Realty business: Energy Consumption, Greenhouse Gas Emissions, and Water Usage

Advance Residence Investment Corporation ("ADR") , an ITOCHU group company, is one of Japan's largest real estate investment trusts (J-REIT) specializing in rental housing. In addition, ADR takes full advantage of the collaboration with ITOCHU Group and acquires and operates some of the rental apartments developed and managed by the group.
ADIM has established a Sustainability Policy consisting of six items, namely (1) Establishing organization-wide structure for compliance and risk management, (2) Reduction of energy consumption and CO₂ emissions, (3) Resource conservation and reduction of waste, (4) Employee education, (5) Stakeholder engagement, and (6) Transparent disclosures. By implementing these things in its general asset management operations, the company contributes to the achievement of a sustainable society.
It has also established policies on energy conservation, greenhouse gas emission reduction, water conservation and waste management to improve the energy efficiency of ADR's properties and is working to reduce the properties' energy consumption and greenhouse gas emissions in order to put the Sustainability Policy into practice. The target is to reduce energy consumption and greenhouse gas emissions by an average consumption rate of 1% annually throughout the entire portfolio of more than 20,000 properties in the medium to long term.

Scenario Analysis

We have begun analyses and business impact assessments using multiple scenarios (including the International Energy Agency's 2℃ scenario*) based on suggestions made by the Task Force on Climate-related Financial Disclosures (TCFD). We are starting with our coal-related businesses which, out of all the businesses ITOCHU is engaged in, are in an industrial sector likely to be more heavily impacted in the event that greenhouse gas emission regulations are tightened around the world. They also have a greater financial impact on our company. Along with assessing materiality of climate-related risks and opportunities, we are identifying the variables with the greatest impact, primarily in terms of transition risk, and using a financial model that reflects the contracts and terms such as quality by business to analyze the optimal portfolio.

• IEA (International Energy Agency) Sustainable Development Scenario, 450 Scenario, ETP2016 2℃ Scenario

Our understanding of the medium- to long-term business environment for the coal mining business and the power generation business, including coal-fired power, and our policy commitments are provided below. We have established the policy based on our understanding of the business environment under both the 4℃ scenario*, which the greenhouse gas reduction efforts of each country are on pace to achieve, and the 2℃ scenario, and will increase the tolerance of our businesses by ensuring proper measures for each scenario.

• Refer to IEA New Policy Scenario, ETP2016 4℃ scenario, etc.

Coal business

Business environment under 4℃ scenario	Business environment under 2℃ scenario
Under the 2℃ scenario, use of fossil fuels will be reduced as a result of technological innovation and changes in regulatory trends, but demand for high-grade coal, which has a relatively lower environmental impact, will remain at a certain level, and effective utilization of CO2 will be promoted. Our analysis shows that our high-grade thermal coal mining business can maintain its competitiveness.

Policy and efforts

• We will not acquire new thermal coal mining interest.
• Regarding the existing thermal coal mining projects, we will continue to review it and contribute to the development of a sustainable society while responding to the social demands of stable supply of energy to domestic and overseas customers.
• We will continue to be involved in development of technologies to contribute to reduction of greenhouse gas emissions, including carbon capture and storage (CCS) and carbon capture and utilization (CCU).

Power generation business

Business environment under 4℃ scenario	Business environment under 2℃ scenario
Under both the 2℃ and the 4℃ scenarios, we will maintain at least the current level of income. Under the 2℃ scenario, we can maintain and grow revenue by increasing the number of new renewable energy plants.

Policy and efforts

• We aim to achieve a renewable energy ratio more than 20% (gross capacity basis) by FYE 2031 and will reflect this to the future strategy.
• We will not develop any new coal-fired power generation business, in part to contribute to the development of a sustainable society.

Toward Sustainable Plantation Operation in Response to Climate Change

We acquired the Asian fruits and vegetables business and processed foods business, which supplies canned food and beverages around the world, from Dole Food Company in the U.S. in April 2013.

