Scenario Selection

We consider which businesses to include in our scenario analysis by evaluating the business sectors that are highly susceptible to the impact of operating environment changes caused by climate change mitigation. From this evaluation, we identified the power generation business, energy business, iron ore, automobile, and chemicals businesses and coal business as businesses that would be significantly impacted by political, regulatory, and other transition risks. We then selected the Dole business feed and grain trade and the pulp businesses for inclusion in our scenario analysis as business highly susceptible to physical risks related to climate change.
When identifying business sectors that are highly susceptible to the impact of operating environment changes caused by climate change mitigation, we referenced the four non-financial sectors (energy, transportation, materials & buildings, and agriculture, food, & wood products) specified by the TCFD as being highly susceptible to the latent impact of climate change. The abovementioned five businesses are included in these sectors.

Business for Scenario Analyses

• Coal-related Business
• Power Generation Business
• Energy Business
• Dole Business
• Pulp Business

• Feed and Grain Trade Business
• Iron Ore Business
• Chemicals Business
• Automobile Business

• Coal-related Business
• Power Generation Business
• Energy Business
• Dole Business
• Pulp Business

• Feed and Grain Trade Business
• Iron Ore Business
• Chemicals Business
• Automobile Business

Definition of Scenario Groups

When considering our scenario analysis, we referenced materials published by the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC). These materials are highly recognized internationally for the credibility, are referenced in TCFD recommendations, and cover a broad range of business domains. As a result, we set the following three scenarios.

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• The IEA WEO 2019 Sustainable Development Scenario is the following scenario: The world works to keep the rise in temperature to less than 2℃ – if possible, 1.5℃. At the same time, this is a scenario in which the targets of everyone being able to use energy and improving air pollution are achieved.
• IEA WEO 2021 "Net Zero Emissions by 2050 Scenario" is a scenario that shows a possible path for the global energy sector to achieve net zero GHG emissions by 2050 and limit temperature rise to 1.5℃ above pre-industrial levels.
• Important input parameters and prerequisites for the climate-related scenarios we used include the following types of parameters.

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  Parameters Related to the Power Generation Business in the US	2040
  	4℃ Scenario	＜2℃ Scenario
  Carbon price/emissions trading	N/A	$140/ton
  Fossil fuel price	Coal: $108/ton Gas: $7.5/MMBTU	Coal: $77/ton Gas: $5.9/MMBTU
  Renewable energy prices	Solar utility scale: 7.2 to 8.8 yen/kWh Land-based wind power: 6.2 to 7.7 yen/kWh	Solar utility scale: 6.6 to 7.1 yen/kWh Land-based wind power: 6.2 to 7.7 yen/kWh
  Energy production volume by source	Coal thermal: 1,016 TWh Gas thermal: 1,480 TWh Renewable energy: 1,488 TWh	Coal thermal: 153 TWh Gas thermal: 959 TWh Renewable energy: 2,560 TWh
  CCS dissemination rate	N/A	Coal thermal w/CCS: 64% Gas thermal w/CCS: 18%

Scenario Analysis and Results

For the scenario analysis, we did not limit the timeline range to the short-term. We also added medium- and long-term axes for 2030 and beyond when organizing and evaluating the factors of latent risks and opportunities that could have a significant qualitative or quantitative financial impact for each business. We extracted risk and opportunity factors from the perspective of procurement, business management, and demand, and then organized and evaluated factors of high importance. For particularly important factors, our scenario analysis was based on finance models that reflect defined parameters. We defined these parameters by identifying variables that significantly impact transition and physical risks and opportunities. For the analysis of financial impact level, we measured the latent impact level of climate change and analyzed the financial impact level, including the effect of risk and opportunity measures.

The quantitative information used in our scenario analysis reflects judgments made by ITOCHU based on scenarios prepared by sources such as the IEA. While we worked to increase analysis precision, the analysis does include numerous uncertainties.

1. Businesses for Which Transition Risks Are the Main Issues

The main issues for fossil fuel-related businesses are transition risks in the <2℃ scenario. The main issues for Chemicals Business, Iron Ore Business and Automobile Business the 1.5℃ scenario.

• Power Generation Business
• Energy Business
• Chemicals Business
• Iron Ore Business
• Automobile Business

Timeframe		By 2040
Temperature Band Scenario		<2℃ Scenario
Main risks and opportunities	Transition	Risk: Thermal power generation costs may increase due to the impact of carbon taxes and mandatory capture and storage of carbon dioxide (CCUS). Opportunity: The competitive advantage of renewable energy may increase. This also includes technological progress and cost reduction. Opportunity: It may be necessary to increase investment in storage batteries and grids for a significant shift to renewable energy.
	Physical	Risk: Power generation facilities may be damaged by natural disasters (abnormal weather).
Business environment under the scenario Business impact assessment		Transition risks will greatly squeeze income with carbon taxes and carbon capture, usage and storage (CCUS) costs. Therefore, the income of thermal power generation may decrease. However, cumulative income is expected to improve due to an increase in renewable energy sales and a decrease in carbon taxes and CCS costs by switching to measures emphasizing renewable energy. Analysis according to the EBITDA indicator (%)*
Adaption/mitigation measures & policies Business opportunities		We will aim to achieve a renewable energy ratio of more than 20% (equity interest basis) by FYE 2031. We will reflect this in future efforts. We will not develop any new coal-fired power generation business. Part of the reason we will do this is to contribute to the development of a sustainable society.
Financial information		Profit in segment of applicable business (gross profit): 54.7 bn yen (the Plant Project, Marine & Aerospace Division / FYE 2023 results) Total assets in segment of applicable business: 690.6 bn yen (the Plant Project, Marine & Aerospace Division / March 2023 results)

