Long-Term Sustainability Indicators

In FY2023, the balance of funds extended in retail transition financing grew around 1.9 times from the previous fiscal year to 1.9 trillion yen, bringing the cumulative three-year total to roughly 3.7 trillion yen. This represented a progress ratio of 37% against to our target of 10 trillion yen. The above growth in the financing balance was mainly attributable to Sustainability-Linked Loans (SLLs) for large corporations and social loans for public sector customers, as well as the robust performance of SX financing for SMEs and housing loan products designed to help address environmental and social concerns.

Looking at the breakdown, financing in the environment-related field increased around 1.7 times year on year to approximately 510 billion yen. Of this, funds extended as financing in conformity with external sustainability standards, such as the Green Loan Principles, accounted for more than 90%. Moreover, the volume of funds extended in other fields increased roughly twofold to approximately 1.4 trillion yen, with nearly half this amount extended in financing in conformity with such external standards as Social Loan Principles.

With regard to the provision of non-financing solutions, our simplified CO₂ emission calculation service released in the previous fiscal year to help SMEs visualize the volume of their CO₂ emissions was used on around 4,000 occasions, an increase of roughly 1.5 times year on year. We also focused on providing SDG-related matching services^*5 to support interaction and cooperation among customers in connection with the United Nations Sustainable Development Goals (SDGs). In FY2023, these services led to roughly 1,600 cases of successful matching.

As such, our financing and non-financing solutions are even more sought after than they were a year earlier. However, we are still only halfway through the journey toward realizing our vision, which states, “In striving to update the Group’s business model, we help customers embrace new lifestyle norms so that we can together adapt to change” and “We aim to become the most significant contributor to customer success in SX.” We will continue to facilitate in-depth dialogue with customers while strengthening our ability to deliver solutions.

1. *5Matching services involving referrals to SDGs-related products and services handled and relevant seminars hosted by other corporate customers, etc.

The Resona Group has taken the various types of organizational action it is able to take to help customers update their awareness and transform their modes of behavior and arranged them as six steps as illustrated in the diagram on the right.

Every year, we specify a step for particular focus. For FY2023, the Group focused on two steps “gathering information” (step 4), i.e., helping customers systematically assess their current situation via the use of a broader perspective, and “providing SX-related solutions” (step 5), rallying its entire strength to serve corporate customers.

Drawing on knowledge accumulated through dealing with a wide variety of cases over the course of the initiatives described above, we have formulated a flow of model initiatives for SMEs using standards we have formulated—to help them properly respond to urgent public calls for carbon neutrality and steadily move forward from their current situation. In FY2024, we will utilize this flow to help customers assess their current situation and identify the steps they should take next. In this way, we will engage in in-depth dialogue with customers and deliver optimal solutions aligned with varied situations they face.

Financed Emissions represent indirect GHG emissions associated with investment and financing undertaken by financial institutions and account for the largest proportion of emissions attributable to such institutions’ activities.

In order to promote the measurement, monitoring and reduction of financed emissions, the Group calculates portfolio related GHG emissions volumes in accordance with standards formulated by the PCAF^*6, an international initiative, prioritizing carbon-related sectors specified by the TCFD. As the above calculation is performed using a simplified method based mostly on estimated values provided by the PCAF database, the Group recognizes the possibility of deviation from the actual volume of GHG emissions.

In addition, loans to SME customers account for the majority of the Group’s loan balance. Looking ahead, we will promote in-depth dialogue with customers and step up our supportive efforts to act as their “running partner,” with the aim of facilitating the widespread practice of emissions-related disclosure among business corporations while helping them adopt more sophisticated methods for the calculation of emissions volumes.

1. *6Partnership for Carbon Accounting Financials

The energy sector is an infrastructure component supporting all industries as well as people’s daily lives. Accordingly, pursuing the decarbonization of this sector is essential to facilitating decarbonization among our retail customers. As the characteristics of power generation businesses differgreatly by region, decarbonization efforts must give due consideration to country and region-specific factors. Looking at factors specific to Japan, the country’s energy base is highly dependent on coal- and gas-fired thermal power generation. Moreover, there is a lack of land suited for establishing transmission networks and renewable energy power plants.

The majority of the Group’s portfolio of financing for the energy sector is accounted for by financing for domestic businesses and projects. Therefore, we will give due consideration to domestic circumstances to support the stable supply of energy even as we contribute to the widespread use of renewable energy an essential solution for decarbonization while helping clients achieve transition and technological innovation. In these ways, we will continue playing our part in the decarbonization of Japan’s energy sector.

The Group has established and announced its “Basic Stance on Lending,” which includes a policy of abstaining from freshly extending financing for coal-fired thermal power generation, except when it finds compelling reasons to do so, such as to realize economic restoration following a disaster. The Group also plans to reduce the balance of credits extended in connection with financing for existing coal-fired power generation projects to zero by the end of FY2035.