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.

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1. Governance

The Board of Directors chaired by President & CEO is responsible for the supervision and deliberation of climate-related risks and opportunities, considering them as important issues and themes related to corporate management. The Board of Directors’ meetings of the Company are held once a month, in principle, to discuss and consider important management issues including climate change based on the medium-term management plan and to monitor the execution of duties by Board members and executive officers.

Aiming to sustainably enhance corporate value and create social value, the Company holds Sustainability Committee meetings twice a year. The Committee is chaired by the President and composed of members including internal directors, executive officers of the Head Office, and presidents of divisions. It works to appropriately grasp and evaluate important sustainabilityrelated information and recommends measures for improvement.

Climate-related risks and opportunities are also being addressed within this framework as one of the key issues and the Committee monitors developments of such risks and opportunities.

2. Strategies

In light of the significance of the potential impacts of climate change on business of the Company and the associated long-term uncertainties, we conduct scenario analysis as part of the process to identify and assess climate-related risks and opportunities related to business of the Company.
Of our five business divisions, we carried out scenario analyses of the two divisions, namely, the Special Purpose Truck business and the Fluid business, ahead of the others. Based on the results of these analyses, we have gradually and systematically performed scenario analyses of the remaining three divisions, namely, the Parking Systems business, Industrial Machinery & Environmental Systems business, and Aircraft business.

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.

Details of scenario analysis process and the results of scenario analyses are as follows.

The results of these climate-related scenario analyses were reflected in the medium-term management plan, SG-2026 and developed 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	Common(*)		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. Indicators and Targets

As a medium-term greenhouse gas reduction target through 2030, the Company is currently working to achieve the target of “reducing total CO₂emissions from energy use by 38% in FY2030 (compared to FY2017).” This means that the Company will reduce CO₂emissions from energy use from 42,720 t-CO_2e in FY2017 to 26,486 t-CO_2e in FY2030 on an actual result basis.

Actual results of Scopes 1 and 2 emissions in the past (non-consolidated) are as shown in the table below. Emissions from major consolidated subsidiaries in Japan and overseas are calculated and added from FY2024 onwards.
Scope 3 emissions have been calculated only on a nonconsolidated basis, but we plan to promote an initiative to calculate emissions including those from consolidated subsidiaries in the future.

Total CO₂ emissions reduction plan (non-consolidated)

Scope 1 and Scope 2 emissions (non-consolidated)

(t-CO_2e)
	Base year	Past 5 years performance					Target standard
management indicators	FY2017	FY2020	FY2021	FY2022	FY2023	FY2024	FY2030
Scope１	11,754	10,528	9,796	9,494	9,474	8,839	―
Scope２	30,966	20,321	20,682	17,918	19,918	18,007	―
Scope１＋２	42,720	30,849	30,478	27,412	29,392	26,846	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-CO_2e)
management indicators	FY2023	FY2024
Scope１	12,442	12,236
Scope２	28,686	31,172
Scope 1 + Scope 2 total	41,128	43,408

Major consolidated subsidiaries that were included in the calculation

Scope 3 emissions (non-consolidated)

(t-CO_2e)
	Categories	FY2023	FY2024
1	Purchased products and services	605,545	602,090
2	Capital Goods	10,794	12,419
3	Fuel and energy-related activities not included in Scope 1 and 2	4,520	4,118
4	Transportation and distribution (upstream)	3,158	3,279
5	Waste generated from business activities	825	1,099
6	Business trip	423	450
7	Employee commuting	1,153	1,220
8	Leased assets (upstream)	Not applicable	Not applicable
9	Transportation and distribution (downstream)	Not applicable	Not applicable
10	Processing of sold products	Not applicable	Not applicable
11	Use of sold products	1,262,255	1,327,728
12	Disposal of sold products	1,413	1,650
13	Leased assets (downstream)	Not applicable	Not applicable
14	Franchise	Not applicable	Not applicable
15	Investment	Not applicable	Not applicable
Total		1,890,086	1,954,053