SECOND PARTY OPINIONIDEMITSU KOSAN CO.,LTD
TRANSITION BOND
POST-ISSUANCE PERIODIC REVIEW (#1)

Prepared by: DNV Business Assurance Japan K.K.
Location: Kobe, Japan
Date: 13 July 2023
Ref. Nr.: PRJN-334509-2022-AST-JPN-02

Rivision history
Issue Date
18 March 2022
13 July 2023

Remarks
Green/Transition Bond Framework Second Party Opinion
Transition Bond Post-Issuance Periodic Review (#1)
(Idemitsu Kosan's 15th unsecured bond and Idemitsu Kosan's 16th unsecured bond)Page 1 of 21

Scope and Objectives
Idemitsu Kosan Co., Ltd. (hereinafter, "Idemitsu Kosan" *including Idemitsu Kosan Group)
has commissioned DNV to conduct periodic reviews of the Idemitsu Kosan Transition Bonds(Idemitsu Kosan's 15th Series Unsecured Bond and Idemitsu Kosan's 16th Series Unsecured
Bond; hereinafter, the "Bonds"). The objective of the periodic review of DNV is to conduct
an assessment to confirm that the Idemitsu Kosan Bonds meet the criteria set out below
and to provide an independent second party opinion on the eligibility of the Bond: theClimate Transition Finance Handbook 2020 (hereinafter, "CTFH"), the Basic Guidelines on
Climate Transition Finance (FSA, METI and MOE 2021, hereafter “CTFBG”), and the Green
Bond Principles (Green Bond Principles 2021, hereinafter, ”GBP”), the GBP) and Green Bond
Guidelines (Ministry of Environment 2020, hereinafter, ”GBGLs”) that meet the four
elements of Transition and Specified Use of the Proceeds.
Idemitsu Kosan issued these Bonds on 14 July 2022. The issue amount of the Bond is 20
billion yen (15th: 10 billion yen, 16th: 10 billion yen). The DNV review team conducted thefirst periodic review for the period July 2022 to May 2023 based on the CTFH and CTFBG,
GBP, and GBGLs.
DNV confirms that Idemitsu Kosan's climate transition initiatives were updated in its
Medium-term Management Plan (2023-2025) by updating its 2030 target and investment
to ensure further transparency and transition of the initiatives.
 Disclosure element – 1 CTF strategy and governance:✓ Emissions (Scope 1+2) reduction target from own operations in 2030 revised upwards
from 4 million tonnes (compared to 2017) to 7.3 million tonnes (46% reduction
compared to 2013).
 Disclosure element – 2 Materiality of environmental aspects of the business model:✓ Released new initiative, “Azure+” scenario for risks and opportunities associated withclimate change, similar to the IEA's net-zero scenario (achieving carbon neutrality in2050).
 Disclosure element – 3 Scientifically based climate transition strategy (including targets
and pathways):✓ Same as disclosure element -1.
(Emissions (Scope 1+2) reduction target from own operations in 2030 revised upwards
from 4 million tonnes (compared to 2017) to 7.3 million tonnes (46% reduction
compared to 2013)).
 Disclosure element - 4 Disclosure of investment plans:✓ Disclosure of a total investment of around 1 trillion yen in new business themes that
contribute to carbon neutrality for the period 2023-2030.

Page 2 of 21

Reference: Idemitsu Kosan website-- Initiatives to address climate change and becomecarbon neutral
https://sustainability.idemitsu.com/en/themes/422
This report provides a post-issuance periodic review of the requirements for the Transition
Bond for the specific use (elements -1 to -4, as described below).
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 paper, no assurance is provided regarding the financial performance of the Bond,
the value of any investment in the Bond, or the long-term environmental benefits of thetransaction.

Standards/guidelines to be applied
No.

Standards/Guidelines

Scheme Owner

Applied Level

1.

Climate Transition Finance Handbook(CTFH) *1

International Capital Market
Association (ICMA), 2020.

Apply

2.

Basic Guidelines on Climate Transition
Finance (CTFBG) *1

FSA, METI, MOE, 2021.

Apply

3.

Green Bond Principles (GBP) *2

International Capital Market
Association (ICMA), 2021.

