Disclosure Based on TCFD Recommendations

The Nishitetsu Group recognizes that preservation of the global environment is an important issue in order to contribute to the realization of a sustainable society and to be a company that is trusted by society and continues to grow over the long term. To this end, we have established the “Nishitetsu Group Environmental Policy” with the aim of reducing our environmental impact through business activities in harmony with the environment and contributing to the realization of a recycling-oriented society and the control of global warming, and have been implementing activities to reduce our environmental impact.
The Group is engaged in a variety of businesses, including transportation, such as the railway and bus businesses, real estate, and retail, and each of these businesses requires a specific response.
In March 2022, we endorsed the TCFD recommendations and disclosed the results of analyses for our railway and bus businesses. Additionally, we conducted scenario analyses based on the TCFD recommendations for leasing,housing, supermarkets/liquor stores, global logistics and hotel businesses, and we are disclosing this information. We will continue our efforts to appropriately address climate change and protect the global environment.
With this disclosure, we are now providing the results of scenario analyses for divisions and group companies that account for approximately 90% of the Group's CO2 emissions.

The Group has identified eight material issues, including climate change issues. In response, we have established a system to promote sustainable management by establishing the ESG Promotion Committee, the Executive Committee, and various committees to discuss important policies and directions in sustainable management and to assist the President & CEO in decision-making.
The ESG Promotion Committee is chaired by the President and CEO and attended by all executive officers. Council meetings are held monthly to receive reports on activities related to sustainable management from each committee, each division, and the executive officers in charge of each group company and to confirm the status of implementation.
In addition, the Committee also directs the company to set voluntary targets for solving climate change issues, checks the progress of the “Environmental Impact Reduction Plan,” which summarizes activities to reduce environmental impact, and consider measures to address these issues.
The Board of Directors receives reports from time to time on important matters discussed at ESG Promotion Committee meetings and provides appropriate oversight.

1. Risks and opportunities

1. Risks and opportunities
The risks posed by climate change can be divided into risks associated with the transition to a decarbonized society (transition risks) and those linked to physical impacts (physical risks). In addition, climate change is also an “opportunity” for our group to grow.
Risks and opportunities that can be quantitatively assessed are evaluated for their importance using two axes: likelihood of occurrence and impact. This evaluation determines the need for countermeasures.
Based on these evaluations, we compile measures for the key risks and opportunities faced by the Group and its individual businesses.
The evaluations are conducted over three timeframes: short-term (approximately three years, aligned with the Medium-term Management Plan), medium-term (by 2030, aligned with the Japanese government's target), and long-term (by 2050, aligned with the carbon neutrality target year).

I. Climate-Related Risks and Opportunities for the Nishitetsu Group (Common Items)

i. Transition Risks

ii. Physical Risk

iii. Opportunities

II. Climate-Related Risks and Opportunities in the Railway Business

i. Transition Risks

ii. Physical Risk

*Physical risks are the same as 'I. Climate-Related Risks and Opportunities for the Nishitetsu Group.

iii. Opportunities

III. Climate-Related Risks and Opportunities in the Bus Business

i. Transition Risks

ii. Physical Risk

*Physical risks are the same as 'I. Climate-Related Risks and Opportunities for the Nishitetsu Group.

iii. Opportunities

IV. Climate-Related Risks and Opportunities in Real Estate (Leasing and Housing Business)

i. Transition Risks

ii. Physical Risk

iii. Opportunities

V. Climate-Related Risks and Opportunities in the Retail Busines

i. Transition Risks

ii. Physical Risk

*Physical risks are the same as 'I. Climate-Related Risks and Opportunities for the Nishitetsu Group.

iii. Opportunities

VI. Climate-Related Risks and Opportunities in the Global Logistics Business

i. Transition Risks

ii. Physical Risk

*Physical risks are the same as 'I. Climate-Related Risks and Opportunities for the Nishitetsu Group.

iii. Opportunities

VII. Climate-Related Risks and Opportunities in the Hotel Business

i. Transition Risks

ii. Physical Risk

iii. Opportunities

1.5℃ Scenario: Global Perspective (2050)

2. Scenario analysis

Scenario analysis was conducted based on scenarios that indicate the range of increase in global average temperatures compared to the pre-industrial era, as drawn up by the Intergovernmental Panel on Climate Change (IPCC), the International Energy Agency (IEA), and other expert organizations. Among these, the 1.5℃external scenario (1.5℃scenario), in which the temperature will be kept below 1.5℃ by a system transition based on the Paris Agreement, and the 4℃ external scenario (4℃ scenario), in which the temperature will rise to around 4.0℃ by the end of the 21st century without new policies or systems being introduced, were analyzed with a focus on the medium term (2030).

[List of Parameters Used]

I) Nishitetsu Group (Common Items)
Based on the results of the scenario analysis, transition risks included significant cost increases due to the introduction of a carbon tax and rising electricity procurement costs, despite ongoing energy-saving measures and upgrades to environmentally friendly vehicles. Physical risks included an increase in damage to facilities and vehicles caused by heavy rainfall due to changing precipitation patterns, leading to higher insurance premiums. A comparison of the 1.5℃ and 4℃ scenarios revealed that the impact of the carbon tax in the 1.5℃ scenario is significantly greater, making it the most critical risk. Addressing this issue must be prioritized to achieve a decarbonized society.
To remain a trusted corporate group that continues to thrive over the long term, the Group must aim to create a sustainable society that leaves no one behind. By striving for a decarbonized society, we will actively disclose information on our efforts toward carbon neutrality and advance initiatives to realize a 1.5℃ world.

