Climate-related Disclosure(Response to TCFD Recommendations, etc.)Sustainability

Fundamental Approach

As a global company committed to solving energy problems in Japan and around the world, we consider measures to combatclimate change to be a priority issue and have identified the relevant material issues.
In September 2021, we endorsed the TCFD*1 recommendations and joined the TCFD Consortium.*2 To properly evaluate climate change-related risks and opportunities and sustainably enhance our corporate value, we have identified four elements—governance, risk management, strategy, and metrics and targets—in line with the TCFD Recommendations that summarize our climate change-related systems, our business in general, and the initiatives typified by the Three Approaches of JERA Zero CO2 Emissions 2050.
We will continue to disclose information related to climate change in line with the TCFD recommendations and further enhance communication with investors and other stakeholders.

• The Task Force on Climate-related Financial Disclosures (TCFD) is the task force established by the Financial Stability Board (FSB) at the request of the finance ministers and central bank governors of G20 countries to avoid destabilization of the financial system in the face of factors attributable to climate change. The task force has published a framework and recommendations to guide companies’ disclosures pertaining to the risks and opportunities posed by climate change.

• The TCFD Consortium is a forum established for companies and financial institutions that endorse the TCFD Recommendations to hold discussions and work together to ensure effective disclosures by companies and facilitate sound investment decisions by the financial institutions to whom the disclosures are made. To further enhance disclosures in line with the TCFD Recommendations and promote constructive dialogue between investors and companies, the consortium actively publishes guidance on various matters and also hosts TCFD Summits to give companies and financial institutions from around the world opportunities to gather in one place.

Governance and Risk Management

Governance

Decisions about important policies, new and updated targets, and other matters pertaining to measures to combat climate change are made by the Board of Directors or the Leadership Panel based on our corporate governance system. We have also established a Sustainability Promotion Committee for the purpose of enhancing sustainability management, as well as environmental, social, and corporate governance (ESG) management. This cross-departmental committee is chaired by the President, Director, CEO and COO and reports directly to the Board of Directors. It will examine measures to combat climate change and other environment-related issues.
Directors hold active discussions with outside experts and specialist organizations to keep pace with the latest information and findings, which they share with the Leadership Panel and other internal groups. We also host seminars regarding ESG and sustainability for our employees in addition to providing opportunities for them to have discussions with the directors. We are proactively working to further improve our ESG and sustainability activities by continuing to expand our directors’ and employees’ understanding of information and trends in climate change and other aspects of ESG and sustainability management.

Risk Management

We have established a risk management system headed by the President, Director, CEO and COO to understand and mitigate risks associated with corporate activities. The system conducts integrated risk management, categorized into operational, market,and credit risks. We identify climate change-related risks in recognition of their potential to impact the different types of risk. Risks to be managed by directors are identified as significant risks to be managed by management. The Risk Management Committee (chaired by the President, Director, CEO and COO) monitors and reviews the management status and plans for responding to these risks and then reports them to the Board of Directors at scheduled intervals or as needed.

Strategies

Scenario Configuration

The following two scenarios have been established to analyze the risks and opportunities related to climate change across the entire value chain of our business.

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• Numerical values in the scenario descriptions and graphs represent the deviation from values expected prior to the Industrial Revolution. Extreme refers to weather events with a probability of occurring once in 10 years.

Assessment of Impact on Our Business

We listed climate change-related risks and opportunities for our business based on the scenarios on the previous page. We conducted a sensitivity analysis of the potential financial impact on JERA regarding the major risk and opportunity factors identified. The legend on the right side is classified into four colors that indicate the financial impact per unit of activity over the short-term (through 2025), medium-term (through 2030), and long-term (through 2050) periods for each risk and opportunity.
We will work to reduce the risks and seize the opportunities through JERA Zero CO2 Emissions 2050 as well as other efforts and measures.

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• Refers to any electricity source that does not emit CO₂ for 24 hours a day, 7 days a week—in other words, 365 days a year.

Assessment of Impact on Our Business: A Deep Dive into the 1.5°C Scenario

In light of the steady progress we have made in our business toward achieving JERA Zero CO2 Emissions 2050 since announcing it in October 2020, and due to changes in business circumstances, we formulated a new long-term vision for 2035, unveiling a set of new environmental targets for achieving the new vision: JERA Environmental Commitment 2035. We will update the JERA Zero CO2 Emissions 2050 Roadmap for JERA Business in Japan based on the new targets and present our updated plan for introducing hydrogen and ammonia conversion in Japan.
As with the previous deep dive into scenario analysis in line with the TCFD Recommendations, we analyzed the financial impact on JERA of [introducing ammonia to our power generation business ahead of technology development/using technology development to expedite our introduction of ammonia to our power generation business/introducing ammonia to our power generation business, which is driven by technological development], assuming the 1.5°C scenario and the aforementioned plan for introducing ammonia in Japan.
Our analysis revealed potential cost advantages on the order of 100 billion yen per year by 2040 and 400 billion yen per year by 2050 compared to the scenario in which we continue using coal.
We will continue to proactively develop large-scale fuel ammonia power generation technology and other decarbonization technologies in addition to devoting energy to ensuring the economic viability of the technologies so that they can help the world move away from carbon as a source of energy.

Cost Benefit Assessment of Introducing Ammonia^*

• All figures are calculated based on assumed parameters (e.g., reference scenarios). Actual cost-effectiveness may differ as business circumstances change.
  The sizes of the circles in the graph illustrate ammonia amounts. Hydrogen is not included in the scope of this impact assessment. The plan for introducing hydrogen is provided here for reference.

Metrics and Targets

We regard JERA Zero CO₂ Emissions 2050 as a long-term objective, developing a comprehensive roadmap and establishing interim targets for CO2 emissions in 2030 and 2035 to attain these goals. We continue to calculate and reevaluate actual results annually to manage our progress.

Domestic Business CO₂ Emissions