Environment TCFD Initiatives

We regard climate change as one of the most important material issues and incorporate it into our management strategies to promote climate change countermeasures.

• Governance

• Strategy

• Risk management

• Targets and goals

Governance

Results in FY2024

Meeting	Main agenda items	Details
1st	Sharing of issues and measure directions	Clarification of strategies that contribute to achieving sustainability goals and enhancing corporate value
2nd	Results and forecast of CO2 emissions	Sharing of FY2023 CO2 emission results and formulation of an action plan to achieve SBT goals
3rd	Scope 3 emissions reduction plan	Detailing and disclosure of specific reduction measures for business activities
4th	Review of TCFD disclosure content	Executive-side review of TCFD disclosure content in preparation for submission to the Management Council
5th	Scope 1 and 2 emissions reduction plan	Policy for activities to reduce Scope 1 and 2 emissions and consideration of the use of carbon offsets
6th	Examination of activities that contribute to emissions reduction	Evaluation of the content and validity of activities that contribute to CO2 emission reductions through business operations
7th	Clarification of activity roles and responsibilities	Formulation of the organizational system and consideration of location-by-location goals for activities contributing to Scope 1, 2, and 3 emission reductions

Plans for FY2025

Meeting body	Members	Frequency	Role
Board of Directors	Directors	4 times per year	Supervision of management and execution Supervision of important matters pertaining to climate-related issues and issuance of instructions as needed
Management Council	Directors and General Managers of main office and branches	4 times per year	Highest decision-making body for business execution Resolutions on addressing climate-related issues
Sustainability Promotion Committee	General Managers of head office General Managers of main office and branches, etc.	8 times per year, including 4 on climate-related topics	Deliberations on important matters concerning climate-related issues as well as resolutions for addressing them Presentations and reports to the Management Council
Company-wide Risk Management Committee	General Managers of head office General Managers of main office and branches, etc.	5 times per year	Identification, assessment, and control of overall business risks categorized as “priority risks,” “important management risks,” and “other management risks” Integrated management of overall risks with recognition that climate-related risks coordinated by the Sustainability Promotion Committee are part of overall business risks

Strategy

The potential business impact assessments and measures for the identified risks and opportunities are as follows. In formulating these measures, possible adverse effects on biodiversity and other factors have been taken into account.

Business impacts and response measures for climate-related risks (transition risks)

Type	Risks	Business impacts*1 1.5℃ scenario	Period*2	Summary of measures
Policies and regulations	Increase in operational costs due to the introduction of a carbon tax	Medium	Medium-term	Utilization of renewable energy Introduce renewable energy at all on-site offices and encourage tenant owners to adopt it Introduce a corporate PPA at T-Base® Installation of renewable energy generation equipment Install renewable energy generation and battery storage equipment at the Innovation Center Use of low-carbon vehicles Adopt hybrid vehicles (HVs) and implement a phased introduction of EVs Encourage the supply chain to follow the above measures in line with our basic procurement policy
	Increase in procurement costs due to the introduction of a carbon tax	Large	Medium-term	Ongoing green procurement (procuring low-carbon materials and equipment) and adoption of “Top Runner” products (high-efficiency products) Ongoing engagement with suppliers
Technologies	Decrease in orders received due to delay in technological development related to energy conservation (existing field)	Large	Short- to medium-term	Accurate identification of stakeholder needs through energy-saving proposals and similar efforts Promotion of company-wide development efforts involving both the R&D and profit divisions
	Loss of revenue opportunities due to delays and increased investment costs of the development of decarbonization-related technologies and services as well as inadequate response to decarbonization-related market needs (new field)		Medium- to long-term	Establishment of appropriate business models based on trends of customers and competitors, etc. Build microgrid systems to supply energy within local regions Promotion of research and development based on the above and collaboration with business partners Develop and implement large-scale water-electrolysis hydrogen production equipment and energy management systems
Reputation	Decrease in corporate value due to inadequate response and disclosure information for climate-related issues	Large	Medium-term	Participation in climate change response initiatives Active sharing of information through integrated reports, the company website, etc.

Business impacts of climate-related opportunities and response measures

Type	Opportunities	Business impacts*1	Period*2	Summary of measures
Resource efficiency	Reduction of operating costs and increase in productivity by transforming the construction process	Large	Medium- to long-term	Promotion and expansion of T-Base® utilization Expansion of BIM utilization, etc.
Products and services	Increase in revenue opportunities due to increased corporate equipment replacement needs as a result of developments in energy conservation promotion policies and regulations	Large	Medium- to long-term	Provision of information to customers to understand their needs and implement planned replacements/renewals Proposal for energy-saving measures based on the Group’s proprietary design and construction Swirling Induction Type TAKASAGO HVAC System (SWIT®) Closed VOC systems, exhaust heat utilization (Mega Stock), bioreactors PMAC products, etc. https://www.tte-net.com/english/solution/swit.html https://www.tte-net.com/english/solution/clean_room.html https://www.tte-net.com/solution/pdf/gat.pdf Collaboration with government agencies, local governments, etc.
	Increase in sales from installation of products that contribute to reducing environmental impact (Swirling Induction Type TAKASAGO HVAC System (SWIT®), PMAC products, etc.)
Market	Development of new markets by introducing new services and developing new technologies such as green energy supply equipment, including our water electrolysis hydrogen production system (Hydro Creator®)	Large	Medium- to long-term	Promotion of R&D for installation of 5,000 kW of green energy supply facilities by 2026 Timely and appropriate collaboration with partners as needed for each project
	Creation of advantageous financing opportunities such as green bonds	Large	Medium- to long-term	Consideration of the use, if needed, for above investment Procure funds for construction of the Innovation Center through the issuance of green bonds

