Climate Change-related Risks and Opportunities

Scenario Analysis

Coal Business

Business Environment under the 4℃ Scenario	Business Environment under the 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.

Policy and Initiatives

• 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 the 4℃ Scenario	Business Environment under the 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 Initiatives

• We aim to achieve a renewable energy ratio more than 20% (equity interest 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.

Oil and Gas Upstream Development Business

Business Environment under the 4℃ Scenario	Business Environment under the 2℃ Scenario
Demand for crude oil is expected to shrink across the world under the 2℃ scenario. Nevertheless, we will be able to increase revenue by capturing the opportunities of the global increase in demand for LNG and the increase in demand for new energies (e.g., biofuels).

Policy and Initiatives

• We will carefully examine an expansion of our crude oil assets.
• We will aim to stabilize business by participating in excellent projects. We will then examine investment opportunities in gas projects (e.g., LNG).
• We will examine a business portfolio that anticipates an increase in demand in the new energies field (e.g., the capture of biofuel and hydrogen related business opportunities).

Dole Business

Business Environment under the 4℃ Scenario	Business Environment under the 2℃ Scenario
We expect climate change (the impact on the amount of harvest per unit area due to the increase in the average temperature) to have the impact of reducing revenue under both the 4℃ and 2℃ scenarios. Nevertheless, we will be able to increase revenue by dispersing risks with diversification of production areas (e.g., Sierra Leone) and by striving to improve our cultivation technologies and cultivation efficiency.

Policy and Initiatives

• We will diversify production areas (expand production in Sierra Leone).
• We will increase the yield by researching and selecting varieties and by improving production methods (e.g., by improving seedling cultivation methods).
• We will contribute to a low-carbon society through the promotion of biogas power generation utilizing pineapple dregs and solar power generation utilizing factory rooftops. We will aim to further improve the Dole brand and product superiority with the support of highly environmentally-conscious consumers.
• We will implement irrigation as necessary.
• We will examine production optimization by using drones and other ICT (e.g., early identification of agricultural chemical application points, yield prediction, and timely and accurate fertilization with monitoring).

Pulp Business

Business Environment under the 4℃ Scenario	Business Environment under the 2℃ Scenario
We will increase revenue due to an increase in pulp production output in some afforestation areas where production output is expected to expand under the 4℃ scenario. Nevertheless, our analysis shows that our revenue will decrease due to the impact of the reduction in production output in afforestation areas overall with the rise in the average global temperature. We will maintain production output at a certain level in afforestation areas with the suppression in the rise of the average temperature under the 2℃ scenario. If the carbon prices are introduced in pulp manufacturing factories using biomass energy, we will be able to curtail costs. In addition, we will be able to increase profit by increasing revenue with an increase in our pulp production output in afforestation areas where production output is expected to expand.

Policy and Initiatives

• We will examine a selection of varieties to respond to climate change.
• We will conduct on-site monitoring to examine measures before the impact of climate change becomes significant.

Moreover, we started work in FYE 2020 on organizing climate-related risks and opportunities in our apparel and ICT businesses – businesses which may potentially be affected by transition and physical risks concerning climate change – from the perspective of raising awareness of climate change and promoting our response to it on a company-wide basis. We have identified risk and opportunity factors with a high level of importance in the medium to long term. We plan to work on further analysis toward the next fiscal year.

Identification of Climate Change Risks

At ITOCHU Corporation, the Sustainability Management Division and each company collects information on climate-related risks and opportunities in our relevant geographies such as those related to regulatory changes, abnormal weather, technology trends and clean tech market trends. Findings are shared with internal companies, Group companies, and subsidiaries in the supply chain to assess the potential size and scope of the risks and opportunities. Finally, we engage with the Sustainability Advisory Board to receive advisory input, and finally report on our overall findings to the Sustainability Committee, which identifies key climate-related risks upon deliberation.

Corporate Risk Management

The ITOCHU Group is exposed to various risks (e.g. market risk, credit risk, and investment risk) due to the wide-ranging nature of its business. In order to manage these risks, we have established various internal committees and departments. We have also developed an enterprise risk management system and relevant protocols to manage risks comprehensively and individually, such as investment standards, risk and transaction limits, and reporting and monitoring systems.

As part of risk management at the corporate level, the Sustainability Committee engages with other internal committees and responsible departments on the identified climate change risks, such as those related to natural disasters, and ESG investments. The Committee focuses on gathering input on the company's climate change policy, its response plan, its awareness and assessment of climate change impacts on its enterprise risks (e.g. market risks, credit risks, investment risks, etc.), and the cultural integration of risk management systems. Based on deliberations at the Committee regarding the input it gathered, the Sustainability Committee chairman (the CAO) reports to the Board of Directors on major developments more than once a year.

Please click here for risk management relating to company-wide business including climate change.

Business Investment Management

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 HMC (Headquarters Management Committee) and the Investment Consultative 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.

As a member of the HMC and the Investment Consultative Committee, the CAO (Chief Administrative Officer), who chairs the Sustainability Committee, participates in the screening of projects that exceed the authority of the 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.

Details are here.

Energy Consumption Reduction Targets

ITOCHU Group's Clean-tech goals

ITOCHU has set the following targets for 2030 for the ITOCHU Group's clean tech-related businesses and projects.

