Mebuki Financial Group shows its stance on initiatives to address environmental issues in its Corporate Ethics, the basic policy in conducting its business activities, and engages proactively in environmental conservation activities through its group companies.

Group Environmental Policy

Mebuki Financial Group has a Group Environmental Policy based on the belief that enhancing the sustainability of society requires revitalizing economies through coexistence with nature while preserving the global environment such as efforts to address climate change and conserve and restore natural capital and biodiversity. Recognizing that addressing climate change is a key issue for the global environment, we have worked to reduce environmental burden in our corporate activities and supported local communities in making efforts toward decarbonization.

Establishment of Procurement and Purchasing Guidelines

Mebuki Financial Group established the Group-wide Procurement and Purchasing Guidelines in January 2023 to engage in responsible purchasing activities in consideration of the environment and society when procuring and purchasing goods and services necessary for its business activities.
The Group also works together with suppliers to realize a sustainable society.

Initiatives for TCFD Recommendations

Mebuki Financial Group considers responding to global warming and climate change a key priority issue and declared support for the TCFD Recommendations in March 2021. The objective of the Paris Agreement is to realize a decarbonized society—to hold the increase in the global average temperature to well below 2℃ above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5℃. To this end, we will put more effort into responding to climate change, for example, reaching out to our supply chain, which includes the entities that we make investments in and provide loans to, and implementing initiatives to achieve net-zero CO2 emissions at the Group, thereby accelerating our contribution to realizing a decarbonized society and the sustainable growth of local communities.
We will also enhance our disclosures based on the Task Force’s recommended disclosures, namely Governance, Strategy, Risk Management, and Metrics and Targets, and proactively disclose these thematic areas, thereby increasing stakeholder engagement.

Governance

Formulation of policies

To further reinforce its initiatives for sustainability issues※ including climate change, Mebuki Financial Group has formulated Group Sustainability Policy, Group Environmental Policy, Environmentally and Socially Friendly Investments and Loans Policy, and Procurement and Purchasing Guidelines. Positioning the sustainability issues as important management agendas, the Group has operated its business based on these policies.

※Initiatives for achieving both the sustainable growth of the Group and the resolution of environmental/social issues in local regions

Supervision by the Board of Directors

To establish a structure that uniformly manages the development and progress of initiatives related to sustainability issues, including climate change, we have set up the Sustainability Committee chaired by the President and Director and have held committee meetings as frequently as once in six months or more.
We have also built a structure in which the Board of Directors can supervise the Group’s sustainability initiatives by having the Sustainability Committee report the details of deliberations at each committee meeting to the Board of Directors and giving instructions to the committee as necessary. Key sustainability issues are proposed to discuss at meetings of the Board of Directors, and it makes decisions on them.

Establishment of dedicated organizations

In April 2022, the Group newly established organizations dedicated to sustainability (Sustainability Management Group within Mebuki Financial Group, Inc.; and Sustainability Promotion Office within subsidiary banks, Joyo Bank and Ashikaga Bank). The Group will bring together its functions and knowledge to accelerate group-wide initiatives toward realizing sustainable local communities.

Strategy

Economic development is dependent on social conditions such as livelihood and education, and society is supported by the natural environment. The maintenance and conservation of the environment is a prerequisite for realizing sustainable local communities and achieving the sustainable growth of both local communities and Mebuki Financial Group. For this reason, we recognize that addressing the issue of climate change is a significant challenge for the global environment and also an important issue for our business strategies. We have therefore stipulated in the Group Environmental Policy that the Group is committed to realizing a decarbonized society.
Mebuki Financial Group has identified climate changerelated opportunities and risks that are expected to impact its business activities as shown below, and assessed the financial impacts of the identified opportunities and risks. Based on the results of the assessment, the Group has been working to mitigate the risks and seize the opportunities.

1．Opportunities

（1）Awareness of opportunities

※Short-term: approx. 5 years; Medium-term: approx. 10 years; Long-term: approx. 30 years

（2）Efforts to seize the opportunities we are aware of

2．Risks

Using the scenario analysis approach, the Group has worked to better understand climate change-related risks through its loans portfolio. In the ongoing scenario analysis, the Group has pursued the sophistication of analytical methods and expanded the scope of analysis.
We expanded the scope of analysis to assess physical risks from Ibaraki Prefecture and Tochigi Prefecture in the previous fiscal year to nationwide. We added the Metals and Mining sector to the sectors subject to the analysis of transition risks. We also increased the sectors subject to the analysis of carbon-related assets from only the energy sector to four sectors.

（1）Awareness of risks

※Short-term: approx. 5 years; Medium-term: approx. 10 years; Long-term: approx. 30 years

（2）Scenario analysis

※A scenario developed by Intergovernmental Panel on Climate Change (the “IPCC”)

• ※1
   A scenario developed by International Energy Agency (the “IEA”)
• ※2
   A scenario developed by Intergovernmental Panel on Climate Change (the “IPCC”)

• ※1
   The sum of loans, acceptances and guarantees, foreign exchanges, private placement bonds, unused portions of commitment lines, etc., excluding the water supply and renewable energy power generation businesses
• ※2
   The sectors suggested in the TCFD recommendations are the Global Industry Classification Standard (GICS) sectors; however, the Company used the Bank of Japan’s sector classification to calculate the amounts and percentages. Therefore, there may be some differences between those calculated based on the GICS sectors and those calculated based on the BoJ’s sector classification.