• Business impact is classified as “small,” “medium,” or “large” based on a qualitative assessment of the estimated financial impact (costs: up to 100 million yen for “small,” 100 million to three billion yen for “medium,” and three billion yen or more for “large;” revenues: up to two billion yen for “small,” two billion to 30 billion yen for “medium,” and 30 billion yen or more for “large”) (the cost and revenue thresholds for “large” are based on the TSE’s timely disclosure standards).
• Short-term refers to one year (aligned with the annual management plan), medium-term refers to 3 to 10 years (aligned with the Medium-Term Management Plan), and long-term refers to over 10 years (aligned with the Long-Term Vision).

Our Group’s 2050 net zero emissions transition plan

From the perspective of ensuring the resilience of our strategies under any scenario, the Group has formulated a transition plan toward net zero emissions in 2050. While appropriately avoiding risks, we will steadily capture business opportunities and work over the medium to long term toward the Takasago Thermal Engineering Group’s Long-Term Vision for 2040 goal of ordinary income exceeding 40 billion yen.

Risk management

The Group classifies risks into three levels based on probability of occurrence and impact, and evaluates and decides them through the Company-wide Risk Management Committee. These risks are monitored by the Board of Directors via the Internal Control Committee, with climate-related risks also subject to integrated management. In FY2024, we implemented company-wide risk control after identifying five risks as priority risks, including compliance with labor regulations, overruns of construction capacity, and human capital deterioration. Climate-related risks are integrated into this framework and managed together with other business risks.

Targets and goals

(1) Indicators for greenhouse gas (GHG) emissions reduction

Our Group has set the GHG emissions reduction rate as a KGI in the Medium-Term Management Plan, aiming to reduce emissions across Scopes 1, 2, and 3. We have obtained SBTi certification for the 1.5°C target, and by the end of FY2024 achieved reductions of 47.0% in Scope 1, 4.6% (non-consolidated) in Scope 3, and 1.0% (consolidated). As KPIs, we have set targets of installing 5,000 kW of green-energy facilities and achieving annual energy-saving proposals/orders totaling 15,000 t-CO₂ by FY2026. Going forward, we will promote EV adoption, renewable energy procurement, and use of low-carbon materials, while also contributing to emissions reduction at customer facilities. Through these efforts, we aim to help reduce society’s overall GHG emissions.

Actual GHG emissions (Scopes 1 and 2)

(unit: t-CO₂)

Consolidated	Target scope	FY2019	FY2022	FY2023	FY2024	Compared to FY2019
	Scopes 1 and 2	11,961	10,727	10,490	9,032	24.4% reduction
	Scope 1	4,794	5,491	4,689	3,926	18.1% reduction
	Scope 2	7,167	5,236	5,801	5,105	28.7% reduction

Non-consolidated	Target scope	FY2019	FY2022	FY2023	FY2024	Compared to FY2019
	Scopes 1 and 2	7,582	5,295	5,339	4,013	47.0% reduction
	Scope 1	3,106	2,801	2,564	1,755	43.4% reduction
	Scope 2	4,476	2,494	2,775	2,258	49.5% reduction

Scope 2 figures are based on the market-based method

Actual GHG emissions (Scope 3)

(unit: t-CO₂)

Consolidated	Target scope	FY2019	FY2022	FY2023	FY2024	Compared to FY2019
	Scope 3	6,129,555	6,294,255	7,007,529	6,064,153	1.0% reduction

Non-consolidated	Target scope	FY2019	FY2022	FY2023	FY2024	Compared to FY2019
	Scope 3	4,874,234	4,753,188	4,892,550	4,647,493	4.6% reduction

• CO₂ Emissions by Scope

(2) Assets and businesses relevant to climate-related risks and opportunities

With regard to carbon taxes—one of the major climate-related risks—if future strengthening of regulations leads to higher tax rates, and assuming taxation based on our FY2024 GHG emissions, the estimated financial impact would be about 155 million yen.

(3) Investments relevant to climate-related risks

Within the current Medium-Term Management Plan period (2023–2026), our Group plans to make growth investments totaling more than 90 billion yen. These growth investments are intended to enable business transformation for our Group as an Environment-CreatorTM, with a significant portion dedicated to addressing climate-related risks and opportunities.

(4) Internal carbon pricing​

When considering future climate-related investments, we are examining the introduction of internal carbon pricing as one of the decision criteria. The set price will be determined with reference to future carbon-price projections published by the IEA.

(5) Incorporation of climate-related indicators into executive remuneration

For executive remuneration, we have established Scope 1 and 2 GHG emissions reduction targets as non-financial indicators for determining performance-linked stock compensation, thereby clarifying the responsibility of executive directors for addressing climate-related social issues. For details, please refer to P. 86.