Net-Zero GHG Emissions Statement

The Okasan Securities Group has established and released its "Net-Zero GHG Emissions Statement" in January 2024.

Response to the TCFD

The Okasan Securities Group considers efforts to realize a sustainable society, including efforts to respond to climate change, as one of its key management issues. It has expressed support for the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and carries out information disclosure pursuant to these recommendations. The Group is also a member of the TCFD Consortium.

1. Governance

Important matters and initiatives related to climate change are reported by the Sustainability Department to the Management Conference for discussion and resolution. The Board of Directors deliberates on and oversees the matters in accordance with the situation.

2. Strategies

1. Connections to materialities
   In October 2021, the Okasan Securities Group identified and announced materialities (key issues). The Group considers "creation of society" (realization of a sustainable society, including efforts to respond to climate change) as one of the issues it needs to work on through its business activities. The Group promotes efforts to find solutions to social issues and promotes contribution to local communities by offering sustainable finance and ESG funds and by providing information on sustainable investment.
2. Scenario analysis
   With these issues in mind, the Group undertook a scenario analysis to identify risks and opportunities related to climate change. To prepare for a wide range of potential outcomes caused by climate change, the Group assumed two scenarios: the 4℃ scenario (inadequate implementation of climate action) and the 1.5/2℃ scenario (adequate implementation of decarbonization efforts). It has set forth the risks and opportunities to consider in each scenario and calculated the business impact.
   

   The selected scenarios are based on the impact of climate change assumed to be as follows:
   

   • 1.5/2℃ scenario: Relatively significant impact of transition risks from market shifts and tightened regulations intended to curb climate change
   • 4℃ scenario: Relatively significant impact of physical risks from flooding and other natural disasters

   In its scenario analysis, the Group used scenarios adopted by the International Energy Agency (IEA) and the Network of Central Banks and Supervisors for Greening the Financial System (NGFS).

   ① Qualitative analysis of risks and opportunities
   For qualitative analyses based on these two scenarios, the Group set transition and physical risks expected to occur due to climate change in each scenario; identified those likely to be relatively significant for Group strategies and businesses; and analyzed their anticipated impact (including commercial impact on the Group) and time of occurrence.

   Table 1. Anticipated impact on the Okasan Securities Group

   Risks	Anticipated impact	Expected window*	Impact
   			1.5℃ /2℃	4℃
   Transition risks
   Policies and legal regulations	Increasing cost due to a contraction of existing businesses or rising capital burdens due to regulatory and legislative change	Medium- to long-term	Moderate	Moderate
   Market	Obsolescence of existing funds and other products due to changing customer needs prompted by climate change and a decline in competitive advantages in new product development	Medium- to long-term	Moderate	Moderate
   Market	Declining businesses with enterprises significantly affected by changing industrial structures over the course of the transition to a low-carbon society	Medium- to long-term	Large	Moderate
   Market	Declining value of assets on hand and shrinking opportunities to sell them off	Medium- to long-term	Moderate	Moderate
   Reputation	Risk of reputational damage due to investments in businesses associated with high environmental impact; deterioration of the brand image of enterprises and products that disregard climate change risks	Short- to long-term	Large	Moderate
   Physical risks
   Acute	Shutdowns of company facilities and business infrastructures after typhoons, tsunami, flooding, and other natural disasters; increase in cost, such as recovery and operating costs; and emergence of employee support costs, etc.	Short- to long-term	Moderate	Large
   Acute	Declining wholesale business due to growing operating costs triggered by customer shutdowns caused by typhoons, tsunami, flooding, and other natural disasters	Short- to long-term	Moderate	Large
   Acute	Slowing retail business due to declining personal assets, with climate change proving catastrophic and economic conditions becoming dire	Short- to long-term	Moderate	Large

   * Expected windows include the short term (within three years from now), the medium term (three to 10 years), and the long term (10 to 30 years).

   Events expected to have a significant impact on the Group are assumed to be as follows: with regard to the transition risks, declining business opportunities with customers significantly affected by the transition to a low-carbon society and rising procurement costs and declining business opportunities associated with reputational damage that will occur if Group measures to address climate change risks are perceived to be inadequate. With regard to the physical risks, incurrence of costs due to the destruction of company facilities and business infrastructures in the event of natural disasters and declining Group business due to the significant impact of natural disasters on customers.
   The Group has a system in place for managing physical risks associated with natural disasters, including the Business Continuity Plan (BCP) and the establishment of the Crisis Management Headquarters.

