Responding to TCFD

Established by the direction of the Financial Stability Board (FSB) in April 2015, the Task Force on Climate-related Financial Disclosures (TCFD) issued its final report in June 2017. At Sumitomo Forestry Group, our Sustainability Committee, tasked with taking up the medium to long-term ESG challenges, has undertaken this as one of its agenda items, recognized the risks associated with climate change as serious risks, and announced its support to the TCFD in July 2018. Based on the TCFD recommendations, scenario analysis was begun the same year.

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Identifying and Evaluating Risks and Opportunities

In business operations in which we position wood as our principal material and product, a major transitional business risk that we face is the increase in timber procurement costs associated with measures against illegal logging such as reinforced regulations. Examples of physical risks include the increased costs associated with increasingly intense natural disasters, which cause delayed construction processes and require checking on safety at homes already delivered. At the same time, the advance of regulations against fossil fuels provide a boost (opportunities) for our biomass energy generation operations business and demand for fuels made from wood chips.

Our corporate headquarters has worked with each business department to identify the risks and opportunities and to evaluate the financial and other impacts. We discuss measures to take with respect to the items identified as critical risks and opportunities, and report them to the Sustainability Committee, chaired by the president and executive officer. Moving forward, we will increase the accuracy of our scenario analyses and discuss how to reflect them in our business planning, while moving forward with the creation of business strategies for the resilience that will see us through into the future.

Climate Change and Biodiversity-related Opportunities and Strategies

Expanding Housing Sales in Concert with Government ZEH Promotion

Japan has launched policy targets that aim for more than half of all custom-built detached houses constructed by housing manufacturers and other companies to be ZEH compliant by 2020 as a countermeasure global warming approved by Cabinet decision in May 2016.

Working in concert with this policy, Sumitomo Forestry is promoting ZEH housing sales while also leveraging the appeal of Double Power Generation that distinguishes our ZEH homes by using both solar panel cells and fuel cell batteries for residential use. This gives us a competitive edge that is boosting our ZEH market share.

Expanding Renewable Energy Demand

The need for renewable energy sources such as biomass power generation and solar power generation is increasing as a means of countering climate change. By moving forward with our renewable energy business, we are able to increase our revenue from energy sales.

These efforts include our wood biomass power generation business, which had expanded to four domestic locations by March 2019. Once the Kanda Biomass Power Generation Plant, slated for completion in 2021, begins operation, the Group will have a total power generation capacity of roughly 177MW, which will supply electricity to approximately 378,000 households.

Response to ESG Evaluation (Impact on Capital Procurement)

The final TCFD recommendations have resulted in financial markets seeking climate change countermeasures. While climate change can be addressed through business operations, appropriate information disclosure can increase trust from financial institutions through improved corporate ESG evaluations, making smooth capital procurement possible.

At Sumitomo Forestry, we engage in appropriate information disclosure and respond to inquiries and questionnaires, and have earned a place on the A List of the CDP Climate Change for three consecutive years. This gives us a high ESG evaluation. In 2018, we became the first Japanese company to receive a Green Bond Pioneer Award from Climate Bonds Initiative.

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Climate Change Countermeasure Indices and Targets

At Sumitomo Forestry, our climate change countermeasures are driven by quantitative targets that are set each fiscal year by each department within each group company based on the Mid-Term CSR Management Plan indexes by which climate-related risks and opportunities are evaluated and managed, as well as our Mid-Term Sustainability Targets.

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Sustainability Report