Responses to TCFD Recommendations

Climate change is one of the global issues that have an enormous impact on natural environment and ecosystems as well as economy and society.
Recognizing responses to climate change as one of the material issues, the Bando Group identified and assessed risks and opportunities using the information disclosure framework of “Task Force on Climate-Related Financial Disclosures (TCFD)” with an aim to develop sustainable and resilient businesses.

※In March 2023, we announced our endorsement of the Task Force on Climate-related Financial Disclosures (TCFD).

Governance

At the Bando Group, the Management Advisory Council comprised of Executive Officers deliberates important matters related to climate change. The policy to address climate change issues deliberated at the Management Advisory Council is shared with the Sustainability Committee, held annually, which develops the action plan for the climate change issues and monitors the progress.
The Board of Directors receives reports on the matters deliberated and decided at the Sustainability Committee and deliberates and supervises the policy and action plan for the climate change issues of the Bando Group.

President chairs the Management Advisory Council, the Risk Management Committee, and the Sustainability Committee and is responsible for the management decisions on the Bando Group’s climate change issues.

Board of Directors (Held more than 12 times a year)	Chair: Chairman Supervise the progress of initiatives to address risks and issues related to important management matters deliberated and approved during the course of business execution.
Management Advisory Council (Held more than 12 times a year)	Chair: President and Representative Director Discuss important management matters from a strategic perspective as an advisory body to President.
Risk Management Committee (Held semiannually)	Chair: President and Representative Director Identify risks that may have an impact on management and deliberate and decide measures. Monitor and assess implementation and operating status of measures against risks and manage the Group’s risk management activities.
Sustainability Committee (Held annually)	Chair: President and Representative Director Deliberate important issues related to sustainability activity themes in line with the management philosophy: “Products and services,” “Environment,” “Labor/Safety,” “Compliance/Human rights,” and “Stakeholder communication.” Develop and monitor progress toward goals to manage and promote the Group’s sustainability activities.
Environment Committee (Held semiannually)	Chair: Officer in charge of environment Discuss environmental policy/measures and promote environmental preservation activities including climate change initiatives.
Technical Committee (Held 6 times a year)	Chair: Officer in charge of technology Discuss research and technology development policy/measures and promote research and technology development activities including those for products contributing to climate change measures.

Strategy

We conducted a scenario analysis for business risks and opportunities related to climate change using the 1.5°C to 2°C scenario and the 4°C scenario. The Bando Group considers the biggest risk in its business to be a decline in sales of accessory drive power transmission belts for new automobiles due to a shift to EVs as a climate change measure. To address the risk, we will work to develop new businesses and evolve current businesses by exploring the Group’s strengths and creating and offering new values based on such strengths.

In terms of the new businesses, we are working to establish a new business foundation with focus on “Medical and healthcare equipment” and “Electronic products.” In “Medical and healthcare equipment,” we acquired shares of Aimedic MMT Co., Ltd. in 2019, which sell medical equipment using our self-developed products, and we also started selling healthcare equipment by ourselves. In “Electronic products,” we develop and sell products using our core technologies. In our current businesses, we aim to grow our business by increasing the market share of accessory drive power transmission belts for the repair market for internal combustion engine vehicles which is expected to be in demand until 2030 and by developing and providing products for EVs.

We will also proactively develop products contributing to climate change solutions and offer them to a broad range of industries through the Bando Group’s network.

In May 2022, the Bando Group set goals toward achieving carbon neutrality by 2050 to reduce CO₂ emissions in its business activities, and developed the Mid-to-Long Term Management Plan starting from fiscal 2023 by incorporating the scenario analysis results into the management strategies.

Selection of scenarios

We listed climate change risks faced by the Bando Group according to the categories in the TCFD recommendations, selected high-probability items, and classified them into “risks that need to be minimized” as well as “risks that can be transformed into opportunities” based on the 1.5°C to 2°C and 4°C scenarios published by International Energy Agency (IEA) and Intergovernmental Panel on Climate Change (IPCC) and the information from inside and outside the Company. We assessed their financial impacts on three levels of “Large,” “Medium,” and “Low” and identified priority measures for each item.

● Projected changes in global surface average temperature

Used scenarios

IEA World Energy Outlook(NZE, SDS), Global EV Outlook (NZE), etc.
IPCC (SSP8.5, SSP2.6, and SSP1.9), etc.

● Scope and term of the assessment

We set the scope and term for the scenario analysis as follows. We used the 1.5°C to 2°C scenario (2030) which assumes impacts of regulations to analyze risks and opportunities associated with a transition to a low carbon society and the 4°C scenario (2050) which assumes larger impacts of increasing temperatures to analyze physical risks associated with climate change. We will analyze physical risks at overseas group bases next year and beyond.