Timeframe		By 2040
Temperature Band Scenario		<2℃ Scenario
Main risks and opportunities	Transition	Risk: Countries may introduce regulations (e.g., carbon taxes) toward the realization of a decarbonized society. This may lead global demand for fossil fuels to shrink. Opportunity: Demand for LNG may increase especially in Asia as a transition fuel to realize a decarbonized society and as a fuel to support industrial development. Opportunity: Demand for new energies (e.g., hydrogen, ammonia and renewable fuel) may increase as alternatives to fossil fuels. Opportunity: Business opportunities may increase for carbon dioxide capture, utilization and storage (CCUS) that contributes to a reduction in greenhouse gases.
	Physical	Risk: Possibility production facilities could be damaged in a natural disaster (abnormal weather).
Business environment under the scenario Business impact assessment		In the 2℃ scenario, a global decrease in demand for fossil fuels is projected but it is possible to maintain earnings by capturing new energy demand for fossil fuel alternatives and environmental business opportunities such as CCUS. Assumes a low possibility that natural disasters (abnormal weather) in relevant regions would further increase in scale. (Evaluated multiple scenarios for energy price fluctuations through 2040) Analysis according to the profit after tax (%)
Adaption/mitigation measures & policies Business opportunities		We will restructure our energy business portfolio by seizing business opportunities through adding synergies with group companies and participating in initiatives in the new energies field. We will strengthen efforts on CCUS and other environmental businesses toward the realization of a decarbonized society. In relation to upstream oil and gas development, we will carefully examine the impact on the environment whenever we switch our assets. We intend to improve the efficiency in our business model and this will align well with the stakeholders’ needs.
Financial information		Profit in segment of applicable business (gross profit): 170.2 bn yen (Energy Division / FYE 2023 results) Total assets in segment of applicable business: 816.7 bn yen (Energy Division / March 2023 results)

Timeframe		By 2030
Temperature Band Scenario		1.5℃ Scenario
Main risks and opportunities	Transition	Risk: Introduction and increase of carbon tax Risk: Decrease in demand for virgin plastic due to widespread adoption of recycling Opportunity: Increase in demand for low-carbon / decarbonization-related materials and products Opportunity: Increase in demand for clean fuels and chemical raw materials
	Physical	Risk: Damage to facilities / inventories and shutdown of operations caused by typhoons, floods, etc. Opportunity: Increase in demand for chemical materials and products related to production increase, preservation and stockpile of food.
Business environment under the scenario Business impact assessment		Under the transition scenario, while the introduction and increase in carbon tax will increase costs and lower demand for virgin plastics will result in lower sales and profits, our chemical business will be able to increase earnings by capturing opportunities in environmental businesses such as recycled plastics, bioplastics, clean ammonia and methanol, where demand is expected to increase. Analysis according to the profit after tax (%)
Adaption/mitigation measures & policies Business opportunities		Accelerate progress toward a decarbonized society through energy saving measures, procurement of renewable energy, etc. Taking the initiative in realizing resource circulation by providing a 3R platform and sustainable cycle. Restructuring our chemical business portfolio by accelerating our efforts in environment-related businesses, such as sourcing of environmentally friendly raw materials.
Financial information		Profit in segment of applicable business (Profit After Tax): 129.2 bn yen (Chemical Division/FYE 2023 results) Asset in segment of applicable business: 628.7 bn yen (Chemical Division / March 2023)

Timeframe		By 2050
Temperature Band Scenario		1.5℃ Scenario
Main risks and opportunities	Transition	Opportunity: The stable supply of low-carbon emission steelmaking raw materials Risk: Increase in cost of fuels and materials due to the introduction of a carbon tax Opportunity: Creation of a new low-carbon emission steelmaking raw materials business
	Physical	Risk: Increase in procurement costs due to the increased frequency of severe weather events and worsening water scarcity Risk: Disruption of iron ore supply chain due to frequent weather disasters
Business environment under the scenario Business impact assessment		The introduction of a carbon tax is expected to increase the cost of fuel, materials, and other items. Nevertheless, the impact on earnings will be limited due to strengthened relationships with blue-chip business partners and improvement of operational efficiencies. Further growth is expected by focusing on the production of high-grade ore, for which demand is expected to increase due to the acceleration of the shift to decarbonization, and steadily seizing business opportunities in iron ore and related fields, such as creation of businesses related to low-carbon emission steelmaking raw materials. Analysis according to the profit after tax (%)
Adaption/mitigation measures & policies Business opportunities		We will closely monitor trends in low-carbon emission steelmaking technologies and promote initiatives to ensure a stable supply of low-carbon emission steelmaking raw materials. Promote initiatives to reduce GHG emissions by strengthening relationships with business partners.
Financial information		Profit in segment of applicable business (gross profit): 222.0 bn yen (Metals & Minerals Company / FYE 2023 results) Asset in segment of applicable business: 1,274.8 bn yen (Metals & Minerals Company / March 2023)

Timeframe		By 2030
Temperature Band Scenario		1.5℃ Scenario
Main risks and opportunities	Transition	Risk: The number of internal combustion engine vehicles we handle may decrease. Opportunity: The number of electric vehicles we handle may increase. Opportunity: New business may expand with the spread of electric vehicles. Risk: Transportation costs may rise due to the introduction of carbon taxes.
	Physical	Risk: There is a risk the factories of our business partners may suffer damage and suspend operations.
Business environment under the scenario Business impact assessment		The automobile industry is expected to shift from internal combustion engine vehicles to electric vehicles. Our customers are found all over the world. That means we can expect automobile demand to remain firm despite the expectation there will be a gradual shift in the vehicles we handle from internal combustion engine vehicles to electric vehicles in line with the regulations of each country. It is also expected that the introduction of carbon taxes may lead to an increase in transportation costs in some regions. We will continue to maintain competitiveness by working with our partners to reduce costs. We will aim to obtain further earnings by strengthening our storage battery and other related businesses with the spread of electric vehicles. Analysis according to the Gross trading profit indicator (%)
Adaption/mitigation measures & policies Business opportunities		We will continue to expand business by ascertaining demand trends by region based on the electric vehicle development and production situation of automobile manufacturers and trends in electric vehicle-related regulations in the countries where we sell our products. We will strengthen relationships with business partners who are reducing greenhouse gases in regards to freight forwarders and marine transportation companies. We will develop and expand business by linking up with partners who are mainly automobile manufacturers to expand our electric vehicle-related business.
Financial information		Profit in segment of applicable business (gross profit): 180.1 bn yen (the Automobile, Construction Machinery & Industrial Machinery Division. / FYE 2023 results) Asset in segment of applicable business: 974.1 bn yen (the Automobile, Construction Machinery & Industrial Machinery Division. / March 2023）

• Earnings before interest, taxes, depreciation and amortization (This refers to earnings calculated by adding interest expenses and depreciation expenses to earnings before tax.)