（3）Results of the scenario analysis

Risk Management

The Group has worked to have a more sophisticated risk management system based on the recognition that one of its most important management issues is to appropriately control risks according to the characteristics of business operations and risks in order to enhance its corporate value while ensuring its sound and safe corporate management. The Group considers climate change risks to be one type of the material risks that could have a significant impact on not only the environment but also the economy and society and to be an important issue for its business strategies. The Group has therefore stipulated in the Group Environmental Policy that the Group is committed to realizing a decarbonized society. To this end, the Group aims to have and develop proper climate change risk management.
The Group undertakes integrated risk management which quantitatively measures various types of risk including credit risk and market risk, using statistical methods, such as VaR, in order to individually manage increasingly diversified and complicated types of risk relevant to financial services, and at the same time, to comprehensively capture said risks.
Climate change risks could permeate and materially affect the Group’s business operations, strategies, and financial planning by way of credit risks, operational risks, and a broad range of complex pathways over a variety of time frames. Therefore, based on the results of the scenario analysis and qualitative analyses, we will deep-dive into how risks permeate in what time frame for each risk category, increase the sophistication of the scenario analysis, and manage risks in a comprehensive framework. We will also develop and offer optimal solutions, such as support for responses to climate change and the transition to decarbonization and support for business continuity measures, to solve the issues and needs identified through customer engagement, aiming to create business opportunities and reduce and avoid climate change risks.
Concerning investments and loans to sectors that could have a negative impact on the environment and society, we have established the Environmentally and Socially Friendly Investments and Loans Policy and sought to reduce and prevent their impact on the environment and society. Based on the policy, we have also monitored regularly if proper management is in place.
We will continue to deep-dive into how risks permeate in what time frame for each risk category and manage risks in a comprehensive framework.

1．Example of spreads of climate change risks

2．Establishment and announcement of loans policy to particular sectors

Concerning investments and loans to particular sectors that could cause a negative impact on the environment and society, we have established the Environmentally and Socially Friendly Investments and Loans Policy and sought to reduce and prevent their impact on the environment and society. Since March 2021 when we established the investments and loans policy, we have not engaged in investments and loans in conflict with the policy.

• ※1
   Including the Arrangement on Officially Supported Export Credits set forth by the Organisation for Economic Co-operation and Development (the “OECD”)
• ※2
   The balance of existing investments and loans include only the projects in which the business operators had adopted the best technology available for the scale of power generation of each project (BAT: Best Available Technology) when the investments were made.
• ※3
   Forest Stewardship Council. A non-profit organization that operates an international forest certification system based on the principle of appropriate, socially beneficial, and economically sustainable forest management from the perspective of environmental protection
• ※4
   Forest certification program. An international umbrella organization that promotes examination of forest certification systems that have been individually developed in each country based on the Intergovernmental Process for Sustainable Forest Management, which covers 85% of the world’s forests, and that promotes mutual recognition of these systems
• ※5
   Roundtable on Sustainable Palm Oil. An organization that develops globally trusted certification standards to promote sustainable palm oil production and use
• ※6
   Including Universal Declaration of Human Rights, and UN Guiding Principles on Business and Human Rights

Metrics and Targets

The Group has set the targets below and created a roadmap for aligning with the Paris Agreement, realizing a decarbonized society, and achieving net-zero CO2 emissions, and monitored them with various metrics.We regularly report the progress made toward the targets and the use of metrics to the Sustainability Committee and the Board of Directors, reflect them in the strategy, and receive supervision.

1．Sustainable finance

We have set targets to execute sustainable finance for a cumulative total of ¥3 trillion, of which the environment fields represent ¥2 trillion, over the period from FY2021 to FY2030.
During the period from FY2021 to FY2022, we executed ¥615.4 billion of sustainable finance, including ¥347.9 billion in environmental fields.

2．CO2 emissions

（1）CO2 emissions reduction target (Scope 1 and Scope 2)

• ※1
   Calculated based on the adjusted emission factors for FY2020 by TEPCO Energy Partner, Incorporated
• ※2
   Calculated based on the adjusted emission factors for FY2021 by TEPCO Energy Partner, Incorporated
• ※3
   Equivalent to approx. 32% of CO2 emissions (adjusted emissions) at the Group in FY2021

（2）CO2 emissions (Scope 3)

※No emissions were measured for categories 8 through 14.

• ※1
   Partnership for Carbon Accounting Financials, an international initiative to develop methods for measuring and disclosing GHG emissions through financial institutions’ investment and loan portfolios
• ※2
   Formula for calculating sector-specific carbon intensity:
  Carbon intensity = ∑ (CO2 emissions from businesses to which the banks provided loans / Sales of the businesses) / Number of the businesses
• ※3
   Formula for calculating emissions (top-down approach):
  Emissions = ∑ (Carbon intensity of each of the businesses to which the banks provided loans x Sales of the business) / Degree of contribution of loans provided by Joyo Bank and Ashikaga Bank

Note: The above calculations used the outstanding balance of loans provided to customers as of March 31, 2023 and their latest financial results that Joyo Bank and Ashikaga Bank had as of March 31, 2022.

（3）Roadmap to Net zero CO2 emissions

Environment Data on Energy Consumption (Joyo Bank + Ashikaga Bank)

Greenhouse Gas (GHG) Emission (from the entire Group, but for Scope 3, total of two banking subsidiaries)

Participation in the Taskforce on Nature-related Financial Disclosures (TNFD) Forum

In addition to responses to climate change, the conservation of natural capital, including biodiversity, is growing in importance for the realization of a sustainable society.

In January 2024, Mebuki Financial Group declared its support for the initiatives of the Taskforce on Nature-related Financial Disclosures (TNFD) and participated in the TNFD Forum. Through our participation in the Forum, in addition to analysis and deliberations in line with the TNFD’s disclosure framework, we will contribute to building a framework for the disclosure of nature-related financial information.

Forest Development Activities

Other activities