Introduction (Approach to Addressing Climate Change)

The SCB has formulated the "Shinkin Central Bank Group SDGs Declaration" and, as the central financial institution of all shinkin banks, is working towards the realization of a sustainable society together with shinkin banks across the country, focusing on the three important pillars of "community," "people," and "environment," in accordance with the mutual aid and non-profit principles of a cooperative organization.

With regard to environmental issues, including climate change, the SCB has formulated the “The SCB Group Environmental Policy” and is actively working to resolve these issues through its operations and other activities.

In addition, in July 2019, the SCB endorsed the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and is disclosing the following information in line with TCFD recommendations.

Governance

• Policies regarding sustainability, including climate change, are discussed at the Executive Committee and then resolved at the Board of Directors. The progress of initiatives based on the policies of the Board of Directors is discussed at Executive Committee and reported at the Board of Directors at least once a year. We regularly discuss climate change risks at committees such as the Risk Management Committee, a subordinate body of the Management Committee, and other committees.

  In addition, from the standpoint of integrated management as one banking group, we hold the “Group Sustainability Promotion Committee” meetings twice a year, a committee comprised of executive officers of the SCB and SCB Group companies to discuss such matters as the SCB Group’s policies and initiatives regarding sustainability including climate change.

  

  ※1This is a matter that is regularly discussed, so only the first meeting is listed.

  ※2Matters that have been submitted at the Board Directors after being discussed at the Executive Committee have been omitted.

• Initiatives for sustainability, including climate change, are being taken cross-organizationally, with the Sustainability Promotion Division playing a central role.

Strategy

Opportunities Associated with Climate Change

To realize a sustainable society, we set the “Shinkin Green Project” in the Medium-Term Management Plan and are actively working on measures such as promoting ESG investments and loans and decarbonizing regions. By leading these initiatives to the growth of the shinkin bank community, we aim to create a virtuous cycle for solving social issues further.

• We view the spread of renewable energy and the advancement of technological innovation as investment opportunities, and are promoting ESG investment and financing with a medium- to long-term goal of achieving a cumulative total of ¥3 trillion (from fiscal 2021 to fiscal 2030) toward 2030, the target date for the SDGs. We are also actively addressing transition finance for the transition to a decarbonized society. As a designated financial institution that conducts business adaptation promotion operations under the Industrial Competitiveness Enhancement Act, we will support the efforts of business operators to achieve carbon neutrality.
• We recognize that encouraging decarbonization efforts in regions and SMEs will not only lead to new businesses and growth opportunities for SMEs, but is also important from the perspective of revitalizing regional economies. Together with shinkin banks nationwide, the Green Project Promotion Office in the Sustainability Promotion Division, is taking the lead in promoting initiatives such as regional decarbonization in cooperation with government agencies and external organizations.

Risk Management

• We manage climate change risks in the integrated risk management framework. Specifically, we recognize that these risks are causes of generating or amplifying risks in risk categories (such as market and credit risks). We add climate change events to a risk map that classifies and organizes them according to two criteria: “impact on the SCB” and “probability of occurrence,” and visualize and share them. The risk map is reviewed, and revisions are approved as needed in the regular Risk Management Committee, which comprises executive officers and heads of related departments. We respond to risk events according to their impact and likelihood.
• We have distinguished those sectors whose financial conditions are susceptible to climate change and formulated the “Guideline for Responsible Investments and Loans by Type of Business.” By making investments and loans in accordance with this Guideline, which is continually being revised, we contribute to the realization of a sustainable society as well as manage the financial impact on the SCB. In April 2024, we set forth a policy on investments and loans applicable across all businesses.
  
• We adopted the Equator Principles in April 2021. Based on them, we have established an internal management system and evaluate the environmental and social impacts of projects in the decision-making process for project finance, etc., and continuously monitor those developments even after the project begins operation.
• In the framework of credit screening, the impact of ESG factors on the creditworthiness of the customer is qualitatively evaluated, and credit decisions are also made based on the evaluation results. In addition, when investing in funds, we evaluate the ESG investment stance of the entrusted asset management company and make investment decisions based on the evaluation results.

Metrics and Targets

• We have set a target of ¥3 trillion for the cumulative amount of ESG investments and loans from fiscal 2021 to fiscal 2030. The scope of ESG investments and loans is defined as investments and loans that contribute to solving environmental and social issues (bonds, loans, funds, project finance, PFI, etc.) with reference to international principles and government guidelines.
  
• We have set targets for reducing the balance of investments and loans used to finance the construction of coal-fired power plants by 50% by fiscal 2030 from the end of fiscal 2020 and to zero by fiscal 2040.
  

• To contribute to “carbon neutrality by 2050,” as outlined in the Paris Agreement and by the Japanese Government, the SCB has set a target to reduce greenhouse gas emissions (Scope 1 and Scope 2)^※2 to virtually zero by fiscal 2030. Based on the road map for the target, we divided our initiatives toward carbon neutrality into two phases: Phase 1, which is up to fiscal 2025, and Phase 2, which begins from fiscal 2026. We set staged targets for each phase and are implementing various measures around the three pillars including “decarbonization,” “energy-saving,” and “energy creation.”

  In Phase 1, our target is to reduce greenhouse gas emissions to 2,000 t-CO2 or less by fiscal 2025. In fiscal 2023, we implemented decarbonization measures such as switching to electricity generated from renewable energy and introducing hybrid and electric vehicles.

  In addition, to further expand measures for fiscal 2024 and beyond, we are implementing new initiatives such as considering the introduction of carbon neutral gas and undergoing energy-saving diagnosis by an third-party organization.

  
  
• In order to reduce CO2 emissions, we are taking actions to reduce electricity consumption to meet the targets under the “shinkin bank community’s environmental voluntary action plan.”