Complying with TCFD

Sojitz Group is actively working to disclose information and improve transparency by utilizing the TCFD*1 framework regarding risks and opportunities related to climate change.
*1: In August 2018, Sojitz declared its endorsement of the final recommendations of the TCFD (Task Force on Climate-related Financial Disclosures).

TCFD

Status of initiatives according to the TCFD framework

Governance

The Sustainability Committee, chaired by the President & CEO, meets at least four times a year. Policies, issues, and other matters discussed by the Sustainability Committee are brought up for deliberation or are reported to the Management Committee and the Board of Directors. The Board of Directors supervises this process and gives directives as necessary.

Risk Management

The Sustainability Committee evaluates and identifies CO2 emissions risks in each business conducted by Sojitz Group.
In addition, Sojitz confirms individual business risks as part of the deliberation process of the Finance & Investment Deliberation Council and shares this information with each business division through the Management Committee. Furthermore, Sojitz holds stakeholder dialogues to discuss and confirm the impact of climate-related risks and opportunities on our businesses.

Systems to Promote and Implement Sustainability

Strategy

【Tailoring Sojitz’s actions and approaches to the latest forecast of technological trends】

Sojitz identifies the technological and global trends of each decade and organizes its thinking and policies based on risks and opportunities for Sojitz. Sojitz will continue to monitor external trends and update its approach and ways of thinking.

【Conducting scenario analysis of future risks and opportunities】

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.

Transition Risks

Scenario analysis of coal interests business and power generation business

【Reference Scenarios】

Three scenarios included in the World Energy Outlook report issued by the International Energy Agency (IEA) in addition to the scenario announced by the Intergovernmental Panel on Climate Change (IPCC).

Stated Policies Scenario*: Outlook includes the stated future policy plans of each country’s government

Sustainable Development Scenario: Supply and demand outlook consistent with SDGs (2℃ Scenario)

Net Zero by 2050 Scenario: 1.5℃ Scenario of the “Net Zero by 2050 Report”

IPCC 1.5℃ Scenario: Scenario for limiting global warming to within 1.5℃ by 2100

* In this year’s World Energy Outlook, the New Policies Scenario is renamed as the Stated Policies Scenario.

【Trends in the Reference Scenarios】

	Coal interests business	Power Generation
Trends	The demand for thermal coal remains stable under the Stated Policies Scenario, but is expected to drop significantly under the Sustainable Development Scenario and Net Zero by 2050 Scenario. The demand for coking coal remains relatively stable under the Stated Policies Scenario and Sustainable Development Scenario, but demonstrates a consistent downward trend under the Net Zero by 2050 Scenario. *Supply and demand for each scenario is determined based on usage and trade volumes. The Net Zero by 2050 Report and IPCC 1.5℃ Scenario do not include separate reference volumes for thermal coal and coking coal. Sojitz estimates are included.	Coal-fired power generation remains stable under the Stated Policies Scenario, but drops significantly in the Sustainable Development Scenario, Net Zero by 2050 Scenario and IPCC 1.5℃ Scenario. Gas power remains an important power source under all scenarios. Carbon capture, utilization, and storage (CCUS) are expected to be deployed in the Net Zero by 2050 Scenario and IPCC 1.5℃ Scenario. Demand for renewable energy will demonstrate growth under all scenarios.

【Measuring Financial Impact】

	Coal Interests Business	Power Generation
Method	Sojitz analyzed the financial impacts on asset valuation based on estimated price forecasts and coal demand leading up to 2050 using the 1.5-degree scenario.	Sojitz analyzed the financial impacts on asset valuation based on estimated carbon prices and fluctuating demand using the 1.5-degree scenario.
Financial Impact	If the 1.5-degree scenario is realized, we confirmed the possibility that some asset deterioration due to the impacts of a rise in production costs.	Sojitz has confirmed there would be a limited financial impact on select power plants from fluctuations in carbon prices and demand.

Contributing to Decarbonization

Demand is expected to rise for renewable energy under all scenarios analyzed by Sojitz Group. In addition to Sojitz’s renewable energy and other decarbonization businesses, we are promoting high-efficiency gas-fired power generation and energy conservation as new business opportunities for a transitional period in the move towards realizing a decarbonized society.

In addition, we will further strengthen our efforts in the area of circular economy, which is essential for achieving a decarbonized society.

Major achievements in FY2022
◆ Began commercial operations at a biomass power plant in Hokkaido
◆ Started sales of household storage batteries in Japan

Physical Risks

In addition to preparing for transition risks such as new regulations aimed at mitigating climate change, we are also planning ways to address physical risks in the event that climate change cannot be curbed and global warming continues to progress. To begin with, we are examining the risks to our assets, primarily focusing on water-related risks such as floods and droughts.

Sojitz conducts regular surveys to confirm impacts on Sojitz’s businesses by utilizing the Aqueduct analysis tool for water risk assessment that references the 4-degree scenario (RCP8.5) provided by the World Resources Institute.Under Medium-term Management Plan 2023, Sojitz is working to address physical risks classified by the TCFD framework. Sojitz measures the financial impacts for company assets identified as having potential flood-related risk, which is considered an acute physical risk.

Amount of damages to company assets (tangible fixed assets) in the event of a flood: JPY 31 billion
* Tangible fixed assets in the “Extremely High” and “High” category in the Aqueduct analysis tool as of end of March 2023.

Sustainable Water Usage

Metrics and Targets

Roadmap for Carbon missions

We have set policies and targets for existing and new businesses moving forward. For existing businesses, we have set CO2 reduction targets according to the international standards for CO2 emissions (SCOPE). For new businesses, we see the transition to a decarbonized society as an opportunity and will actively promote this transition while tailoring our approach in each business to achieving net-zero emissions.

Sojitz Group's Policies for Realizing a Decarbonized Society (established in March 2021) Click for details

Existing businesses

[Scope 1 and Scope 2 Targets]

SCOPE1+2	Reduce emissions 60% by 2030; achieve net-zero emissions by 2050 1 For Scope 2: Net-zero emissions by 2030 2
Coal-fired power generation	No current projects nor future projects planned

*1、*2
FY2019 serves as the base year, with Sojitz and its consolidated subsidiaries included in the scope.
FY2018 was used as the base year when these targets were originally released in March 2021. We have now changed the base year to FY2019 in order to duly reflect the environmental impact of an overseas papermaking company acquired in FY2019. The change allows the papermaking operations to be treated as part of “existing businesses.”
･ Includes carbon offsets from certificates, introduction of internal carbon pricing under consideration, which supports the reduction of CO2.

[Scope 3 Targets (Natural Resource Interests)]

Thermal coal interests	Reduce interests to half or less by 2025 zero interests by 2030 *3
Oil interests	Zero interests by 2030
Coking coal interests	Zero interests by 2050

*3 FY2018 serves as the base year, and targets are based on the book value of assets in coal interests. In May 2019, Sojitz announced its goal of reducing thermal coal interests to half or less by 2030.

Change in thermal coal interests assets

【New business】

We have adjusted our approach to decarbonization for each business and aim to achieve net zero CO2 emissions by 2050.

【Contributing to a decarbonized society】

Sojitz considers this an opportunity and will expand related businesses and promote decarbonization initiatives.

Sojitz will measure the amount of avoided CO2 emissions (Scope 4) prior to pursuing business.

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