Endorsement of TCFD recommendations and related information disclosure

In support of the purpose of the TCFD recommendations to proactively disclose financial information related to climate change, ShinMaywa Industries disclosed information based on the recommendations in January 2023.
Going forward, we will continue to utilize the framework of the TCFD recommendations to enhance the quality and quantity of information disclosure, and at the same time, contribute to the realization of sustainable society by further promoting initiatives toward climate change.

TCFD_logo_blue

1. Governance

The Board of Directors of the Company chaired by the President and Chief Executive Officer, sees climate risks and opportunities as key issues and topics concerning corporate management and is responsible for overseeing and deliberating on them. The Board of Director meets monthly in principle to discuss and examine key management issues including those concerning climate change based on the medium-term management plan, thereby supervising the execution of duties by Directors and Executive Officers.

The Company is oriented toward management from a long-term perspective and established the Sustainability Committee to respond to environmental, social and governance (ESG) issues in corporate management. The Committee, chaired by Deputy Chief Executive Officer (Sustainability management), is tasked with identifying key issues (materiality), setting key performance indicators (KPIs), monitoring and supervising the progress of investigations by sub-committees for the ESG elements (Environmental Subcommittee, Social Subcommittee, and Governance Subcommittee), checking achievements against KPIs and reviewing plans, and reporting to the Board of Directors on these topics (twice annually, in principle).

Climate risks and opportunities will be also handled under this framework as a key issue, and the Sustainability Committee will monitor developments.

2. Strategy

Given the significance of the potential impact that climate change may have on the business of the Company as well as long-term uncertainty, the Company conducts scenario analyses as a process to identify and assess climate risks and opportunities relevant to its business.
Of the five businesses, scenario analyses were conducted for two of the businesses in fiscal 2022: special purpose truck and fluid. In fiscal 2023, analyses were conducted for the remaining three businesses: parking systems, industrial machinery and environmental systems, and aircraft

The Company identified climate risks and opportunities based on two assumed scenarios for the world outlook: the 1.5/2.0 degrees Celsius scenario of globally achieving net zero by 2050 and the 4.0 degrees Celsius scenario of facing more extreme weather events and more serious disasters due to changing climate as a result of prioritizing economic activities.

The specific processes and results of the scenario analysis are provided below.

In addition, the results of these climate-related scenario analyses are reflected in our medium-term management plan [SG-2026], which began in fiscal 2024, and are being implemented in the Business strategies of each business division.

