fundraiser" and "Lender," respectively, in the context in the following disclosure
requirements, as appropriate.
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

1

Issuerʼs Climate
Transition
Strategy andGovernance

The financing purpose should be forenabling an issuerʼs climate change
strategy. A ʻtransitionʼ label applied to a
debt financing instrument should serve tocommunicate the implementation of anissuerʼs corporate strategy to transform thebusiness model in a way which effectively
addresses climate-related risks andcontributes to alignment with the goals of
the Paris Agreement.

Confirmed documents/01//02//03//04/

Through its evaluation work, DNV has confirmed thatfundraisers are considering green/transition bond as away of helping to realise their own transition plan
strategies toward achieving carbon neutrality.

Interviews with stakeholders

DNV has also confirmed through its evaluation work thatthe fundraiser plans to use the issuance of thegreen/transition bond to help communicate that theirbusiness strategy is being implemented to transform theirbusiness portfolio in a way that effectively addresses
climate-related risks and contributes to aligning with thegoals of the Paris Agreement.

Suggested information and indicators•••

A long-term target to align with thegoals of the Paris Agreement (e.g., theobjective of limiting global warming
ideally to 1.5℃ and, at the very least,
to well below 2℃).
Relevant interim targets on the
trajectory towards the long-term goal.
Disclosure on the issuerʼs levers
towards decarbonisation, and strategicplanning towards a long-term target to< Information and indicators already disclosed>.
••

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Technology roadmaps for the oil, chemical, andelectric power sectors published by METI (assumingthese roadmaps are consistent with the goals of theParis Agreement)
Long-term target (Scope 1+2) and indicator level forachieving carbon neutrality in 2050 (Scope 1+2+3
consider the amount of reduction contribution)

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

Criteria

Requirements••

Work Undertakenalign with the goals of the Paris
Agreement.
Clear oversight and governance oftransition strategy and,Evidence of a broader sustainability
strategy to mitigate relevant
environmental and social externalities
and contribute to the UN Sustainable
Development Goals.

DNV Findings
•
•

•
•

2

3

Business model
environmental
materiality

Climatetransition
strategy to bescience-based
includingtargets andpathways

The planned climate transition trajectoryshould be relevant to the environmentallymaterial parts of the issuerʼs businessmodel, taking into account potential futurescenarios which may impact on current
determinations concerning materiality.

Confirmed documents/01//02//03//04/

Issuerʼs climate strategy should reference
science-based targets and transition
pathways. The planned transition trajectoryshould:Confirmed documents/01//02//03//04/•

Interviews with stakeholders

Reasonable mid-term guidance on a trajectory
toward the long-term goal
Disclosure by fundraiser of measures toward carbon
neutrality and strategic plans toward long-term goalsconsistent with the goals of the technology roadmap
for the oil, chemical and electric power sectors
published by METI
Clear oversight and governance of the transition plan(business strategy)
A broader sustainability strategy to contribute to the
UN Sustainable Development Goals (SDGs) while
mitigating associated negative environmental andsocial external externalities

Through its evaluation work, DNV has confirmed that thefundraiser's planned climate transition trajectory relates
to the material environmental aspects of the issuer's
business model.
DNV also has confirmed through its evaluation work thatthe fundraiser has considered several future scenariosthat could affect its current materiality decisions.

Interviews with stakeholders

be quantitatively measurable (based ona measurement methodology which isconsistent over time).

Through its evaluation work, DNV has confirmed thatfundraisers' climate strategies are based on sciencebased targets and pathways towards transition.
DNV also has confirmed through its evaluation work thatthe planned trajectory of the fundraisers' transitions
meets the following requirements:•

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be quantitatively measurable using consistentmethods over a long period of time

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

Criteria

Requirements•••

Work Undertaken

be aligned with, benchmarked, orotherwise referenced to recognized,
science-based trajectories where suchtrajectories exist.
be publicly disclosed (ideally inmainstream financing filings), include
interim milestones, and;be supported by independent assurance
or verification

DNV Findings••

be aligned with, benchmarked with technology
roadmaps for the oil, chemical, and electric power
sectors published by METI
be published in a form that includes a mid-term(2030) target/indicator level

Suggested information and indicators
•

•
•
•
•

4

Implementationtransparency

Short, medium, and long-term
greenhouse gas reduction targets
aligned with Paris Agreement;
Baseline
Scenario utilised, and methodology
applied (e.g. ACT, SBTi, etc.).
Greenhouse gas objectives covering all
scopes (Scope 1, 2 and 311); and,Targets formulated both in intensity
and absolute terms

Market communication in connection withthe offer of a financing instrument which
has the aim of funding the issuerʼs climatetransition strategy should also provide
transparency to the extent practicable, ofthe underlying investment program
including capital and operational
expenditure. This may include R&D-related
expenditure where relevant, and details ofConfirmed documents/01//02//03//04/
Interviews with stakeholders

Through its evaluation work, DNV has confirmed that thefundraiser intends to explain its investment plan to themarket to the extent practicable and to be as transparent
as possible when offering financial instruments aimed atfinancing the implementation of the fundraiser'stransition plan.
DNV has also confirmed through its evaluation work that
it is expected to be as transparent as practicable in its

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Ref.

Criteria

Requirements

Work Undertaken

communication to the market regarding its basic
investment plan, including capital expenditures (Capex),
operational expenses, and operating expenses (Opex).

where any such operating expenditure isdeemed ʻnon-Business as Usualʼ, as well asother relevant information indicating how
this program supports implementation of
the transition strategy, including details ofany divestments, governance, and processchanges.
Suggested information and indicators••

DNV Findings

Disclosure on the percentage ofassets/revenues/
expenditures/divestments aligned to
the various levers outlined in Element 1
above;
Capex roll-out plans consistent with theoverall strategy and climate science

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Schedule-3 Green Bond (Transition Finance with specific use of proceeds) Eligibility Assessment
ProtocolThe checklist below (GBP/GBP-1 to GBP/GBP-4) is a DNV evaluation procedure created for Transition Finance (Bond & Loan) Eligibility Assessment (Bond & Loan
with specific use of proceeds) based on the requirements of GBP/GBGLs and GBP/GBGLs. "Confirmed documents" in the “Work Undertaken” includes documents
inside the issuer and is provided as evidence of eligibility judgment for DNV.
In Schedule-3, it is referred to as GBP or GBP according to the practice, but this is the standard to be referred to in the case of financing that specifies the use ofproceeds such as transition projects in transition finance (bonds and loan) that specifies the use of proceeds based on CTFH and CTFBG, so please read as themeaning of the transition as appropriate.

GBP/GBP-1 Use of proceeds
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

1aTypes of funds

The types of green bonds are classified into
one of the following types defined by GBP.
· (Standard) Green/transition Bond・ Green/transition Revenue Finance・ Green/transition Project Finance・ Other

Confirmed documents/01/

Through its evaluation work, DNV has identified thefollowing categories of transition finance (bonds/loans)Interviews withstakeholders

Green/Transition Bonds (for specific purpose)

The key to a green/transition bond is thatthe proceeds will be used for a green
project, which should be properly stated in
the legal documents relating to the security.

Confirmed documents/01//013/

Through its evaluation work, DNV has confirmed that thefundraiser intends to explain to investors in advance when
it issues a specific green/transition bond by means of the
Framework, statutory documents such as an amended
shelf registration statement, and other documents.

1b

Green/transition
Project
Classification

Interviews withstakeholders*At the time of this evaluation, the specific use of proceeds
and the timing of the bond issuance have not yet been

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Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
determined, and therefore the statutory documents (suchas the Amended Shelf Registration Statement) have notyet been finalized.

1c

1dEnvironmental
benefits

Refinancing rate

All green projects to which the funds areused should have clear environmental
benefits, the effects of which should beassessed by the issuer and, where possible,
quantitatively demonstrated.

Confirmed documents/01//05//06/

If all or part of the proceeds are used or
may be used for refinancing, the issuer will
indicate the estimated ratio of the initialinvestment to the refinancing and, if
necessary. Therefore, it is recommended toclarify which investment or project portfolio
is subject to refinancing.

Confirmed documents/01//08/

Interviews withstakeholders

Interviews withstakeholders

Through its evaluation work, DNV has confirmed that thegreen/transition projects envisioned to use the funds haveenvironmental benefits (climate change mitigation), which
will be evaluated and, where possible, quantified by thefundraiser.

Through its evaluation work, DNV has confirmed that if allor part of the proceeds are used or may be used forrefinancing, the fundraiser will disclose the amount offunds allocated by project category, the amount of
unallocated funds from the proceeds, and the amount of
the proceeds allocated as an existing expenditure that thecompany plans to do.
DNV has also confirmed that the fundraiser intends toclarify at the time of reporting the amount allocated foreach use of proceeds and which uses of proceeds will in
effect be subject to refinancing once the specific uses ofproceeds have been determined.

