Response to TCFD｜Sustainability｜SINANEN HOLDINGS CO., LTD.

The Sinanen Holdings Group has expressed its support for the TCFD (Task Force on Climate-related Financial Disclosures) recommendations to further improve the effect of measures against climate change, which is a key management issue, and participates in the TCFD Consortium, which is a forum for supporting companies and financial institutions to hold discussions.
In addition, by recognizing the various risks caused by the impact of climate change, ascertaining the market changes as well as opportunities and threats from various perspectives, and engaging in efforts to improve efficiency and optimization, we will be able to fulfill our social mission of delivering energy to customers safely and stably, while at the same time contributing towards the reduction of greenhouse gas emissions and mitigating the impact on climate change.

Governance

The Group regards the response to climate change as an important management issue, and has established a Sustainability Promotion Committee chaired by the President and CEO of Sinanen Holdings Co., Ltd.; issues concerning sustainability in general are ascertained across the Group, and discussions are held regarding specific response measures and the setting of targets.
The deputy chairperson of the Sustainability Promotion Committee is the Chief Compliance Officer, who is the chairperson of the Risk Management and Compliance Committee, to enhance the comprehensiveness of risk management for the entire Group, and the members of the committee comprise of the persons in charge at the relevant departments with jurisdiction over Group-wide initiatives, which allows for the strengthened interconnectedness of business.
Details on the discussions and decisions by the committee will be reported to the Board of Directors, which will approve the measures to be implemented by the Group and provide necessary advice.
In addition, the progress of the sustainability initiatives of the Group, including the response to climate change, will be reported to the Board of Directors at least once per year.

Sustainability Promotion System Diagram

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Strategy

The climate change risks and opportunities scenario analysis targets the petroleum business and LP gas business, which occupy over 80% of Group sales (FY 2021 results), due to the size of their expected financial impact.
We set 2050 as the analysis time axis, as this is when migration risks and physical risks will become larger and apparent, and have conducted analysis for the scenarios at both 4°C and 2°C.
For the analysis method, we identified the items that are closely related to the business of the Company from the SDGs targets and TCFD recommended disclosure items, and performed calculations for migration risks and physical risks respectively.
The analysis work was focused on migration risks, which will have a high level of impact on business, and for physical risks, we mainly calculated the level of impact of natural disasters on the real estate owned by the Company.
Risks and opportunities were organized for each item, their timing of occurrence was categorized as short term, medium term, or long term, and their level of impact was categorized as low, medium, and high.

TCFD Category		Item	Risk	Opportunity	Timing of Occurrence	Level of Impact
Migration Risks	Policy and regulation	Introduction of carbon taxes and carbon pricing	Decrease in demand for fossil fuels due to the introduction of carbon pricing Increase in costs for the procurement of fuel due to the introduction of carbon pricing	ー	Medium to long term	High
	Policy and regulation	Setting of decarbonization target	Increased credit purchasing costs if target not achieved	Increased profit from credit sales if target is achieved	Medium to long term	High
	Market	Changes in energy mix / changes in energy prices	Increased energy procurement costs due to transportation expenses Decreased demand due to soaring energy prices	Increased profits of the renewable energy business Increased sales of petroleum alternative fuels	Short to medium term	High
	Market	Increased market share of carbon-free products	Decrease in demand for gasoline due to the spread of electric vehicles and hydrogen vehicles	Promotion of LPG low carbon fuel	Short to medium term	Medium
	Technology	Introduction of new decarbonization and low carbon technology	Decreased sale of petroleum, etc., due to the spread of decarbonized materials such as bioplastics Increased costs for introducing equipment such as environmentally-friendly vehicles	Decreased costs in conjunction with improved fuel efficiency of environmentally-friendly vehicles and improved distribution efficiency Reduction of transportation costs through the introduction of smart meters and the improvement of delivery efficiency	Short to medium term	Medium to high
	Technology	Risk in investing in the development of new technology	Increased investment costs and obsolescence of investment targets in renewable energy, etc., investments	Increased profits from investments in renewable energy, etc.	Medium to long term	Medium
	Reputation	Changes in demand due to consumer preference for carbon-free	Increased funding costs due to acceleration in divestment from oil and gas business	ー	Medium to long term	Low
	Reputation	Increased amount of concern from stakeholders	Increased response costs due to increased demand for action against climate change	ー	Medium to long term	Low to medium
Physical Risks	Acute risks	Occurrence of flood damage due to typhoons and heavy rains	Increased damage recovery costs, countermeasures costs, and insurance premiums for owned assets Decreased revenue due to reduction in days when business can be conducted and restrictions on use Increased costs in conjunction with delivery delays and larger number of accidents Impact of supply chain division on business continuity Decreased asset value of properties located in areas with high flood risk	Increased LP gas stockpile due to lifeline division	Short to medium term	Medium
	Chronic risks	Rise in sea levels	Flooding of factories and facilities located in bay areas, etc. Property relocation costs	ー	Medium to long term	Low
	Chronic risks	Rising average temperature	Decreased demand for gas in conjunction with increases in average temperature and water temperature	ー	Medium to long term	Low

