We recognize climate change as a critical management challenge, given the increasing frequency and intensity of natural disasters linked to extreme weather worldwide. Environmental conservation is one of our key sustainability priorities, and we are promoting initiatives across the Group to contribute to a decarbonized society through our business activities, while appropriately addressing climate-related risks and opportunities.

In 2022, we endorsed the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). In line with the TCFD framework, we disclose the actual and potential impacts of climate-related risks and opportunities on our businesses, strategy, and financial planning. Our disclosures align with the four core elements of Governance, Strategy, Risk Management, and Metrics and Targets.
We have set a target to achieve net-zero Scope 1 and Scope 2 greenhouse gas emissions by 2033 and are taking proactive actions to reduce emissions across our operations.

Governance

The Sustainability Committee oversees our climate change initiatives. The Committee is chaired by the President and CEO, and vice-chaired by the Executive Officer responsible for Corporate Planning. Its members comprise the heads of relevant departments. The Committee identifies, assesses, and monitors progress on material sustainability issues and promotes ongoing improvement in addressing important topics, including climate change. For matters requiring specialized consideration, the Committee works closely with relevant committees to enhance the effectiveness of our initiatives.
The Sustainability Committee reports its activity plans and progress to the Management Committee, where essential climate-related issues are discussed, and decisions are made. The Board of Directors receives regular reports, at least annually, on key matters determined by the Management Committee and provides oversight and guidance.

Strategy

We recognize the climate-related regulatory development and shifts in the market environment as material business risks. At the same time, we view the transition to a decarbonized society as a medium- to long-term business opportunity. To address these climate-related risks and opportunities, we have incorporated related initiatives into our sustainability medium-term plan, STY2027, and are advancing them in alignment with our medium-term management plan. Under STY2027, we have identified three priority themes: contributing to technological innovation, promoting environmental conservation, and establishing a sustainable management foundation. Our core strength in measurement and evaluation solutions provides an essential technological foundation for the transition to a decarbonized society. These solutions support the development of electric vehicles, advanced mobility technologies, next-generation batteries, and renewable energy sectors such as hydrogen energy and offshore wind power.

With the rapid advancement of technological innovation and research development, we anticipate a sustained increase in the demand for advanced measurement and evaluation technologies. We view the global transition toward decarbonization as a significant medium- to long-term growth opportunity, leading to a continued expansion in demand for our solutions.

Climate-related Scenario Analysis

We conduct climate-related scenario analysis in line with the recommendations of the TCFD to assess the potential impacts of climate change on our business. In 2022, we identified climate-related risks and opportunities and conducted a qualitative assessment of their potential financial impacts, publicly disclosing the results. In 2026, three years after the initial assessment, we reassessed climate-related risks and opportunities, considering changes in the external environment, and conducted a quantitative evaluation of potential financial impacts using quantitative data.

Scenario Analysis Process

(*1): A scenario in which climate regulations are strengthened, and global warming is limited to below 1.5℃ above pre-industrial levels.
(*2): A scenario in which greenhouse gas emissions continue to rise, resulting in a 4℃ increase in global average temperature above pre-industrial levels.

Climate-related Risks, Opportunities, and Response Measures

Time horizons: Short term (less than 3 years), medium term (3 to less than 10 years), and long term (10 to 30 years).
Financial impact: Low (less than JPY 100 million), medium (JPY 100 million to less than JPY 1 billion), and high (JPY 1 billion or more).

Results of Scenario Analysis

Our scenario analysis shows that the potential financial impacts of climate-related risks on our business are limited, while opportunities generated by climate change are set to have a positive effect. Under the 1.5℃ scenario, we have assessed that transition risks such as carbon pricing and stricter energy efficiency regulations will have an immaterial financial impact on our business. In contrast, we expect technological innovations to emerge from the transition to a decarbonized society. This shift is expected to drive demand for our measurement and testing solutions in areas such as electric vehicles, next-generation batteries, hydrogen technologies, and offshore wind power, creating significant medium- to long-term business opportunities. Under the 4°C scenario, we assert that physical risks, including storm surges, flooding, and other extreme weather events, will have a limited impact on our facilities and operations. Based on these findings, we conclude that our business will remain viable and resilient across all climate scenarios assessed through 2050.

Response to Climate-related Risks and Opportunities

We are committed to managing transition risks by setting ambitious greenhouse gas (GHG) emissions reduction targets. Our strategic phased approach encompasses the procurement of renewable energy certificates and carbon credits. We have integrated the associated costs into our financial planning, enabling us to effectively manage potential increases in operating expenses.

To manage physical risks, we are strengthening our business continuity planning (BCP) framework in response to the increasing frequency and severity of natural disasters, including heavy rainfall and large-scale typhoons. While we maintain comprehensive insurance coverage for potential facility damage, we are enhancing the resilience of critical equipment and optimizing warehouse management systems to strengthen our preparedness and mitigate the impact of disasters on our business operations.

To capture climate-related opportunities, we are expanding the provision of high-precision measurement and evaluation solutions in areas that support the transition to a decarbonized society. This includes electrification, hydrogen utilization, and renewable energy, as well as supporting the development of resilient social infrastructure, such as communications network resilience, disaster prediction, and monitoring technologies. Through these initiatives, we advance efforts in both climate change mitigation and adaptation.

We will continue to refine our climate-related scenario analysis by incorporating multiple climate scenarios and enhancing both quantitative and qualitative assessments of risks and opportunities. By integrating the results of these assessments into our business strategy, we will further strengthen our ability to respond to climate change and enhance corporate value.

Risk Management

We proactively address climate-related changes in the external environment by thoroughly evaluating the financial impacts of climate-related risks and opportunities through our Sustainability Committee. We employ a three-tier scale (large, medium, and small) to quantitatively assess these impacts and identify appropriate response measures. Risks and opportunities identified as having significant financial impacts are reported to the Management Committee and the Board of Directors. We discuss and determine suitable response measures from an enterprise-wide risk management perspective. Through this framework, we aim to minimize risks, maximize opportunities, and continuously strengthen our climate-related risk management approach.

Metrics and Targets

To minimize the environmental negative impacts associated with our business activities, we have set greenhouse gas (GHG) emissions reduction targets. In October 2025, we expanded the organizational boundary of our Scope 1 and Scope 2 emissions reduction targets to include consolidated subsidiaries in Japan and overseas, in addition to TOYO Corporation on a standalone basis. Additionally, we have accelerated our decarbonization efforts by bringing forward our net-zero target year from 2050 to 2033. These targets are aligned with a 1.5℃ pathway consistent with the goals of the Paris Agreement. Using 2024 as the base year, we aim to reduce Scope 1 and Scope 2 GHG emissions by 60% by 2030 and achieve net-zero emissions by 2033. For Scope3 emissions, we aim to quantify emissions from Category 11 (Use of Sold Products) and Category 12 (End-of-Life Treatment of Sold Products). Based on the results of this assessment and a clearer understanding of impacts across the value chain, we will establish Scope 3 emissions reduction targets.