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GBP/GBP-2 Project selection and evaluation process
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

2aProject
selection
process

Green bond issuers should provide an overview
of the process of qualifying projects for whichgreen bond funding will be used. This includes(but is not limited to):• The process by which the issuer determinesthat the project in question is included in thebusiness category of a qualified green project.
・ Creation of criteria for eligibility of projects forwhich green bond funding will be used
・ Environmental sustainability goals

Confirmed documents/01//02//03//05//06//07/

Through its evaluation work, DNV has confirmed thatthe fundraiser has provided an overview of theprocess of qualifying projects for whichgreen/transition bond will be used.

Interviews with stakeholders

•

•

•

2b

Issuer's
Environment
al and Social
Governance
Framework

In addition to criteria and certifications, theinformation published by issuers regarding thegreen bond process also considers the quality of
performance of the issuer's framework andenvironmental sustainability.

Confirmed documents/01//02//03//05//06//07//010//01
1/
Interviews with stakeholders

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The process by which the fundraiser determinesthat an eligible project falls within the businesscategory of an eligible green/transition project.
Mechanism for evaluation of environmental
value, risk management, and optimal
verification of investment for eligibility of
projects to use of proceeds fromgreen/transition bonds
Methods for evaluating environmental aspects ofproject categories (e.g., calculation methods for
GHG reductions)Through its evaluation work, DNV has confirmed thatthe information published by the fundraiser also
considers the quality of environmentally relevant
sustainability performance in green/transition bonds(e.g., use of certified materials that meetsustainability criteria in black pellets).

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

GBP/GBP-3 Management of funds raised
Ref.

Criteria

3a

Tracking
procedure-1

3b

3c

Tracking
procedure-2

Temporaryholding

Requirements

Work Undertaken

DNV Findings

The net proceeds from of green bonds should bemanaged in sub-accounts, included in subportfolio, or otherwise tracked. It should also be
certified by the issuer in a formal internal process
related to the issuer's investment and financing
operations for the Green Project.

Confirmed documents/01//08/

Through its assessment work, DNV has confirmed thatfunds raised by green/transition bonds are tracked in an
appropriate manner.
DNV has also confirmed that the fundraiser will properly
manage green/transition projects within formal internal
processes related to the fundraiser's investment
operations.

During the green bond redemption period, thebalance of funds raised that is being tracked
should be adjusted at regular intervals to matchthe amount allocated to eligible projects
undertaken during that period.

Confirmed documents/01//08/

If no investment or payment has been made in aqualified green project, the issuer should also
inform the investor of the possible temporary
investment method for the balance of unallocatedproceeds.

Confirmed documents/01//08/

Interviews with stakeholders

Interviews with stakeholders

Interviews with stakeholders

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Through its evaluation work, DNV has confirmed thatthe balance of the fund raised that is tracked will be
adjusted at regular intervals to match the amountallocated to eligible projects undertaken during theperiod up to the redemption of the green/transition
bonds.
Through its evaluation work, DNV has confirmed that if
no investment or payment has been made in a qualified
green project, the fundraiser will be held in cash or cash
equivalents for the balance of unallocated proceeds.

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

GBP/GBP-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,
the issuer will consider each projectat least once a year for projects towhich the green bond proceeds havebeen allocated, taking into accountthe following: A list of each project
should be provided.
-Confidentiality and competitive
considerations-Outline of each project, expectedsustainable environmental and social
effects

Confirmed documents/01//016/

Through its evaluation work, DNV has confirmed that the fundraiser will disclose
information about the projects to which proceeds from green/transition bonds
are allocated, at least once a year, in addition to reporting on the use ofproceeds and temporary unallocated proceeds, considering the followings:

Interviews withstakeholders••

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Confidentiality and competitive considerations
An overview of each project (the progress of each project, amount of CO2
reduction/reduction contribution, and other items specified in the
Framework)

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Schedule-4: Basic Guidelines on Climate Transition Finance Eligibility Assessment Checklist
The following checklist (from CTF-1 to CTF-4) are based on four “disclosure elements “which indicated in the “Basic Guidelines on Climate Transition Finance (CTF)”
established by the Financial Services Agency, Ministry of Economy, Trade and Industry, and Ministry of the Environment in May 2021.
According to the CTF, “disclosure elements” are classified into the following three categories. Should:◎ recommend:〇 be considered/possible: △These expressions are used in the following context.
-

Items described with the word “should” are basic elements that financial instruments labelled as transition finance are expected to have.

-

Items described with the word “recommended” are elements that financial instruments labelled as transition finance are optimally recommended to have under-these Guidelines although instruments which do not have these items can also be labelled as “transition”.
Items described with the word “be considered” or “possible” are elements that these Guidelines provides as examples and interpretations although it is notconsidered problematic even if financial instruments labelled as transition finance do not have them.

There is a supplementary explanation in the margin of each checklist for the annotations in the disclosure elements.
The number /01/、/02/〜/19/ listed in the “Work Undertaken” are documents confirmed through the eligibility evaluation work. Details (document name) are
shown in Appendix. In addition to the confirmed documents, the “Work Undertaken” includes the case where the information obtained through discussions andinterviews with the issuer is used as evidence.

CTF-1 Fundraisers' Climate Transition Strategies and Governance
Ref.

No.

Disclosure elements

◎

1-a)

Financing through transition finance should aim
to implement or incentivize the achievement oftransition strategies9. Such strategies shouldincorporate a long-term target to align with thegoals of the Paris Agreement, relevant interim
targets on the trajectory towards the long-term
goal, disclosure on the levers towards
decarbonization, and fundraiserʼs strategicplanning.

Requirement
check
Yes
No
Not Applicable

Work
Undertaken

DNV Findings

Confirmed
documents:/01//02//03//04/

Through its evaluation work, DNV has confirmedthat fundraiser is considering green/transition bondfinancing in a way to help realize their own transition
plans to achieve carbon neutrality.

Interviews withstakeholders

Page of 61 of 91

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

No.

Disclosure elements

◎

1-b)

A transition strategy should serve to explicitly
communicate the implementation of an issuerʼsstrategy to transform the business model in a
way which effectively addresses climate-relatedrisks and contributes to achieving the goals of
the Paris Agreement10. Transformation of abusiness model is not limited to initiatives as anextension of existing businesses but can also betransformation based on various otherperspectives. It includes fuel conversion that
achieves significant carbon and GHG reduction
benefits, introduction of innovativetechnologies, improvement of / changes inmanufacturing processes and products, anddevelopment and provision of products andservices in new fields.

(△)

Requirement
check

Work
Undertaken

DNV Findings

Yes

Confirmed

No

documents:/01//02//03//04/

Through its evaluation work, DNV has confirmedthat the fundraiser intends to communicate thefollowing to the market in issuing green/transition
bonds

Not Applicable

Interviews withstakeholders•••

Addresses climate-related risks through thecompany's business strategy
Aligned with the Paris Agreement and Japan's
carbon neutrality goals
Transforming its business portfolio to address
climate change< Information and indicators already disclosed>.
•

•

•
•

•

Page of 62 of 91

Technology roadmaps for the oil, chemical, andelectric power sectors published by METI
(assuming these roadmaps are consistent withthe goals of the Paris Agreement)
Long-term target (Scope 1+2) and indicator
level for achieving carbon neutrality in 2050
(Scope 1+2+3, considering the amount of
reduction contribution)
Reasonable mid-term guidance on a trajectory
toward the long-term goal
Disclosure by fundraiser of measures toward
carbon neutrality and strategic plans toward
long-term goals consistent with the goals of thetechnology roadmap for the oil, chemical andelectric power sectors published by METI
Clear oversight and governance of the transition
plan (business strategy)

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

No.

Disclosure elements

Requirement
check

Work
Undertaken

DNV Findings

•

〇

◎
(△)

〇

1-c)

1-d)

1-e)

The implementation of a transition strategy
assumes cases where it affects society andenvironment other than climate change, suchas employment or stable provision of products
and services, through transformation of abusiness model. In such cases, it isrecommended that the fundraiser also takes
into consideration the impact of business
innovations to society and environment otherthan climate change.

Climate change-related scenarios11 should bereferenced in developing transition strategies.
The pathway to transition should be planned forrespective sector and regions of individual
fundraiser, who may generally be placed in adifferent starting point and pathway totransition.

