IHI Corporation
Sustainable Finance Framework
September 2023

（C）JAXA

Director, Executive Officer,
General Manager of Finance and Accounting
Division

President,
Chief Executive Officer

Yasuaki Fukumoto

Hiroshi Ide

Director，Managing Executive Officer,
General Manager of Human Resources Division,
In Charge of Group ESG

Akihiro Seo

Top Message
The business environment surrounding the IHI Group is drastically changing. Large scale natural disasters such as severe floods andheat waves in various parts of the world due to climate change are occurring frequently. Excessive technology has exceeded its limits,affecting not only nature but also our daily lives.
Over the past 170 years, we have been engaged in a broad range of infrastructure businesses, including social infrastructure, aerospace,and energy, and have continued to challenge to solve various social issues. At a time when multiple and complex social issues such as
climate change mitigation and adaptation are being faced, the IHI Group will once again boldly continue to try to solve them bycombining its ambition for a better future, technology, and internal and external wisdom.
In May 2023, the IHI Group developed the Group Management Policy 2023 for “create a world where nature and technology work inunity”, continuing innovative change of business for high growth and revolution of corporate culture to meet change of various
environment. In order to accelerate management based on ESG, we will engage sustainable high growth by boldly shifting management
resources to the aero engine and rocket sectors and the clean energy sector, which we have defined as growth areas.
In the aero engine and space, in addition to strengthening the existing aero engine business, we are also working to reduce aircraft
weight and create new businesses from the perspective of life cycle and value chain, such as SAF. Furthermore, in the clean energy, we
are working to establish an ammonia value chain based on gas turbine utilizing the world's leading ammonia combustion technology
and storage, and receiving terminals that boast top-class results.
We have formulated the Sustainable Finance Framework in order to make finance integral to business strategies based on the GroupManagement Policy 2023, and to promote transformation initiatives with stakeholders.
With the funds raised using this framework, we will work to solve social issues and create social value, while aiming to improve
corporate value and achieve sustainable growth of our business.

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Table of Contents
1 INTRODUCTION ........................................................................................................................................ 3
1.1 FRAMEWORK OVERVIEW ........................................................................................................................... 3
1.2 ABOUT IHI GROUP..................................................................................................................................... 4
1.3 OVERVIEW OF BUSINESS ............................................................................................................................ 4
1.4 MANAGEMENT PHILOSOPHY ..................................................................................................................... 5
1.5 IHI GROUP MATERIAL ISSUES ................................................................................................................... 6
1.6 IHI GROUP’S ESG MANAGEMENT AND LONG-TERM GOAL ...................................................................... 8
1.7 GROUP MANAGEMENT POLICIES 2023 ................................................................................................... 15
1.8 SIGNIFICANCE AND GOALS OF SUSTAINABLE FINANCE .......................................................................... 18
1.9 TRANSITION STRATEGY’S CONSISTENCY WITH ROADMAPS.................................................................... 19
1.10 ESG MANAGEMENT PROMOTION SYSTEM ............................................................................................ 20
1.11 EVALUATION BY THIRD PARTIES............................................................................................................ 20
2 ALIGNMENT WITH FOUR ELEMENTS OF RELAVANT INTERNATIONAL CAPITAL MARKETASSOCIATION PRINCIPLES (FOR FINANCE WITH SPECIFIC PROCEEDS USAGES)................. 21
2.1 USE OF PROCEEDS ..................................................................................................................................... 21
2.2 PROCESS FOR PROJECT EVALUATION AND SELECTION ............................................................................. 22
2.3 MANAGEMENT OF PROCEEDS .................................................................................................................... 22
2.4 REPORTING ................................................................................................................................................ 22
3 ALIGNMENT WITH FIVE ELEMENTS OF RELAVANT INTERNATIONAL CAPITAL MARKETASSOCIATION PRINCIPLES (FOR FINANCE WITH NON-SPECIFIC PROCEEDS USAGES ........ 24
3.1 SELECTION OF KPI AND CALIBRATION OF SPT......................................................................................... 24
3.2 BOND AND LOAN CHARACTERISTICS........................................................................................................ 25
3.3 REPORTING ................................................................................................................................................ 25
3.4 VERIFICATION ........................................................................................................................................... 25

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1 Introduction
1.1 Framework Overview
The IHI Group developed Transition Bond Framework in March 2022 and issued the Company’s first transitionbond in June 2022.
In April 2023, we updated our GHG emission reduction target to "halve FY 2030 GHG emissions (Scope1 and
2) from FY 2019 levels," a more ambitious target against the backdrop of the further promotion of the "IHI
Group’s ESG Management" set forth in November 2021 and the ever-increasing global efforts to respond toclimate change.
In May 2023, we formulated the Group Management Policy 2023 based on social issues to be addressed. We
aim to make a further leap into a sustainable, high-growth company by boldly shifting management resources togrowth areas.
Based on the above, we have formulated the Sustainable Finance Framework (Hereinafter, the "Framework") toraise investment funds smoothly for achieving sustainable high growth.
This framework enables IHI Group to finance through green, transition and transition-linked bonds and loans.
The framework is based on the following principles and guidelines.
⚫
⚫
⚫
⚫
⚫
⚫
⚫
⚫