Initiatives in Coal-related Business

The business environment and response measures under the 2℃ scenario for the coal-related business is as follows.

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Business environment under the scenario	Under the 2℃ scenario, business could be impacted by technological innovation, regulatory trends, and global energy demand but, overall, thermal coal usage volume will decrease over the medium- and long-term.
Measures and policies	In February 2019, we adopted a policy outlining not developing new coal thermal power plants or acquiring thermal coal mine businesses. Decided on the withdrawal from thermal coal mine interests to reflect commitment to leading the industry in realizing a decarbonized society. This is in line with the basic policies in the Medium-term Management Plan from FYE 2022: enhancing our contribution to and engagement with the SDGs through business activities. In April 2021, we sold our Drummond interests in Colombia, completing our withdrawal from interests in coal mines that only produce thermal coal. In March 2022, we also sold our interests in Ravensworth North in Australia, which produced both coking coal and thermal coal. We will strongly promote efforts toward technological development and social implementation to contribute to a reduction in greenhouse gas emissions. This includes carbon capture and storage (CCS) and carbon capture and utilization (CCU). On the other hand, there will continue to be a need for thermal power generation as regulated power supplies and backup power supplies for the time being for the large-scale spread of renewable energy. Therefore, we will continue to fulfill our duty to stably supply resources through thermal coal trading.
Financial information	Profit in segment of applicable business (gross profit): 222.0 bn yen (Metals Company / FYE 2023 results) Total assets in segment of applicable business: 1,274.8 bn yen (Metals Company / March 2023 results)

2. Businesses for Which Physical Risks Are the Main Issues

The main issues for agriculture- and forestry-related businesses are physical risks in the 4℃ scenario.

• Dole Business
• Pulp Business
• Feed and Grain Trade Business

Timeframe		By 2030
Temperature Band Scenario		4℃ Scenario
Main risks and opportunities	Transition	Opportunity: An expansion in the introduction of recycled clean energies (biogas power generation and biomass boilers) utilizing our own organic resources (including pineapple, banana and other food residues, and waste factory liquids) and renewable energies (e.g., solar power generation) may help to lower carbon levels and protect water resources.
	Physical	Risk: There may be a reduction in yields due to abnormal weather (e.g., typhoons and droughts) in banana and pineapple plantations in the Philippines.
Business environment under the scenario Business impact assessment		The decrease in crop harvests attributable to climate change can be supplemented by increasing per-unit crop harvest volume. This can be accomplished by selecting breeds that are viable in high-temperature climates and through improvements to production methods, including cultivation and irrigation methods. We also started pineapple production in West Africa (Sierra Leone, etc.) as part of production site diversification to prepare for weather risks. The above initiatives will make it possible to increase earnings. Analysis according to the EBITDA indicator (%)*
Adaption/mitigation measures & policies Business opportunities		We will diversify producing areas in preparation for weather risks (e.g., Sierra Leone in West Africa). We will increase per-unit harvest by improving production methods, including selecting breeds that are viable in high-temperature climates, improving seedling cultivation, and installing irrigation equipment. We will use drones and ICT (agricultural chemical spraying location identification, yield prediction and timely and accurate fertilization) to increase the efficiency of production. We will capture the support of environmentally-conscious consumers and increase our brand value by expanding our adoption of recycling-based clean energy and renewable energy such as solar power to contribute to low carbon and water resource protection.
Financial information		Dole International Holdings net profit: ▲36.4 bn yen FYE 2023 results) Total assets in segment of applicable business: 2,146.8 bn yen (Food Company / March 2023 results)

Timeframe		By 2030
Temperature Band Scenario		4℃ Scenario
Main risks and opportunities	Transition	Opportunity: If a carbon tax is introduced in Finland, we will have a competitive advantage. That is because we already use 100% biomass energy in pulp manufacturing.
	Physical	Risk: The suitable areas for growing trees change for each species with a rise in temperature. In addition, the amount produced decreases depending on the type of tree and region (pine trees in Finland and spruce trees in the south of the country). Risk: Heavy machinery farming in the winter in Finland is premised on frozen soil. However, the soil may soften due to the rise in temperature and harvesting costs may increase.
Business environment under the scenario Business impact assessment		The amount produced is expected to decrease in some areas due to the rise in the global average temperature. Nevertheless, we can continue to improve earnings by increasing the amount of pulp we produce with the augmentation of facilities in afforestation regions where the amount produced is expected to increase and by curtailing the rise in harvesting costs with measures against soil softening. Analysis according to the EBITDA indicator (%)*
Adaption/mitigation measures & policies Business opportunities		The impact on the amount produced will vary between the north and south in Finland. Therefore, we will enhance monitoring of yield changes and examine a flexible production structure including the construction of a new factory. We will give training on the use of special heavy machinery for soft soil and examine even more efficient methods for harvesting in Finland.
Financial information		Profit in segment of applicable business (gross profit): 168.7 bn yen (Forest Products & General Merchandise/Logistics Division / FYE 2023 results) Total assets in segment of applicable business: 752.3 bn yen (Forest Products & General Merchandise/Logistics Division / March 2023 results)

Timeframe		By 2030
Temperature Band Scenario		4℃ Scenario
Main risks and opportunities	Transition	Opportunity: We may capture demand with feed products and other low-carbon-related products which contribute to reducing greenhouse gases.
	Physical	Risk: Decrease in the amount of crops harvested and logistics disruption due to large hurricanes, droughts and other abnormal weather in countries from where we import crops. Risk: The amount of crops harvested may decrease and transaction prices may increase in countries from where we import crops due to rising temperatures. Opportunity: We may maintain a supply structure by diversifying the countries from where we import crops and capture demand for grain.
Business environment under the scenario Business impact assessment		The decrease in the amount of crops harvested due to weather disasters and rising temperatures may lead to supply instability and increases in prices. However, we can maintain a supply structure by diversifying the countries from where we import crops and then provide further opportunities for low-carbon-related products. Analysis according to the Gross trading profit indicator (%)
Adaption/mitigation measures & policies Business opportunities		We will diversify the countries from where we import crops to prepare for the acute and chronic impacts from climate change. We will engage in new environmental-related business such as feed which leads to a curb on methane emissions.
Financial information		Profit in segment of applicable business (gross profit): 330.9 bn yen (Food Company / FYE 2023 results) Total assets in segment of applicable business: 2,146.8 bn yen (Food Company / March 2023)

• Earnings before interest, taxes, depreciation and amortization (This refers to earnings calculated by adding interest expenses and depreciation expenses to earnings before tax.)