Apply

4.

Green Bond Guidelines (GBGLs) *2

Ministry of the Environment, 2020.

Apply

*1

Climate transition: The concept of climate transition focuses principally on the credibility of an issuer’s
climate change-related commitments and practices (quoted from CTFH, CTFBG).

*2

It confirms compliance with four core elements (use of proceeds, process for project evaluation andselection, management of proceeds, and reporting) that must be met as a bond/loan that meets the four
elements of transition and has a specific use of proceeds (quoted and edited from CTFBG).

Page 3 of 21

Responsibilities of Idemitsu Kosan and DNV
The management of Idemitsu Kosan has provided the information and data used by DNV
during the delivery of this review. Our statement represents an independent opinion and isintended to inform Idemitsu Kosan management and other interested stakeholders in theBond 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 projects or assets
referred to in this opinion and cannot be held liable if any of the information or data
provided by Idemitsu Kosan management and used as a basis for this assessment were
not correct or complete.

Page 4 of 21

Basis of DNV’s Opinion
To provide as much flexibility as possible for Idemitsu Kosan, DNV has adapted ourTransition Bond Assessment Methodology, which incorporates the requirements of CTFH
and CTFBG, GBP and GBGLs to create Idemitsu Kosan specific Transition Bond Eligibility
Assessment Protocol (hereinafter, “DNV’s Protocol”). The Protocol is applicable to CTFHs
and CTFBGs, as well as specified use of funds type of Transition Bond under GBP and
GBGLs.
DNV's Protocol includes a set of suitable criteria that can be used to underpin DNV’sopinion. The overarching principle behind the criteria is that a Transition Bond should“enable capital-raising and investment for new and existing projects with environmental
benefits”.
As per our Protocol, the criteria against which the Bond has been reviewed are grouped
under the four Principles:Principle One: Use of Proceeds. The Use of Proceeds criteria are guided by therequirement that an issuer of a Transition Finance (specified use of funds) must use thefunds raised to finance eligible activities. The eligible activities should produce clear
environmental benefits.

Principle Two: Process for Project Evaluation and Selection. The Project Evaluationand Selection criteria are guided by the requirements that an issuer of the Transition
Finance should outline the process it follows when determining eligibility of aninvestment using Transition Finance proceeds and outline any impact objectives it willconsider.



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



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

Page 5 of 21

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

Pre-Issuance Assessment of Transition Bond (*Not included in this report)
 Creation of an Idemitsu Kosan specific Protocol, adapted to the purpose of theBond, as described above.
 Assessment of documentary evidence provided by Idemitsu Kosan on the Bond andsupplemented by a high-level desktop research. These checks refer to current
assessment best practices and standards methodology.
 Discussions with Idemitsu Kosan management, and review of relevant
documentation and evidence related to the criteria of the Protocol.
 Documentation of findings against each element of the criteria.

ii.

Periodic (annual) Review of Transition Bond *Contents of this report Assessment of evidence documents provided by Idemitsu Kosan after issuance of theBond, and supplemental assessment by desk review from a higher perspective.
Consultation with issuer management and review of relevant document controls.
 Interview with key personnel of Idemitsu Kosan, and review of the relevant
documentation.
 Field research and inspection (if necessary).
 Review of the nominated projects and assets at the time of the post-issuance
verification.
 Document creation of post-issuance assessment result.

Page 6 of 21

Findings and DNV’s Opinion
DNV’s findings and opinions are listed below:(1) Use of Proceeds:
DNV has confirmed that, as at the end of March 2023, Idemitsu Kosan had fully allocatedthe proceeds of 19.9 billion yen out of the funds raised (20 billion yen) to the following
projects.
In addition, the following projects are projects that directly or indirectly support projects
that result in significant greenhouse gas reductions as exemplified by CTFH/CTFBG,
GBP/GBGLs and other representative projects that contribute to the business
transformation of issuers to achieve carbon neutrality, and projects that are aligned with
the Ministry of Economy, Trade and Industry's Electricity Sector and Chemical Sector
Transition Roadmaps and contribute to achieving their targets. These projects have been
evaluated by Idemitsu Kosan as meeting the criteria required for transition projects and as
having a clear environmental benefits effect on the transition strategy and are expected tocontribute to the SDGs.