Transition strategies and plans must be highly
credible in terms of their effectiveness.
Therefore, it is recommended that a transition

Yes
No
Not Applicable

Confirmed
documents:/01//02//03//04/
Interviews withstakeholders

Yes
No
Not Applicable

Confirmed
documents:/01//02//03//04/
Interviews withstakeholders

Yes
No
Not Applicable

Confirmed
documents:/01//02//03//04/

Page of 63 of 91

A broader sustainability strategy to contributeto the UN Sustainable Development Goals(SDGs) while mitigating associated negativeenvironmental and social external externalities

Through its evaluation work, DNV has confirmedthat the fundraiser has considered the non-climate
environmental and social impacts of business
transformation, such as job security, in
implementing its transition plan.
DNV has also confirmed through its evaluation workthat the fundraiser has also consideredenvironmental and social contributions other thanclimate change to the business transformation.

Through its evaluation work, DNV has confirmedthat fundraiser refers to internationally recognized
scenarios related to climate change in developing its
own transition plans (business strategies). DNV has
also confirmed through its evaluation work thatfundraiser has considered the technology roadmaps
for the oil, chemical, and electric power sectors,
published by METI, considering regional and industry
characteristics.
Through its evaluation work, DNV has confirmedthat the fundraiser has developed a transition planthat is linked to its medium-term management plan

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

No.

Disclosure elements

Requirement
check

strategy and plan are linked to management
strategy and business plan, including mediumterm management plans.
△

1-f)

However, because such strategies and plansrun for a long period of time, it is possible thatthe content may be modified or adjusted in theevent of a major change in the assumed
external environment and so on.

Work
Undertaken

Interviews withstakeholders
Yes
No
Not Applicable

Confirmed
documents:/01//02//03//04/
Interviews withstakeholders

△

◎

1-g)

1-h)

In the initial phase of developing a transition
strategy by the fundraiser, it is considered as
an option for the fundraiser to indicate a planfor future implementation of items describedwith the words “recommended” and “beconsidered/ possible” in these Guidelines.

In order to secure the effectiveness of thetransition strategy, the fundraiser should
establish an organizational structure12 for theboard of directors and/or other such committee
to oversee the activities addressing climatechange and for management to play a role inassessing and managing such climate-related
activities.

Yes
No
Not Applicable

Confirmed
documents:/01//02//03//04/
Interviews withstakeholders

Yes
No
Not Applicable

Confirmed
documents:/01//02//03//04/
Interviews withstakeholders

Page of 64 of 91

DNV Findings

and other management strategies and businessplans, and that it has high confidence in theeffectiveness of the plan.
Through its evaluation work, DNV has confirmedthat the fundraiser has considered reviewing thecontents of the transition plan and modified or
adjusted in the event of a major change in theassumed external environment or other factors
accordingly.

Through its evaluation work, DNV has confirmedthat fundraiser may implement the items listed as"recommended" and "be considered / possible" in
Basic Guidelines on Climate Transition Finance in the
future as it review its transition plan considering
future changes.

Through the evaluation work, DNV confirmed thatthe fundraiser has established an organizational
structure to ensure the effectiveness of thetransition plan (business strategy), to monitor
climate change response by the board of directors
and others, and to evaluate and manage efforts. theexternal environment.

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

No.

Disclosure elements

△

1-i)

While a transition strategy shall be basicallydeveloped by a company in need of finance, it ispossible for entities to utilize the strategy ofcompanies that are wholly or partially
responsible for the initiatives to establish or
explain their own strategy, given that thefinance supports GHG emissions reduction
initiatives of not just a single company but its
supply chain.

◎

△

〇

1-j)

1-k)

1-l)

Transition strategies should be disclosed inadvance in a companyʼs integrated report,sustainability report, statutory documents andother materials for investors (including suchdisclosures on the website). This also applies tothe other three elements.

It is possible to disclose transition strategies
and elements concerning the governanceguaranteeing that the execution of transition
strategies is in alignment with the reporting
frameworks such as the Recommendations of
the Task Force on Climate-Related Financial
Disclosures (TCFD; Final Report)13.
If the implementation of a transition strategy
assumes impacts on society and environment
other than climate change, it is recommended

Requirement
check
Yes
No
Not Applicable

Work
Undertaken

DNV Findings

Confirmed
documents:/01//02//03//04/

Through its evaluation work, DNV has confirmedthat the projects covered by green/transition bondare expected to be limited to the fundraiser and its
group companies. On the other hand, DNV has also
confirmed that the environmental benefits are notlimited to the group companies but are also
expected to contribute to CO2 reduction through thevalue chain in the form of reduction contributions.

Interviews withstakeholders

Yes
No
Not Applicable

Confirmed
documents:/01//02//03//04/
Interviews withThrough its evaluation work, DNV has confirmedthat the fundraiser disclosed its transition plan(business strategies) in advance through its
websites, IR briefings, integrated reports, andsustainability reports.

stakeholders

Yes
No
Not Applicable

Confirmed
documents:/01//02//03//04/
Interviews withstakeholders

Yes
No
Not Applicable

Confirmed
documents:/01//02//03//04/

Page of 65 of 91

Through its evaluation work, DNV has confirmedthat the fundraiser has disclosed its transition plan(business strategy) and the governance that ensures
its implementation in a manner consistent with theframework of the TCFD recommendations.

Through its evaluation work, DNV has confirmedthat the fundraiser has disclosed the potential
environmental and social impacts of theIdemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

No.

Disclosure elements

Requirement
checkthat the fundraiser explain the view underlying
its approach14, etc. to address such impacts anddisclose how the strategy on the wholecontributes to achieving the Sustainable
Development Goals (SDGs) so that the effects
can be appropriately evaluated by the financier.
◎

〇

1-m)

1-n)

Considering the length of application and otherfactors, there may be instances when atransition strategy and plan will need to bemodified due to major changes in the external
environment and relevant conditions that wereassumed at a planning phase. In this case, thecontents of the modification should be disclosed
together with the underlying reason in a timely
manner.

In terms of governance, it is recommended that
disclosures include an organizational structure
for overseeing the implementation of atransition strategy and for assessing andmanaging related initiatives. It is also
recommended that disclosures include thespecific roles of the constituent organizations
and the management and the process by which
the content of deliberations is reflected inmanagement.

Work
Undertaken

Interviews withstakeholders

Yes
No
Not Applicable

Confirmed
documents:/01//02//03//04/
Interviews withstakeholders

Yes
No
Not Applicable

Confirmed
documents:/01//02//03//04/
Interviews withstakeholders

Page of 66 of 91

DNV Findings

implementation of its transition plan (businessstrategy), other than climate change, in a mannerthat allows investors to adequately assess its
effectiveness, and that the strategy also considers
its contribution to the achievement of the
Sustainable Development Goals (SDGs).
Through its evaluation work, DNV has confirmedthat the fundraiser intends to review its transition
plan (business strategy) accordingly, regardless ofwhether all the use of proceeds have been allocatedto the subject project, due to major changes in theexternal environment that were assumed when theplan was developed, and that this is expected toresult in timely disclosure as it relates to long-term
strategies such as energy business environment
scenarios and medium-term business plans.
Through its evaluation work, DNV has confirmedthat the fundraiser has disclosed the specific roles of
the constituent organizations and management andthe process by which the deliberations are reflected
in management, in addition to the organizational
structure for monitoring the implementation of its
transition plan (business strategy) and evaluating
and managing the efforts of the fundraiser.

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

No.

Disclosure elements

〇

1-o)

In cases where the fundraiser determines theneed for an objective assessment regarding thetransition strategy, it is recommended that areview, assurance and verification by an
external organization for its transition strategy.

△

1-p)

Requirement
check

It is recognized useful to obtain a review
particularly concerning the following inconnection with the transition strategy:- Alignment of short-term, mid-term and longterm targets (for targets, refer to Element 3)
with the overall scenario- Credibility of the fundraiserʼs strategy toreach the targets- Appropriateness of the management process
and governance for the transition strategy

Yes
No
Not Applicable

Work
Undertaken

DNV Findings

Confirmed
documents:/01//02//03//04/

As an external agency, DNV conducted its review for
the Framework for green/transition bond.