Impact on Existing Strategies and Business Transition Plans

During our scenario analysis, we ascertained high-impact negative financial risks associated with not implementing climate change measures such as shifting current business strategy or business regions. As a result, we have already begun incorporating specific business transition plans and financial plans (including divestment and portfolio restructuring) into our Medium-term Management Plan, Brand-new Deal 2023 based on the basic policy of leading the industry in realizing a decarbonized society in enhancing our contribution to and engagement with the SDGs through business activities.

The Division Company Management Committee (DMC) conducts annual reviews of business risks and opportunities, including those related to climate change. Each DMC determines the order of priority for each policy and business, including business transition plans, and then drafts annual plans. The annual financial plans for each company are presented for approval to the HMC, the executive body, and the Board of Directors, the supervisory body, before final approval by the Board of Directors. This final approval is subject to a comprehensive analysis and deliberations from an ESG perspective, including matters related to climate change.

In March 2021, ITOCHU also issued SDGs Bond (Sustainability bond totaling US $500 million) as part of our financial strategy to enhance our contribution to and engagement with the SDGs through business activities. A portion of these SDGs Bonds were allocated towards R&D-related investments in climate-related subjects like those indicated below. The issuance of SDGs Bonds will increase recognition of ITOCHU Group policies to a broader range of stakeholders and further promote initiatives related to the SDGs.

• GHG emissions reduction initiatives: Renewable energy (power generation, power storage)
• Initiatives to promote GHG emission reduction measures at FamilyMart.

We confirmed that implementing these types of transition plans will enable us to maintain resilient business operations, even in over the medium- and long-term, for Group businesses, products, and services. Beyond the scope of applicability to this scenario analysis, ITOCHU is engaged in diverse business activities in various regions. Those business activities are also impacted by climate change. However, at this point in time, we have determined that the impact on Group overall earnings caused by risks associated with each individual business activity would be limited.

To confirm the impact of climate change on overall Group business, we will continue to conduct analyses of both transition and physical risks. We will further identify and organize fields susceptible to significant impact and evaluate response policies based on an order of priority given to areas requiring a response.

Climate-related Risk Management Procedures and Evaluation Methods for Each Business Phase

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If risks and opportunities are identified via the evaluation methods at each business phase, we use the tool shown below in Risk Assessment & Management Activities to assess the impact of risks and opportunities on business. Risk Assessment & Management Activities include quantitative evaluations such as scenario analyses and stress tests, and qualitative evaluations such as assessments of compliance with investment policy and GHG reduction targets. Quantitative information for risks and opportunities not related to climate change is added to climate change risk and opportunity information that has been quantitatively assessed. This information is then used to analyze the level of contributions to earnings.

Risk Assessment & Management Activities

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Business Start Phase

ITOCHU has established a multilayered decision-making process that seeks to realize swift decision-making by delegating discretionary power to each internal company, while pursuing investment returns and controlling investment risks. Depending on the size and terms of a project, a review is conducted at the internal company level or by the Investment Consultative Committee and the HMC (Headquarters Management Committee). In all cases, ESG risk assessments, including climate change risk, are incorporated into considerations when making investment decisions in the business investment process, which includes climate change risks. Using a tool called ESG Checklist for investments, we conduct shadow pricing for the purposes of risk analysis of GHG emission-intensive projects, promotion of low-carbon investments, identification and expansion of low-carbon business opportunities, stress testing, etc, which is one of internal carbon pricing methodologies. As a member of the HMC and the Investment Consultative Committee, the CAO, who chairs the Sustainability Committee, participates in the screening of projects that exceed the authority of the division company president. This system reflects the content of deliberations at the specific stage of climate change risk and at the assessment stage of climate change risk for company-wide risk management.

Refer to: Our business investment management

Business Management Phase

ITOCHU evaluates and manages risks such as climate change, natural disasters, and ESG investment identified in the business start stage and the business management stage through collaboration between responsible committees such as the Sustainability Committee and Internal Control Committee and the departments in charge. Environmental and social risks, including climate change, are summarized as one of the major risks subject to centralized management. Each year, the Sustainability Management Division serves as the executive unit in charge of organizing this information and issuing reports to the Internal Control Committee along with information on the other major risks to integrate the risk information into company-wide risk management system. The Sustainability Committee also deliberates on policies and measures related to climate change risk and how to promote the risk management system, etc. The director serving as chair of the Sustainability Committee reports on the content of deliberations to the Board of Directors approximately twice per year.

As part of our specific climate-related risk management procedures, we compile the results of Scope1/2 and Scope3 for each of 8 Division Companies every year. The results are compiled in a form that allows for an assessment over time, and are reported to the Sustainability Committee and the Board of Directors after being approved by each Division Company. This process enables the Board of Directors to oversee progress toward achieving GHG emissions reduction targets from a medium- to long-term perspective, and is also used to review new business strategies.

Review Business Strategy

Reviews of business strategy related to climate change are conducted by the Division Company Management Committee (DMC), and then by the HMC via the Investment Consultative Committee on which the CAO, who serves as the chair of the Sustainability Committee, also participates as a key member. Final decisions are made following deliberation by the Board of Directors. Scenario analysis based on TCFD recommendations is also used as a tool when considering business strategies and portfolio restructuring. In our analysis, we analyze short-term, medium-term, and long-term climate-related risks and opportunities once a year for their impact on organization business, strategy, and financial planning.

