Long-Term Sustainability Indicators

In FY2024, the amount of funds extended in retail transition financing was approximately 1.9 trillion yen, virtually unchanged from the previous fiscal year, bringing the cumulative four-year total to roughly 5.7 trillion yen. This represented a progress ratio of 57% against our target of 10 trillion yen.

The breakdown of such financing has not changed substantially. The volume of financing in the environment-related and other fields was on par with the level recorded in the previous fiscal year, while the proportion of such financing in conformity with external sustainability standards remains flat year on year. In the environment-related field, funds extended as financing in conformity with external sustainability standards^*7, such as the Green Loan Principles, accounted for more than 90%.

With regard to the provision of non-financing solutions, we have focused on engaging with SME customers to assess the status of their initiatives to achieve carbon neutrality via interviews. These efforts, in turn, encouraged customers to utilize our simplified CO₂ emission calculation service, with the number of cases in which this service was delivered growing approximately threefold.

On the other hand, the number of SMEs that regularly assess the volume of their CO₂ emissions remains low. It was also confirmed that the status of their initiatives varies greatly, depending on the size of their operations.

We will continue to facilitate in-depth dialogue with customers while strengthening our ability to deliver solutions.

1. *7Financing in conformity with Green Loan Principles, Social Loan Principles and other standards

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^*8, 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. *8Partnership 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.

We launched discussions with major domestic power companies engaged in loan transactions with us, with the aim of promoting decarbonization.

Main points discussed thus far

• Policies and targets for decarbonization
• The content of plans for the achievement of targets
• Status of progress in the plans and issues

Through these discussions, we learned that the current energy mix varies greatly by power company and as does their potential for renewable energy generation. We also identified a variety of issues that should be tackled to realize decarbonization even as power companies strive to maintain stable supplies of the energy needed to support the industrial and living infrastructures of regional communities.

We will maintain an accurate understanding of these issues in order to continuously extend optimal financial support to facilitate transition.