Interviews withstakeholders
Yes
No
Not Applicable

Confirmed
documents:/01//02//03//04/

Throughout its evaluation work, DNV reviewed thefundraiser's transition plan (business strategy),
particularly with respect to the following:

Interviews withstakeholders•••

Consistency of the scenarios with the mid-termand long-term goals (or indicator level)
Confidence that the fundraiser's transition plan(business strategy) will achieve its goals andobjectives
Adequacy of the management process andgovernance of its transition plan (businessstrategy)

9 Transition finance is available for not only entities with strategies and plans for reducing emissions associated with their corporate economic activities, but also entities that plan to take initiatives that enable
others to implement transition strategies through their own products and services. In such cases of financial institutions, a financier should articulate how the underlying projects or activities themselves fit
into the fundraiserʼs strategy while, similarly, a subsidiary or an SPC to make use of its groupʼs or its sponsorsʼ strategy. However, doing so they should explain how their strategy will contribute to thestrategy. In addition, it can be considered that parent company or the group who established the strategy would explain the transition elements as the main fundraiser.
10 The Paris Agreement sets out a goal to Holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C
above pre-industrial levels.
11 Climate-related scenarios are listed in the “Task Force on Climate-related Financial Disclosures (TCFD) Technical Supplement” and the document issued by the Ministry of the Environment: “Practical Guide for
Scenario Analysis in line with TCFD Recommendations”. In addition, Principles for Responsible Investment (PRI) disclose a set of climate scenario tools.
12 Assumes matters provided for under “governance” in the TCFD Recommendations.
13 As for the approach to disclosure aligned with TCFD Recommendations, refer to “Guidance on Climate-related Financial Disclosures (TCFD Guidance) 2.0”, “Guidance for Utilizing Climate-related Information to
Promote Green Investment (Green Investment Guidance)” (both published by the TCFD Consortium), and the document published by the Ministry of the Environment: “Practical Guide for Scenario Analysis inline with TCFD Recommendations”.

Page of 67 of 91

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion
14 An example of the approach may be to identify, eliminate, reduce, and manage potential negative effects.

CTF-2 Business Model Environmental Materiality
Ref.

No.

Disclosure elements

◎

2-a)

Initiatives for achieving the transition
strategy should be such that contributeto transforming core business activities
that are environmentally material parts
today and in the future.15

〇

△

◎

2-b)

2-c)

2-d)

When identifying business activities thatare environmentally material parts, it isrecommended that the fundraiser
consider multiple climate change-related
scenarios that may possibly impact its
judgment on the identification16.
In terms of considering materiality, it ispossible to apply existing guidance
provided by an organization that creates
standard criteria concerning sustainability
reporting17.

The fundraiser should indicate thatclimate change is an environmentallymaterial part of business activities18.

Requirement
checkWork Undertaken

DNV Findings

Yes

Confirmed
documents:/01//02//03//04/
Interviews withstakeholders

Through its evaluation work, DNV has confirmed that a
subject project will be an initiative that will contribute to thetransformation of a core business portfolio that isenvironmentally important now and in the future in therealization of the fundraiser's transition plan (businessstrategy).

Confirmed
documents:/01//02//03//04/

Through its evaluation work, DNV has confirmed that thefundraiser has considered several future scenarios that could
affect its current materiality decisions.

No
Not ApplicableYes
No
Not Applicable

Interviews withstakeholders

Yes
No
Not Applicable

Confirmed
documents:/01//02//03//04/
Interviews withstakeholders

Yes
No
Not Applicable

Confirmed
documents:/01//02//03//04/
Interviews withstakeholders

Page of 68 of 91

Through its evaluation work, DNV has confirmed that thefundraiser has addressed materiality considerations byreferring to the SDGs goals and GRI standard non-financial
disclosures as guidelines for identifying society's needs andchallenges.

Through its evaluation work, DNV has confirmed that thefundraiser has indicated climate change to beenvironmentally material in its operations.

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

No.

Disclosure elements

〇

2-e)

It is recommended that disclosures
include the contents of climate changerelated scenarios used in identifying
business activities that areenvironmentally material parts along withthe underlying reasons (e.g., regional
and industrial characteristics) for
selecting such scenarios.

Requirement
checkWork Undertaken

DNV Findings

Yes

Confirmed
documents:/01//02//03//04/

Through its evaluation work, DNV has confirmed thatfundraiser has referred to internationally recognized
scenarios related to climate change in developing its
transition plan (business strategies). DNV has also
confirmed through its evaluation work that fundraiser has
considered the technology roadmaps for the oil, chemical,
and electric power sectors, published by METI, considering
regional and industry characteristics.

No
Not Applicable

Interviews withstakeholders

15 They include activities that are environmentally material parts are considered to be business activities of the fundraiser that identifies climate change as part of its materiality.
16 Scenario analysis using multiple climate-related scenarios is similar to that required by the TCFD Recommendations, and it is considered useful to refer to relevant guidelines and such like for implementation
methods. An example is the document issued by the Ministry of the Environment: “Practical Guide for Scenario Analysis in line with TCFD Recommendations”.
17 “The SASB Materiality Map” issued by the Sustainability Accounting Standards Board serves as a guidance concerning materiality.
18 As for the approach to identifying environmentally material business activities, it is possible to use the materiality map and such like and outline the level of materiality of climate change for oneʼs entity.

Page of 69 of 91

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

CTF-3 Climate Transition Strategy to be Science-based Including Targets and Pathways
Ref.

No.

Disclosure elements

◎

3-a)

The fundraiser should reference
science-based targets in developing
its transition strategies.

Requirement
check
Yes
No
Not
Applicable

◎

◎

(△)

3-b)

3-c)

This should include mid-termtargets (short- to mid-term targets)in addition to long-term targets for2050 and be quantitatively
measurable based on ameasurement methodology whichis consistent over a long period oftime.
In addition, it is recommended thatGHG reduction targets, which could
be formulated either in intensity
and absolute terms, should
consider environmental materiality
and cover Scopes 1 through 3 of
GHG Protocol, the international
standard on supply-chain
emissions. It is recommended thattargets covering Scope 3 be set
using a practical calculation method

Yes
No
Not
Applicable

Yes
No
Not
Applicable

Work Undertaken

DNV Findings

Confirmed documents:/01//02//03//04//05//06/

Through its assessment work, DNV has confirmedthat the fundraisers' transition plan (businessstrategies) is benchmarking the transition
pathways in line with the technology roadmaps in
the oil, chemical, and electric power sectors
published by METI, which are consistent with theParis Agreement.

Interviews with stakeholders

Confirmed documents:/01//02//03//04//05//06/
Interviews with stakeholders

Confirmed documents:/01//02//03//04//05//06/
Interviews with stakeholders

Page of 70 of 91

Through its evaluation work, DNV has confirmedthat the trajectory of the fundraiser's plannedtransition plan (business strategy) is
quantitatively measurable in a long-term andconsistent manner that includes a 2030 indicator
level and the 2050 long-term goal.

Through its evaluation work, DNV has confirmedthat the fundraiser includes a 2030 indicator levelin addition to the 2050 long-term goal and isquantifiable over time and with consistentmeasurement methods.

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

No.

Disclosure elements

Requirement
checkWork Undertaken

DNV Findings

Confirmed documents:/01//02//03//04//05//06/

Through its assessment work, DNV confirmedthat the fundraiser's climate strategies are basedon science-based targets and pathways fortransitions, considering regional and industry
characteristics, as they are aligned with thetechnology roadmaps for the oil sector, chemical
sector, and electric power sector published by
METI, consistent with the Paris Agreement.

when it could be subject tosignificant reduction in thefundraiserʼs business model19. It isalso possible to disclose the avoided
emissions as necessary.
◎
(△)

3-d)

Science-based targets are GHG
reduction targets required forachieving the goals of the Paris
Agreement and should be set while
taking into account differences inregional characteristics andindustries. In so doing, it is possible
to refer to the following
trajectories.
- Scenarios widely recognizedin the international community(Examples include theSustainable Development
Scenario (SDS) outlined by theInternational Energy Agency(IEA)20)- Objectives verified under the
Science Based Targets
Initiative (SBTi) and such like- Nationally Determined
Contributions (NDC) of
countries aligned with thegoals of the Paris Agreement,
roadmaps by industry sector21,
industries set out plans that

Yes
No
Not
Applicable

Interviews with stakeholders

Page of 71 of 91

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

No.

Disclosure elements

Requirement
checkWork Undertaken

DNV Findings

Confirmed documents:/01//02//03//04//05//06/

Through its assessment work, DNV has
confirmed that the fundraiser's climate strategy is
set to be on a path toward the long-term goals
planned in line with the technology roadmap forthe oil, chemical and electric power sectors,
published by METI, that are consistent with theParis Agreement.

are science-based achieving
the Paris Agreement22 and so
on.
◎

△

◎

3-e)

3-f)

3-g)

Short- to mid-term targets (with aterm of three to fifteen years)
should be set by referencing the
aforesaid trajectories or on thepathway toward the long-termtargets planned as benchmarks23.

In doing so, since short- to midterm targets will likely be set inconsideration of various factors(including the starting point andtrack records of the issuer, timingof capital investments, economic
rationality, cost-benefit analysis,
and availability of technology
necessary to achieve the targets), it
is possible that the pathway may
not necessarily be linear with thesame slope at all times but may benonlinear.
The fundraiser should disclose theshort- to mid-term and long-termtargets they have set, including thebase years etc.

