Value Creation by the Group’s Human Resources

Responses to the Effects of Accelerating Climate Change

Initiatives Addressing Climate Change Issues
Basic Policy
Efforts to achieve carbon neutrality are accelerating worldwide today, as natural disasters
become increasingly frequent and more severe against the background of global
warming, and the impact of climate change on society as a whole intensifies by the day.
Seeking to realize “sustainable management supporting growth together with
its local communities,” the Group is committed to decarbonizing its operations while
contributing to realization of sustainable regional growth by supporting customers’ efforts
to decarbonize their operations and respond to the SDGs.

Fiscal 2023 Action Plan
External environment

Goal to beachieved

Fiscal 2023 Action Plan
Realizing sustainable local communities bymaking efforts to address various climate change issues, including
reduction of CO2 emissions

Globalwarming

Support for customers’
efforts to pursue
decarbonizationand the SDGs

Group
initiatives fordecarbonization

Enhancement of
information disclosure inaccordance with the TCFD
recommendations

Sustainablelocalcommunities

Support for customers’ efforts to pursue decarbonization and the SDGs
We support our customers’ efforts to decarbonize their business operations and to pursue the SDGs by acting proactively to develop
environment-related loans and solution products as well as by working with local customers to solve their business challenges.

Strengthening sustainable finance initiatives
We are actively making use of financing instruments, including “positive impact finance,” to provide financial support for customers’sustainability initiatives.
Green businessSocial projects

External evaluation requiredTargets for climate change operations
Green loansSocial loans

Sustainability loans

Transition loans
Sustainability-linked loans (SLL)
ESG-responsive private placement bonds (externally evaluated)
Positive impact financing (PIF)
Investments and loans forenvironment-related businesses

Loans with social significanceSubject to TCFD

Sustainable finance disbursement targets
We have set the the following targets as the amounts ofsustainable finance the Bank should provide to support
activities aimed at resolving the sustainability challenges facedby our customers and communities.

TargetamountPeriod In February 2023, Nanto Bank
formulated the “Positive Impact
Finance Framework,” which enables
it to engage proactively in “positiveimpact finance.”Positive impact finance is a financing
instrument that involves assessing
the positive environmental, social,and economic impacts of a projectand supports customers’ from afinancial perspective with suchsustainability initiatives as our “GreenLoan” and “Sustainability-linkedLoan.”

1 trillion yen (cumulative total investments and loans executed)
8 years (FY2023-FY2030)
Financing that contributes to solving issues in the environmental andsocial fieldsScope• Environmental: Renewable energy, energy conservation, ZEB, ZEV, etc.
• Social: Regional revitalization, local development, startups, business succession,BCP measures, etc.

Financing to support and promote customers’ SDG initiatives

40 Nanto Report 2023, the integrated report of Nanto Bank

About Nanto Bank

Our Shared Vision

Value Creation by theDeveloping Human
Governance Supporting Our Consolidated Financial
Statements
Resources for Value Creation Group’s Human Resources Proactive Human Resources

BusinessmodelRisks andopportunities

Strategiesand resources
allocationPerformance

Outlook

Structured finance reinforcement initiatives
We will strengthen our efforts in the area of structured finance forrenewable energy-related projects, etc., which are expected to proliferatesignificantly in the future.
Although the market for solar and biomass power generation iscontracting, onshore and offshore wind power and other renewableenergy-related projects continue to be structured in response to thegovernment's Basic Energy Plan and today’s growing momentum toward
carbon neutrality initiatives.
In June 2022, we arranged a syndicated loan for a new biomass power
plant to be built by a local company, which was a first for the Bank.
In response to the TCFD recommendations, all banks are strengthening
their environmental financing initiatives. We will continue to work with ourspecialized teams to acquire new projects in this area.