Since this acquisition, typhoons, drought, and damage from disease and harmful insects have struck the Philippines — the largest production base of major products. The production volume of bananas was 440,000 tons in FYE 2017; this was a 40% decrease compared with before the acquisition. We looked to restore and expand this production volume. To that end, we introduced irrigation facilities for bananas. We also aggregated and expanded farmland and took measures against damage from disease and harmful insects. In addition, we invested in facilities for plantations and reviewed cultivation methods for pineapples to improve productivity. We are also promoting the diversification of production areas to prepare for the risk of unpredictable weather. Furthermore, we have improved management (e.g., the selection and concentration of businesses and products, and the disposal of unprofitable businesses).
In the future, we will aim to become the largest agricultural produce integrator in Asia by FYE 2021. We will achieve this by developing a structure to increase production to 800,000 tons of bananas and 1 million tons of pineapples in the Philippines. We believe that people, the environment and society are important resources for the survival and development of the company. Accordingly, DOLE again focused efforts on activities to contribute to local societies in the Philippines, Thailand, Japan, South Korea, China, North America and other countries in FYE 2018. For example, we spent approximately 3.2 million dollars to donate textbooks, desks, chairs and PCs to schools in various areas, construct and maintain school buildings, provide scholarships, and supply educational opportunities for children with disabilities. We also provided daily necessities and medical assistance to areas affected by natural disasters, donated blood, held hygiene education and provided food assistance to work on maintaining and promoting health.

Utilization of Solar Power Generation in a Joint Venture with Teys in Australia

Teys Australia Condamine introduced 1,034 solar panels in 2015. This has made it possible to generate approximately 506,000 kWh of power annually. Accordingly, approximately 50% of the power used in this facility comes from renewable energy. The introduction of solar power generation has reduced CO₂ emissions by approximately 395 tons. Consequently, a reduction in CO₂ emissions of approximately 49% has been realized compared with before the introduction of solar power generation.
We also procure beef to be slaughtered and processed from Teys — our joint investment partner in Australia. This firm has formed sustainable operations. It extracts methane gas generated in the slaughter process and reuses it as heat for its factory.

Initiative Participation (Activities Through Financial and Industry Groups)

We are participating in the Global Environment Subcommittee of the Committee on Environment and Safety — an environment and energy related committee of the Japan Business Federation (Keidanren). We are working to realize an environmental policy compatible with the economy (e.g., through promotion of voluntary action plans, and measures for global warming, waste and recycling and environmental risks). We are also participating in the Global Environment Committee of the Japan Foreign Trade Council. We are striving to build a low-carbon society, construct a recycling-orientated society, and to support environmental related laws and regulations.

If we decide the direction regarding such as climate change in various industry groups we participate, we express an opinion in line with our Basic Policy on Sustainability in the decision process, and when it is different from our policy, we will strive to be in line with our policy.

Energy Consumption

Greenhouse Gas (GHG) Emissions

ITOCHU sets target values for a reduction in our electricity consumption and in the volume of waste we discard, the promotion of recycling, and a reduction in our paper and water consumption. The target values are as below. ITOCHU alone and our consolidated subsidiaries as a whole have set a target of reducing our energy consumption by at least 1% on average annually at our output level. We are working to reduce our GHG emissions.

Efforts Toward Environmental Distribution

ITOCHU is engaged in green distribution to reduce our environmental impact. This is to comply with the Act on the Rational Use of Energy (Energy Conservation Law).

Carbon Dioxide Emissions from Distribution

The carbon dioxide emissions generated due to contracted transport as shippers of ITOCHU is as follows.

CO₂ Emissions Attributable to Distribution★

• ★This is independently assured through KPMG AZSA Sustainability Co., Ltd. This assurance conforms to the International Standard on Assurance Engagements (ISAE) 3000 and 3410 of the International Auditing and Assurance Standards Board.
• There were errors in the data for FYE 2016, so we revised these.