For the EnvironmentResponse to Climate Change and TCFD Endorsement
Initiatives to Address Climate Change
Under Tokyo Century Group’s management philosophy, the Group “will work alongside customers in pursuit of their growth as a highly specialized and unique financial services company and will contribute to the creation of an environmentally sound, sustainable economy and society.” We have recognized that addressing climate change is important for creating an environmentally sound, sustainable economy and society, identified materiality (key issues) linked to the SDGs, and have been working on these issues.
Tokyo Century announced its endorsement of the recommendations of the Task Force on Climate-related Financial Disclosures* (TCFD) on April 28, 2021. In addition, based on a risk materiality assessment related to climate change, we identified climate change risks and opportunities under multiple scenarios and conducted qualitative and quantitative business impact assessments for our environment and energy business (solar power generation) in line with TCFD recommendations.
Going forward, we will further consider how to address risks and seize opportunities as well as expand businesses subject to scenario analysis while also improving the accuracy of the analysis. We will continue to promote sustainability management through our business activities, including our solar power generation and other renewable energy businesses, towards fulfilling our management philosophy.
Task Force on Climate-related Financial Disclosures（TCFD）
Established by the Financial Stability Board (FSB) at the request of the G20 to review how climate-related information should be disclosed and how the financial sector accounts for it. In June 2017, it published recommendations on corporate disclosure of climate change initiatives.
In the governance system of Tokyo Century Group, the Sustainability Committee, responsible for planning, promoting, and overseeing Group-wide sustainability activities, deliberates the sustainability management strategy on climate risks and opportunities. Key issues are submitted to and discussed at the Management Meeting and the Board of Directors Meeting.
The Sustainability Committee is chaired by the president of the Corporate Planning Unit and composed of relevant directors and the presidents of each unit. The Sustainability Management Division in the Corporate Planning Unit serves as the secretariat, and the committee meets in principle twice a year. It works under the supervision of the Board of Directors to strengthen the PDCA cycle for sustainability management.
The following link provides more information on the structure for promoting sustainability management.
Tokyo Century Group uses a materiality map to verify the importance of issues from the perspectives of Tokyo Century and its stakeholders and determines the five areas of materiality (key issues), which include climate change measures, that correspond with the SDGs. The Group then pursues sustainability management to promote businesses that contributes to the sustainable development of society in collaboration with partner companies.
Materiality (Key Issues) and the SDGs
Tokyo Century Group recognizes climate change as one of the most important social issues facing global society, and it is therefore a key management issue in its materiality as a “contribution to a decarbonized society.” As long-term risks leading up to 2030, we recognize the physical risks of emergency due to extreme weather events such as typhoons and torrential rains as well as transition risks such as the introduction of a carbon tax and stricter laws and regulations. As a result of a risk severity assessment by industry and by business segment, we selected the environment and energy business (solar power generation) for scenario analysis. We conduct the scenario analysis in accordance with TCFD recommendations following the four processes below.
Detailed cenario Analysis (by Process)
- ■Risk Severity Assessment
Risks and opportunities in the Environment and Energy Business (Solar Power Generation)
Only items that were assessed as “Large” in terms of impact on the business related to risks and opportunities have been listed.
- ■Definition of Scenario Groups
The Reason for the Scenario Selection
We used the Sustainable Development Scenario (2°C or lower scenario) and the New Policy Scenario (4°C scenario) published by the International Energy Agency (IEA), which are widely used in various assessments.
Future Society under the 4°C Scenario
Future Society under the 2°C Scenario
- ■Business Impact Assessment
In order to evaluate the impact of climate change on the environment and energy business (solar power generation), which is the subject of our scenario analysis, we projected various parameters as estimates up to 2030. As a result, we assumed under the 4°C scenario that non-life insurance costs would increase by approximately \400 million as costs of physical risks. Furthermore, we estimated the impact in 2041, after the end of the Feed-in Tariff (FIT) program, and found that the business will continue to be profitable even if the purchase price drops to \7/kWh (Agency for Natural Resources and Energy, “Price Target”: Fundamental Review of FIT Program and Renewable Energy Policy Reconstruction, April 2019).
We assumed under the 2°C Scenario that non-life insurance costs would increase by approximately \300 million as a cost burden due to physical risks. Although the purchase price will be affected after the end of the FIT program, the estimated impact in 2041 shows that the business continues to be profitable. The results of analysis under the 2°C scenario show a high expectation for profit growth through the capture of opportunities due to expected increases in non-fossil value and opportunities in the renewable energy business, including solar power generation.
The impact of both physical and transition risks on the overall portfolio of Tokyo Century Group was limited in this scenario analysis. Based on the results of these scenario analyses, however, we will continue to strive for sustainable growth by strengthening our resilience to climate change and taking advantage of business opportunities.
- ■Definition of Countermeasures
As a result of the scenario analysis, the following countermeasures have been defined to mitigate risks and capture opportunities from climate change.
The scenario analysis related to the environment and energy business (solar power generation), considered to be significantly affected by climate change, found no significant impact on the current business strategy. Other business activities are also affected by climate change, but we currently believe that risks in individual business activities have a limited impact on the overall performance of the Group.
Going forward, we plan to prepare a scenario analysis from the perspectives of both risks and opportunities, prioritize businesses with a significant business impact, and consider specific policies while monitoring the impact of climate change on our business as a whole.
Toward realizing a decarbonized society, we will work on businesses related to new environment-related technologies along with customers in pursuit of their growth to reduce climate-related risks and will contribute to the creation of an environmentally sound, sustainable economy and society.
Tokyo Century Group has established the Basic Risk Management Policy and set up its Comprehensive Risk Management Committee to identify and evaluate Group-wide risks that may significantly impact management and to appropriately address both qualitatively and quantitatively as necessary to implement comprehensive risk management.
Regarding climate change risk as an operational risk in a non-financial risk category, we have a system in place to report monitoring results to the Board of Directors twice a year through the Comprehensive Risk Management Committee as a risk indicator for non-financial information.
The following links provide more information on our governance system, risk management, and environmental management system.
Metrics and Targets
Based on its Basic Environmental Policy, Tokyo Century Group is working to reduce its environmental load by adopting an ISO 14001-certified environmental management system (EMS).
We have set targets for contributing to environmental well-being through our business activities, including office activities and renewable energy business, and continuously manage these activities by calculating annual CO2 emissions. In fiscal 2020, electricity consumption* was 11,746,000 kWh, CO2 emissions were approximately 5,521 t-CO2, annual power generation through the solar power generation business (Kyocera TCL Solar LLC and 2 other companies) was 414,000 MWh, and CO2 emission reduction was 173,000 t-CO2.
*The target companies were those within the scope of the EMS plus domestic core affiliates.
The following link provides additional environmental performance information related to the metrics and targets.