Hirogin : TCFD Report for FY2022

Contributing to the creation of a prosperous future for the regional community, as a trusted Regional Comprehensive Services Group by closely offering thorough support to customers

TCFD Report

(Development of climate change initiatives in accordance

with TCFD recommendations)

Having declared their support for the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD), Hirogin Holdings and its subsidiary Hiroshima Bank are moving forward with qualitative and quantitative enhancements in their disclosure of matters such as the effects of climate-related risks and opportunities on Group business activities, earnings, and other results, in accordance with the TCFD framework.

1.	Key progress (highlights since April 2022)	・・・	p. 1
2.	Progress in advancing climate measures based on TCFD recommendations	・・・	p. 2
3.	Disclosures based on TCFD recommendations

(1)	Governance	・・・	p. 4
(2)	Strategy	・・・	p. 7
(3)	Risk management	・・・	p.18
(4)	Metrics and targets	・・・	p.21

Final update: June 27, 2023

Toward a brighter future

Hirogin Holdings

1. Key progress (highlights since April 2022)

1.

Governance

2.

Strategy

3.

Risk

management

4.

Metrics and

targets

• Revising the Directors' skills matrix (March 2023)
• • Adding "sustainability" to the matrix of required skills to promote and enhance sustainability management
• The Board of Directors deliberated on medium- to long-term courses of action for achieving carbon neutrality (September 2022).
• • Formulating a roadmap to achieve carbon neutrality with regard to Group emissions (Scopes 1 and 2)
  • Identifying the state of greenhouse gas emissions (Scope 3 / Category 15) generated by investees and borrowers and providing support through our engagement to achieve reductions
  • Enhancing demand and supply foundations for renewable energy within the community, in cooperation with various companies, local public agencies, and other organizations
• Efforts to achieve carbon neutrality for the Group itself
• • Adopting renewable electricity at the Head Office Building (November 2022)
  • Adopting carbon neutral city gas at the Head Office Building (January 2023)
• Response to and support for carbon neutral initiatives by community and customers
• • Adopted for and participation in the Ministry of the Environment Financial Institutions Portfolio Carbon Analysis Pilot Program Support Project (October 2022 - March 2023)
  • Launching Hirogin Positive Impact Finance (March 2023)
• Enhancing scope of disclosure of credit exposure to carbon-related assets (June 2023)
• • Enhancing the scope of disclosure beyond the energy sector to include the transport, materials/structures, and agriculture/food/forestry sectors
• Added climate change policies to the Risk Appetite Statement (October 2022)
• • Developing a structure for monitoring the state of response by subsidiaries based on climate change policies
• Revising the Policy on Investment and Financing for Environmental and Social Solutions (October 2022)
• • Establishing a target year (2035) to achieve a zero project financing balance for coal-fired thermoelectric power generation
  • Establishing investment and finance policies for coal, petroleum, and natural gas exploration, palm oil farming, and large-scale lumbering
• Established medium- to long-term targets for the Group in the areas of reducing greenhouse gas emissions and promoting sustainable finance (May 2022)
• • Target 1: Achieving Scope 1 and 2 carbon neutrality by FY2030
  • Target 2: Achieving Scope 1, 2, and 3 carbon neutrality by FY2050
  • Target 3: Extending a cumulative total of two trillion yen in sustainable finance (including one trillion yen in environmental finance) from FY2021 through FY2030
• Expanding the scope of disclosure of greenhouse gas emissions (June 2023)
• • Adding disclosure of greenhouse gas emissions generated in activities supported by Hiroshima Bank's business loans (financed emissions)
• Establishing an internal carbon pricing scheme for Scopes 1 and 2 (September 2022)

1. 5

p. 10

1. 11

1. 13 to
   16

1. 8

1. 18

1. 19

1. 21 to
   22

1

2. Progress in advancing climate measures based on TCFD recommendations

Presented below are key initiatives since Hirogin Holdings and its subsidiary Hiroshima Bank declared their
HD: Hirogin Holdings
support for the TCFD recommendations.	BK: Hiroshima Bank
2020		[BK]	Declared support for TCFD recommendations
March
August		[BK]	Established Policy on Investment and Financing for Environmental and Social Solutions [Governance] [Risk Management]
October		[HD]	Hirogin Holdings established (migration to a holding-company structure)
	[HD]	Established Environmental Policy and Policy on Investment and Financing for Environmental and Social Solutions [Governance]
			[Risk Management]
November		[HD]	Declared support for TCFD recommendations
2021		[HD/BK] Hirogin Holdings' new Head Office building opened [Strategy]
May		→ Improved the energy efficiency of the Group as a whole by concentrating the main Group head office and other functions in
			the highly eco-efficient Head Office building.
July		[BK]	Adopted for the Ministry of the Environment FY2021 Community ESG Finance Promotion Project [Strategy]
	→	Examining new business creation schemes for automotive suppliers with a focus on ESG elements (through March 2022)
		[BK]	Adopted for the Ministry of the Environment TCFD Climate Risk/Opportunity Scenario Analysis Pilot Program Support Project
September			[Strategy] [Risk Management]
	→	Analyzing and ascertaining climate change risks and opportunities for use in credit-portfolio analysis and for enhancing our
			engagement (through March 2022)
November		[HD]	Established Basic Sustainability Policy [Governance]
	[HD]	Established Group Sustainability Promotion Committee and Sustainability Management Office [Governance]
		[HD]	Concluded agreements with the Chugoku Electric Power Co., Inc. on joint efforts in support of carbon neutrality for local firms
December			[Strategy]
	[BK]	Launched Carbon Neutrality Support Consulting Services [Strategy]
		[BK]	Launched Hirogin Sustainable Loans [Strategy]
2022
January		[BK]	Launched Hirogin Sustainability Management Adoption Support Services [Strategy]

