Our Response to Climate Change- and Nature-Related Issues (initiatives related to the TCFD and TNFD recommendations)

Resona Holdings will deepen its efforts in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and the Task Force on Nature-related Financial Disclosures (TNFD) and will work to expand its disclosures.

The Board of Directors is responsible for overseeing responses to climate change and nature-related issues as an important element of sustainability initiatives. Please refer to "Sustainability Implementation Structure" for specific oversight structures and status. The Board of Directors has also established the Resona Group Environmental Policy, which includes supporting international environmental norms and engaging in dialogue with stakeholders, including business partners, to improve efforts on climate change and biodiversity in line with those norms. In addition, bearing in mind that environmental issues are closely related to human rights and local communities, the Board of Directors has also established the Resona Group Policy on Human Rights, which includes supporting international human rights norms and engaging in dialogue with stakeholders, including local communities, to improve efforts on respect for human rights in line with those norms.

To measure the impact of climate change, which is highly unpredictable, we have undertaken qualitative and quantitative evaluations of opportunities and risks based on two different scenarios involving, respectively, a 1.5℃ and a ℃ rise in global temperatures.

This evaluation includes the assessment of estimated impact in the short-, medium- and long-terms, which are defined as approximately 5-, 15- and 35-year periods, respectively.

We recognize that the risks and opportunities described above could result in a significant financial impact on our portfolio of loans, which represents the Group’s largest asset.

Based on this recognition, we have selected priority sectors requiring urgent action from among carbon-related sectors specified by the TCFD. Targeting these sectors, we conducted an in-depth analysis of climate change scenarios.

Currently, these priority sectors comprise (1) “Energy / Utility,” (2)“Transportation / Automotive” and (3) “Real estate development / Construction.”

Based on the qualitative analysis, we conducted a quantitative analysis of the impact on the Group’s financial performance of transition and physical risks.

The characteristics and magnitude of transition risks’ financial impact vary by sector. Also, these factors may be altered going forward by measures undertaken by businesses pursuing carbon neutrality. Accordingly, our qualitative analysis has targeted priority sectors selected via qualitative analysis. In addition, we have positioned “introduction and/or heightening of carbon tax” as an important risk factor to be used as an assumption for our scenario in light of the universal impact of such taxation on each sector. Moreover, in reference to publicly approved scenarios, we have assumed a 1.5°C rise in global temperature to assess the resulting future impact on our clients. In this way, we estimated our exposure to credit risks that may emerge during the period leading up to 2050.

The Resona Group has positioned risks that are deemed to possess a high possibility of impacting heavily on the Resona Group as top risks in order to develop a consistent risk management structure, placing the foremost emphasis on managing these risks.

Top risks recognized as being relevant to sustainability include “Deterioration in competitiveness, etc., due to changes in social and industrial structures,” “Changes in the earnings structure and deterioration in profitability, etc., due to the revision of laws, regulations, government policies, etc.,” and “Operational suspension, etc., due to the occurrence of natural disasters.”

We have also identified such main risk scenarios as “Loss of growth opportunities, the emergence of stranded assets and other issues due to delays in the response to climate change and biodiversity issues, etc., that negatively impact corporate value,” “Deterioration of corporate value due to the absence of information disclosure practices that can be considered sufficient by external stakeholders,” and “Operational suspension or other serious consequences, including a threat to human life, due to a major natural disaster, such as an earthquake, massive wind or flooding, or a pandemic.”

Top risks are determined via discussion at the Executive Committee, the Board of Directors and other important bodies. Through top risk management, the Company is striving to enhance risk governance, prevent the emergence of significant risks, ensure swift response to risk materialization and curb the spread of risk repercussions.

We have also clarified types and definitions of risks to be managed and the organizational structure for risk management as well as the fundamental risk management framework, with the aim of establishing a structure enabling us to manage various risks by using methodologies aligned with their characteristics.

To address credit risk, which is considered to have a particularly strong impact on the Group’s operations, we are working to step up risk management via, for example, “Initiatives for Socially Responsible Investing and Lending” described below.

In 2021, the Resona Group established Long-Term Sustainability Targets for its long-term initiatives aimed at mitigating climate change-related risks and increasing opportunities. In May 2023, we announced our commitment to reach net zero emissions by 2050 in terms of Scope3 Category 15 greenhouse gas emissions resulting from our investment and loan portfolio. We also announced an interim target to lower emissions in the electric power sector2022.