Climate Change Efforts

1. Governance

1. We have developed a governance system by establishing the Sustainability Committee (Chairperson: Representative Director and President, CEO) at the same level as Management Meeting and incorporating sustainability into management issues. The Sustainability Committee deliberates on policies related to research, technology development, human resource training, and other contributions to reducing greenhouse gas emissions and building a sustainable community. Decisions are made on key matters following deliberations at the executive officers’ meeting and the Board of Directors’ meeting.

   

   Governance System Diagram

2. The progression of climate change in tandem with global warming will result in various risks and opportunities for the Group’s business in the medium to long term. To identify and assess their impact on the Group’s finances and strategies and to appropriately reflect such risks and opportunities into our management policy, we collect and analyze information and assess impacts mainly through the Green Investment Strategy Working Group under the Sustainability Committee. The Committee then determines the action policies and plans of the Group.

2. Strategy

1. We have conducted a qualitative assessment of the major risks and opportunities anticipated in the medium to long term, based on the scenarios assumed in the impact assessment of the Group’s business. The risks and opportunities identified were as follows. Transition risks included bolstered emissions regulations, such as carbon taxes levied on business activities; and the Group’s increased social responsibility due to heightened awareness of climate change in society. Physical risks included more natural disasters, such as typhoon and heavy rain. Opportunities included rising demand for social infrastructure planning and designing in order to prevent and mitigate disasters caused by growing climate change impacts, as well as demand for services to transition to decarbonized energy sources, such as renewable energy.
   We will assess the risks and opportunities for the Group’s business, both quantitatively and precisely, and enhance our strategy to contain more specific countermeasures and other content.

   Table: Major Risks and Opportunities Associated with Climate Change and Their Countermeasures

   Category			Description	Financial Impact		Countermeasure
   				1.5℃	4℃
   Transition	Risk	Policy/regulation	Increase in utility and energy management costs due to charges on fossil fuel use	Medium	Small	Transition to renewable energy Reduce CO2 emissions by turning company buildings into net zero energy buildings, fully electrified buildings, etc.
   		Market	Increased corporate responsibility due to heightened awareness of environmental considerations in society	Medium	Medium	Contribute to achieving the sustainability of local communities
   	Opportunity	Policy/regulation	Expanding demand for services related to regional and corporate decarbonization and climate change adaptation	Medium	Small	Conduct business in the public and private sectors related to building a decarbonized society
   			Increasing demand for renewable energy, etc.	Medium	Small	Develop technologies and conduct business related to renewable energy Develop technologies and conduct business related to the creation and management of credit
   Physical	Risk	Acute	Increase in business continuity risks due to natural disasters, such as typhoon and heavy rain	Small	Medium	Develop BCP for disaster measures Strengthen measures for avoiding natural disaster risks
   	Opportunity	Chronic	Rising demand for consulting services related to disaster prevention, mitigation, and enhancing national resilience	Large	Large	Strengthen schemes for enhancing national resilience Develop technologies and conduct business aimed at disaster prevention and mitigation

3. Risk management

1. The progression of climate change in tandem with global warming will result in various risks and opportunities for the Group’s business in the medium to long term.
   We have established the Risk Management Committee to promote appropriate risk management for the Group based on its risk management regulations, including identifying and controlling risks that could negatively impact our business operations before such risks materialize.
   The Sustainability and Risk Management Committees will work together to manage the risks associated with climate change.

4. Metrics and targets

1. The Group aims to reduce the environmental impact of its own corporate activities. Furthermore, fulfilling its responsibility as a company engaged in public projects, the Group aims to improve the sustainability of local communities, and thereby, enhance its corporate value built on the trust and empathy of relevant stakeholders. To this end, we have established the following targets. For Scope 1 and Scope 2 emissions, “Reduce carbon dioxide emissions from corporate activities to virtually zero by 2030.” At the same time, “We will establish a budget line for CTI Group sustainable investment and invest in projects that improve the sustainability of local communities, while promoting related research and development and human resource development.”

   Table: Current Situation of the Targets and Metrics Based on Our Challenges for Sustainability Promotion Plan

   Classification			Target	Current Situation
   Net-zero emissions by the Group	Greenhouse gas emissions	Emissions (2022)	-	4,451t-CO2/year
   		Scope 1	Net zero greenhouse gas emissions by 2030	810t-CO2/year
   		Scope 2		3,642t-CO2/year
   		Scope 3	-	23,100t-CO2/year
   Contribution to the sustainability of local communities	R&D investment	R&D investment allocation for sustainability	50% of R&D investment budget	32%

[Reference] Scenarios for assessing climate change impact

For assessing the impact of climate change, the Group adopted scenarios used by the Intergovernmental Panel on Climate Change (IPCC), specifically the 1.5°C scenario (SSP1-1.9) and the 4°C scenario (SSP5-8.5).
In the 1.5°C scenario, it was assumed that, to keep the change in the Earth’s average temperature to below 1.5°C, a socio-economic environment is realized where various policy measures are implemented with the aim of decreasing emissions to net zero by 2050, and a shift to decarbonized energy sources, such as renewable energy, and improved energy efficiency are promoted.
In the 4°C scenario, it was assumed that a socio-economic environment is realized where current levels of efforts are maintained, and policy measures such as carbon taxes are not introduced. As a result, climate change due to global warming progresses, leading to rising demand for adaptation measures for climate change impacts, such as increased floods and other natural disasters.
Based on these scenarios, we analyze the risks and opportunities for the Group’s business and make disclosures on high-priority risks and opportunities for the Group.

(a) Global surface temperature change relative to 1850～1900

Source: Japan Meteorological Agency, “Summary for Policymakers, IPCC AR6 WG1 Report (Provisional Translation),” December 2022.