1. Project Category: Power and Renewable Energy (Geothermal and Solar) - 2.4
billion yen allocated
The project is categorised under Power and Renewable energy in Idemitsu Kosan's Climate
Transition Strategy (Transition Plan), Roadmap, and Strategic Investment Plan.
The projects covered by this project category are geothermal power plants and solar power
plant developments. Geothermal power generation emits GHGs incidentally due togreenhouse gases contained in the extracted steam from the ground used during power
generation, but DNV has confirmed through its assessment of Idemitsu Kosan that the
impact of GHGs in this extracted steam is significantly lower than in existing power
production processes, including thermal power generation, and that clear environmental
benefits can be expected and that the project is progressing well.
Regarding solar power plants, the project confirmed that clear environmental benefits canbe expected from the transition from existing power production processes, including
thermal power generation, and that the project has commenced operations as planned.

Page 7 of 21

2. Project Category: Low-carbon Solutions for Replacing Coal-fired Power
Generation - 5.6 billion allocated
The project is classified as a low-carbon solution to coal-fired power generation in Idemitsu
Kosan's Climate Transition Strategy (Transition Plan), Roadmap, and Strategic Investment
Plan.
Through an assessment with Idemitsu Kosan, DNV has quantitatively assessed that the
project's CO2 emissions are significantly lower than coal-fired power generation in terms of
CO2 emissions over the life cycle, taking into account the production, processing andtransport processes of the biomass fuel, and the shift from coal-fired power generation tobiomass co-firing power generation confirmed that a clear environmental improvement
effect can be expected from the shift from coal-fired power generation to biomass co-firing
power generation.
DNV also confirmed that the project has no impact on the roadmap, although the start ofcommercial production has been changed from 2022 to July 2023 due to the impact of
COVID-19, and that the 2030 supply target has been revised upwards from 2 million to 3
million tonnes/year in line with the increased share of biomass in the power sourcecomposition of the Sixth Basic Energy Plan formulated by the Agency for Natural Resources
and Energy. DNV confirmed that the target for the amount of biomass supplied in 2030
was revised upwards from 2 million tonnes/year to 3 million tonnes/year.

*IGEP(Black pellets) and IGEP production plant

Page 8 of 21

3. Project Category: Development of Functional Material Products- 11.9 billion yen
allocated
Idemitsu Kosan is involved in the development of a variety of functional material products,
and one example of this project category, 'Development of all-solid-state lithium-ion
rechargeable batteries (hereinafter, “all-solid-state batteries”)', involves the developmentof solid electrolytes, which are key materials for all-solid-state batteries, for which earlycommercialisation for EVs and other applications is required. DNV confirmed that Idemitsu
Kosan is accurately grasping market trends and needs for materials and feeding them backto the supply system by providing samples to automakers and battery manufacturers
respectively, in order to promote the development of all-solid-state batteries for market
launch and to determine material specifications.
We also confirmed that various research and development initiatives are underway,
including the start of joint development with material manufacturers.

* First Plant of Small Pilot Facilities*All-solid-state batteries*Summary chart of initiatives (extract from Idemitsu Kosan Medium-term Management Plan document)

Page 9 of 21

(2) Process for Project Evaluation and Selection
In assessing and selecting transition projects, DNV confirmed that, in addition to meetingthe Eligibility Criteria, Idemitsu Kosan confirmed that the following Exclusion Criteria set
out in the Framework in advance were not violated.
Unfair transactions that do not comply with the laws and regulations of the country,
such as bribery, corruption, blackmail, embezzlement, etcTransactions that can cause social problems relate to human rights and theenvironment

As part of the specific evaluation and selection process, the Finance and Accounting
Department selected candidate projects based on the eligibility criteria, and the relevant
departments comprehensively analysed and reviewed the financial, technical andoperational, market environment and ESG risks, before confirming that the decision wasmade by the General Manager of the Finance and Accounting Department.