Action Plan

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Materiality	SDGs Targets	Impact Classification	Issues to Address	Business Area	Commitment	Specific Approach	Performance Indicators	Degree of Progress
Machinery Company
Address Climate Change (Contribute to a Decarbonized Society)		Climate Change Opportunities	Taking countermeasures against climate change	Overall power generation business	We will develop power plants with a good balance between renewable energy power generation and conventional power generation, thereby contributing to the development of countries and regions in a sustainable manner that is optimized for each.	Pursue opportunities to invest aggressively in renewable energy power generation through analyses of countries and regions.	FYE 2031: Target to achieve a renewable energy ratio more than 20% (equity interest basis) and reflect this to the future strategy.	We continue to operate wind power projects. (Butendiek and Cotton Plains). We invested in wind farms consisting of Kimball Power Plant (Nebraska, U.S.) and South Fork Power Plant (Minnesota, U.S.) in March 2020. We acquired all equity interests in Bay4 Energy Services, LLC in December 2020. Bay4 Energy Services, LLC operates, maintains and provides asset management services for to approximately 1,500 solar power plants with a total capacity of 2.3 GW in the U.S. We established Tyr Energy Development Renewables, LLC (“TED”) to accelerate the development of renewable energy in the U.S. TED is currently developing approximately 2 million kW of renewable energy assets, primarily solar power plants. Negotiations are also underway to conclude a long-term renewable energy power purchase agreement (PPA). In December 2022, we signed an agreement to invest in the Prairie Switch wind farm (Texas, USA). The project is currently under construction and is expected to be completed by the end of 2023. The renewable energy ratio based on the generation project equity capacity is 16.1% (as of March 2023).
Address Climate Change (Contribute to a Decarbonized Society)		Climate Change Opportunities	Taking countermeasures against climate change	Zero emission vessels	We will contribute to decarbonization in the shipping and maritime sectors through the promotion of an “integrated project” encompassing the development, ownership and operation of ammonia-fueled ships, the development of fuel supply chains, and fuel procurement.	In addition to the joint development of ammonia-fueled vessels with the Japanese consortium and the ownership and operation of these vessels, ITOCHU will take the lead in the development of supply chain of an ammonia bunkering and fuel procurement, aiming for early materialization of the pilot project.	Establish a value chain centered on ammonia as an alternative marine fuel by promoting the development, ownership, and operation of ammonia-fueled vessels, the development of fuel supply chains, and the procurement of ammonia fuel in an integrated manner. After 2026, promote the spread of ammonia-fueled vessels and the establishment of a supply chains to contribute to the decarbonization of the maritime industry.	Aiming to contribute to the decarbonization of international shipping and build a new business, we are promoting an “integrated project” for ammonia-fueled vessels. The project is developing (1) development of ammonia-fueled vessels, (2) ownership and operation, (3) development of fuel supply chains, and (4) procurement of fuel ammonia in a comprehensive and concurrent manner. In April 2022, we concluded a memorandum of understanding with the Maritime and Port Authority of Singapore to promote the development of ammonia bunkering facilities in Singapore, together with partner companies that are developing bunkering facilities in the country. ITOCHU and partners are promoting the establishment of a safe fuel supply system and the development of ammonia bunkering vessels. In November 2022, together with partner companies jointly selected for the Green Innovation Fund project, we obtained Approval in Principle from Nippon Kaiji Kyokai for the basic design of a large ammonia-fired bulk carrier. The development of ammonia-fired large bulk carriers is underway with safety in mind. As part of the project, ITOCHU is facilitating “Joint Study” as a framework for organizing and discussing common issues related to the introduction of ammonia as an alternative marine fuel, with 34 domestic and foreign companies and organizations, including major resource companies, energy companies, steel manufacturers, shipping companies, and shipbuilders. In April 2022, the “Joint Study for Ammonia Bunkering Safety” was newly launched as a framework for exchanging opinions on ammonia bunkering safety standards with major port authorities and related industry players, and its activities will be expanded in cooperation with the existing “Joint Study”. More than 50 presentations were made by concerned parties and experts.
Address Climate Change (Contribute to a Decarbonized Society)		Climate Change Opportunities	Taking countermeasures against climate change	Sales of passenger cars and commercial vehicles	We will achieve the eco-friendly mobility society by strengthening　businesses of electric vehicles (EVs), hybrid vehicles (HVs), vehicles with a reduced environmental impact, and those related.	Contribute to spread of eco-friendly vehicles by increasing business of eco-friendly and high-efficiency products, such as EVs, HVs, vehicles with a reduced environmental impact, and related parts.	Expand sales of eco-friendly products in response to the expanded lineup of EVs, HVs, vehicles with a reduced environmental impact, and similar vehicles from automakers as our business partners.	We have invested in a ride sharing service company called Via (2019). We have been providing efficient transport system to mainly rural areas. We have been participating in a small electric truck demonstration experiment since January 2019 and in developing features around EVs, and have started to provide various solutions as a partner of ISUZU “EVision”, total solution program for ISUZU EVs in Japan market. We aim to reduce environmental load through shifting to EVs and also shifting to renewable energy with EVs. In Sep 2021, “Combination of developing battery-exchangeable EVs and utilizing renewable energy Sector coupling demonstration project” was adopted as the Ministry of the Environment-commissioned project. We aims to commercialize battery-exchangeable EVs and as the owner of this project. In November 2022, the demonstration and operation started with a prototype (Two battery-exchangeable EV trucks, six battery packs, and one battery-exchange station) developed and manufactured under the project. We have invested in 2018 in China called Dishangtie Car Rental, an electric commercial vehicle rental and maintenance service. We have engaged a MOU to study about expanding such EV maintenance rental and leasing to abroad countries.
Address Climate Change (Contribute to a Decarbonized Society)		Water Resources Pollution Prevention and Resource Recycling	Improving water and sanitation infrastructures	Water and environmental projects	We will contribute to improve the sanitary conditions, the development of economic activities, and the protection of the global environment through the appropriate treatment and effective use of water and waste.	Expand water and environment projects to promote the appropriate use and treatment of water and the effective utilization of resources, and reduce the burden on the environment.	Expand and diversify the investment portfolio in the water and environment field. (Plan to work on decarbonization project development utilizing JCM etc.)	■Water Field We have developed a water supply service business in the U.K. and seawater desalination business in Australia and Oman. We aim to continue contributing to stable water supply in regions through seawater desalination, and water supply/ and sewerage businesses. At the same time, we are looking to be involved in solutions-based business for water issues in each industrial sector across a range of industries. ■Environmental Field We operate four municipal solid waste incineration and power generation plants(waste to energy plant) in the U.K, which treat 1.3 million tons of waste annually, accounting for 15% of the UK's waste incineration market, and generate enough electricity to power 160,000 British households. In November 2020, we acquired a 20% stake in Environment Development Company Ltd. (current SSES), which provides integrated hazardous waste management services in Jubail Industrial City in Saudi Arabia. In August 2021, we started to provide the government of Serbia with partial service of energy-from-waste project. Appropriate treatment of municipal solid waste in City of Belgrade and reduction of environmental pollution and greenhouse gas emissions has begun without environmental loads. Recycling of construction waste has also begun. We are currently constructing a municipal solid waste incineration and power generation plant(waste to energy plant). 