Yes
No
Not
Applicable

Yes
No
Not
Applicable

Yes
No
Not
Applicable

Interviews with stakeholders

Confirmed documents:/01//02//03//04//05//06/
Interviews with stakeholders

Confirmed documents:/01//02//03//04//05//06/
Interviews with stakeholders

Page of 72 of 91

Through its assessment work, DNV has
confirmed that the fundraiser is set to be on apath toward the long-term goals planned in linewith the technology roadmaps for the oil,chemical, and power sectors, published by METI,
consistent with the Paris Agreement, considering
how various matters have already been
implemented, among others.

Through its evaluation work, DNV has confirmedthat the fundraiser disclosed the mid- to longterm goals and indicator level it has established,including the base year (FY 2017).

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

No.

Disclosure elements

◎

3-h)

In order to show that long-termtargets are science-based,disclosures should explain themethodology or trajectory used todefine target, including theunderlying reasons (e.g.,characteristics specific to a region
or industry). In particular, whenreference is made to plans andindustry roadmaps established byan industry, etc., the explanation
should include that they are
grounded in scientific basis.

△

△

3-i)

3-j)

It is possible that disclosuresexplain the pathway toward a longterm target and the alignment
between the short- to mid-termtargets on the pathway and thetransition strategy, based on theinvestment plan (refer to Element
4) and other plans.
Concerning targets and trajectories,
obtaining expert reviews on thefollowing is considered to beparticularly useful:- Whether the long-term target isaligned with science-based targets

Requirement
check
Yes
No
Not
Applicable

Yes
No
Not
Applicable

Yes
No
Not
Applicable

Work Undertaken

DNV Findings

Confirmed documents:/01//02//03//04//05//06/

Through its assessment work, DNV has
confirmed that the fundraiser has set up
transition pathways that consider the technology
roadmaps in the oil, chemical, and electric power
sectors, published by METI, consistent with theParis Agreement, including regional and sectoral
characteristics.

Interviews with stakeholders

Confirmed documents:/01//02//03//04//05//06/
Interviews with stakeholders

Confirmed documents:/01//02//03//04//05//06/
Interviews with stakeholders

Page of 73 of 91

Through its evaluation work, DNV has confirmedthat the fundraiserʼs transition plan toward
carbon neutrality is aligned with the mid-termtarget/indicator level, the technology roadmaps
in the oil, chemical, and power sectors, and its
investment plans.

Through its evaluation work, DNV has confirmedthat the fundraiser has established transition
pathways in line with the technology roadmaps in
the oil, chemical, and power sectors, and that themedium- and long-term targets and indicator
level are consistent with the science-basedtargets.

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

No.

Disclosure elements

Requirement
checkWork Undertaken

DNV Findings➡Whether the disclosed
information explains thealignment with the Paris
Agreement- Whether the short- to mid-termtargets are determined using a
GHG emissions forecast
calculated based on a climatechange scenario analysis➡Whether scenarios, etc. widely
recognized in the international
community are used orreferenced- Whether the actual values of theindicators used for the targets arequantitatively measured using
consistent measurement methods➡Whether a specific GHG emissions
reduction measure has beendeveloped to achieve short- to midterm targets aligned with long-term
goals
Since an appropriate method for calculating Scope 3 emissions for specific industrial sectors is under development, it is possible to estimate Scope 3 emissions on a provisional “best effort” basis. When disclosing,it is recommended that boundaries, calculation methods and other relevant factors be also reported. “Basic Guidelines on Accounting for Greenhouse Gas Emissions Throughout the Supply Chain” (METI, MoE;
2017 Japanese only. Related information in English) can be used for calculation references.
20 In addition to benchmarks indicated by the IEA, there are those referenced by the IPCC, such as RCP 2.6 (keep global warming to below 2°C), RCP 1.9 (keep global warming to below 1.5°C) and other related
Transition Pathway Initiative (TPI) benchmarks. Meanwhile, scenario listings are available in the TCFD Technical Supplement and in the document published by the Ministry of the Environment: “Practical
Guide for Scenario Analysis in line with TCFD Recommendations”.
21 An example of a sector-specific roadmap formulated by a public organization is the “Roadmap to Zero Emission from International Shipping” (Ministry of Land, Infrastructure, Transport and Tourism; 2020).
The Ministry of International Trade and Industry also plans to formulate a roadmap for high emission industries.
22 In utilizing a plan formulated at a sector level, it is necessary to have a credible proposition that the alignment with the Paris Agreement can be explained with scientific grounds.

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Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion
23 While it is possible to set short- to mid-term targets by determining the standard based on an assumed use of best available technologies (BAT), consideration should be made as to whether the use of suchtechnologies might make it difficult to achieve long-term targets.

CTF-4 Implementation Transparency
Ref.

No.

Disclosure elements

◎

4-a)

In implementing transition
strategies, the fundraiser should
provide transparency of the basic
investment plan to the extent
practicable.

◯

△

4-b)

4-c)

The investment plan includes not
only capital expenditure (Capex) but
also capital and operational
expenditure (Opex). Therefore, costs
related to research anddevelopment, M&A, and dismantling
and removal of facilities are also
subject to the investment plan. In
other words, it is recommended thatthe investment plan incorporate, tothe extent possible, expenditure andinvestment necessary for
implementing the transition
strategy.
It is recommended that theinvestment plan outline the assumed

Requirement
check
Yes
No
Not
Applicable

Yes
No
Not
Applicable

Yes

Work Undertaken

DNV Findings

Confirmed documents:/01//02//03//04//05//06//07//010//011//012/

Through its evaluation work, DNV has confirmedthat the fundraiser disclosed, to the extent
possible, its basic investment plan in implementing
the transition plan (business strategy).

Interviews with stakeholders

Confirmed documents:/01//02//03//04//05//06//07//010//011//012/
Interviews with stakeholders

Through its evaluation work, DNV has confirmedthat the fundraiser's investment plans include not
only capital expenditures (Capex) but also
operational and operating expenses (Opex), asappropriate. DNV has also confirmed that, if
necessary, the investment plan could also cover
expenses related to research and development,
mergers, and acquisitions, and dismantling anddemolition of facilities.

Confirmed documents:

Through its evaluation work, DNV has confirmedthat quantitative indicators are used for theNo
Page of 75 of 91

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

No.

Disclosure elements

climate-related outcomes andimpacts24 in a quantitative fashion
where possible, along with thecalculation methods andprerequisites25. If quantification isdifficult, the use of external
certification systems can beconsidered as a substitute for
qualitative assessment.
◯

〇

4-d)

4-e)

In particular, when outlining theassumed climate-related outcomes
and impacts, it is recommended thatthe disclosure include not only GHG
emission reduction and otherinitiatives to ease climate change
but also report how consideration of
a “just transition”26 is incorporated
into the transition strategy.
If implementing the transition
strategy has the potential of having
a negative impact on employment or
the environment and communities
other than climate change, it isrecommended that any expenditures
to mitigate such negative impacts be
added to the plan.

Requirement
check
Not
Applicable

Work Undertaken

DNV Findings/01//02//03//04//05//06//07//010//011//012/

expected climate-related and other outcomes (CO2
reduction/reduction contribution) according to theinvestment plan of the fundraiser, and thatmethods and examples regarding calculation
methods are set. DNV has also confirmed that, incases where quantification is difficult, the projectprogress is planned to be disclosed.

Interviews with stakeholders

Yes
No
Not
Applicable

Yes
No
Not
Applicable

Confirmed documents:/01//02//03//04//05//06//07//010//011//012/
Interviews with stakeholders

Confirmed documents:/01//02//03//04//05//06//07//010//011//012/
Interviews with stakeholders

Page of 76 of 91

Through its evaluation work, DNV has confirmedthat the fundraiser has considered not only items
related to climate change mitigation, such as
greenhouse gas emission reductions fromgreen/transition projects, but also a “justtransition”, to ensure that the project does not
result in a loss of jobs, etc. due to the activities.

Through its evaluation work, DNV has confirmedthat the fundraiser has a process to conduct an
optimal validation of the investment and add it to
the investment plan in the implementation of its
transition plan (business strategy), along with arisk management mechanism that includes anenvironmental value assessment and negative
impact on the eligibility of the project to use thefunds raised.

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

No.

Disclosure elements

◎

4-f)

Moreover, the outcomes arising frominvestments included in theinvestment plan should align withthe targets.