(3) Management Proceeds
DNV confirmed how Idemitsu Kosan will track and manage the proceeded since the Bondissue until March 2023. The allocation of proceeds is shown in Table 1.
DNV confirmed that the proceeds of 19.9 billion yen out of the 20 billion yen raised were
deposited into a common account at Idemitsu Kosan, and that the Finance and Accounting
Department subsequently managed the allocation for each project using accounting
regulations, accounting systems, and the Transition Bond Proceeds Management Chart.
Note that, as mentioned earlier, DNV does not provide treatment here of the financial
performance of the Bond, the value of any investment or the long-term environmental
effects.
Table 1: Proceeds allocated
Allocation

Project Category(of which refinancing amount)

Power and Renewable Energy

2.4 billion.

(Geothermal and Solar)(2.2 billion)

Low-carbon Solutions for Replacing Coal-fired

5.6 billion.

Power Generation(5.6 billion)

Development of Functional Material Products
Total appropriation

Page 10 of 21

11.9 billion.
(9 billion)
19.9 billion yen.
(16.8 billion)

(4) Reporting
DNV confirmed that Idemitsu Kosan will disclose the status of the allocation of proceeds
and the effects of environmental benefits on its website. The Framework states thatreporting is until the full amount of proceeds has been allocated, and as the full amount
was allocated in March 2023, no information is planned to be disclosed beyond next year.
The allocation and management of proceeds and the effects of environmental benefits are
as follows.
(1) Allocation and Management of Proceeds
Allocation

Project Category(of which refinancing amount)

Power and Renewable Energy

2.4 billion.

(Geothermal and Solar)(2.2 billion)

Low-carbon Solutions for Replacing Coal-fired

5.6 billion.

Power Generation(5.6 billion)

Development of Functional Material Products
Total appropriation

11.9 billion.
(9 billion)
19.9 billion yen.
(16.8 billion)(2) Environmental Benefits
Environmental benefits (Amount of CO2 reduction contribution)
Installed
Project Category

Capacity(Idemitsu
Equity)Actual Power
Generation*1(Idemitsu Equity)

Environmental
Benefits*2(Amount of CO2 Reduction
Contribution)

Power and
Renewable Energy

31.9 MW

133,795 MWh/year(Geothermal and(23.3 MW)(67,728 MWh/year)

35,589 t-CO2

Solar)*1

Includes planned values*2

Calculation method: electricity production (MWh) × CO2 emission factor (t-CO2/MWh)
The CO2 emission factor is the difference between the CO2 emission factor of the electricity company
to which the renewable energy is sold and the CO2 emission factor for project implementation.

Page 11 of 21

Environmental benefits (Amount of CO2 reduction contribution)

Project Category

Amount of Idemitsu

Environmental

Green Energy Pellets

Benefits*2(Black Pellets)(Amount of CO2

Produced
Low-carbon Solutions for Replacing
Coal-fired Power Generation*1

Reduction Contribution)

120,000 tons

191,302 t-CO2*1

Planned value*2

Calculation method: difference between 'black pellet production (tonnes) x CO2 emission factor of
black pellets (t-CO2 /tonnes)' and 'amount of coal replaced by black pellets (tonnes) x CO2 emission
factor of coal (t-CO2 /tonnes)'.

Environmental benefits (project description and progress)
Project Category

Project Overview and Progress
Development of mass production technology for
Project

sulfide-based solid electrolytes, utilising processes

Overview

accumulated in existing businesses (lithium sulfide
production technology).
Idemitsu Kosan is promoting the development of
all-solid-state batteries and providing feedback tothe supply system while providing samples to each

Development ofof the battery manufacturers/automakers in order

Functional Material

to determine the material specifications. Various

Products

R&D initiatives are being promoted, including the(e.g., all-solid-statebatteries)

State of
Progress

start of joint development with material
manufacturers.
The first plant of the small-scale demonstration
facility currently in operation at Chiba Complex(operation begun in November 2021) will have its
production capacity increased (to be completed by
the end of FY2024), and the second plant in the
Advanced Technology Research Laboratories isscheduled to start operations (July 2023).

Project category: development of functional material products, only project progress
is reported as it is still in the research and development stage, but Idemitsu Kosan
has confirmed that it is in the process of developing a method to calculate thecontribution to CO2 reduction in order to quantify the environmental benefits.