- Financial impact assessment of Nishitetsu Group (Change in projected cost per year 2030)

II) Railway Business
Based on the results of the scenario analysis, transition risks included cost increases due to the introduction of a carbon tax and the spread of renewable energy driven by changes in the energy mix. Physical risks included potential damage to facilities, which could result in prolonged delays in resuming operations and significantly reduced revenue.
Updates to energy-efficient, environmentally friendly vehicles are scheduled to proceed systematically under all scenarios; therefore, they have been excluded from impact evaluations.
Aiming for a decarbonized society, we will work on the systematic replacement of existing vehicles with energy-efficient ones and the introduction of solar power generation. The Group will also continue to improve facilities and vehicles that are resistant to wind and flood damage and continuously review our BCP, with the aim of realizing a 1.5℃ world. Furthermore, aiming for compact and clean cities, we will collaborate with other organizations to promote the active use of public transportation through the spread of MaaS, striving to achieve sustainable public transportation systems.

- Financial impact assessment of railway business (Change in projected cost per year 2030)

III) Bus Business
Based on the results of the scenario analysis, transition risks include the bus business, which is heavily reliant on fossil fuels, facing significant cost increases due to the introduction of a carbon tax. It was also found that promoting the adoption of environmentally friendly vehicles could significantly mitigate these impacts, along with cost reductions from changes in the energy mix. Additionally, the advancement of modal shifts could encourage a transition from private cars to buses, creating opportunities to increase revenue. Physical risks included damage to facilities, as well as road and tunnel closures, which could lead to a decline in revenue.
Aiming for a decarbonized society and the realization of a 1.5℃ world, we will promote the adoption of electric buses to move away from fossil fuels. Additionally, we will collaborate with other organizations to encourage the active use of public transportation through the spread of MaaS and AI-powered on-demand services, striving to create compact, clean cities. Furthermore, we will promote measures such as utilizing storage batteries as emergency power sources during outages, aiming to achieve sustainable public transportation systems.

- Financial impact assessment of bus business (Change in projected cost per year 2030)

IV) Real Estate Business (Leasing, Housing, etc.)
Based on the results of the scenario analysis, transition risks showed that the introduction of a carbon tax would lead to increased operational and material procurement costs. Additionally, the spread of renewable energy driven by changes in the energy mix would result in higher electricity costs, and compliance with the Building Energy Efficiency Act would also increase associated costs. Physical risks included the potential for flooding damage to facilities, which could result in operational suspensions at commercial properties.
Aiming for a decarbonized society and the realization of a 1.5℃ world, we will continue promoting ZEH compliance in condominiums and houses within the residential business and advancing efforts toward ZEB compliance in the leasing business. Additionally, we will focus on developing facilities resilient to wind and water damage and continue regular reviews of our BCP.

- Financial impact assessment of real estate business (Change in projected cost per year 2030)

V) Retail Business
Based on the results of the scenario analysis, transition risks showed that the store business relies heavily on commercial refrigeration equipment. Strengthened regulations on fluorocarbons and energy efficiency were found to potentially lead to increased equipment investment costs. Physical risks included the potential for flooding damage to facilities, which could result in operational suspensions. It is also anticipated that the introduction and strengthening of a carbon tax may increase material procurement and delivery costs. We will continue to assess the extent of these impacts moving forward.
Aiming for a decarbonized society and the realization of a 1.5℃ world, we will promote energy efficiency and consider developing a roadmap for the systematic transition to non-fluorocarbon equipment. Additionally, we will continue efforts toward decarbonization, while also focusing on strengthening facilities resilient to wind and water damage and regularly reviewing and updating our BCP.

- Financial impact assessment of retail business (Change in projected cost per year 2030)

VI) Global Logistics Business
Based on the results of the scenario analysis, transition risks showed that the global logistics business, which is primarily focused on forwarding operations, may face significant cost increases in delivery fees due to the introduction and strengthening of a carbon tax. Additionally, changes in customer behavior and preferences could lead to a shift away from environmentally taxing air transportation. Physical risks included the potential for flooding damage to facilities, which could result in operation stoppages.
Aiming for a decarbonized society and the realization of a 1.5℃ world, we will monitor CO2 emissions for each transportation method and continue utilizing airlines' SAF programs to expand low-carbon transportation initiatives. In addition to promoting decarbonization efforts, we will strengthen facilities resilient to wind and water damage and continue regular reviews and updates of our BCP.
 

- Financial impact assessment of global logistics business (Change in projected cost per year 2030)

VII) Hotel Business
Based on the results of the scenario analysis, transition risks showed that the hotel business, which primarily serves travelers, including inbound tourists, may face significant revenue declines due to changes in customer behavior and preferences. It was found that promoting sustainability initiatives and effectively communicating related information are essential measures that can help recover from these challenges. Physical risks included the potential for flooding damage to facilities, which could result in operational suspensions.
Aiming for a decarbonized society and the realization of a 1.5℃ world, we will promote initiatives such as the planned transition to sustainable hotels. Additionally, we will continue efforts to strengthen facilities resilient to wind and water damage and regularly review and update our BCP.
 

- Financial impact assessment of hotel business (Change in projected cost per year 2030)

(Note 1: "+" indicates a positive impact on business and financials, "-" indicates a negative impact, and the number of signs indicates the magnitude of the impact.