7 SDGs certified, with an expected reduction of approximately 210,000 tons of greenhouse gas emissions, and, in 2022, the project obtained Certification of Carbon Credit by Gold Standard. In December 2020, we entered a concession agreement for the development and operation of an Energy-from-Waste (EfW) plant with Dubai Municipality. This is the first EfW project in Dubai and will be one of the largest EfW plants in the world, processing half of municipal solid waste from the emirate per year (1.9 million tons), which is currently under construction. We are aiming to enhance the functions of our initiatives that to capture strong demand for waste management services in light of intensifying environmental regulations in each the industrial sector and the growing awareness of ESG and SDGs more generally in the same way as in the water field.
Metals & Minerals Company
Address Climate Change (Contribute to a Decarbonized Society)		Climate Change Opportunities Capital Introduction	Taking countermeasures against climate change	Resource recycling business Mining business Environmental business Materials-related business	We will realize stable resource supply as our social mission and responsibility while fully considering its environmental impact. We will contribute to climate change issues through businesses that help to reduce greenhouse gases (e.g., lighter-weight vehicles and electric vehicles (EVs)) and the stable supply of essential materials.	Take the lead in developing recycling-orientated business. Promote initiatives for the social implementation of hydrogen and ammonia as next-generation resources and raw materials in client industries (e.g. steel and power). Promote businesses to contribute to the stable supply of nickel, PGM and other materials necessary in the manufacture and supply of hydrogen, green materials and energy, and storage batteries. Continue to be involved in the development of technologies that contribute to the reduction of greenhouse gas emissions, including technologies for carbon dioxide capture and storage (CCS) and carbon dioxide capture and utilization (CCU). Promote initiatives to completely withdraw from thermal coal mine interests while continuing to realize stable resource supply as our social mission and responsibility through trading in regards to our coal business. Implementation and expansion of businesses that contribute to developing lighter-weight vehicles and shifting to EVs (e.g., aluminum and copper).	Promote recycling-orientated business. Promote initiatives for the social implementation of hydrogen and ammonia as next-generation resources and raw materials in client industries (e.g., steel and power). Promote examination toward technological development and commercialization to contribute to a reduction in greenhouse gas emissions, including hydrogen, green material and energy production, and carbon dioxide capture and storage (CCS) and carbon dioxide capture and utilization (CCU). Strive to withdraw from thermal coal mine interests. Realize initiatives in businesses that contribute to developing lighter-weight vehicles and shifting to EVs (e.g., aluminum and copper).	We are contributing to the effective utilization of limited resources and the supply of environmental materials by promoting 3R+W (reduce / reuse / recycle + waste management) through our supply chains toward the realization of a sustainable society. Specifically, we are steadily promoting initiatives in venous industries. This includes the reuse and recycling of store facilities and fixtures, the expansion and increase in sophistication of metal scrap and waste treatment, and strengthening of cooperation with the REVER HOLDINGS CORPORATION (current TRE HOLDINGS CORPORATION) general recycling company we invested into last year. We agreed with Nel ASA (Norway), who is the world's largest manufacturer of electrolysers that are essential for green hydrogen production, to create a strategic partnership in the hydrogen industry. We and Nel are jointly exploring hydrogen business opportunities. We are promoting to realize the Platreef project and others in the PGM/nickel business where demand is expected to grow significantly due to the worldwide spread of electric vehicles and fuel cell vehicles, and also expanding trade activities of such materials. We continue to conduct a commercialization survey of a by-product hydrogen project in northern Kyushu with partners for the social implementation of hydrogen. We have an investment into Australia-based MCi, who possesses mineral carbonation technologies. We are promoting this technology for the Japanese market. In July 2022, we signed an MOU with TAISEI CORPORATION to begin verification of the use of this calcium carbonate as raw materials for concrete. We are promoting the examination of other carbon dioxide capture, utilization and storage (CCUS) technologies and various initiatives that will lead to a reduction in CO2 emissions. As per the Medium-Term Management Plan, we decided to withdraw from thermal coal mine interests with a perspective of strengthening contribution and initiatives to SDGs. We already divested our Drummond mine interests in Colombia that had accounted for the majority of the ITOCHU's thermal coal interests and also divested Ravensworth North coal mine interests in Australia producing both thermal and coking coal. We are currently promoting business in North America with Nikkeikin Aluminum Core Technology Company, Ltd. which we invested into in FYE 2020 for the manufacturing of aluminum parts for automobiles. It started commercial production in the beginning of 2023. In addition, we will continue to promote aluminum raw material and product trading to contribute to the development of lighter-weight vehicles.
Energy & Chemicals Company
Address Climate Change (Contribute to a Decarbonized Society)		Transition Risk Stable Supply of Resources	Stably supplying energy taking into account climate change and the environment	Oil/gas interests and liquefied natural gas (LNG) projects	We will produce resources (transition fuels) taking into account a reduction in greenhouse gases. We will provide a stable supply of energy to contribute to the development of industry and the construction of infrastructure.	Work on resource development projects in collaboration with superior partners who have advanced technical capabilities and abundant experience.	Pursue opportunities to participate in gas projects with a relatively low environmental burden in fossil fuels and as raw material source of the low-carbon fuel while keeping in mind the stable supply of energy in the transition phase toward the realization of a sustainable society.	To realize a sustainable society through the stable supply of energy, we continue to discuss with competent partners ways to participate in new upstream projects and collaborate on decarbonization as a transition fuel and raw material source of low carbon.
Address Climate Change (Contribute to a Decarbonized Society)		Climate Change Opportunities	Energy use that takes into consideration local communities and the environment	District heating and cooling	We will promote initiatives toward environmentally friendly regional energy use.	Communicate appropriately with neighboring stakeholders in the Jingu Gaien district.	Maintain the stable operations of district heating and cooling in the Jingu Gaien district and promote the spread of it to neighboring areas.	We are continuing discussions with the relevant stakeholders to spread and promote district heating and cooling to neighboring areas.