Page 12 of 21

Assessment Conclusion
On the basis of the information provided by Idemitsu Kosan and the work undertaken,
it is DNV’s opinion that the Idemitsu Kosan Transition Bond meets the criteria
established in the Protocol and that it is aligned with the staged definition of purpose of
Transition Bond within the CTFH and CTFBG, GBP and GBGLs, which are to "enable
capital-raising and investment for new and existing projects with environmental
benefits" and "provide the investment opportunities necessary for climate transition
finance to be implemented transparently and credibly."

DNV Business Assurance Japan K.K.
13 July 2023

Thomas Leonard

Naoki Maeda

Head of Section, Sustainability Services

Managing Director

Supply Chain & Product Assurance

DNV Business Assurance Japan K.K.

DNV Australia, New Zealand and Southeast Asia

Masato Kanedome

Akira Tsukasaki

Project Leader

Lead Assessor

DNV Business Assurance Japan K.K.

DNV Business Assurance Japan K.K.

About DNV
Driven by our purpose of safeguarding life, property and the environment, DNV enables organisations to advance the safety
and sustainability of their business. Combining leading technical and operational expertise, risk methodology and in-depth
industry knowledge, we empower our customers We continuously invest in research and collaborative innovation to provide
customers and society with operational and technological foresight.
With our origins stretching back to 1864, our reach today is global. operating in more than 100 countries, our 16,000
professionals are dedicated to helping customers make the world safer, smarter and greener.
Disclaimer
Responsibilities of the Management of the Issuer and the Second-Party Opinion Providers, DNV: The management of Issuer
has provided the information and Our statement represents an independent opinion and is intended to inform the Issuer
management and Our statement represents an independent opinion and is intended to inform the Issuer management andother interested stakeholders in the Bond as to whether the established criteria have been met, based on the information
provided to us. In our work we have relied on the information and the facts presented to us by the Issuer. Thus, DNV shallnot be held liable if any of the information or data provided by the Issuer is incorrect. Thus, the DNV shall not be held liable
if any of the information or data provided by the Issuer's management and used as a basis for this assessment were notcorrect or complete.

Page 13 of 21

Schedule-1 Green Bond Eligibility Assessment Protocol
GBP-1 Use of Proceeds
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

1aType of Bond

Transition Bond must fall in one of thefollowing categories, as defined by theGreen Bond Principles:(Standard) Transition BondTransition Revenue BondTransition Project Bond
Other

Documents identified- Framework<Results of Pre-Issuance Assessment of Bond>

A crucial aspect of transition finance isthat the funds raised are to be used forgreen projects, and this should beproperly stated in the legal
documentation for the securities.

Documents identified- Framework- Investment plans
for the use ofproceeds- Information on the
progress ofprojects initiating
allocations- Amended Shelf
Registration
Statement

1bTransition ProjectClassification

Interviews withstakeholders

DNV confirmed through its assessment work that the Idemitsu
Kosan Transition Finance (Bond) falls into the following
categories:(Standard) Transition Bond

Interviews withstakeholders<Results of Pre-Issuance Assessment of Bond>DNV confirmed that the Idemitsu Kosan Transition Bond isintended to fund a wide range of transition projects focused on
the Idemitsu Group's environmental goals, as outlined in the
Framework.
<Results of Post-Issuance Assessment of Bond (results ofthis evaluation)>
All candidate transition projects were assessed as meeting thetransition strategy, confirming that the funds raised through theTransition Bond were allocated to fund several candidate
transition projects. The specific projects to which the funds wereallocated are as follows:-

Page 14 of 21

Project category 01) Power and Renewable Energy(Geothermal and Solar)
Project category 02) Low-carbon Solutions for Replacing
Coal-fired Power Generation

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings-

Project category 03) Development of Functional Material
Products

Through the assessment, DNV concludes that thegreen/transition candidate project will provide tangible andgenuinely environmental benefits.

