Addressing Climate Change

In recent years, natural disasters caused by climate change are on the rise around the world, and the impact of extreme weather and changes in the natural environment on social life and corporate activities is becoming increasingly significant.
Amidst growing social demands to reduce environmental burden, the Amano Group recognizes that addressing environmental issues, including climate change, is one of the most important management issues for solving social issues and improving corporate value, and we have defined the contribution to addressing climate change and realizing a decarbonized society as one of our materiality. We will continue to work toward climate change mitigation and adaptation in all of our business activities, and we will strive to proactively disclose information in accordance with the TCFD information disclosure framework.

Endorsement of the TCFD (Task Force on Climate-related Financial Disclosures)

Amano discloses its evaluation of the impact of climate change on our business in four areas: Governance, Strategy, Risk Management, and Metrics and Objectives, compliant with the TCFD Recommended Framework. Considerling the response to climate change to be an important issue, we expressed our endorsement of the TCFD recommendations in October 2022. We will continue our efforts to address climate change and disclose information based on the TCFD recommendations.

Corporate Governance

In order to respond to environmental issues such as climate change, the Amano Group has created an Environmental Management Committee and implemented initiatives such as reducing CO₂ emissions, etc. In addition, in April 2022, we created the Sustainability Committee, which encompasses the Environmental Management Committee, to promote efforts to both achieve a sustainable society and improve corporate value.
In cooperation with relevant departments and the Risk Management Committee, the Committee has formulated a basic policy for responding to climate change, activity goals, and practical issues, and has also expanded them to our Group companies. In addition, the Board of Directors receives a report at least once a year on the basic policies and activity goals examined by the Committee regarding how our business contributes to the realization of a sustainable society and environmental issues such as reductions of CO₂ emissions to respond to climate change, evaluates their progress, approves the effectiveness of the activity policies, and provides monitoring and supervision.

Strategy

At the Amano Group, the Sustainability Committee works to identify and evaluate climate change scenario analysis and the financial impact of risks and opportunities for each business. Currently, in the Group, which develops, manufactures, and sells products in Time Information System business and Environment System business, the risks and opportunities common to all businesses are identified as follows. In addition, we are preparing to identify risks and opportunities in our domestic group companies. We will disclose the information as soon as it is ready for disclosure.

Transition scenario (temperatue rise of 2℃ )

Evaluation items		Assumptions	Risks and Opportunities (R & O)			Impact High, Medium, Low	Measures & Actions
Main Classification	Sub Classification	Assumptions	Specific Examples	R	O	Impact High, Medium, Low	Measures & Actions
Policies, Laws & Regulations	CO₂ Emission Restrictions	Strengthening energy-saving standards for buildings (i.e.mandatory compliance with ZEB(∗))	Increase in capital investment costs for energy-saving measures in self-owned factories and offices	○		M	Expand adoption of renewable energy such as solar power generation, invest more to energy-saving facilities Relocate branches and offices to buildings with high energy-saving performance
	Implementation of Carbon Tax	Implementation of carbon tax and adoption of emissions trading (carbon pricing)	Increase in raw material procurement costs due to carbon taxes imposed on emission at suppliers and passed on to purchase prices	○		H	Negotiate to pass on the increase in material costs to sales prices Find new procurement sources / investigate alternatives Modify design to reduce materials with high CO₂ emissions Shift to materials and parts with low carbon emissions
	Implementation of Carbon Tax		Increased tax costs due to the burden of carbon tax imposed on own CO₂ emissions Increased costs of own emissions trading and purchase of certificates (credits)	○		H	Promote energy-saving measures and expand adoption of renewable energy for self-consumption
Market	Changes in the Energy Mix	Promoting the adoption of expensive clean energy (renewable energy and hydrogen)	Increased production costs due to rising energy bills	○		L- M	Reduce energy costs by promoting energy-saving activities Renew or modify the facilities that use energy sources with high CO₂ emissions Negotiate to pass on cost increases to selling prices
Technology	Changes in Demand and Consumer Intentions	Research and development associated with transition to low-carbon technology	Increased introduction and development costs for CO₂ capture, utilization, and storage technology (CCUS)	○		M	Technical cooperation with advanced low-carbon technology companies
Technology	Changes in Demand and Consumer Intentions		Increase in R&D expenses and capital investment costs to expand the development of environmentally friendly products (other than CCUS)	○		M	Develop energy and resource saving products that meet customer needs
Reputation	Changes in Consumer Behavior	In order to utilize resources more efficiently, recycling and circular economy are making progress	Reduced product manufacturing costs and waste disposal costs associated with progress in recycling-oriented (manufacture ⇒ use ⇒ retrieve ⇒ manufacture) economy and processes		○	―	Initiatives to retrieve usable materials from discarded products
Reputation	Changes in Consumer Behavior	Due to the growing demand for low-carbon products and services, environmentally friendly products and services are expanding to meet that demand	Increase in sales by selling products that contribute to a low-carbon society as well as environmentally friendly products and services		○	M-H	Develop energy efficient products which reduce environmental burden to meet customer needs Expand the use of recycled materials

(∗) ZEB：Net "Zero Energy Building" (A building that aims to achieve a comfortable indoor environment while achieving zero annual primary energy balance.)

