Disclosure Based on TCFD Recommendations

Introduction (Way of Thinking About Climate Change Initiatives)

The SCB formulated the “Declaration of Shinkin Central Bank Group on SDGs.” As the central bank for all shinkin banks, the SCB implements initiatives together with shinkin banks throughout Japan toward the realization of a sustainable society by the principle of mutual support and nonprofit of a cooperative institution focusing on three important themes, namely the “region,” the “people” and the “environment.”

For environmental problems, including climate change, the SCB formulated the “SCB Group Environmental Policy” and is actively involved in solving these problems through its business and other activities.

In July 2019, the SCB endorsed the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Information is disclosed in line with TCFD recommendations as follows.


  • We hold an Executive Committee meeting to deliberate on our response policies regarding the SDGs including climate change, and then resolve them at the Board of Directors. We deliberate on the status of our initiatives based on the policies of the Board of Directors at meetings and then make reports to the Board of Directors at least once a year. We regularly deliberate on climate change risks at committees such as the Risk Management Committee, a subordinate body of the Management Committee, and other committees.
  • From the standpoint of integrated management as one banking group, we hold the “Group Promotion Committee on SDGs” 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 the SDGs including climate change.
  • Initiatives about SDGs, including climate change, are being taken cross-organizationally, with the SDGs Promotion Division playing a central role.


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 industry, we aim to create a virtuous cycle for solving social issues further.

  • We regard the penetration of renewable energies and the advancement of technological innovations as investment opportunities. Toward the SDGs target deadline of 2030, we have set a medium- to long-term goal of a cumulative total of ¥3 trillion in ESG investments and loans (from fiscal 2021 to fiscal 2030) and promoted ESG investments and loans. We are also actively addressing transition finance for the transition to a decarbonized society. As a designated financial institution that conducts business adoption promotion operations under the Act on Strengthening Industrial Competitiveness, we will support initiatives of business operators toward realizing carbon neutrality.
  • We recognize that encouraging decarbonization initiatives by regions or SMEs will create new businesses and obtain growth opportunities for SMEs and will also be important from the standpoint of revitalizing regional economies. Together with shinkin banks nationwide, the Green Project Promotion Office, established within the Regional Innovation Division, is taking the lead in promoting initiatives such as regional decarbonization in cooperation with government agencies and external organizations.
Regional economy ecosystem

Risks Associated With Climate Changes

As climate change risks, we recognize that the assumed risks include the risk associated with a transition to a low-carbon society, such as tightening regulations and technological innovations relating to the climate (transitional risk) and the risk associated with physical damage due to causes such as an increased number of the natural disasters and abnormal weather related to climate change (physical risk). We establish a business continuity structure and take measures, such as assessing impacts on finance conditions of the SCB because these risks are assumed to have a direct impact on our business activities and an indirect impact from affected investment and loan customers.

  • As the central bank for all shinkin banks, our business continuity plan (BCP) recognizes that in continuing to provide financial functions required to maintain the economic activities of shinkin banks as well as stakeholders, storm and flood damage and other disasters are events that have a material impact on performing businesses. We have established a structure that enables us to continue essential businesses when these become apparent.
  • To assess the impact on the financial conditions of the SCB quantitatively if customers are affected by climate change, we conducted a scenario analysis as follows.

    Scenario Analysis for Climate Change

    Based on the “Practical Guide for Scenario Analysis of Climate Change Risks and Opportunities in Accordance with TCFD Recommendations (for the Banking Sector) ver.2.0” released by the Ministry of the Environment, we analyzed two scenarios: "1.5 °C" and "4 °C." Based on the TCFD recommendations, we selected loans and bills discounted as exposure to be analyzed.

    ①Organization of outlook of the world per scenario

    The outlooks of the world in “the 1.5 °C scenario” and “the 4 °C scenario” are as follows.

    Outlook of the world in the 1.5℃ scenario
    Outlook of the world in the 4℃ scenario

    ②Selection of important sectors

    Given the degree of climate change impacts and the scale of exposure of loans and bills discounted, we selected the electricity and real estate sectors as important sectors for scenario analysis.

    ③Organization of transmission channels for impacts on financial conditions of important sectors

    We organized the transmission channels in which climate change impacts companies’ financial conditions in the important sectors in “the 1.5 °C scenario” and “the 4 °C scenario.” In organizing the transmission channels, we recognized important elements as listed in the table below.

    Important Elements That Impact  Each Sector

    ④Quantitative assessment of transitional and physical risks in important sectors

    In line with the transmission channels, we estimated each company’s financial statements by 2050. We calculated the increase in creditrelated costs appropriate to the corporate credit strength changes derived from the resulting estimation.

    Transitional Risk
    Physical Risk

    ⑤Scenario analysis results

    For the important sectors, the transitional risk by 2050 is around ¥17.1 billion on a cumulative basis, while the physical risk is a slight amount, showing the impact of both risks on financial conditions is limited.

  • As of March 31, 2023, carbon-related assets accounted for 25.4% of total loans*. Based on TCFD recommendations, loans to the energy, transportation, materials and construction, and agriculture, food, and forest products groups are defined as carbon-related assets.
    * Total direct lending to members (shinkin banks) and non-members (¥9,266.4 billion)

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 risk 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 these. 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. The risk events' measures are taken according to their impact and probability.
  • We have distinguished those sectors whose financial conditions are susceptible to climate change and formulated the "Guideline for Making Responsible Investments and Loans by Type of Business." By making investments and loans in accordance with this Guideline, which is continually being revised, we are making a contribution to the realization of a sustainable society as well as managing the financial impact on the SCB. In July 2021, we tightened our policy on investments and loans for coal-fired power generation.

    [Outline of the Guideline for Making Responsible Investments and Loans by Type of Business]

    1. Cluster munition manufacturing businesses

      Because of the inhumane nature of cluster munitions, we will not provide investments or loans to companies engaged in such business.

    2. Coal-fired power plant businesses

      Compared to other power generation methods, coal-fired power plants emit a significant amount of greenhouse gases, making such businesses a major contributor to negative environmental impacts. With this in mind, we will not provide investments or loans that will be used to finance the construction of coal-fired power plants.

    3. Palm oil farm development businesses and deforestation businesses

      Palm oil farm development businesses and deforestation businesses run the risk of illegal logging and adversely affect the ecosystem. Before providing investments or loans that will be used to finance such businesses, we will carefully consider any impact on regional communities and the environment.

  • The SCB adopted the Equator Principles in April 2021. Based on these principles, we assess the environmental and social impacts of projects in the decisionmaking process on project finance, etc., and continuously monitor the status of environmental and social considerations even after the project has been put into operation.In April 2022, we established the Procedures for the Equator Principles.
  • In the framework of credit screening, the impact of ESG factors on the creditworthiness of the credit recipient 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.
    Amount of ESG investments and loans executed
  • 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.
    [Balance of investments and loans used to finance the construction of coal-fired power plants
  • 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 will contribute to realizing a decarbonized society by switching to electricity derived from renewable energy sources and saving energy.
    Greenhouse gas emissions
    Road map toward reduction of greenhouse gas emissions to virtually zero
  • In order to reduce CO2 emissions, efforts are underway to achieve electricity consumption reduction goals based on the "shinkin bank industry’s environmental voluntary action plan," and have achieved actual reduction that exceeds the reduction target for fiscal 2030.
    Electric power consumption