Table - Idemitsu Kosan Major initiatives to achieve carbon
neutrality(Transition finance candidate projects and projects for which thisfunding has been allocated are highlighted in yellow).
Project Category

Eligibility Criteria

Green/Transition Projects

Page 15 of 21

01

Power and
Renewable
EnergyProjects related to the development,
construction, operation, and otherrelated expenditures for renewableenergy (biomass, geothermal, solar,
and wind) power generation facilities

02

Distributed
EnergyProjects related to the development,
construction, operation, renovation,and other related expenditures offacilities for distributed energy

03

Developmentof Functional
Materials

Projects related to lithium solid
electrolyte development, production,
R&D, and other related expenditures(electric vehicles (EV))

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
04

05

Turning into
“Carbon
NeutralTransformation centers”

Projects on the construction of awaste plastic recycling chain(manufacturing of chemicals)
Projects related to the development
and promotion of circular businessTransition Projects

06

Projects on manufacturing and sales ofultra-compact EVs

07

Projects related to MaaS services

08

Projects related to service station
logistics bases, unmanned delivery,drone pesticide spraying, day services,
etc.

09

Turning into
“Carbon
NeutralTransformation centers”

Projects on SAF (Sustainable Aviation
Fuel) production and supply

12

Low-carbon
Solutions for
Replacing
Coal-fired
Power
Generation

Projects on production, sales, andR&D of black pellets (with an eye on
increasing ratio of mixed firing anddedicated firing)

13

Energy Saving

Projects on Energy Saving Investment
in Refineries and Complexes

10Page 16 of 21

Smart OneStop Shops

Project on building a CO₂-freeammonia supply chain for power
generation and industrial sectors

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

1cGreen benefits

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

Documents identified- Framework- Investment plans
and results related
to the use ofproceeds- Information on the
progress of eachproject
Interviews withstakeholders<Results of Post-Issuance Evaluation of Bond>

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

Documents identified- Framework- Investment plans
and results related
to the use ofproceeds- Information
related to eachproject
Interviews withstakeholders<Results of Pre-Issuance Assessment of Bond>

1d

Refinancing share

Page 17 of 21

Transition projects have environmental benefits, including CO2
emission reductions through low and decarbonisation, which areclassified in the project categories and eligibility criteria indicatedin 1b, contributing to Idemitsu Kosan's objectives under theTransition Strategy.
The environmental benefits were assessed either quantitatively
as CO2 emission reductions, taking into account the specificcharacteristics of each project, or as an annual report on the
project overview and progress to the extent practicable.

Idemitsu Kosan confirmed that all funds raised would be used for
either new investment, refinancing or both for one or more of
the potential eligible projects.
<Results of Post-Issuance Evaluation of Bond>
Through its annual report, Idemitsu Kosan confirmed that it had
identified the approximate amount of the portion of the funds
raised that had been used for refinancing.

GBP-2 Process for Project Selection and Evaluation
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

2a.

Investmentdecision process

The issuer of a Transition Bond issuers
should outline the decision-making
process it follows to determine theeligibility of projects using the Transition
Bond Proceeds. This includes, without
limitation:

A process to determine how the
projects fit within the eligible
Transition Bond Projects categories;
The criteria making the projects
eligible for using the Transition Bond
proceeds; andThe environmental sustainability
objectives
In addition to information disclosed by anissuer on its Transition Bond process,criteria and assurances, Transition Bond
investors may also take into consideration
the quality of the issuer’s overall
framework and performance regarding
green sustainability.

Documents identified- Framework- Information related
to each projectInterviews withstakeholders<Results of Pre-Issuance Assessment of Bond>

2b

Issuer’s
environmental,social andgovernanceframework

DNV confirmed that Idemitsu Kosan has processes and systems inplace to determine the eligibility of projects to use transition
finance proceeds and that these are clearly outlined in the
Framework.
<Results of Post-Issuance Evaluation of Bond>DNV confirmed that Idemitsu Kosan has a process for determining
the eligibility of projects to use Transition Bond proceeds, andthat it has selected and evaluated transition projects inaccordance with that process.