Power source composition
Approx.
1,024 billion kWh
RenewableenergyNuclearpower

LNG

Approx.
18%

Approx.
934 billion kWh

Non-fossil
Approx. 24%

Approx.
6%

Approx.
1% Hydrogen, ammonia

Non-fossil
Approx. 59%

Approx.
37%
Approx.
20-22%Petroleum,etc.

Approx.
32%

Approx.
22-24%
Non-fossil
Approx. 44%

Approx.
36-38%

FossilApprox. 76%

Coal

Approx.
1,065 billion kWhApprox.
20-22%

Approx.
27%
FossilApprox. 56%

Approx.
20%

Approx.
7%

Approx.
19%
Approx.
2%

FY2019FY2030Approx.
FossilApprox. 41% 26%
Approx.
3%

FY2030(At the time of H27 formulation)

Source: “Cabinet Decision on the Sixth Strategic Energy Plan,” Agency for Natural
Resources and Energy

Resolution of environmental and social issues through financing
The Group’s outward-bound efforts to address climate change issues consist of two main categories:
First, we support the introduction of sustainable management that contributes to enhancing corporate value for local customers and provide sustainablefinance as a means of achieving it. In the past, the Group has focused on solution of issues confronting companies and “managers/owners” of corporate clients.
In recent years, however, the importance of sustainable management that takes into consideration various other stakeholders as well, including employees, local
communities, and supply chains, has attracted increased attention, including among SMEs. Starting in FY2023, therefore, we have been striving to enhance
the sophistication of our consulting sales activities by offering “IT-enabled sustainable support” to help
customers improve their productivity, decarbonize their businesses, and expand their benefit packages.
The essence of our sustainability support for customers is involvement in the upstream of decisionmaking and “collaborative thinking about the kind of management we aim for” from the perspective of theSDGs. Our engagement in these activities stems from a recognition that the process itself is importantto the fostering of “unconventional” human resources while also providing customers with added value
through resolution of management issues.
Second, we provide structured financing for renewable energy and other projects throughout Japan,
with the aim of fulfilling the Group’s social mission by addressing climate change issues and generating
income. The majority of our participation in solar, wind, and other renewable energy projects is outside theregion, but we continue to contribute to sustainable regional power source development in both our own
and other regions through provision of structured finance, including arrangement of Green Loans for new
biomass power plants. We will continue to contribute actively to sustainable local community development
inside and outside the region through provision of structured finance.
Corporate Solutions Department
Manager Yutaka Sasai

Group initiatives for decarbonization
Besides promoting reduction of Group-wide CO2 emissions, we participate in efforts to reduce paper resources consumption andother environmental activities.

Promoting use of LED lighting in stores and other venues
Another way we seek to reduce CO2 emissions is by promoting the replacement of fluorescent lighting with LED lighting in our branch
offices and other facilities. In FY2022, we replaced lighting equipment in nine of our branch offices with LED lighting (with a resulting
455,000 kWh reduction in electricity consumption), and in FY2023, we plan to do the same in 24 more branches, at which point thelighting in approximately 70% of our branches will have been converted. (Planned electricity reduction in FY2023: 609,000 kWh).

Paper resources reduction (elimination of cash envelopes)
We are participating in efforts to conserve forest resources and reduce waste by such means as discontinuing the installation ofcash envelopes at ATM corners (inside and outside the branches) as of May 31, 2023.

Nanto Report 2023, the integrated report of Nanto Bank41

Value Creation by the Group’s Human Resources

Responses to the Effects of Accelerating Climate Change
Initiatives Addressing Climate Change Issues
 nhancement of information disclosure inE
accordance with the TCFD recommendations* The Task Force on Climate-related Financial Disclosures(TCFD) was established in December 2015 by theFinancial Stability Board (FSB) at the request of the G20
finance ministers and the central bank governors. TheTCFD published its final report offering recommendations
to encourage voluntary disclosure by companies in June
2017. These recommendations targeted not only financial
companies but the corporate sector as a whole.