Green Bond Principles2021（ICMA）
Green Loan Principles 2023（APLMA，LMA，LSTA）
Sustainability Linked Bond Principles 2023（ICMA）
Sustainability Linked Loan Principles 2023（APLMA，LMA，LSTA）
Green Bond and Sustainability Linked Bond Guidelines 2022（Ministry of Environment）
Green Loan and Sustainability Linked Loan Guidelines 2022（Ministry of Environment）
Climate Transition Finance Handbook 2023（ICMA）
Basic Guidelines on Climate Transition Finance 2021（Financial Services Agency, Ministry of Economy,
Ministry of Environment）＜Alignment with the Four Disclosure Elements of Climate Transition Finance＞
Four Disclosure Elements of Climate Transition Finance

Sections

1. Issuer’s climate transition strategy and governance

1.5，1.6，1.7，1.8，1.9，1.10

2. Business model environmental materiality

1.5，1.6，1.7

3. Climate transition strategy to be science-based including
targets and pathways

1.6，1.7，1.9

4. Implementation transparency

1.6，1.7＜Alignment with the Four Core Components of Green Bond and Green Loan＞
Described in Chapter 2:Alignment with Four Elements of the Relevant International Capital Market Association
Principles＜Alignment with the Five Core Components of Sustainability-Linked Bond and Sustainability-Linked Loan＞

Described in Chapter 3:Alignment with Five Elements of the Relevant International Capital Market Association
Principles
The IHI has obtained an external review from Japan Credit Rating Agency, Ltd., an external reviewer, regarding thealignment of the Framework with the Principles and Guidelines stated above.
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1.2 About IHI GroupThe IHI Group’s history extends back to the establishment of Ishikawajima Shipyard, Japan’s first modern
shipbuilding facility, in 1853. The IHI Group has continuously developed original technologies for each era, andcontributed to the development of society by providing products and services that are the foundation of daily life
including by leveraging its shipbuilding technology in new areas, such as heavy machinery manufacturing, bridgebuilding, plant construction and aero-engine production.
The IHI Group is deeply committed to contributing to society through technology, combining diverse
engineering capabilities to meet expanding global needs for energy, urbanization and industrialization, andtransportation efficiency.
1.3 Overview of Business
The IHI Group operates four main businesses: Resources, Energy and Environment; Social Infrastructure andOffshore Facilities; Industrial Systems and General-Purpose Machinery; and Aero Engine, Space and Defense.
【Resources, Energy and Environment】・・・Minimizing Environmental Impact
The IHI Group provides products and services through total lifecycles which generate best mix energy for earth
and human by our extensive expertise and original technologies in various areas. It contributes to the stablesupple of energy essential to industrial progress and comfortable lifestyles and the prevention of global warming.
◇Main businesses, products and service
Power systems (power systems plants for land use and power systems for ships), Carbon solutions（boilers，
storage facilities，chemical plants），Nuclear energy (components for nuclear power plants)【Social Infrastructure and Offshore Facilities】・・・Underpinning the Essentials of Modern Living
In social infrastructure, offshore and urban development, as well as in other areas, the IHI Group builds
infrastructure using the technical skill and strong sensibility developed through our many years of achievementsthat underpins society and ensures people can live in safety and security. This allows us to contribute to thegrowth of nations and societies, promote offshore development and ensure safety and security.
◇Main businesses, products and service
Bridges and water gates, Transport systems, Shield systems, Concrete construction materials, Urban development(real estate sales and rental）【Industrial Systems and General-Purpose Machinery】・・・Transforming the World's Industrial
Infrastructure
The IHI Group evolves industrial infrastructure around the world and support the future of “Monozukuri” byoffering ceaseless technological innovative systems and optimal solutions skills. It contributes to enhancing thecustomers manufacturing processes and creating more sophisticate products that will satisfy their users.
◇Main businesses, products and service
Vehicular turbochargers, Parking, Rotating machineries (compressors, separation systems, turbochargers forships), Heat treatment and surface engineering, Transport machineries, Logistics and industrial systems (logistics
systems, industrial machineries)4【Aero Engine, Space and Defense】・・・Opening New Horizons
In the aero engine and space business unit, the IHI Group draws on our range of state-of-the-art technologies
and organizational skills to open up new possibilities in the sky and outer space. This allows us to contribute todevelop systems that help make air travel and transport more comfortable, safer and better for the environment,
and to expanding space utilization and development to help spread related services and software to benefit
humankind.
◇Main businesses, products and service
Aero engines, Rocket systems and space utilization systems, Defense systems.
（Revenue（FY2023））

