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.

Governance

• 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.

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 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.

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.
  
• 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 will contribute to realizing a decarbonized society by switching to electricity derived from renewable energy sources and saving energy.
  
  
• 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.