<Scenario Analysis Process>

<Scenario Analysis Result>

Scenario	Changes in the external environment				Scenario analysis results	Time of manifestation
1.5℃/2.0℃ scenario	・Strengthening regulations on GHG emissions ・Transition to low-carbon technologies ・Changes in market structure	Risks	Common		Increase in production and procurement costs due to carbon taxes, etc. Increased expenses due to purchasing renewable energy	Mid to long term
			Special Purpose Truck		Loss of sales opportunities if customer requests and technical responses cannot be made in a timely manner due to specification changes to EVs and alternative fuel vehicles (fuel cells, hydrogen, etc.) Increased costs due to research and development of new production technologies and productivity improvements aimed at low-carbon and decarbonization	Mid to long term
			Parking Systems		Increased costs associated with technological developments to accommodate changes in mobility, such as EV charging facilities	Mid to long term
			Parking Systems		Risk of losing order opportunities due to a lack of environmental requirements, such as being unable to contribute to ZEB and renewable energy/ EV preferential policies, or requests from client developers for ZEB construction, resulting in reduced market competitiveness	Mid-term
			Industrial Machinery & Environmental Systems	Mechatronics	Amid diversification and increased demand for special electric wires used in EVs and self-driving cars, there is a risk of intensifying competition with new entrants and a decline in market share	Mid-term
				Mechatronics	Risk of product evaluation being negatively affected due to a delay in responding to a recycling-oriented society, resulting in a higher environmental impact during product use compared to other companies.	Mid to long term
				Envrionment	Increased costs for developing low-carbon technologies at transfer facilities and refuse resources recycling center, and reduced competitiveness due to delayed introduction	Mid to long term
				Envrionment	Risk of lost sales opportunities due to a decrease in new equipment sales caused by a decline in overall demand for waste treatment and delays in responding to the decline in demand, such as by proposing a variety of plants	Long-term
			Fluid		Loss of sales opportunities if existing products cannot be made low-carbon (highly efficient and long-lasting) Decreased product sales due to delays in responding to low-carbon and circular economy trends throughout the entire manufacturing process (including the supply chain)	Mid to long term
			Aircraft		aircraft Increased costs such as recycling of waste materials and used aircraft generated in the manufacturing process due to increased demand for recycling. Increased research and development costs for commercializing electric/hydrogen aircraft (research to meet requests for additional product safety standards, research into thermoplastic materials, etc.)	Mid to long term
		Opportunity	Special Purpose Truck		Increased sales opportunities through high added value in terms of technology and quick response to customer requests With the growing awareness of _CO2 reduction, reliable, long-life products are being selected, and the importance of maintenance is increasing, leading to improved competitiveness and increased sales opportunities.	Mid to long term
			Parking Systems		Increased sales opportunities for high-value-added products through precise technical responses to customer requests for ZEB construction	Mid-term
			Parking Systems		Increased demand for updating mechanical car parking systems to accommodate changes in mobility, such as EV charging facilities	Mid to long term
			Industrial Machinery & Environmental Systems	Mechatronics	Opportunities to expand market share and acquire new revenue sources by providing equipment that meets customer demands for a variety of special electric wires (materials/structures) for EVs, hydrogen vehicles, and autonomous driving, as well as high efficiency. Increased sales due to the diversification of electric wires resulting from new equipment demand in response to changes in the market structure due to low carbonization	Mid to long term
			Industrial Machinery & Environmental Systems	Envrionment	Expanding product lineup through development and design of equipment with low life cycle emissions due to longer equipment life and maintenance extension In response to the shift to a low-carbon economy, there are opportunities to increase sales by introducing low-carbon technologies (energy-saving operation, etc.) to existing facilities and realizing carbon-free products by understanding potential needs (responding to changes in the role of relay facilities accompanying the shift from incineration/landfill processing to 3R and strengthening services at refuse resources recycling center, etc.).	Mid to long term
			Fluid		Increased sales opportunities through construction, maintenance and inspection services that improve product efficiency and save energy and labor Increased sales opportunities for equipment, construction, and services through the renewal of existing facilities in line with national policy, such as maintaining functionality during flooding and taking measures against aging facilities	Mid to long term
			Aircraft		Opportunity to increase product competitiveness, increase market share and gain new revenue sources by responding to customer needs for low-carbon, environmentally friendly next-generation air mobility (lightweight and energy-efficient).	Mid to long term
			Aircraft		Increased opportunities for inquiries about low-carbon composite parts through the use of recycled CFRP materials that meet low-carbon requirements and the development of new processing technologies	Short to long term
4.0℃ scenario	- Intensification of meteorological disasters such as heavy rains, floods, and typhoons - Long-term increases in annual average temperatures and changes in precipitation	Risks	共通　(※)		Weather disasters such as high tides, heavy rains, and floods can cause construction work to stop, parts shortages due to supply chain disruptions, and changes in procurement sources, leading to increased procurement costs and reduced profitability. Rising average temperatures will lead to worsening working conditions, lower productivity, and higher air conditioning costs	Long-term
		Opportunity	Special Purpose Truck		Increased sales opportunities through strengthened sales of special purpose truck necessary for infrastructure development in line with the Fundamental Plan for National Resilience	Short to long term
			Parking Systems		Increased demand for maintenance of broken mechanical car parking systems due to an increase in typhoons, heavy rains, floods, etc. caused by abnormal weather, and increased demand for disaster-resistant equipment such as flood prevention products to protect vehicles from flying objects and environmental changes	Mid to long term
			Industrial Machinery & Environmental Systems	Mechatronics	Products equipped with remote monitoring systems and implementation of preventive diagnostics and services	Mid to long term
			Industrial Machinery & Environmental Systems	Envrionment	Increase sales and build relationships with the local community by working with local governments to propose accepting disaster waste.	Mid to long term
			Fluid		Demand for infrastructure development, such as storm water drainage facilities, is growing in preparation for an increase in natural disasters, such as typhoons and heavy rains.	Mid to long term
			Aircraft		With large-scale forest fires increasing worldwide due to the effects of global warming, adding firefighting capabilities to our large Amphibian will contribute to firefighting efforts and provide an opportunity to increase sales Opportunity to increase revenue by providing forest fire monitoring services using fixed-wing drones	Mid to long term