2

2. Progress in advancing climate measures based on TCFD recommendations

(Continued from previous page)

HD: Hirogin Holdings

BK: Hiroshima Bank

2022

April

May

June

September

October

November

2023

January

March

April

June

[HD]	Established Economic and Industrial Research Divisions [Strategy]
[BK]	Began offering Sustainability-linked Derivatives [Strategy]
[HD]	Established Medium-/Long-Term GHG Emissions Reduction Targets [Metrics and Targets]
[HD]	Established Medium-/Long-Term Sustainable Finance Targets [Metrics and Targets]
[BK]	Measured credit exposure to carbon-related assets [Strategy] [Metrics and Targets]
[BK]	Quantified results of scenario analysis for physical risks and transition risks [Strategy] [Risk Management]
[HD]	Established an internal carbon pricing scheme [Metrics and Targets]
[BK]	Adopted for the Ministry of the Environment Financial Institutions Portfolio Carbon Analysis Pilot Program Support Project
	[Strategy] [Metrics and Targets]

• Analysis and assessment of GHG emissions generated in activities financed by business loans (financed emissions) for enhancing our engagement (through March 2023)

[HD] Revised Policy on Investment and Financing for Environmental and Social Solutions [Governance] [Risk Management]

• Establishing a target year (2035) to achieve a zero project financing balance for coal-fired thermoelectric power generation
• Establishing investment and finance policies for specific sectors (coal mining projects, petroleum and natural gas exploration projects, palm oil farming projects, and large-scale lumbering projects)

[HD] Adopted renewable electricity at the Head Office Building [Strategy]

[HD]	Adopted carbon neutral city gas at the Head Office Building [Strategy]
[HD]	Revised the Directors' skills matrix [Governance]
→ Adding "sustainability" to the required skills to promote and enhance sustainability management
[BK]	Concluded agreements on product and service development in the field of sustainability with MEJAR banks [Strategy]
[BK]	Concluded partnership agreements to support carbon neutrality at companies in Hiroshima Prefecture with Hiroshima Gas
	Co., Ltd. [Strategy]
[BK]	Launched Hirogin Positive Impact Finance [Strategy]

[HD] Concluded agreements with Hiroshima Prefecture on promoting use of lumber in construction

• Making active use of lumber from Hiroshima Prefecture at Company branches and other facilities

[BK] Expanding target sectors in the scope of disclosure of credit exposure to carbon-related assets [Strategy] [Metrics and Targets] [HD] Publication of TCFD Report

3

3. Disclosures based on TCFD recommendations

1.

Governance

1. Description of the board's governance structure for climate- related risks and opportunities

Establishing various basic policies on climate change

• Recognizing climate change and other sustainability issues as important management topics, the Board of Directors has established various basic policies on climate change within the Group, including the Basic Sustainability Policy, the Environmental Policy, and the Investment and Finance Policy for Environmental and Social Solutions.

Policy	Overview (summary, excerpts)
	By promoting initiatives through its primary	Social	Virtuous	The Group's
	business as a Regional Comprehensive	and environmental
	increasing sustainability
	solutions and increasing	cycle
	Services Group, the Group will realize solutions
Basic	social and environmental		and corporate value
to social and environmental challenges as well as	sustainability
Sustainability
sustained growth within the community, while achieve virtuous cycles through the Group's sustained growth
Policy
and gains in corporate value to realize its management vision.

• We will consider social and environmental impact, today and into the future, in all our business activities, striving to maximize positive impacts and minimize negative impacts.
• The Hirogin Group has identified the following four materialities related to achieving the United Nations Sustainable Development Goals (SDGs). We will contribute to social and environmental solutions and sustained community growth by providing comprehensive community solutions marked by exceptional

Hirogin Group	added value.
SDGs Statement	1.	Community
We will address global warming and climate change under the
	2.	Aging
	materiality theme of the environment.
	3.	Human rights

• 4. Environment

• Our efforts to protect the environment are a key social responsibility of the Group as a member of the local community. All employees will participate in active and sustained efforts to protect the environment based on

Environmental	a keen environmental awareness.
1.	Striving to reduce the environmental impact of office activities
Policy
2.	Supporting community environmental protection activities through the Regional Comprehensive
		Services
	3.	Group employees acting in ways that reflect consideration for the environment
	 The Hirogin Group actively supports businesses that contribute to the realization of a sustainable society
	and sustainable environment, including renewable energy projects that reduce the risk of climate change
	and help build a carbon neutral society and biodiversity projects to protect forestry resources and
	endangered species.
	 At the same time, in light of the potential environmental and social risk or impact, we have identified the
	following businesses as ones requiring careful consideration before the commitment of investment or
Policy on	financing or ones for which investment or financing should be avoided altogether.
Investment and	Businesses for which no investment or financing are to be made:
Financing for	1.	Businesses involved in the development and manufacture of
Environmental		weapons such as nuclear weapons and cluster bombs
and Social	2.	Businesses involved in human trafficking, forced labor,
Solutions		and other violations of human rights
	Careful consideration required:	For more information,
	1.	Coal-fired thermoelectric power generation	see p. 19.
	2.	Coal mining
	3.	Oil and gas exploration
	4.	Palm oil farming
	5.	Large-scale lumbering

4