Sojitz Corporation

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Complying with TCFD

Our Group is "working to achieve a decarbonized society through our business activities" as set out in the “Sustainability Challenge”, and we are promoting initiatives that link business to measures against climate change, such as our renewable energy business. These initiatives are based on the requirements of the Paris Agreement adopted in the United Nations Framework Convention on Climate Change (COP21) in 2015.

In August 2018, we declared our endorsement of the final recommendations of the TCFD and are striving to cooperate with a wide range of stakeholders, proactively disclose information, and improve our transparency.

TCFD

What is TCFD?

TCFD stands for Task Force on Climate-related Financial Disclosures. The TCFD is an initiative created by the Financial Stability Board (FSB) based on the request from the G20 seeking a review of the financial industry from the perspective of financial stability and preventing loss of assets as the financial world undergoes fundamental and serious changes in transition to a low-carbon economy.

TCFD encourages companies to assess and consider future financial effects that result from the risks and opportunities presented by climate change.

Risk

Source: Final Report: Recommendations of the Task Force on Climate-related Financial Disclosures (June 2017)

TCFD-recommended Framework for Climate-related Financial Disclosures

TCFD presents a voluntary framework for helping businesses disclose climate-related financial information. The TCFD recommends disclosure in relation to risks and opportunities linked to climate change in terms of four themes:governance, strategy, risk management, and metrics and targets.
Additionally, it recommends incorporating scenario analysis as a distinctive part of strategic planning.

Governance
Ensure oversight by the Board of Directors
Define the role of management in assessing and managing risks and opportunities
Risk Management
Describe the processes for identifying and assessing risks
Describe the processes for managing risks
Integrate those processes into overall risk management
Strategy
Identify the climate-related risks and opportunities over the short, medium, and long term
Describe the impact on the company's businesses, strategy, and financial planning
Incorporate scenario analysis in strategic planning
Metrics and Targets
Set targets for evaluating risk
Disclose greenhouse gas emissions and the related risks
Describe the targets and relevant Key Performance Indicators to manage risks

Status of initiatives according to the TCFD framework

This section introduces Sojitz Group's positions and activities concerning climate change in accordance with the TCFD framework's recommendations.

Governance

We scrutinize climate-related risks and opportunities and discuss their influence on our business strategies based on promotion and implementation systems centered on the Sustainability Committee (Committee Head: CEO). The details of these proceedings are regularly reported to the Management Committee and the Board of Directors, and the latter supervise and give direction when necessary.

Risk Management

We assess and identify the CO2 emissions risk of each of our Group-operated businesses by using external investigations by third parties which cover the greenhouse gas emissions statistics by industry, alternative technology trends, and policy and regulatory trends.

In addition to the deliberation process for investments and loans that involves managing individual business risks, we also hold regular meetings between our business divisions and management to discuss and assess the effect of climate-related risks and opportunities on our businesses.

Strategy

Based on external investigations and internal analysis, we are working on sequential scenario analysis of the business fields believed to present the greatest risks and opportunities to our Group’s business activities, management strategy, and financial planning. The scenario analysis is then analysed to determine financial impact.

Scenario analysis of coal interests business and power generation business

【Reference Scenarios】

Three scenarios included in the World Energy Outlook 2018 report issued by the International Energy Agency (IEA).

Current Policies Scenario
Policies that are currently in place in various countries continue without change
New Policies Scenario
Various policies and targets announced by the governments of various countries are included
Sustainable Development Scenario
Market supply and demand matches the UN’s Sustainable Development Goals(SDGs). Also known as the "2℃ Scenario".
【Trends in the Reference Scenarios】
  Coal interests business Power Generation
Trends
  • The demand for thermal coal remains stable under the Current Policies and New Policies Scenarios, but drops drastically in the 2℃ Scenario.
  • The demand for coking coal remains relatively stable under all three scenarios.
  • Coal-fired power generation remains stable under the Current Policies and New Policies Scenarios, but drops drastically in the 2℃ Scenario.
  • Gas power remains relatively stable under all three scenarios.
  • Power generation from renewable resources will expand under all three scenarios.
【Measuring Financial Impact】
  Coal Interests Business Power Generation
Method
  • Demand and price forecasting is conducted based on a number of assumed scenarios by 2040, including the 2°C scenario, followed by analyzing the value of Sojitz's assets
  • Analysing the cost influence of Sojitz's assets accompanying an anticipated increase in environmental taxes conducted based on a number of assumed scenarios by 2040, including the 2°C scenario
Financial Impact
  • Our thermal and coking coal businesses have a certain cost competitiveness
  • Even in a scenario that that might influence asset value, the effect on Sojitz businesses is limited
  • We have confirmed the cost resilience of our assets
  • We have made predictions to enable us to respond to conditions, even if those conditions change in the future, so the effect on Sojitz businesses is limited

Metrics and Targets

Formulating policies for initiatives related to the coal interests business and the coal-fired power generation business (May 2019)

  • Reducing the assets of our thermal coal interests to half or less by 2030
  • In principle, not acquiring new thermal coal interests
  • Not undertaking new initiatives in the coal-fired power generation business
    (we have no current projects)

Change in thermal coal interests assets

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