Risk and Opportunity	Timing	Scenario	Scope
Transition risk	Up to 2030	1.5°C to 2°C	All businesses
Physical risk	Up to 2050	4°C	Bando Chemical Industries, domestic group bases
Opportunity	Up to 2030	1.5°C to 2°C	All businesses

● Assessment results based on the scenario analysis

Category		Description of risks	Financial impact	Timing of impact	Main responses
Transition risk （2030） （1.5℃-2℃ Scenario）	Policy and legal	Introduction of a carbon tax, increase in carbon price	Medium	Mid-to- Long term	・Reduce energy consumption and increase resource efficiency through a shift to new manufacturing process ・Increase use of renewable energy through aggressive introduction of solar power generation ・Increase energy efficiency by upgrading transformers, etc. to top-runner transformers ・Optimize logistics by increasing transport efficiency ・Make products smaller/lighter
		Increase in raw materials, energy, and logistics costs (pass-through of carbon price, etc.)	Large	Mid-to- Long term
		Decrease in sales of products related to internal combustion vehicles (four-wheel, two-wheel) due to applicable sales restrictions	Large	Mid-to- Long term	・Transform business portfolio by establishing new businesses ・Explore and develop belts for EV devices (electric power steering, power sliding doors, etc.) ・Introduce/replace with cost-competitive specifications ・Maintain and increase market share of belts for repair market
	Market	Loss of opportunities due to accelerated customer demand for energy saving/low carbon products and development delay	Medium	Mid-to- Long term	・Reduce energy consumption through a shift to new manufacturing process ・Develop products contributing to carbon neutrality Enhance development of environmentally-friendly products
		Difficulty in procurement of petroleum-derived raw materials and increase in research cost and capital investment to accommodate new materials	Medium	Mid-to- Long term	・Conduct research of biomass materials and recycled materials ・Develop/shift manufacturing processes to use new materials
	Reputation	Decrease in earnings due to delay in taking action for climate change, decline in trust due to inadequate efforts/information disclosure and difficulty in fund raising	Small	Short-to- Mid term	・Promote environmentally-friendly products ・Proactive disclosure of initiatives to achieve carbon neutrality
Physical risk （2050） （4℃ Scenario）	Acute	Destruction of facilities and suspension of operations due to flooding caused by typhoons and heavy rains	Large	Long term	・Establish global production system
		Damages due to water quality incidents caused by flooding, etc.	Small	Long term	・Strengthen measures to prevent water quality incidents
		Impact on operations of disruption of supply chain due to typhoons and heavy rains, and increase in procurement costs	Large	Long term	・Secure multiple suppliers
	Chronic	Deterioration of work environment due to increasing temperature, and increase in costs to deal with heat attack and extreme heat	Small	Mid-to- Long term	・Strengthen measures against heat illness ・Improve work environment by automating factories and shifting manufacturing processes

Degree of impact: Large: over 3% of sales; Medium: between 0.5% and 3% of sales; Small: less than 0.5% of sales
Timing of impact: Short-term: up to 2026; Medium-term: up to 2030; Long-term: up to 2050

Category	Description of opportunities	Main responses
Resource efficiency	Reduction of energy and raw material costs by introducing energy saving technologies and shifting manufacturing process	・Reduce energy consumption and increase resource efficiency through a shift to new manufacturing process ・Increase use of renewable energy through aggressive introduction of solar power generation ・Increase energy efficiency by upgrading transformers, etc. to top-runner transformers ・Optimize logistics by increasing transport efficiency ・Make products smaller/lighter ・Conduct research of biomass materials and recycled materials ・Develop/shift manufacturing process to use new materials
Products/ Services	Increase in demand for products to address climate change	・Develop products contributing to carbon neutrality /Enhance development of environmentally-friendly products
	Increase in demand for products such as power semiconductors due to a shift to EV	・Transform business portfolio by establishing new businesses ・Explore and develop belts for EV devices (electric power steering, power sliding doors, etc.) ・Introduce/replace with cost-competitive specifications ・Maintain and increase market share of belts for repair market
	Increase in demand for automated robots due to deterioration of work environment	・Develop products accommodating changes in the market
Markets	Increase in demand for products related to redevelopment of infrastructure and disaster prevention	・Develop products accommodating changes in the market
Resilience	Improvement in resilience of production plants by enhancing measures against natural disaster risk	・Establish global production system ・Review insurance coverage to prepare for physical damages ・Review and improve BCP

Risk Management

The Bando Group defines risks as “possibilities of events that might interfere with the survival of the company and achievement of business goals.” The Risk Management Committee identifies material risks that might have a significant impact on the business management based on the analysis/assessment of its probability of occurrence as well as the degree of impact and deliberates/determines responses. The Committee particularly positions climate change-related issues as material risks, develops action plans, monitors the progress in cooperation with the Sustainability Committee, and reports to the Board of Directors.

We identify individual risks and opportunities related to climate change exhaustively and assess their materiality based on their impact on the Group and probability of occurrence. We address risks and opportunities assessed as especially material by incorporating into the Group’s strategy.

Metrics and Targets

The Bando Group set a target to reduce CO₂ emissions from fuel usage and electricity by 38% compared to fiscal 2013 by 2030 (on a non-consolidated basis) with a goal of realizing carbon neutrality, virtually zero CO₂ emissions, as the Bando Group by 2050. Toward the achievement the target, we developed action plans including a shift to new manufacturing processes and aggressive introduction of solar power generation to promote initiatives.

We also position products contributing to reduction of CO₂ emissions and energy saving as environmentally-friendly products, set the goal of increasing the share of the total newly marketed products in fiscal 2026 to over 50% and monitor the progress.