〇

4-g)

(△)

◯

◯

4-h)

4-i)

Transition finance is a means tofinancially support theimplementation of a transition
strategy, and it is recommended
that financing be provided for new
initiatives. However, in the case oftransition finance in the format of
Use of Proceeds instruments,
refinancing for a reasonably set
lookback period (the period during
which refinancing is to be applied for
projects that have already started) is
considered to be eligible.
It is recommended that investment
plans be disclosed by linking theoutcomes and impacts with theexpenditures to the extent
practicable27.

It is recommended that thefundraiser, after securing financing,
reports any deviations between theinitial plan and the actual

Requirement
check
Yes
No
Not
Applicable
Yes
No
Not
Applicable

Yes
No
Not
Applicable

Yes
No

Work Undertaken

DNV Findings

Confirmed documents:/01//02//03//04//05//06//07//010//011//012/

Through its evaluation work, DNV has confirmedthat the results and targets generated bynominated investments are consistent in terms of
CO2 reductions/reduction contributions, to theextent practicable for each.

Interviews with stakeholders
Confirmed documents:/01//02//03//04//05//06//07//010//011//012/
Interviews with stakeholders

Confirmed documents:/01//02//03//04//05//06//07//010//011//012/
Interviews with stakeholders

Confirmed documents:/01//02//03//04//05//06//07//016/

Page of 77 of 91

Through its evaluation work, DNV has confirmedthat it is planned that some or all of the proceeds
will be used to refinance existing expenditures, andthat, if applicable, the lookback period will belimited to expenditures undertaken within three
years retroactively from the issuance of agreen/transition bond.

Through its evaluation work, DNV has confirmedthat fundraiser intends to disclose the CO2
reductions/reduction contributions to be achievedby each of the green/transition projects envisaged
for use of the proceeds, by project category, to theextent practicable.
Through its evaluation work, DNV has confirmedthat fundraiser intends to disclose any major
events in a timely manner, such as major changes

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

No.

Disclosure elements

expenditure, outcomes and impacts.
For any deviations, it isrecommended that the underlying
reasons be explained.
◎

◯
(△)

4-j)

4-k)

In cases where the Use of Proceeds
bonds include refinancing, thefundraiser should provide an
explanation on the lookback period
set under the framework or otherrelevant methods along with theunderlying reasons and factors.
While there are differences inbusiness practices, such as the factthat loans are traditionally madebased on the bilateral relationshipbetween a borrower and a lender, it
is recommended that disclosure on
the above be made to the extent
possible in order to ensuretransparency and credibility oftransition finance. However, if it isdifficult to disclose such information
to the public from the standpoint ofconfidentiality and competition, it ispossible to report such information
only to lenders or external
evaluation organizations without
disclosing it to the public.

Requirement
check
Not

Work Undertaken

DNV FindingsInterviews with stakeholders

in the fundraiser's appropriation plan for eligible
projects.

Confirmed documents:/01//02//03//04//05//06//07//010//011//012/

Through its evaluation work, DNV has confirmedthat it is planned that some or all of the proceeds
will be used to refinance existing expenditures, andthat, if applicable, the lookback period will belimited to expenditures undertaken within three
years retroactively from the issuance of agreen/transition bond.

Applicable

Yes
No
Not
Applicable

Yes
No
Not
Applicable

Interviews with stakeholders

Confirmed documents:/01//02//03//04//05//06//07//010//011//012/
Interviews with stakeholders

Page of 78 of 91

The fundraiser does not plan to utilize the loan.

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

No.

Disclosure elements

△

4-l)

Similarly, in cases where thefundraiser is a small-to-mediumsized enterprise and it is difficult todisclose to the public the samecontent as that reported to thefinancier or an external evaluation
institution, it is possible for thefundraiser to simplify the content of
disclosure, for example, by limiting
disclosure to a summary of h) to j)of this section.

Requirement
check
Yes

Work Undertaken

DNV FindingsInterviews with stakeholders

The fundraiser is not a small-to-medium-sizedenterprise.

No
Not
Applicable

24 The Ministry of the Environment, in its “Concept Paper on Impact Finance”, refers to impact as “a positive or negative change to the environment, society or economy caused by an organization and is not a
direct deliverable or output but an outcome as a change brought about in terms of the environment, society or economy.”
25 In disclosing impacts, outlining the amount of contribution to reducing CO2 emissions in the global value chain on the whole and the entire lifecycle, including the consumption phase, can be considered. For
the amount of contribution to the reduction, it is possible to reference the “Guideline for Quantifying GHG Emission Reduction Contribution” (METI, 2018). Furthermore, as for outcomes on research anddevelopment, it is possible to reference the IEA Measuring Innovation by Technology Readiness Level (TRL) or Importance for Net-Zero Emission, among others, and outline the progress in the R&D phase or
the potential of reducing CO2 emissions with the relevant technology by highlighting the importance of net-zero emissions.
26 A just transition is an attempt to ensure the wide sharing of virtual profits created through a transition to a green economy, as well as to support any party who will experience an adverse economic impact(be it a country, a region, an industry, a community, a worker, or a consumer). The concept of a just transition corresponds to several SDGs.
27 In particular, disclosure of investment plans is expected to be required for projects applicable to Use of Proceeds.

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Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Schedule-5 Eligibility Assessment for Green Bond Guidelines (Bonds with Specified Purpose forTransition Finance)
The following check list (GBGLs-1 to GBGLs-6) is prepared based on the Green Bond Guidelines (GBGLs, MOE, 2020).
According to the GBGLs, Requirements/Evaluation aspects are divided into following two terms, Should:◎ Recommend:〇
The numbers /01/, /02/ ~ /19/ listed in the Work Undertaken column are the confirmed documents, and the details (document name) are shown in Reference
dcoument-1 (See the Attachment).
In addition to the confirmed documents, the Work Undertaken includes the case where the information obtained through discussions and interviews with the
publishers is used as evidence.
This assessment applies as a requirement for Use of Proceeds based on CTFH and CTFBG, so any term "green" and “bond” in Schedule-5 should be read as"transition” and “finance (bond)", respectively.

GBGLs-1 Use of proceeds
Ref.

SectionRequirements◎

1-①

Green Bond proceeds should beallocated to Green Projects that state
the clear environmental benefits,
which should be assessed by theissuerRequirement
check
Yes

Work UndertakenNo

Not Applicable

Confirmed
documents:/01//02//03//05//06/
Interviews withstakeholders〇

1-①

Environmental benefit of Green Bond
proceeds, where feasible,
quantification is recommended.

Yes

No

Not Applicable

Confirmed
documents:/01//02//03//05//06/

Page of 80 of 91

DNV Findings

Through its evaluation work, DNV has confirmed that thefundraiser has evaluated that some or all of the funds to beraised by a transition bond will be used for green/transition
projects that will result in environmental improvement
benefits (CO2 emission reductions) and that suchenvironmental improvement benefits have been evaluatedby the fundraiser.
Through its evaluation work, DNV has confirmed thatgreen/transition projects for which the funds will be usedhave environmental benefits (climate change mitigation),
which will be assessed by the fundraiser and quantified
where possible.

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

SectionRequirements

Requirement
checkWork Undertaken

DNV FindingsInterviews withstakeholders◎

1-④

In advance, issuers should provide
investors with information regarding
the use of Green Bond proceeds
through legal documentation (such asa prospectus) or other documents.

Yes

No

Not Applicable

Confirmed
documents:/01//013/
Interviews withstakeholders

Through its evaluation work, DNV has confirmed that thefundraiser intends to explain to investors in advance when it
issues a specific green/transition bond by means of the
Framework, statutory documents such as an amended shelfregistration statement, and other documents.
*At the time of this evaluation, the specific use of proceeds
and the timing of the bond issuance have not yet been
determined, and therefore the statutory documents (such as
the Amended Shelf Registration Statement) have not yet
been finalized.

◎

1-⑤

The provision of the information
regarding the use of proceeds should
specify the Green Project categories.

Yes
No
Not Applicable

Confirmed
documents:/01//013/
Interviews withstakeholders〇

1-⑤

In the cases where individual Green
Projects have been specified, it isrecommended that issuers clearlypresent the projects to investors.

Yes
No
Not Applicable

Confirmed
documents:/01/
Interviews withstakeholders◎

1-⑥

In cases where Green Projects haveincidental negative environmental

Yes
No

Confirmed
documents:

Page of 81 of 91

Through its evaluation work, DNV has confirmed that an
investor presentation of funds to be raised and used tofinance green/transition projects will be presented in linewith the Basic Guidelines for Climate Transition Finance and,
where appropriate, the project categories of the Green Bond
Principles.
Through its evaluation work, DNV has confirmed that thefundraiser intends to clearly identify to investors theindividual green/transition projects for which the proceeds
will be used once such projects have been specifically
identified.