1.4 Management Philosophy
The IHI Group positions being a good corporate citizen who develops together with society as our primaryobjective and fulfills our social mission through the below visions based on our management philosophies of“Contribute to the development of society through technology” and “Human resources are our single mostvaluable asset”
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1.5 IHI Group Material Issues
The IHI Group has identified material issues to be prioritized to achieve sustainable growth as a company andrealize a sustainable society.
ESG management makes engaging in the global challenge of climate-related initiatives, respecting the humanrights of everyone involved in our businesses, empowering diverse human resources as the driving force to value
creation, and earning trust from stakeholders through integrity management, which is more important than ever.
＜Climate change＞
Climate change has an enormous social and economic impact and is a vital social issue for companies to addressin order to realize sustainability. The IHI Group sees climate change as one important management issue and isdoing everything possible to combat it.
＜Human rights＞
The IHI Group formulated the IHI Group Human Rights Policy in December 2020 based on its management
philosophy and its approach to human rights outlined in the Basic Code of Conduct for the IHI Group under theapproval of the Board of Directors.
Through human rights awareness activities based on international standards, we will fulfill our responsibility torespect the human rights of all by fostering a respectful corporate culture and promoting human rights throughout
our business activities.
＜Diversity and inclusion＞
The employees are necessary to reform corporate culture as well as build workplaces and systems that empower
people to reach their full potential. We drafted the Group Human Resource Management Policy to embed thisbasic approach to human resource management in the entire Group. This management policy expands various
recruitment, assignment, development, and evaluation measure.
＜Securing and Maintaining Stakeholder Trust＞
IHI defines corporate governance as a system that assures sustainable growth and maximization of corporate
value by enhancing management efficiency so that IHI can leverage its innate capabilities to the fullest extent
possible. To achieve this, IHI targets efficient and appropriate internal decision-making by clearly separating
management monitoring and supervisory functions from functions related to their execution of duties.
Furthermore, by establishing the relevant internal rules and building a system to administer them, IHI ensuresappropriate operations across the entire Group.

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（Identification Process of Material Issues）

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1.6 IHI Group’s ESG Management and Long-term Goal
1.6.1 IHI Group’s ESG Management
The IHI Group, which is seeking to create a world where nature and technology work in unity throughaddressing social issues partly by becoming carbon-free, has pledged to make its complete value chain carbonneutral by 2050.
We aim to be carbon-neutral in our processes overall by reducing the direct and indirect (Scope 1 and 2) GHG
emissions from our business activities as well as Scope 3 emissions from the upstream and downstream processes
in our value chain.

＜Achieving the Goals through Business＞
We are seeking to make our business activities carbon-neutral by actively introducing our products, systems,
and other new technologies to reduce CO2 emissions from our production operations and by converting to fuelswith low or zero CO2 emissions. We are also promoting the use of renewable energy. We are actively partneringwith suppliers with environmentally friendly operations and working to achieve carbon neutrality throughout thevalue chain.
＜Achieving the Goals by Providing Products and Services＞
We have categorized initiatives using our products and services into the two actions of “transition” for our
existing technologies and “transformation” primarily through new technologies. We intend to become carbonneutral through providing such products and services. There are three “transition” components. The first is toincrease the efficiency of existing power plants, such as by using advanced maintenance technologies to upgrade
operations. The second is to lighten and electrify products, noteworthy examples being lighter, more heatresistant aircraft parts and electric turbochargers. The third is to tap renewable energy sources. There are twotransformation components. The first is to use hydrogen and ammonia, such as by early transitioning to pure8

ammonia firing and establishing an ammonia value chain. The second is to minimize or eliminate CO2
emissions through carbon recycling, which covers methanation and carbon capture, usage, and storage, anddirect air capture.
＜Transition（Utilization of existing technologies）＞◇Weight Reduction, Electrification, and Alternative fuel in Air transportation Systems
The aviation industry is seeking to reduce CO2 emissions to make air transportation more environmentallyfriendly. In this direction, the International Air Transport Association in October 2021 resolved that the global
air transport industry will aim to achieve net-zero carbon emissions by 2050. In December 2021, the Japanese
Ministry of Land, Infrastructure, Transport and Tourism announced the schedule for reduction of CO2 emissions
in the aviation field, and launched policies for investigating specific measures in the three fields of (1)introduction of new technology to aircrafts, maintenance items, etc., (2) operation improvement based on
optimized flight profiles, (3) SAF introduction and promotion.
The IHI Group perceives these kinds of movements field as business opportunities. In particular, with thestrength of our value chain and track record in developing the main parts for aircraft engines for the private
sector, we are working on introducing new technologies for improving fuel consumption and reducing engine
weight.
As a further transformation, we are targeting expansion of application of new technology for weight reduction,and the realization of engine and airframe systems applying our original electrification core technology. In
addition, regarding SAF, too, which is a large element contributing to decarbonization, we must find thebusiness opportunities and apply technologies developed in other fields while working on research anddevelopment toward introducing SAF.