Address Climate Change (Contribute to a Decarbonized Society)		Climate Change Opportunities	Efforts to optimally and continuously supply renewable energy	Energy Storage System Power & Environmental Solution	We will continue to stably supply the Energy Storage System that are the key to the efficient and optimal utilization of renewable energy. We will aim to strengthen our Energy Storage System business chain and establish a circular model through the battery recycling business in particular.	We will continue to sell Energy Storage System equipped with optimal charging/discharging software based on machine learning (AI) and we will establish a recycling and reuse business with repurposed batteries from EV.	Number of storage batteries sold. Use of recycled and reused batteries.	We have sold a cumulative total of approximately 55,000 units (539 MWh) of energy storage systems as of the end of March, 2023. ITOCHU signed a Capital and Business Alliance with Lunar Energy, a newly launched clean tech company in the U.S. ITOCHU will continue to promote the installation and sales of Gridshare in the “Smart Star” series of residential ESS in the Japanese market and to promote Gridshare as the best global platform for controlling distributed energy resources and will contribute to realize distributed energy in a decarbonized society. ITOCHU conducts Demand Response POC with Japanese power companies, by using its residential ESS networks. Executed an investment in Power X, which aims to build one of the largest battery solution manufacturing factory in Japan. We aiming to promote fast EV charge stations through this investment. ITOCHU signed a Strategic Partnership MOU with ZF, for the joint feasibility study of comprehensive decabonization service by utilization of EV on-board battery. A recycling demonstration is underway using waste batteries from household battery storage system with the aim of establishing a recycling chain and traceability.
Address Climate Change (Contribute to a Decarbonized Society) Ensure Stable Procurement and Supply		Stable Supply of Resources Capital Introduction	Working on new fuel initiatives toward the realization of a carbon-neutral society / recycling-orientated low-carbon society	Production and supply of hydrogen and fuel ammonia, and procurement and supply of renewable fuels	We will aim to build a production and supply structure for new fuels to contribute to the reduction of greenhouse gases on a life cycle assessment basis toward the realization of a sustainable society.	Work on hydrogen and ammonia which are expected to serve as next-generation energies and fuels that do not emit carbon dioxide when burned. Also work on renewable fuels (derived from waste oils) to contribute to the reduction of greenhouses gases emitted from aircraft and large vehicles that are difficult to convert from internal combustion engines.	Build a new fuel value chain to be able to realize production, efficient transportation and supply by utilizing collaboration with superior partners and our track record in development and trading.	【Hydrogen and Ammonia】 Continuing to collaborate with ITOCHU ENEX Co., Ltd. and Air Liquide Japan G.K. on hydrogen refueling stations (HRS), following the successful development of Japan's first HRS for large commercial vehicles at Motomiya Interchange, Fukushima Prefecture, which is scheduled to begin operating in the first half of 2024. Conducting detailed studies on a joint project to manufacture and sell blue ammonia in Canada with Petroliam Nasional Berhad, Malaysia's national oil company, and Inter Pipeline Ltd., a major regional infrastructure enterprise. 【Renewable Diesel (RD) and Sustainable Aviation Fuel (SAF)】 Procuring RD produced by Neste OYJ for use in convenience store delivery vehicles, tank trucks, and fueling stations with ITOCHU ENEX Co., Ltd. Supplying SAF: (i) produced by Raven SR, Inc. to All Nippon Airways Co., Ltd. and Japan Airlines Co., Ltd.; and (ii) produced by Neste OYJ to Etihad Airways PJSC from October 2022. Selected by the Civil Aviation Bureau (Ministry of Land, Infrastructure, Transport and Tourism) to carry out the “Imported Neat SAF Model Demonstration Project” to import neat SAF from Neste OYJ, blend it with fossil-based jet fuel in Japan, and establish a supply chain to transport it to airports. Invested in Impact Bioenergy, a U.S. based startup that manufactures and sells equipment to produce biogas from food waste through anaerobic digestion.
Address Climate Change (Contribute to a Decarbonized Society)		Capital Introduction	Working on initiatives in carbon dioxide capture and storage (CCS) business toward the realization of a carbon-neutral society and inclusive and sustainable economic growth	Building of CO2 capture chains using CCS	We will aim to build CO2 capture chains to contribute to the reduction of greenhouse gases toward the realization of a sustainable society.	Refine CO2 storage technologies - an application of petroleum development technologies - and enhance access to CO2 capture chains (e.g., collection and transportation) to link them to CO2 storage technologies.	Build a CO2 transportation and storage business model by uncovering CO2 capture needs at places where CO2 is emitted in client industries across our companies.	Together with ITOCHU Oil Exploration Co., Ltd., we joined the Geological Carbon Dioxide Storage Technology Research Association to participate in a project to research and develop technologies for underground sequestration of carbon dioxide. In connection with the comprehensive CCS strategy formulated by Japan’s Ministry of Economy, Trade and Industry, we are studying with our consortium partners the feasibility of a CCS value chain project using ship transportation. We aim to build a business model for the CO2 capture chain through these initiatives.
Address Climate Change (Contribute to a Decarbonized Society)		Climate Change Opportunities	Working on initiatives to optimally and continually supply renewable energy	Renewable energy independent power producers (IPPs) / renewable energy-related materials procurement / dispersed power source initiatives	We will realize a stable supply of renewable energies through the development, ownership and operation of renewable energy power plants (solar power, biomass and wind power). We will stimulate renewable energy power generation inside and outside of Japan through renewable energy-related materials procurement. We will realize a world where renewable energy is commonplace by spreading solar power generation as an independent power source that does not rely on the power gird through the deployment of solar power dispersed power sources.	Expand the scale of our renewable energy assets with the stable operation and new development of renewable energy plants and establish dispersed power sources in Japan with a focus on the conversion to virtual power plants (VPP).	Scale of our renewable energy assets Scale of our dispersed power sources	We have expanded the third party-owned distributed power supply using renewable energy, by operating approximately 555 on-site photovoltaic power plants (combined output is appx 120,000kW) across Japan through VPP Japan, Inc. We have commenced the provision of corporate PPA for the provision of electric power generated from off-site photovoltaic power plants in Japan to Amazon.com, Inc. through Clean Energy Connect Co., Ltd., our portfolio company. (Feb, 2023)
Food Company
Address Climate Change (Contribute to a Decarbonized Society)		GHG Emissions	Taking countermeasures against climate change	Fresh food field	We will examine and promote measures that contribute to tackling climate change.	We will utilize green energy in our processed food business.	New boiler and power plant operating situation. Situation of the utilization of raw materials in boilers and power plants. (1) Situation of the utilization of all food residue generated in pineapple processing factories. (2) Situation of the utilization of non-standard products that cannot be sold as food, generated in banana plantations.	2nd biogas plant (Polomolok plant) was started to be operated on July, 2022. (1st biogas plant (Surallah plant) was activated on Dec, 2021) Result of utilization of processed pineapple residue : 97,566MT in 2022.
General Products & Realty Company
Address Climate Change (Contribute to a Decarbonized Society)		Capital Introduction	Taking countermeasures against climate change	Cement substitute material such as slag	We plan to expand the use of sustainable byproducts (slag) as a substitute material for the cement which is vital for construction and civil engineering.	Establish continuous, stable business between Steelworks as the supplier of slag and Users.	Consider investment, participation, etc. in the slag business and focus initiatives on creating demand, especially in developing countries, with the aim of establishing continuous, stable business.	We are currently in discussions concerning investment and participation in the slag business.