Through its evaluation work, DNV has identified thefollowing measures to minimize the potential for eligible

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

〇

◎

Section1-⑦

1-⑦Requirements

Requirement
checkWork Undertaken

impacts along with the alleged
environmental benefits, the issuers
should include information regardingthese negative impacts (e.g., how
they are assessed, what the issuers
do to curb them) to investors so thatthe investors and market participants
can appropriately evaluate these
impacts.

Not Applicable(In case of where a part of Green
Bond proceeds is used to refinanceexisting Green Projects,) it isrecommended that the issuers
provide information to the investors
regarding (1) the amount (or theshare) of the bond proceeds being
allocated for refinancing, and (2)which Green Projects (or Green
Project categories) may be
refinanced.

Yes

When Green Bonds are issued
multiple times to refinance an asset
that requires long-term maintenance,
the issuer should clearly disclose theassetʼs age and remaining useful life
and the amount to be refinanced as at
the time of the bond issuance,/01//02//03//04//05//010//011//013/
Interviews withstakeholders

No
Not Applicable

Confirmed
documents:/01/
Interviews withstakeholders

Yes
No
Not Applicable

Confirmed
documents:/01/
Interviews withstakeholders

Page of 82 of 91

DNV Findings

green/transition projects to have incidental, negative effects
on the environment, apart from their original environmental
improvement benefits:(1) Exclusion criteria are defined within the Framework.
(2) The project has a process for environmental impact
assessment, risk management including negative impacts,and evaluation of optimal verification of investments.
(iii) Through sustainability reports and/or its websites (newsrelease list), the status of compliance with environmental
protection laws and regulations is disclosed to stakeholders,
including investors.
Through its evaluation work, DNV has confirmed thatfundraiser intends to explain the following in their
explanations to investors if the use of proceeds includes
green/transition projects that have already been initiated.
(1) The amount (or percentage) of proceeds to be allocatedfor refinancing(2) The related project category described in the Framework

Through its evaluation work, DNV has confirmed that whenrefinancing through multiple green bond issues for assetsthat need to be maintained over a long period of time, theintention is for the fundraiser to clearly disclose the age ofthe asset, its remaining durable years, and the amount to berefinanced at the time of issuance.

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

SectionRequirements

Requirement
checkWork Undertaken

DNV Findings

DNV has also confirmed that the fundraiser intends todisclose the sustainability of the environmental improvement
effects over a long period of time, based on the impact
reporting approach.

evaluate the long-term sustainabilityof environmental benefits and obtainan assessment from an external
reviewers for verification.

GBGLs-2 Process for Project Evaluation and Selection
Ref.

SectionRequirements◎

2-①

In advance, issuers should provide
investors with information regarding
the following:
The environmental sustainability
objectives that the issuers intend toachieve through Green Bonds.

◎

2-①

In advance, issuers should provide
investors with information regarding
the following:

Requirement
check
Yes
No
Not Applicable2-①

In advance, issuers should provide
investors with information regarding
the following:

Confirmed
documents:/01/
Interviews withstakeholders

Yes

No

Not Applicable

The criteria for determining theappropriateness of Green Projects
based on the environmental
sustainability objectives describedabove◎Work Undertaken

Yes
No

DNV Findings

Through its evaluation work, DNV has confirmed thatfundraiser intends to explain to investors in advance their"environmental goals" (i.e., the environmental benefits
they intend to achieve through the green/transitionbond).

Interviews withstakeholders

Through its evaluation work, DNV has confirmed thatfundraiser intends to explain to investors in advance thatthe nominated green/transition project is in line with the
Basic Guidelines on Climate Transition Finance and,
where applicable, with a project category of the Green
Bond Principles.

Confirmed documents:/01//02//03//07/

Through its evaluation work, DNV has confirmed thatfundraiser has explained to investors in advance theConfirmed
documents:/01/

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Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

〇

◎

Section

2-⑥

2-⑦

Requirements
The process for determining how
Green Projects fit the criteria for theachievement of the environmental
sustainability objectives (The process
for the determination refers to thereason why issuers determine that
Green Projects can provide
environmental benefits appropriately
in light of the objectives and criteria
for the use of Green Bond proceeds,
how and by whom are the criteria
applied and used to determine
whether Green Projects areappropriate in light of the objectives,
and the like)
It is recommended that the issuers
explain to investors in advance any
environmental standards orcertifications that the issuers willrefer to in evaluating and selecting a
Green Project to be financed.
If an issuer intends to establish an
exclusion standard to identify andcontrol such potentially material
environmental and social risks ofGreen Projects, the issuer should
explain it to investors in advance as
one of the criteria it applies.

Requirement
checkWork Undertaken

DNV Findings

Not Applicable

Interviews withstakeholders

process of evaluation and selection of eligible
green/transition projects.

Yes

Confirmed documents:/01/

Through its evaluation work, DNV has confirmed that, inevaluating and selecting green/transition projects, thefundraiser intends to explain to investors in advance thatthe projects are in line with the technical roadmaps in theoil, chemical, and electric power sectors, published by
METI, and, if applicable, are consistent with the project
categories defined in the Green Bond Principles.
Through its evaluation work, DNV has confirmed that thefundraiser intends to establish the followings, to identify
and control potentially significant environmental and social
risks that the nominated green/transition projects may
have, and to explain them to investors in advance:No
Not ApplicableYes
No
Not Applicable

Interviews withstakeholders

Confirmed documents:/01//02//03//04//05//
010//011//012/
Interviews withstakeholders(1) Exclusion criteria are defined within the Framework.
(2) The project has a process for environmental impact
assessment, risk management including negative impacts,and evaluation of optimal verification of investments.

Page of 84 of 91

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

〇

Section

2-⑨

〇

2-⑪

Requirements

It is recommended that internalgroups who have expertise, such as
the environment related group, or
external institutions check whether
the determination process is suitablefrom an environmental point of view.
It is recommended that issuers
position their environmental
objectives, criteria and informationon their processes in the context of
their comprehensive environmental
sustainability objectives, strategy,
policies and so on (e.g., mediumterm management plan,sustainability strategy, CSR strategy)
when explaining them to investors.

Requirement
checkWork Undertaken

Confirmed documents:/01//02//03//07/

Yes
No
Not Applicable

Interviews withstakeholders

Confirmed documents:/01//02//03//04/

Yes
No
Not Applicable

Interviews withstakeholders

DNV Findings(iii) Through sustainability reports and/or its websites(news release list), the status of compliance withenvironmental protection laws and regulations is disclosed
to stakeholders, including investors.
Through its evaluation work, DNV has confirmed thatsome departments in the fundraiser, with expertise
related to safety and environmental management, areinvolved in the project selection process, and, whereapplicable, external agencies are involved to provide
checks and balances to ensure appropriateness from anenvironmental perspective.
Through its evaluation work, DNV has confirmed that
information on the environmental goals, criteria, andprocesses for green/transition projects are placed within
the context of the fundraiser's transition plan (businessstrategy) and are explained to investors.

GBGLs-3 Management of proceeds
Ref.

SectionRequirements◎

3-①

Issuers should track and manage the net
Green Bond proceeds in an appropriatemanner. These tracking and managing

Requirement
check
Yes
No
Not Applicable

Work Undertaken
Confirmed
documents:/01//08/

Page of 85 of 91

DNV Findings

Through its evaluation work, DNV has confirmed that thefundraiser plans to ensure that the full amount of funds

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

SectionRequirements

Requirement
check

activities should be controlled by theissuerʼs internal process.

◎

◎

◎

3-②

3-②

3-⑤

As long as the Green Bonds areoutstanding, issuers manage the amountof the allocation to the Green project isequal to or more than proceed, or issuers
should periodically adjust to match theamount of the total Green Bond proceeds
to the sum of the amount of the proceeds
allocated to Green Projects and theamount of the unallocated proceeds.
If any of the proceeds remains
temporarily unallocated, the issuer should
explain to investors how it intends tomanage the balance of such unallocatedfunds and endeavour to promptly allocate
such funds to Green Projects.

In advance, issuers should provide
investors with information on how Green
Bond proceeds will be tracked andmanaged.

Work Undertaken

Interviews withstakeholders

Yes
No
Not Applicable

Confirmed
documents:/01//08/
Interviews withstakeholders

Yes
No
Not Applicable

Confirmed
documents:/01//08/
Interviews withstakeholders

Yes
No
Not Applicable

Confirmed
documents:/01//08/
Interviews withstakeholders

Page of 86 of 91

DNV Findings

raised will be controlled and tracked by the fundraiser's
internal processes in an appropriate manner.

Through its evaluation work, DNV has confirmed that thefundraiser will ensure periodically, at least once a year,that the amount allocated to the eligible project matches
the proceeds from the issuance of the green/transitionbond until the green/transition bond is redeemed, or thatthe total amount allocated to the project and the amountof unallocated funds matches the total amount ofproceeds.