Governance
The Group has formulated a “Basic Sustainability Policy" as a foundation for addressing sustainability issues, and the Board ofDirectors is discussing matters to be prioritized contained in the Policy. The Board has identified “addressing the escalating problemof climate change” as one of the Group’s top materialities (priority issues).
The Board of Directors examines the conclusions reached at the semi-annual meetings of the Executive Committee todetermine their appropriateness in light of the Group’s Management Strategy.

StrategyThe Group is committed to acting in unison to address climate change issues as a means of providing value to our stakeholders
through fulfillment of the three objectives defining our Mission: “pursuit of regional development,” “fostering of vitality-creating humanresources,” and “enhancing profitability.” As a member of the community, we will actively support both the Bank’s decarbonization
efforts and those of our customers. In our own efforts to this end, we have set targets for reducing CO2 emissions and begun
promoting such initiatives as upgrading our air-conditioning systems, switching to LED lighting, and introducing eco-cars.
In our efforts to help regional customers pursue decarbonization and the SDGs, meanwhile, we actively propose environmentrelated loans and solution-related products and work with them to solve their business challenges.

Risks and opportunities
We assessed the risks and opportunities associated with climate change based on several public scenarios,* including the 1.5°Cand 4°C scenarios. The timeline is analyzed for the short term (5 years), medium term (10 years), and long term (30 years).
Temporalperspective

PhysicalTransition risk
risk

Opportunity

Risk

Contents
Increase in credit costs (credit risk) resulting from negative effects of tighter climate change regulations and changes in the tax system on customers’
business and financial conditions, as well as damage to the value of real estate collateral due to non-compliance with environmental regulations.

Short- to long-term

Increase in credit costs (credit risk) due to the impact of technological innovations and market changes focusing on decarbonization on customers’ businessand financial conditions

Short- to long-term

Decrease in the Bank’s corporate value due to insufficient responses to climate change (operational risk related to damaging rumors)

Short- to long-term

Increase in credit costs (credit risk) due to damage to real estate collateral resulting from large-scale windstorms, floods, or other natural disasters, as well as
suspension of business and/or adverse effects on business stemming from damage to customers’ operating bases, etc.

Medium- tolong-term

Increase in restoration costs (operational risk related to tangible assets) stemming from damage to the Bank’s bases by large-scale windstorms, flood
disasters, or other natural disasters.

Medium- tolong-term

Increase in customer demand for capital investment in decarbonization projects

Short- to long-term

Increase in demand for funds for infrastructure investment in disaster-prevention measures

Short- to long-term

Increase in opportunities to offer disaster preparedness insurance products and financial products and services related to environmental protection stemmingfrom growing numbers of windstorms and flood disasters that lead to increasingly environmentally conscious customer behavior

Short- to long-term

Increase in business opportunities for services such as solution provision to support customers' decarbonization efforts

Short- to long-term* Referenced public scenarios
1.5°C scenario with progressive decarbonization: IEA NZE2050, IEA APS, NGFS Net Zero2050, IPCC SSP1-1.9, SSP1-2.6
4°C scenario with warming exceeding 4°C: IEA STEPS, current NGFS policies, IPCC SSP5-8.5

Scenario analysis
A scenario analysis was conducted for the risks and opportunities shown below.
Our assessment of the analysis results suggested that there was only a limited financial impact of transition risk and physicalrisk. Since the analysis is based on certain assumptions, however, we will continue to upgrade our analysis methods and expand
the scope of coverage.
Transition risk

Physical risk

Risks to be analyzed

Increase in credit costs due to impacts on customers' business and financial
conditions of tightened regulations, changes in taxation systems, and other suchfactors.