9◇Automobiles Electrification
The transition to electrification is progressing rapidly in the automobile industry. While each automobile
manufacturer is advancing development of technology for decarbonization in their respective scenario, we areworking on decarbonization in the automobile industry through technological issue resolution in which eachscenario is imagined.
For large commercial vehicles, production is expected to increase going forward because there is active
development and partnerships for an advantageous FCV from the viewpoint of cruising distance, fuel fillingtime, and load capacity. Along with that, the demand for electric turbochargers aimed at FCVs is expected to
grow steadily. The IHI Group perceives the electric turbocharger as a business opportunity, while making use of
the technology and value chain for vehicle turbochargers.

10＜Transformation（Introduction of New Technologies）＞
The IHI Group will transition its energy mix toward 2050 for a society centered on the use of hydrogen,ammonia, and renewable energy. At the same time, in response to this spread of renewable energy, the IHI
Group will be able to combine the use of nuclear power generation as a base power source with the adaptability
associated with the rollout of small nuclear reactors.
In addition, we believe that decarbonization technologies that capture and use CO2 will provide support
during the transition period until 2050. Therefore, we consider the realization of decarbonization, in which
environmental performance and economic rationality are compatible, to be a social issue that needs to beaddressed. In particular, we establish ①Decarbonization of the energy value chain, ②Realization of safe andeco-friendly nuclear power generation capable of load adjustment, ③Realization of carbon recycling as three
specific issues.

◇Establishment of an Ammonia Value Chain
Since ammonia does not emit CO2 during combustion, it can be used as a fuel to achieve decarbonization ofthermal power plants. The IHI Group sees the entire value chain from ammonia production to utilization as abusiness opportunity and is implementing various initiatives.
Ammonia is currently used as a fertilizer and chemical raw material, and much larger amounts are required tomeet the demand for fuel. Therefore, the IHI Group is considering participation in ammonia production projects,
especially green ammonia production projects utilizing renewable energy sources, through Capital contribution.
The IHI Group is a leading domestic manufacturer of LNG receiving stations and storage tanks. Taking
advantage of this strength, we are working to expand our ammonia acceptance and storage technology, thereby
contributing to the early and low-cost construction of an infrastructure to manufacture and store large amountsof ammonia.
In the area of ammonia utilization, especially in the power generation field, we are working on the exclusive
firing of ammonia in boilers and gas turbines utilizing combustion technology that we have cultivated overmany years. We have already succeeded in an ammonia firing test at a boiler experimental facility, and is the
only gas turbine in the world capable of firing ammonia in a liquid state.
As described above, we will take advantage of the strengths of the IHI Group throughout the value chain toensure that business opportunities are captured.

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＜Roadmap of Ammonia Combustion Technology Development＞

The goal of the IHI Group is to achieve zero emissions at thermal power plants. In order to decarbonize
natural gas-fired power plants in the future, we are developing a combustor for an ammonia-fired gas turbine,
aiming at a design that can be retrofitted to existing facilities. At present, reduction of coal-fired thermal power
emissions is an urgent issue, and we are developing technologies for co-firing and exclusive firing of existing
facilities, and promoting social implementation with partners.

12◇Small-Scale Nuclear Power Generation
The Japanese government publicizes the progress in initiatives targeting R&D and demonstrations throughinternational collaboration in small modular reactor (SMR) technology in Sixth Strategic Energy Plan. The
SMRs of the US company NuScale Power, LLC which IHI invests in are capable of load-following operation by
operating while controlling the number of units, and are expected to play the role of regulating power sources
for renewable energy.
IHI has provided value to its customers globally through design and manufacture of primary components fornuclear power plants. Using IHI’s existing technology and expertise as a starting point, we will contribute tofurther safety improvement of nuclear power and maintaining our technology at the forefront.
◇Carbon Recycling
The IHI Group is not only developing CO2 capture technology, but also technology to produce hydrogen
efficiently, and technology to convert CO2 to value-added materials through its reaction with hydrogen. By
combining these three technologies, the IHI Group is conducting significant cost-cutting initiatives through theeffective use of energy and other means. Toward commercializing them, we are going to provide CCUS
technology (technology for carbon dioxide capture, utilization, and storage) to target industries searching forCO2 capture as a decarbonization method, and the industry searching for carbon-neutral fuels and raw materials.
We are going to provide CCUS technology to target industries searching for CO2 capture as a decarbonization
method, and the industry searching for carbon-neutral fuels and raw materials. In addition, forest conservationthat takes up part of carbon recycling not only fixes CO2 but also leads to the protection of the ecosystem
existing there. We will work on large-scale forest conservation by making use of our strengths in technology
using artificial satellite data advanced over many years within space development, and climate observation andprediction technology.