• In the power generation business as a whole, we aim to increase the ratio of renewable energy based on equity capacity from 12.5% in FYE 2020 to over 20% by FYE 2031.
• By the end of FYE 2031, we aim to sell (Energy Storage System: ESS) a power storage system that functions as a regulator in stabilizing renewable energy supply, with a total electric power capacity of 22 times that of FYE 2020, on a 850,000 kWh scale.

Details are here.

Initiatives in Business tackling Climate Change

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. 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 initiatives on activities to contribute to local societies in the Philippines, Thailand, Japan, South Korea, China, North America and other countries in FYE 2019. For example, we spent approximately 2.5 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.

Contributing to Emissions Reductions in the Value Chain through Projects and Investments

Initiatives for the Tokyo Metropolitan Government Program to Prevent Global Warming

ITOCHU submitted a plan to the Tokyo Metropolitan Government to reduce the CO₂ emissions in our Tokyo Headquarters by approximately 15% from the reference value (average value from FYE 2003 to FYE 2005) over five years from FYE 2016 to FYE 2020 based on the Ordinance on Environmental Preservation. Our emissions in FYE 2019 were 6,168 t-CO₂. This is an approximately 42% reduction compared to the reference value.

The documents we have submitted to the Tokyo Metropolitan Government so far are as follows.

• Greenhouse Gas Emission Reduction Plan for FYE 2016 to FYE 2020 (Submitted in November 2016) (Japanese Only) (585KB)
• Greenhouse Gas Emission Reduction Plan for FYE 2016 to FYE 2020 (Submitted in November 2017) (Japanese Only) (577KB)
• Greenhouse Gas Emission Reduction Plan for FYE 2016 to FYE 2020 (Submitted in November 2018) (Japanese Only) (119KB)
• Greenhouse Gas Emission Reduction Plan for FYE 2016 to FYE 2020 (Submitted in November 2019) (Japanese Only) (354KB)

• In addition to the Tokyo Headquarters, the adjacent commercial facility of Itochu Garden is also subject to the Greenhouse Gas Emission Reduction Plans submitted to the Tokyo Metropolitan Government.

Participation in TCFD Consortium

In May 2019, ITOCHU Corporation announced its support for the TCFD, which encourages companies to disclose financial information related to climate change. We also participated in the TCFD Consortium established on May 27, 2019 by Ministry of Economy, Trade and Industry (METI), Ministry of the Environment (MOE), and the Financial Services Agency (FSA) as a body for promoting discussion and deliberation among companies and financial institutions supporting the TCFD mission. By participating in this Consortium, we will engage in the appropriate disclosure of ITOCHU business opportunities and risks associated with climate change.

Initiative Participation (Activities Through Business 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. Climate change-related targets set out in the Global Environment Committee are as follows.

• 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)
• 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.

Participation in CDP (Climate Change)

ITOCHU is actively providing information on ESG initiatives to various stakeholders around the world. As part of these initiativess, we participate in the CDP, an NGO that is recognized worldwide as a global standard for corporate environmental information disclosure. Since FYE 2014, we have been responding to the CDP's climate change questionnaire.

Participation in COOL CHOICE

ITOCHU participates in the Ministry of the Environment-led COOL CHOICE climate change campaign aimed at realizing a low-carbon society. We are striving to adjust our air conditioning in the summer and winter and to switch off unnecessary electricity. We also conduct environmental conservation activities from the things that all employees can do in their daily lives. For example, we encourage separation of waste in offices and promote recycling.

Scope of Aggregation

○:in scope of aggregation

1. The other business facilities cover business facilities owned or leased by ITOCHU (except facilities for residences).
2. The group companies in Japan and overseas cover consolidated subsidiaries directly invested in by ITOCHU (as of March 31, 2017) for FYE 2016 to FYE 2017. All consolidated subsidiaries are covered since FYE 2018 (coverage 100%).

Energy Consumption

Greenhouse Gas (GHG) Emissions

Scope1 Total Emissions Breakdown by Greenhouse Gas Type (6.5 Gases)

(Unit:t-CO₂e)

Costs Associated with Climate Change

Among the environmental conservation costs disclosed as a part of our environmental accounting, costs associated with climate change (FYE 2020) are as follows：

• Administrative costs of the power generator installed in the Tokyo Headquarters: 1,770 thousand yen
• Research and development (R&D) expenses for climate change risk aversion (donation to Division of Climate System Research, Atmosphere and Ocean Research Institute, the University of Tokyo): 500 thousand yen

Initiatives 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◆

Independent Assurance

Independent Assurance Report (1.5MB): The data below marked with a ❖ 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 (IAASB).
❖: Total electricity consumption and total CO₂ emissions attributable to the domestic bases of ITOCHU corporation (business facilities of the Tokyo Headquarters, the Osaka Headquarters, branches in Japan, domestic branches and other business facilities), and the waste volume, waste non-recycled, waste recycled, recycling rate, water consumption, gray water production volume and wastewater volume for the Tokyo Headquarters.

Independent Assurance Report (1.5MB): The data below marked with a ◆ 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 (IAASB).
◆: Total electricity consumption and GHG emissions attributable to ITOCHU Group in total, and CO₂ emissions attributable to distribution of ITOCHU Corporation.