Toward Sustainable Plantation Operation in Response to Climate Change

ITOCHU group company Dole has a banana field on Mindanao Island in the Philippines, where typhoons, droughts, pests and diseases have occurred. Banana production volume decreased by 40% to 440,000 tons in FYE 2017. In light of this situation, we conducted the following analysis.

• Climate change risk assessment (short- and medium-term risks) in the Group company environmental status survey (conducted on 2 to 3 companies per year) as a part of global risk management process.
• As information necessary for risk assessment, we ascertained domestic and international trends related to climate change and problem cases caused by climate change. We used ERM to analyze those trends.

As a result, we recognized that the concentration of production areas was a serious risk. To recover and expand production while dealing with this risk, we introduced irrigation equipment for bananas, consolidated and expanded agricultural land, and implemented measures against pests and diseases. Since similar risks exist in pineapple cultivation, we also decided to improve productivity by investing in equipment for pineapple farms and reviewing cultivation methods. We also promoted diversification of production areas in preparation for abnormal weather risks. Through the above analysis and countermeasures, we were able to maintain banana and pineapple production by making full use of diversified production areas and cultivation techniques, even when several typhoons occurred near Mindanao Island in 2020.

Withdrawal from Interests in Thermal Coal

ITOCHU has invested in several coal interests, but in the future these businesses will likely be subject to carbon tax. Also, countries will introduce energy diversification policies, which will lead to the promotion of renewable energy and energy saving technology. The changing and more competitive prices of renewable energy risks decreased profits from coal-related businesses, causing these assets to become impaired or fixed.

Based on this risk analysis, in 2019 ITOCHU announced that we will not develop a new coal-fired power plants or acquire thermal coal mine businesses. In February 2019, we sold all interests in the Rolleston thermal mine owned by ITOCHU Minerals & Energy of Australia Pty Ltd (IMEA). In 2021, we declared through our Medium-term Management Plan that we will lead the industry in realizing a decarbonized society. As part of this initiative, we sold off interests in Drummond and Ravensworth North.

We will continue to review existing thermal coal mine businesses as we seek to contribute to the development of a sustainable society while also continuing to meet societal demands for stable energy supply to domestic and overseas consumers.

Full Switchover to Real CO₂-free Electricity at Tokyo Head Office

ITOCHU is sourcing its real CO₂-free electricity, together with a Non-Fossil Fuel Energy Certificate showing the environmental value of not emitting CO₂, from TEPCO Energy Partner, Incorporated, which supplies electricity to the Tokyo Head Office since January 2020. The Non-Fossil Fuel Energy Certificate includes the tracking information (information about type of energy sources and power plant location) of Maebashi Biomass Power Plant (Maebashi, Gunma Prefecture), which is operated by a subsidiary of Kandenko Co., Ltd., and is used at the Tokyo Head Office building in combination with purchased electricity. This initiative can also be used to prove compliance with “RE100,” a global initiative of businesses committed to 100% renewable electricity, in response to the global trend towards decarbonization.

Refer to: Press release regarding full switchover to real CO₂-free electricity at Tokyo Head Office

2030 Reduction Targets for Domestic Business Activities (Trading Industry)

• In FYE 2031, we will strive to reduce unit power consumption (Electric power consumption per floor area for the entire company) by 15.7% from FYE 2014 level. (Reestablished July 2018)
  (We have set a target of reducing power consumption at our Japanese Bases by 30% from FYE 2011 level, and have achieved 51.8% reduction in FYE 2023.)

Long-term Vision for Climate Change Measures of the Japan Foreign Trade Council

To create a carbon-neutral society, the JFTC aims to effectively utilize its links with other industries and organizations, cooperate in implementing their long-term visions, and contribute to achieving the long-term goals for 2050 set out in the Paris Agreement. Based on this vision, JFTC member companies will position the investigation and implementation of measures to mitigate and adapt to climate change as key business issues and strive to generate new businesses and solutions. We have flexibly evolved our businesses according to changing times and diverse needs. Shosha (trading firms), which operate worldwide and conduct business in cooperation with various players in a wide range of industries, are able to fully exercise their capabilities in contributing to solutions for the global challenge of climate change.

Refer to: Long-term Vision for Climate Change Measures