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1.6.2 Long-term Goal

Since the publication of the "IHI Group’ ESG Management " in November 2021, we have been working to
reduce CO2 emissions (Scope1 and 2) in fiscal 2030, which are directly and indirectly emitted by our own
business activities at our plants and offices, in line with the target set by the Japanese government (46% reduction
in fiscal 2030 compared to fiscal 2013).
Against this backdrop, in April 2023, the IHI Group set a more ambitious reduction target of "2030 GHG(Scope1 and 2) emissions by 50% from FY 2019" against the backdrop of strengthening global responses toclimate change. The newly established interim target is based on fiscal 2019 and exceeds the policy of theJapanese government and the IPCC recommendations. By working toward achieving this goal, the IHI Group,
which has decarbonization technologies, will contribute to the realization of a global carbon-neutral society.
With regard to Scope3, we believe it is important to work together with those involved in the value chain, suchas suppliers of materials and parts, and customers who use the company’s products, to realize a "CO2 recycling
society.". the company will promote CSR procurement of materials and components upstream of Scope3, andwork to reduce GHG emissions through transition and transformation downstream of Scope3, as described in thepreceding paragraph (1.6.1 ESG Management of the IHI Group).
The actual results and reduction targets of Scope3 will be disclosed as soon as it becomes available.
141.7 Group Management Policies 2023
Through the "Project Change" period, we are getting ready for business transformation, such as the full-scale
implementation of the Lifecycle Businesses (LCB) and the Ammonia Value Chain Business. On the other hand,
there is a need to further strengthen our corporate structure in order to cope with the new social environment inwhich instability becomes the norm.
The Group Management Policy 2023 promotes business transformation to realize sustained high growth, and at
the same time accelerates the transformation of the corporate structure to be able to respond to disruptive
environmental changes.
■Business transformation and business portfolio transformation to achieve strong sustainable growth
Aiming to solve the problems faced by customers, industry, and society, we will transform each business by
diversifying our efforts to "provide value through the life cycle" and "build and enhance the value of the entire
value chain" while utilizing the IHI Group's technology and wisdom. At the same time, we will transform ourbusiness portfolio by boldly shifting management resources to growth and development-focus businesses.
■Response to environmental changes and transformation into a corporate structure capable of realizing change
The IHI Group will thoroughly implement management centered on ESG once again, and actively promote thedevelopment and acquisition of transformational talent, which is most important in achieving the advancement of
the digital infrastructure essential for business transformation and the transformation of the corporate structure.
＜Growth Business：Aero Engines and Space＞
In the Aero engine and Space sector, which is positioned as a growth business, the rapid return to growth isexpected in commercial aircraft as a result of the recovery from the coronavirus recession, and demand in the
defense sector is also expected to expand. In order to meet such demand, we will reduce lead time and drastically
improve operational efficiency through bold production reforms, while simultaneously increasing production ofaero engines and rockets and improving profitability and capital efficiency.
In addition, the IHI Group will expand its business over the life cycle through the steady launch of businesses at
new maintenance sites and initiatives in the materials business, thereby driving the growth of the IHI Group. We
will also work to create new business areas from a value chain perspective, such as environmentally friendly nextgeneration aircraft and space, ground and underwater data utilization projects.

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＜Development-focus Business：Clean Energy＞
IHI Group will focus on development of the clean energy fields, including ammonia, to make it the main pillar
as Aero Engines and, Space. Against the backdrop of rising energy prices and increasing interest in carbon
neutrality, the market potential for the use of ammonia as a fuel is expanding around the world. We will contributeto the early realization of the ammonia value chain by accelerating the creation of "produce, transport, and use"
network with partners in Japan, Asia, the United States, and Europe, starting with gas turbines that utilize theworld's leading ammonia combustion technology and storage and receiving terminal that boast top-class results.

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＜Core Businesses：Growth Strategy Centered on Exploit and Evolution of Lifecycle Businesses (LCB)
In the core business areas of Resources, Energy, & Environment, Social Infrastructure, Industrial Systems, andGeneral-purpose Machinery, we will focus on cash generation through business structure reform, in addition to
our growth strategy, which is not an extension of the past, based on the exploit (※1) and evolution (※2) of the
LCB.
※１：Exploit of LCB
To improve the social and environmental value of customers by considering their entire life cycle and value
chain, including not only individual products but also competitive products, as business opportunities.
※２：Evolution of LCB
To further improve customer value by developing new products and services by increasing contact points withcustomers, noticing customer and market needs, and providing feedback on information obtained through digital
use.