In regard to following materialities selected in the assessment of risks and opportunities that have a high level of impact, we selected relevant scenarios and parameters, and evaluated the financial impact for each scenario at 4°C and 2°C respectively.
In regard to the materiality items specified by the scenario analysis, we will improve strategic resilience through the reflection of these in the formulation of our long term vision and medium-term management plan, in order to minimize the risks and to maximize the opportunities.

High Impact Items

Changes in sales due to climate change	Changes in costs due to climate change
Decreased sales due to decreased demand Soaring energy price due to the introduction of carbon taxes and carbon pricing, and decreased demand for energy due to this Decreased demand in conjunction with the spread of hydrogen and electric vehicles, etc. Decreased demand for petroleum, etc., in conjunction with the spread of decarbonized materials Decreased demand for gas in conjunction with increased temperatures and water temperatures	Increased costs in conjunction with the introduction of carbon taxes and carbon pricing Increased costs due to the introduction of carbon taxes and carbon pricing Increased carbon credit costs in conjunction with the non-achievement of carbon emissions
Increased sales in the renewable energy business	Increased transportation expenses Increased transportation costs in conjunction with soaring energy prices (gasoline, light oil, etc.) Increased transportation costs due to the passing of capital investment in EV vehicles and transport costs on to price
Increased sales of fossil fuel alternatives	Increased capital investment 　 Increased equipment costs in conjunction with water damage from floods and typhoons, etc.

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Risk Management

The Group collects and analyzes information on a wide range of risk factors, such as climate change-related regulations and the impact on business. The important opportunities and risks that should be kept in mind are assessed and specified at the Sustainability Promotion Committee, and are supervised and monitored by the Growth Strategy Department, which is the committee's secretary office.
In addition, the Chief Compliance Officer concurrently serves as the deputy chairperson of the Sustainability Promotion Committee and the chairperson of the Risk Management and Compliance Committee, which allows for the sharing of issues between the two committees and the integrated performance of risk management across the organization.

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Indicators and Targets

The Group has set the two indicators of GHG emissions and carbon productivity for the assessment and management of climate change risks and opportunities, and will simultaneously realize business growth and reduced GHG emissions.

Indicator	Target	Target Scope
(1) GHG emissions	Reduction of GHG emissions	Scope1+2
(2) Carbon productivity	Business growth and increased carbon efficiency	Scope1～3

Indicator (1) GHG Emissions

Upon having calculated the overall emissions of Scope 1 to 3, we set targets for reduction with a focus on Scope 1 and Scope 2, for which there is significant margin for reductions through our own efforts.

Subject Fiscal Year	Reduction Target
FY 2030	Scope 1 + Scope 2 50％ reduction (compared to FY 2016)
FY 2050	Scope 1 + Scope 2 carbon neutral (substantially zero emissions)

Specific Initiatives

Indicator (2) Carbon Productivity

As an index of achieving not only financial expansion (sales, profits, etc.), but also decarbonization of the entire supply chain on the basis of cooperation with stakeholders, carbon productivity (i.e. measurement of productivity per ton of GHG emissions) will be adopted.

Carbon productivity = gross profit / GHG emission. The aim is to convert to a business structure appropriate to a decarbonized society, i.e. with lower GHG emission and higher profit generated.

Subject Fiscal Year	Target
FY 2027	Scope 1 to 3 6.0% increase in the entire supply chain (compared to FY2016)

Specific Initiatives

Please refer here for GHG Emissions (Scope 1 to Scope 3) results.

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