Through its evaluation work, DNV has confirmed that, if
unappropriated funds are to arise temporarily, thefundraiser will explain to investors how theunappropriated funds are temporarily managed in an
expected manner.

Through its evaluation work, DNV has confirmed that thefundraiser intends to explain to investors in advance thatit uses an internal management system to manage theappropriation of funds (i.e., how it tracks and manages
procured funds).

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

SectionRequirements〇

3-⑥

It is recommended that issuers keep
evidenced documents appropriately that
demonstrate how they tracked andmanaged Green Bond proceeds.

◎

〇

3-⑧

3-⑨

Requirement
check
Yes
No
Not Applicable

Work Undertaken
Confirmed
documents:/01//08/

DNV Findings

Through its evaluation work, DNV has confirmed that thefundraiser has internal document control regulations forthe management of funds raised, to ensure that
documents and other evidential items are properly kept.

Interviews withstakeholders

In advance, issuers should provide
investors with information on how
unallocated Green Bond proceeds will be
managed when the Green Projects thatwill receive the Green Bond proceeds
have not been determined, or when such
Green Projects have been determined but
the proceeds have not been allocatedbecause the allocation timing has not yet
arrived.

Confirmed
documents:

It is recommended that issuers manage
unallocated Green Bond proceeds as an
asset with high liquidity and safety suchas cash, cash equivalents, or short-term
financial assets

Confirmed
documents:/01//08/

Through its evaluation work, DNV has confirmed that thefundraiser intends to explain to investors in advance how
the unallocated funds will be managed in cash or cash
equivalents.

Interviews withstakeholders/01//08/

Interviews withstakeholders

Page of 87 of 91

Through its evaluation work, DNV has confirmed that it isreasonable based on actual performance for thefundraiser to manage the unappropriated funds in cash or
cash equivalents.

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

GBGLs-4 Reporting
Ref.

Secti
on

Requirements◎

4-①

Issuers should publicly disclose thelatest information on the use of Green
Bond proceeds after issuance

Requirement
checkWork Undertaken

Yes
No
Not Applicable

Confirmed
documents:/01/
Interviews withstakeholders

◎

◎

4-②

4-③

Issuers should disclose the latest
information at least once a year until
full allocation of the proceeds and asnecessary thereafter in the event of
new developments.

Disclosed information should include
the following contents:<Contents>• A list of the Green Projects towhich Green Bond proceeds havebeen allocated• A brief description of each Green
Project (including up-to-date
progress)• The amount allocated to eachGreen Project

Yes
No
Not Applicable

Confirmed
documents:/01//08/
Interviews withstakeholders

Yes
No
Not Applicable

DNV Findings

Through its evaluation work, DNV has confirmed that thefundraiser plans to disclose up-to-date information on theuse of proceeds raised through a green/transition bond toinvestors by publishing it through its website on an annual
basis.

Through its evaluation work, DNV has confirmed that thefundraiser's disclosures will be published on its website on
an annual basis until the proceeds from the issuance ofgreen/transition bond have been fully allocated.
DNV has also confirmed that the fundraiser intends todisclose in a timely manner any major events, such as majorchanges in its plans for the appropriation of proceeds.

Confirmed
documents:/01//08/

Through its evaluation work, DNV has confirmed thatfundraiser intends to include the following items in theirdisclosure information:

Interviews withstakeholders

•
•
•
•

Page of 88 of 91

Amount of funds allocated per project category
Amount of unallocated funds raised
Amount of funds allocated to existing expenditures outof the amount of funds raised
Environmental improvement benefits expected to result
from the project (e.g., CO2 reduction/reduction
contribution (t-CO2))

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

Secti
on

Requirements

•
•

〇

〇

4-④

4-⑤

Requirement
checkWork Undertaken

DNV Findings

The expected environmental
benefits of each Green Project
Information regarding unallocatedGreen Bond proceeds (the amountof the unallocated proceeds or theshare of the unallocated proceeds
to the total amount of theproceeds, when the unallocatedproceeds are expected to beallocates to Green Projects, andhow the unallocated proceeds aremanaged until allocation)

If Green Bond proceeds have been
allocated to the refinancing of existing
projects, it is recommended that
disclosed information include: 1) the
approximate amount (or the share) of
the allocated proceeds used forrefinancing, and 2) a list of the Green
Projects (or the project categories)
refinanced.

While it is recommended to disclose 4-③
and 4-④ on a project-by-project basis, if
there are confidentiality agreements,
competitive considerations, or a large
number of underlying projects that limit
the disclosure of details, it is consideredthat information is presented in genericterms or in an aggregated portfolio.

Yes
No
Not Applicable

Confirmed
documents:/01//08/

Through its evaluation work, DNV has confirmed thatfundraiser intends to explain the followings in its explanation
to investors if the use of proceeds includes green/transition
projects that have already been initiated.

Interviews withstakeholders(i) The amount (or percentage) of proceeds to be allocatedfor refinancing(ii) Project category of the project defined in Green Bond
Principles (if applicable)
Yes
No
Not Applicable

Confirmed
documents:/01/
Interviews withstakeholders

Page of 89 of 91

Through its evaluation work, DNV has confirmed thatfundraiser intends to make disclosures on a project-byproject basis to the extent practicable.

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

Ref.

Secti
on

Requirements◎

4-⑦

When disclosing information regarding
the expected environmental benefits ofprojects, issuers should use appropriate
indicators while ensuring consistency
with the “environmental sustainability
objectives,” the “criteria” for Green
Projects specified in Section 2, “Process
for Project Evaluation and Selection,”and the characteristics of Green
Projects.
When disclosing the expectedenvironmental benefits of projects, it isrecommended that issuers, where
feasible, use quantitative indicators anddisclose information on methodologies
and/or assumptions as well as these
indicators.

〇

4-⑧

Requirement
checkWork Undertaken

Yes
No
Not Applicable

Confirmed
documents:/01//06/
Interviews withstakeholders

Yes
No
Not Applicable

Confirmed
documents:/01//06/
Interviews withstakeholders

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DNV Findings
Through its evaluation work, DNV has confirmed that thefundraiser intends to use appropriate indicators (e.g., CO2
reduction/reduction contribution (t-CO2)), in disclosing
information on environmental improvement benefits,considering the environmental objective of green/transitionbond (i.e., mitigation of climate change).

Through its evaluation work, DNV has confirmed thatfundraiser intends to use quantitative indicators (e.g., CO2
reduction/reduction contribution (t-CO2)), to the extent
practicable, in disclosing information on environmental
improvement effects.

Idemitsu Kosan Co.,Ltd. Green/Transition Bond Framework, Second Party Opinion

List of reference materials/01/

Idemitsu Kosan Green/Transition Bond Framework/02/

Idemitsu Integrated Report 2021

/03/

Idemitsu Sustainability Report 2021

/04/

IR-related materials
a. Review of Mid-term Management Plan (FY2020~2022) (May 11, 2021)
b. Financial Results for the Second Quarter of FY2021 (November 9, 2021)

/05/

/06/

Eligible Projectsa.

Summary information on the target project(s) envisaged for the use of the proceedsb.

CO2-free ammoniac.

Idemitsu Green Energy Pellets (IGEP)

Documents related to CO2 emission reductiona.

Supplementary explanatory materials related to CO2 reduction contribution throughout thevalue chain

/07/

/08/

b.

Methodology and case study materials related to calculation of GHG reduction contributionc.

Idemitsu Kosan GHG Emissions Sustainability Websited.

Supplemental material on low-carbon energy supply

Related to project evaluation and selection processa.

Investment and Finance Committee Operating Bylawsb.

Investment Drafting Sheet for Strategic Investmentc.

Environmental Impact Assessment (Renewable Energy Project no.1)

d.

Environmental Impact Assessment (Renewable Energy Project no.2)

Cash Managementa.

Transition Bond Appropriated/Unappropriated Funds Control Chartb.

Cash and cash equivalents at end of year (2019 and beyond)/09/

Second Quarter of FY2021 Investment Plan Progress/010/

Biomass Feedstock Sustainability Criteriaa.

General woody biomass certification for wood pellets for power generation (January 14,
2021)

/011/

b.

FSC certificate (certificate registration number: NC-COC-032628/NC-CW-032628)

c.

Business Planning Guidelines (Biomass Power Generation) Revised April 2021

Related to sustainable procurementa.

Idemitsu Kosan Sustainable Procurement Guidelines (November 2021)b.

Sustainable Procurement Self-Assessment Sheet/012/

News Release List | Idemitsu Kosan (https://www.idemitsu.com/jp/news/)/013/

Draft Amended and Restated Shelf Registration Statement

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