Physical scenario (temperature rise over 4℃)

Evaluation items		Assumptions	Risks and Opportunities (R & O)			Impact High, Medium, Low	Measures & Actions
Main Classification	Sub Classification	Assumptions	Specific Examples	R	O	Impact High, Medium, Low	Measures & Actions
Acute	Intensification of Extreme Weather Conditions	Severity and frequency of natural disasters/extreme weather due to extreme temperature changes (heavy rain, floods, typhoons, etc.)	Loss of sales opportunities and increased recovery costs due to damage to self-owned factories, etc.	○		H	Continuous review of BCP Strengthen the capability of mutual alternative production between the factories
Acute	Intensification of Extreme Weather Conditions		Loss of sales opportunities and decreased sales due to damage to the suppliers' production equipment	○		H	Thoroughly practice multi-company purchasing
Chronic	Rise in Average Temperatures and Extreme Weather	Improving the working environment and considerations given for health risks	Increase in employee health maintenance and air conditioning costs due to rising average temperatures Reduced work efficiency due to restrictions on outdoor work hours and time zones due to extreme weather conditions (heatwave, heavy rain, etc.)	○		M	Improve the work environment and upkeep the infrastructure Promote work efficiency to shorten the work time
Chronic	Rise in Average Temperatures and Extreme Weather	Spread of infectious diseases such as viruses and outbreaks of pandemics	Loss of sales opportunities and decreased sales due to factory shutdowns caused by the spread of infectious diseases Loss of sales opportunities and decreased sales due to stagnated operations arising from shortages of parts and supplies caused by the spread of infectious diseases	○		M-H	Constrain losses through damage prevention measures in line with the guidelines and policies of each country

Flood Risk Assessment

In recent years, damage caused by flooding in Japan has been increasing. In particular, typhoons and torrential rains have caused physical damage to factories and other facilities, forcing them to suspend operations. We strive to understand the status of risks that may affect our business, especially flood risk. In the current fiscal year, we have expanded the scope of our assessment to include not only our major factories but also our headquarters and important sales offices.

Referring to the Ministry of Land, Infrastructure, Transport and Tourism's "Guidelines for Physical Risk Assessment in TCFD Recommendations," we calculate the financial impact as an incremental future risk by taking into account changes in future flood frequency multipliers based on the current 100-year and 1,000-year probability of inundation.
Regarding a storm surge risk, we conducted a risk analysis of it, but we disclose only the flood risk as the calculated damage came to zero.

Forecast of Damages caused by Physical Risks at Domestic Key Sites (period: until 2100)

Name of Sites	Flood Depth once in 1,000years	4℃ Scenario Incremental Risk (hundred million yen)	2℃ Scenario Incremental Risk (hundred million yen)	Risk Reduction Measures
Headquarters	0.5m～3.0 m	Single year：0.0 Cumulative total：5.1	Single year：0.0 Cumulative total：1.1	Currently under consideration
Factory Sagamihara factory Hosoe factory	0.0m～0.5m	Single year：0.0 Cumulative total：6.2	Single year：0.0 Cumulative total：1.1
Sales Offices Tokyo branch Kanagawa branch Nagoya branch Osaka branch	3.0 m～5.0m	Single year：0.2 Cumulative total：17.0	Single year：0.0 Cumulative total：3.7
"0.0 hundred million yen" in the table indicates that the incremental risk is less than 10 million yen. The incremental risk includes decreases in assets and sales.

Calculation Steps for Damage Forecast

STEP 1	Checking the current flood depth at each assessment site
STEP 2	Calculating the current damage and loss amounts
STEP 3	Confirming the future flood frequency multiplier and calculating future damage and loss amounts at the targeted flood scale
STEP 4	Evaluating the future incremental risk at the targeted flood scale (∗)
See below and other Ministry of Land, Infrastructure, Transport and Tourism publication: Future forecasts of flood frequency, Geographical Survey Institute: Overlapping Hazard Maps, Flood Inundation Navigation System, Flood Control Economy Manual.

(∗) Future incremental risk: Expected impact amount in the future

Risk Management

In consultation with the relevant departments, the Sustainability Committee annually identifies sustainability risks, including climate-related risks, and conducts scenario analyses and financial impact assessments as appropriate. The Sustainability Committee and the Risk Management Committee that manages risks discuss and review the strategy for responding to the significant risks identified.
The identified key risks and response policies are to be reported to the executives in charge of risk management via the Risk Management Committee and approval is obtained.

Metrics and Targets

Amano set a target to reduce CO₂ emissions in December 2021, aiming to reduce greenhouse gas emissions. We will continue our efforts to reduce CO₂ emissions in order to prevent global warming.

CO₂ emissions reduction target: Reduce CO₂ emissions by 46% by the fiscal year 2030, compared to the 2013 baseline.

∗ Scope 1+2 emissions are included in the target.

Results and Targets for CO₂ Emissions Reduction

Initiatives for CO₂ Emissions Reduction

Completed switching solar power generation to private consumption (Hosoe factory)
Implemented an electric power visualization system (Hosoe factory)
Planning to switch solar power generation to private consumption (Sagamihara factory)

Items to be disclosed in the future

We are preparing to calculate Scope 3 of our CO₂ emissions.

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