Documents identified- Framework- Information related
to each projectInterviews withstakeholders<Results of Pre-Issuance Assessment of Bond>
When selecting transition projects, Idemitsu Kosan takes into
account compliance with environmental laws, regulations,ordinances and rules, as well as clear environmental benefits suchas CO2 reductions during the entire life cycle or in each process.
In the operation and implementation of its projects, Idemitsu
Kosan works to preserve the surrounding environment in therelevant departments.
DNV confirmed that the transition project implemented by
Idemitsu Kosan is in line with its management and environmental
policies and consistent with the transition strategy, targets andpathways.

Page 18 of 21

GBP-3 Management of Proceeds
Ref.

Criteria

3a

Tracking procedure
-1

3b

3c

Tracking procedure-2

Temporaryholdings

Requirements

Work Undertaken

DNV Findings

The net proceeds of Transition Bondhouldbe credited to a sub-account, moved to a
sub- portfolio or otherwise tracked by theissuer in an appropriate manner andattested to by a formal internal processthat will be linked to the issuer’s lending
and investment operations for Transition
Projects.

Documents identified- Framework- Transition Bond
Proceeds Control
ChartInterviews withstakeholders<Results of Post-Issuance Evaluation of Bond>

So long as the Transition Bond
outstanding, the balance of the tracked
proceeds should be periodically reducedby amounts matching eligible Transition
investments made until green benefit
appearance or completion of proceeds
allocation.

Documents identified- Framework- Transition Bond
Proceeds Control
ChartInterviews withstakeholders<Results of Post-Issuance Evaluation of Bond>

Pending such investments or
disbursements to eligible Transition
Projects, the issuer should make known
to investors the intended types of
temporary investment instruments forthe balance of unallocated proceeds.

Documents identified- Transition Bond
Proceeds Control
ChartInterviews withstakeholders<Results of Post-Issuance Evaluation of Bond>

Page 19 of 21

DNV has verified that the proceeds relating to the funds to beraised through transition finance are traceable in line with
Idemitsu Kosan's accounting systems, etc., and that the systems
actually used or planned to be used through the assessment andthe documents to be produced exclusively for this purpose havebeen verified and certified accordingly.

DNV confirmed that Idemitsu Kosan regularly (at least once ayear) review the balance of the Transition Financing from thetime of its execution to the redemption or repayment of theTransition Financing, including in the accounting systemdescribed in 3a and in documents prepared exclusively for thecompany.

DNV confirmed that the confirmation process through Idemitsu
Kosan's accounting system and documents prepared exclusively
for the company is a system that enables the sequential
recognition of the balance of unallocated funds. It also confirmedthat as of May 2023, the entire amount of funds raised had been
fully allocated and therefore no balance of unallocated funds
exists.

GBP-4 Reporting
Ref.

Criteria

4a.

Periodical reporting

Requirements

Work Undertaken

DNV Findings

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

Documents identified- Framework- Annual report- Idemitsu Website<Results of Post-Issuance Evaluation of Bond>

Interviews withstakeholders

DNV confirms that the issuer has carried out transition financereporting (annual reporting) until the proceeds have been
allocated, disclosing information on the allocation of proceeds,
the projects to which the funds have been allocated or theenvironmental benefits as follows.
In addition, even after the allocation plan or allocation has been
completed, any changes in the transition strategy or pathway, or
any major changes in the allocation plan or project
implementation status (e.g.; suspension of a project for which
allocation has been initiated, significant deferral on an annual
basis, sale or disposal, etc.) will be reported in a timely manner
or in reporting, although there were no significant changes atthis time.
The reporting will be published on the website.
<Fund allocation status>
 Allocation amount Estimated amount of the portion of proceeds allocated torefinancing<Environmental benefits>Page 20 of 21

Power and Renewable Energy (Geothermal and Solar):
Installed capacity(Idemitsu Equity), Actual Power
Generation, Environmental Benefits(Amount of CO2
reductions Construction)
Low-carbon Solutions for Replacing Coal-fired Power
Generation: Amount of Idemitsu Green Energy
Pellets(Black Pellets) Produced, Environmental
Benefits(Amount of CO2 Reduction Contribution)

Ref.

Criteria

Requirements

Work Undertaken

DNV FindingsPage 21 of 21

Developing Functional Material Products: Project
Overview and Progress