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＜Resource Allocation＞
IHI Group will invest a total of approximately 500 billion yen over a three-year period beginning in fiscal 2023.
About half of this investment budget will be invested in Growth and Development-focus Businesses.
At this juncture, the IHI Group does not expect any of these investment areas to impede fair transitions. We will
disclose information as needed if requiring future investments equivalent to the just transition.

1.8

Significance and Goals of Sustainable Finance
The IHI Group will leverage its transition bonds to fund efforts to materialize its transition strategy and convey
its ESG management initiatives to stakeholders. These include business partners, shareholders and other investors,
governments, communities, and employees. We realize entire value chain carbon neutral and contribute toachieving global carbon neutral through implementation of the transition strategy. In addition, the IHI Group will
endeavor to deepen stakeholder engagement by disseminating information in sustainable finance, helping reach
Sustainable Development Goals and ultimately contributing to a sustainable economy.

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1.9

Transition Strategy’s consistency with roadmaps
The IHI Group believes that our reduction target and transition strategy are in line with the following technology
roadmaps based on Paris Agreement targets and Sixth Strategic Energy Plan and thus are science-based.
Business
Areas

Roadmaps

Aero Engines
and Space• Process Chart for Promoting Decarbonization of Aircraft（Ministry of Land, Infrastructure,
Transport and Tourism）• Net zero carbon 2050 resolution（IATA）

Clean Energy• Road map to Zero Emission from International Shipping（Ministry of Land, Infrastructure,
Transport and Tourism）• Technology Roadmap for ”Transition Finance” in Chemical Sector（Ministry of Economy
Trade and Industry）• Technology Roadmap for the Electricity Sector（Ministry of Economy Trade and Industry）• Technology Roadmap for ”Transition Finance” in Gas Sector（Ministry of Economy Tradeand Industry）• Technology Roadmap for ”Transition Finance” in Automobile Sector（Ministry of Economy
Trade and Industry）• Net Zero by 2050（IEA）※The above roadmap is as of the framework publication date19

1.10 ESG Management Promotion System
The IHI Group began considering basic ESG management policies and measures, consequently establishing the
ESG Management Promotion Committee for the purpose of evaluating and improving the progress of the policy
and measures implemented. ESG Management Promotion Committee, chaired by the Chief Executive Officer(CEO) discusses basic sustainability policy and measures, and reports to the Management Committee.
（Sustainability Promotion System）

In May 2019, the IHI Group became a signatory to the Task Force on Climate-related Financial Disclosures(TCFD) by resolution of the Board of Directors to play a role as a tool to formulate strategies able to strengthenrisk management and cultivate business opportunities. The IHI Group put in place a task force under the ESG
Management Promotion Committee in fiscal 2021 to advocate carbon-neutral initiatives. The IHI Group also
conducts uncompromising risk management to fully and rapidly respond to any risks found by carefully
identifying changes around business operations. The IHI Group is integrating TCFD Task Force activities and therisk management systems to create a PDCA cycle for climate change risks.

1.11 Evaluation by Third Parties
Various third-party agencies have evaluated the sustainability initiatives of the IHI Group worldwide.

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2

Alignment with Four Elements of the Relevant International Capital Market Association Principles (forFinance with Specific Proceeds Usages)
2.1 Use of Proceeds
The IHI Group will use proceeds for new and existing expenditures, (such as for technology and productdevelopment costs, capital expenditures, and capital investment spending) relating to qualified projects meetingthe following four eligibility criteria. The refinancing of existing expenditure is limited that within two years oftransition bond funding.
Category

123GrowthBusiness（Aero
Engines andSpace）

Weight reductionof aircraft
Electrification of
aircraft engine※・Improvement of gas turbine’s efficiency, Development of Next generationengine, etc.
（Use of Proceeds：Research and Development, Business Development,
Capital Expenditure, Miscellaneous cost relevant to above mentioned
projects and Capital Contribution）

SAF※

・Development synthetic catalysts and algae culture, etc.（Use of Proceeds：
Research and Development, Business Development, Capital Expenditure,
Miscellaneous cost relevant to above mentioned projects and Capital）

Establishment ofan Ammonia
Value Chain＜Produce＞
・Capital Contribution to green ammonia production projects and investment
to ammonia synthesis system, etc.
＜Transport and Storage＞
・Development of ammonia tanks, Capital contribution to large receiving andstorage terminals, etc.
＜Use＞
・Demonstration and commercialization of gas turbines that can operate on
100% firing, etc.
（Use of Proceeds：Research and Development, Business Development,
Capital Expenditure, Miscellaneous cost relevant to above mentioned
projects and Capital）

Realization off
carbon recycling

・Demonstration and commercialization toward CCUS, methane synthesis
and e-fuel production, etc.
・Capital contribution to projects of conservation and management of
Tropical Peatland（NeXT FOREST, etc.）（Use of Proceeds：Research and Development, Business Development,
Capital Expenditure, Miscellaneous cost relevant to above mentioned
projects and Capital）

Electrification of
automobile※

・Development of electric turbochargers, etc.
（Use of Proceeds：Research and Development, Business Development,
Capital Expenditure, Miscellaneous cost relevant to above mentioned
projects and Capital）

Others・Capital contribution to Small Modular Reactors（SMR）,etc.