Damage to real estate collateral due to flooding, and increased credit costs due
to suspension or stagnation of business operations resulting from damage tocustomers' sales offices

Scenarios

IEA*1 / NZE (1.5°C scenario), SDS (2°C scenario)

IPCC*2 / RCP8.5 (4°C scenario), RCP2.6 (2°C scenario)

Portfolio to be analyzed Electricity and gas sectors

Business loans in the Bank's operating region

Analysis methodology

Projected future financial impacts and estimated additional credit costs based ontransition scenarios

Additional credit costs due to damage to collateral and reduced sales, estimatedby determining inundation risk based on collateral property and customer location

Analysis results

Increased credit costs to 2050, cumulative total up to approx. 2.1 billion yen

Increased credit costs to 2050, cumulative total up to approx. 6 billion yen*1 IEA (International Energy Agency) *2 IPCC (Intergovernmental Panel on Climate Change)

42 Nanto Report 2023, the integrated report of Nanto Bank

About Nanto Bank

Our Shared Vision

Value Creation by theDeveloping Human
Governance Supporting Our Consolidated Financial
Statements
Resources for Value Creation Group’s Human Resources Proactive Human Resources

BusinessmodelRisks andopportunities

Strategies
and resources
allocation

Performance

Outlook

Carbon emissions-related assets
The electricity and energy sector (excluding renewable energy power generation projects) accounts for approximately 2.1% of theBank’s loans. The percentage of carbon emissions-related assets* based on the 2021 TCFD Revised Supplement is approximately
24.4%. (As of March 31, 2023)*	Carbon emissions-related assets were redefined as the “Energy,” “Transportation,” “Materials and Building Products,” and “Agriculture, Food and Forest Products” sectors
in the October 2021 Revised TCFD Proposals. The Bank’s calculations are based on the Bank of Japan’s industry classifications.

Risk Management
The Group recognizes that addressing climate change is a central issue for sustainable regional development. The Bank’s
climate change risk is classified into two categories, credit risk and operational risk, each of which is incorporated into the items
for monitoring by the ALM Committee and Operational Risk Management Committee, respectively, to enhance appropriate risk
management.
Furthermore, in October 2020, the Group established a financing policy which clearly states that it will not, in principle, engage
in financing for the construction of new coal-fired power plants. It also states that it will provide financing for projects involving
deforestation only after carefully considering whether or not its engagement is proper based on the intended project's lawfulness
and its potential environmental impacts.

Indicators and Targets
Group’s CO2 emissions (Scopes 1 and 2) and reduction targets
The Group is striving to reduce CO2 emissions, aiming to achieve a reduction target set for FY2030 of at least 50% below theFY2013 level. CO2 emissions in FY2022 were 5,091t- CO2, a reduction of 49% from FY2013.
CO2 emissions and reduction targets for fiscal 20302)(t-CO(t-CO2)

–35%

–49%

–50%

9,925
6,427

2013

2021

5,091

4,962

2022

2030 (Fiscal year)(Target)Group’s CO2 emissions (Scope 3)
The Group began calculating Scope 3 emissions in FY2022.
We plan to consider calculation methods for extending thescope of calculation to more categories in the future.

(t-CO2)

ItemContents
Scope 1City gas, LP gas, gasoline,Direct emissions heavy oil
Scope 2Electricity
Indirect emissions
TotalFY2013

FY2021

FY2022

1,584

1,509

1,517

8,341

4,918

3,574

9,925

6,427

5,091

Scope 3(t-CO2)

FY202290

Category 6: Business travel
Category 7: Commuting

2,222

Total

2,311(Reference) FY2022 Capital investment in renewable energy- and energy conservation-related facilities and number of solution product-related contracts
Capital investment in renewable energy and energy conservation*1
Total loans executed: 8.4 billion yenSolution-related products for SDGs and decarbonization
Consulting services for <Nanto> SDG introduction
Declaration recipients 355
e-dash*2 Number of contracts 3*1 Capital investment related to energy conservation: Limited to projects conducted under the interest subsidy program*2 e-dash: CO2 emissions visualization and reduction service

Nanto Report 2023, the integrated report of Nanto Bank43