Time horizon definitions
Short term: by 2023; medium term: by 2030; long term: by 2050
Scenarios used
1.5/2.0 degrees Celsius scenario: IEA Energy Outlook, the 2.0 degrees Celsius scenario (RCP2.6) of the IPCC Fifth Assessment Report
4.0 degrees Celsius scenario: IPCC Sixth Assessment Report, the 4.0 degrees Celsius scenario (RCP8.5) of the IPCC Fifth Assessment Report

3. Risk Management

With regard to risks associated with business operations, the Company established the ShinMaywa Group Risk Management Rules. Under these Rules, each of the divisions and Group companies is taking the initiative to build risk management systems suitable for their business characteristics. In addition, the Head Office monitors the status of risk management by those divisions and group companies and implements company-wide measures against risks, including disaster and financial risks, thereby establishing risk management systems.

The Sustainability Committee checks the establishment of risk management systems and activities in the ShinMaywa Group based on information reported by the Head Office and business divisions. The Committee also identifies company-wide key risks in light of their impact on business operations and reports such information to the Executive Committee and the Board of Directors on a regular basis to ensure the effectiveness of risk management in the group.

As for climate change, the Company has conducted scenario analyses for the first time in FY2022, covering two businesses, as a process to identify and assess climate risks and opportunities relevant to its businesses, given the significance of the potential impact that climate change may cause to its businesses, as well as long-term uncertainty. Under the company-wide risk management framework described above, the Company will manage climate risks and opportunities of special important, among those identified by the scenario analysis.

4. Metrics and Targets

Our current mid-term greenhouse gas reduction target for 2030 is to "reduce total CO2 emissions from energy use by 38% (compared to fiscal 2017) by fiscal 2030." This will reduce our CO2 emissions from energy use in fiscal 2017, which was 42,720 t-CO2e, to 26,486 t-CO2e in fiscal 2030.
In addition, past Scope 1 and 2 emissions performance (non-consolidated) is as shown in the table below, and emissions from major domestic consolidated subsidiaries have been calculated and added from fiscal 2023. Scope 3 emissions (non-consolidated) have also been calculated.

Total CO2 emissions reduction plan (non-consolidated)

Scope 1 and Scope 2 emissions (non-consolidated)

(t-CO₂e)
	Base year	Past 5 years performance					Target standard
管理指標	FY2017	FY2019	FY2020	FY2021	FY2022	FY2023	FY2030
Scope１	11,754	12,059	10,528	9,796	9,494	9,474	―
Scope２	30,966	23,893	20,321	20,682	17,918	19,918	―
Scope１＋２	42,720	35,952	30,849	30,478	27,412	29,392	26,486

*1Aggregate figures of ShinMaywa Industries on a non-consolidated basis

Scope 1, Scope 2 emissions (domestic consolidated)

Scope 1 and Scope 2 when including major domestic consolidated subsidiaries

(t-CO2e)
管理指標	FY2023
Scope１	12,442
Scope２	28,686
Scope１＋Scope２合計	41,128

Eligible domestic group companies

Iwafuji Industrial Co., Ltd. / TOHO CAR CORPORATION / OSK, Ltd., Ltd. / WAKO, Ltd., Ltd. / Wing Field Co., Ltd. / DIAVAC Limited Co., Ltd. / ShinMaywa Parking Technologies, Ltd. / ShinMaywa Aqua Technology Service, Ltd. / Maywa Komuten, Ltd.

Total 9 companies

Scope 3 emissions (non-consolidated)

(t-CO2e)
	Categories	FY2023
1	Purchased products and services	605,545
2	Capital Goods	10,794
3	Fuel and energy-related activities not included in Scope 1 and 2	4,520
4	Transportation and distribution (upstream)	3,158
5	Waste generated from business activities	825
6	Business trip	423
7	Employee commuting	1,153
8	Leased assets (upstream)	Not applicable
9	Transportation and distribution (downstream)	Not applicable
10	Processing of sold products	Not applicable
11	Use of sold products	1,262,255
12	Disposal of sold products	1,413
13	Leased assets (downstream)	Not applicable
14	Franchise	Not applicable
15	investment	Not applicable
Total		1,890,085