Development
focus Business（CleanEnergy）

Core
Businesses（Utilizing
Existing
Businesses）

Projects（Example）

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4

Reducing CO2 Emissions in
Business Operations（Scope1，2）※

・switching to fuels for heat source equipment at business sites, promoting
electrification, and upgrading to energy efficiency equipment, etc.
（Use of Proceeds：Capital Expenditure, Miscellaneous cost relevant toabove mentioned projects and Capital）※Projects recognized as green projects
Among the projects for use of proceeds to be appropriated, in the establishment of the ammonia value chain,corrosive and exothermic ammonia will be appropriately managed to reduce environmental impact. In addition,although nitrogen compounds (NOx) are usually generated when ammonia is burned, the company has succeededin exclusively burning under NOx emission control. Furthermore, the reduction of greenhouse gases such as nitrous
oxide (N2O) generated during combustion by the exclusive combustion of liquid ammonia in a gas turbine has beenachieved by more than 99%. It has also been demonstrated that power generation at rated output can be achieved by
the combustion of liquid ammonia alone. In order to contribute to the realization of a decarbonized society, we will
promote efforts to build an ammonia value chain with appropriate management of ammonia.
For other projects, although no negative effects are expected at this time, the evaluation and selection process for
all projects takes into consideration the potentially negative environmental and social impacts, and confirms that theequipment certification, approval, and environmental assessment procedures required by the installation country,
region, and local government are appropriate for the target equipment and projects.
2.2 Process for Project Evaluation and Selection
IHI’s Finance & Accounting Division, after consultation with business areas, SBUs, the Corporate Planning
Division, etc., selects eligible criteria described in "4.1 Use of Proceeds" and target project candidates, and theGeneral Manager of Finance & Accounting Division makes a final decision. In the operation and implementationof projects, we will cooperate with the relevant divisions and regularly monitor them in PDCA cycle.
2.3 Management of Proceeds
Funding and asset linkage, as well as the management of funding appropriations, are tracked and managed by
IHI’s Finance & Accounting Division throughout the internal management process. Tracking results are generally
scheduled to be confirmed by the General Manager of the Finance & Accounting Division on a quarterly basis.
Until the proceeds are appropriated, they will be managed in cash or cash equivalents.
We confirm that appropriated and unused funds are properly balanced through quarterly internal audits andquarterly reviews by quarterly auditors and accounting audits, in addition to the tracking management within the
IHI Group.

2.4 Reporting(1)
Fund Appropriation Reporting
With respect to funded status, we will disclose the funded status on our website or to the lenders (in the case ofloans) once a year until the proceeds from are fully funded.
If, even after the completion of the funding, a project subject to the funding is subject to an event that differsfrom our initial assumptions, we will promptly disclose on our website or to the lenders (in the case of loans) the
event and the status of the funding accrual.

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(2)
Impact Reporting
Until the redemption or repayment, we will announce the following once a year on our website.
Category

Projects（Example）

1

Weight reduction of aircraft
Growth Business Electrification of aircraft（Aero Engines and engine※Space）
SAF※

Report the outline of technologies and products,
outline and progress of R&D plans andparticipating projects, etc., and explanations oftargeted effects, etc. to the extent possible fordisclosure

2

Establishment of an Ammonia
Development focus
Value Chain
Business（Clean Energy）
Realization off carbon
recycling

3

4Core Businesses（Utilizing Existing
Businesses）

Electrification of
automobile※

Report the outline of technologies and products,
outline and progress of R&D plans andparticipating projects, etc., and explanations oftargeted effects, etc. to the extent possible fordisclosure
Report to the extent that disclosure is possible,
such as the outline of technologies and products,
and the progress and results of the business

OthersReducing CO2 Emissions in Business Operations（Scope1，2）※

Report on activities to reduce CO2 and theireffectiveness to the extent practicable.