   The Group anticipates various business opportunities, as set forth in Table 2.

   Table 2. Business opportunities for the Group

   Opportunities
   Expanding business opportunities related to adaptation, including green finance, transition finance, and solutions businesses
   Expanding markets due to rising confidence in ESG-related products and growing awareness among individual investors
   Expanding opportunities to handle sustainable bonds, green bonds, and other products focused on sustainability and the environment

   The Group will seize these opportunities by strengthening its capacity to offer diverse financial services.

   ② Quantitative analysis of the risks and opportunities
   In addition to qualitative analysis, the Group has performed a quantitative analysis based on the above-mentioned scenarios as preliminary calculations of the financial impact in 2030.

   With regard to transition risks, the Group analyzed the impact of cost increases prompted by the introduction of carbon taxes and the impact of reputational damage on procurement costs, and the knock-on effects on commissions earned from Group securities business. With regard to physical risks, the Group analyzed the impact of various acute risks, including business shutdowns, damage to company facilities, and major market fluctuations due to flooding at operational sites. The flood damage is assumed to occur at major Group sites, which are located in Japan.

   With regard to the transition risks, the analysis indicates the importance of expanding relevant businesses and maintaining the Group's reputation for climate action, by continuing to pursue Group initiatives related to decarbonization and sustainable finance. With regard to physical risks, the analysis points to the need for risk management capable of handling the market impact that may be triggered by climate disasters, as there will be indirect impact imposed via the market in addition to the direct impact of flooding and other extreme weather events.

   In either scenario, the preliminary calculations made it clear that the Group's earnings will be reduced should it fail to take appropriate action in response to the risks and opportunities presented by climate change. In contrast, if the Group can take appropriate action and seize the opportunities that emerge, the financial impact will be significantly more limited.
   

3. Roadmap to a decarbonized society
   Based on the recognition that climate change is both a pressing global and an important social issue, the Group treats it as a key management issue (materiality) as stated in (a) Connections to materialities, and is addressing it through its business activities. The Group supports both the Paris Agreement and the Japanese government's 2050 Carbon Neutral Declaration. To support the transition to and the realization of a decarbonized society, the Group announced its Net-Zero GHG Emissions Statement, which encompasses the goals of achieving the net-zero target for its GHG emissions (Scopes 1 and 2) by 2030 and supporting the transition to a decarbonized society through its business activities, and has been assiduously working on related activities. The future specific plans are as follows:

   （i） Achieving the net-zero target for its GHG emissions (Scopes 1 and 2) by 2030
   To reduce its GHG emissions (Scopes 1 and 2), the Group will continue its energy-saving activities while expanding the use of renewable energy. The former will include enhancing the efficiency of energy use at each facility; the latter will include introducing EVs and electric motorcycles and introducing renewable energy to the facilities owned by the Group and other companies.

   （ii） Supporting the transition to a decarbonized society through its business activities
   The Group has launched various initiatives to help resolve social issues, including climate change. These include underwriting and offering green bonds and other SDGs bonds and providing information via seminars and reports for investors and issuers. The Group remains committed to promoting and expanding the availability of sustainable finance.

3. Risk Management

The Okasan Securities Group believes climate change affects the occurrence of natural disasters and environmental issues, the economic environment, and also the management environment including finances. Given the complexity of how climate change affects the existing risks, the Group believes that it needs to implement risk control based on the characteristics of the risks that arise within the Group. Thus, the Group manages climate change risks under the existing risk management category of Management Environment Risks and applies a group-wide approach.

4. Indicators and targets

（i） GHG emissions
The Okasan Securities Group is striving to achieve the net-zero target for its GHG emissions (Scopes 1 and 2) by 2030 and has promoted various initiatives to identify and reduce emissions in accordance with the basic guidelines of the Ministry of the Environment and the Ministry of Economy, Trade and Industry, which are consistent with the GHG Protocol. The Group will continue to take measures to reduce the energy consumed and GHG emitted during its business activities.

GHG emissions (unit: t-CO2)

（ii） Underwriting of SDGs bonds
Okasan Securities Co., Ltd., a core company of the Group, was registered in 2020 on the Green Bond Issuance Promotion Platform. It has been working to help counter climate change and other social issues by underwriting and offering green bonds and other SDGs bonds.

Underwriting of SDGs bonds

Based on the recognition that the risks and opportunities related to climate change are one of the important management issues, the Group will continue to promote its information disclosure in accordance with the TCFD recommendations and continue to make efforts to decarbonize its operations and help achieve a sustainable society.