※Projects recognized as green projects(3)
Reporting on ALL Aspects of IHI’s Business
The IHI Group began publishing the IHI Integrated Report, bringing together the Annual Report and CSR
Report, in 2015. We also produce the IHI Sustainability Data Book, which discloses detailed and comprehensive
information on Group sustainability policies, stances, structure, and performance.
•
IHI Integrated Reporthttps://www.ihi.co.jp/en/ir/library/annual/•
IHI Sustainability Data Book
https://www.ihi.co.jp/en/sustainable/data/sustainabilitydatabook/(4)
Reporting on Financial Position
IHI discloses securities reports and results information on its website.
Securities reports and results information
https://www.ihi.co.jp/en/ir/library/finance_report/

23

Alignment with Five Elements of the Relevant International Capital Market Association Principles (forFinance with Non-Specific Proceeds Usages)
Alignment with the five elements outlined under the ICMA Sustainability-Linked Bond Principles and LMA
Sustainability-Linked Loan Principles (1. Selection of Key Performance Indicators (KPIs), 2. Calibration of
Sustainability Performance Targets (SPTs), 3. Loan characteristics, 4. Reporting, 5. Verification) is described asfollows.
3

3.1 Selection of Key Performance Indicators (KPIs) and Calibration of Sustainability Performance
Targets (SPTs)
The KPI to be executed based framework is “CO2 emissions (Scope1+2)”
KPI

IHI Group’s GHG Emissions（Scope1+Scope2）

SPT

50% reduction in 2030 （Compared to 2019）
FY2018FY2019FY2020

FY2021

FY2022

GHG emissions（Scope1+Scope2）(t-CO₂e)329,602254,227

225,066

220,138

215,753

Scope1(t-CO₂e)80,30264,72458,51764,27061,469

Scope2(Market-based) (t-CO₂)

249,570

189,503

166,549

155,868

154,284※Scope: IHI Corporation and consolidated subsidiary※The total value for each item is rounded off and may not match the figures in the breakdown.
※Third-party Verification for the data in FY2021 and FY2022 is provided by an external reviewer.
※Since fiscal 2022, the scope of measurement of GHG emissions (Scope1) has included CH4, N2O, HFC5,
PFC5, SF6, and NF3.
In the "the IHI Group’s ESG Management" in November 2021, IHI Group positioned "countermeasures against
climate change" as an important issue in ESG management, and had continued CO2 reduction activities based on
the Japanese government's policy of "46% reduction in CO2 emissions in fiscal 2030 (compared to fiscal 2013)."On the other hand, in April 2023, we decided to reduce GHG emissions (Scope1 and 2) in FY 2030 by half
compared to FY 2019, in response to the need to strengthen global responses to climate change. The company,
with its decarbonization technology, will take the lead in contributing to the realization of a global carbon-neutral
society by working toward achieving this goal as a KPI of transition-link finance, exceeding the policy of theGovernment of Japan and the recommendations of the IPCC.
In addition to the SPT described above, the annual SPT may be determined in consideration of the financing
period, etc. In such cases, disclosure will be made in statutory disclosure documents for bond issues or contract
documents for loans, etc. at the time of financing.
If the IHI Group changes its SPT after implementation of transition-link financing, the SPT for transition-link
financing already implemented will not be changed. If an unforeseeable situation (Significant changes in M & A
activities, regulations and other institutional aspects, or occurrence of abnormal events) occurs at the time of
publication of this framework, and it is necessary to change the definition of KPI or the setting of SPT, the reason
for the change and the content will be disclosed on the company’s website.

24

3.2 Bond and Loan Characteristics
The financial and structural characteristics of the transition-linked finance executed based on this framework
will change depending on the achievement of the SPTs.
Changes in financial characteristics include an interest rate increase(step-up)/decrease(step-down), execution of
donations to organizations which aim to engage in environmental conservation activities, but are not limited.
The financial and structural characteristics will be specified in the statutory disclosure documents or contract
documents formulated at each time of financing.
3.3 Reporting
We will report on an annual basis on its progress on the KPIs and the achievement or non-achievement of the
SPTs. The reports will be published on IHI Integrated Report or IHI’s website.
3.4 Verification
The progress of SPT against KPIs is scheduled to be verified by a third-party reviewer once a year after
execution of transition-linked financing and before redemption or payment is completed.
Verification results are disclosed annually in the Integrated Report or on the company website or disclosed tolenders (for loans only).
【References】
I. Green Bond Principles2021（ICMA）
II. Green Loan Principles 2023（APLMA，LMA，LSTA）
III. Sustainability Linked Bond Principles 2023（ICMA）
IV. Sustainability Linked Loan Principles 2023（APLMA，LMA，LSTA）
V. Green Bond and Sustainability Linked Bond Guidelines 2022(Ministry of Environment)
VI. Green Bond and Sustainability Linked Bond Guidelines 2022（Ministry of Environment）
VII. Climate Transition Finance Handbook 2023（ICMA）
VIII. Basic Guidelines on Climate Transition Finance 2021（Financial Services Agency, Ministry of Economy,
Ministry of Environment）
IX. IHI ESG STORYBOOK（December 2021）
X. IHI Integrated Report（November 2022）
XI. IHI Sustainability Data Book（September 2022）
XII. Our Company Securities reports
XIII. Our Company Website（https://www.ihi.co.jp/en/）25