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TCFD - work to understand and disclose the impact

In November 2019, the azbil Group endorsed the recommendations by the Task Force on Climate-related Financial Disclosures (TCFD)*1 to gain an accurate understanding of the impact of climate change on business activities and disclose that impact. After this announcement, we summarized azbil Group governance, opportunities, and risks connected to climate change as shown in the table below. Current evaluationsof each of our businesses’ opportunities and risks, based on a scenario where global temperatures are rising, indicate that the opportunities for business activities that contribute to reducing CO2 greatly outweigh the risks.
In line with the instructions by TCFD, we will continue to disclose the impact of climate change on the management of the Group.

TCFD

Governance

The azbil Group recognizes that climate change is one of the top priorities in practicing the Group philosophy, and a cross-group task force led by designated officers was formed to deliberate in Management Meetings from the perspective of business and financial impacts under supervision of the Board of Directors.

Strategy

The azbil Group promotes reducing the environmental impact of our own business activities, and harnessing the technologies and know-how accumulated through those initiatives. We contribute to the environmentazbil through our core businesses by utilizing our measurement and control technologies to help customers solve their environmental issues, which will lead to the realization of a sustainable society.

(A) Disclosure of opportunities and risks

If temperature rise is controlled(the scenario assuming a rise of between 1.5 degrees Celsius and 2 degrees Celsius)*2

  Building Automation(BA) Advanced Automation(AA) Life Automation(LA)
Opportunity Expanding demand for energy-savings solutions and services that meet global needs Increased demand for solutions, and for sensors and other measurement instruments designed for new industries Increased SMaaS business for gas meters using IoT technologiess
Risk (Shared by all core businesses)
  • Increased development costs for products and services to meet new regulations
  • Increased production and procurement costs due to rising energy prices
  • Reduced customer investment from increased burden due to introduction of carbon taxes and other costs

If temperature rise continues(the scenario assuming a rise of appr oximately 4 degrees Celsius)*3

  Building Automation(BA) Advanced Automation(AA) Life Automation(LA)
Opportunity Increased demand for products, services, and solutions that enable buildings to adapt to climate-related disaster Increased demand for products, services, and solutions that offer anomaly prediction function Increased demand for products, services and solutions adapted to handle climate-related disasters
Risk (Shared by all core businesses)
  • Operational stoppages due to abnormal weather events, inability to provide products, services, and solutions
  • Large reduction in customer investment due to business instability caused by abnormal weather

(B) Impact of opportunities and risks on azbil Group financial plans, and countermeasures

  • At this stage, we recognize that there are more opportunities than risks, as reduction of CO2 emissions significantly outweighs CO2 emissions from azbil Group business activities.

TCFDimpact

  • We are actively investing in R&D and equipment to accelerate new products’ and services’ development and their launch onto the market, to enable the azbil Group to contribute to a sustainable society.
  • The azbil Group is also working to decentralize the pr oduction network to reduce the risk of concentration.

Risk Management

The azbil Group comprehensively works to identify risks that may have a significant impact on operations, including those connected to climate change. (1) After risks ar e extracted and analyzed by the Comprehensive Risk Subcommittee, consisting mainly of the department managers, (2) the Comprehensive Risk Committee, headed by the executive of ficer in charge of risk management, identifies “risks deemed important to the azbil Group” for deliberation and decision-making by the Board of Directors. Once the risks are identified, the Company works to reduce the various types of risk by proposing countermeasures at the Management Meeting and other forums and reporting on the implementation status of measures as necessary to the Board of Directors.

Indicators and Goals

We promote efforts to combat climate change through our business activities which contribute “in series” to the achievement of a sustainable society, by considering indicators and goals that take into account all azbil Group customers, the Group itself, and its entire supply chain.

  • Target setting for reduced GHG (CO2) emissions at customer sites
  • Implementation of the 2050 Long-term Vision for Reducing GHG Emissions, which lays out our goal to ac hieve substantially zero emissions by 2050 by reducing GHG emissions (scopes 1+2) within our own companies
  • Formulation of (SBT certified) emission reduction targets for 2030 to reduce greenhouse gas emissions throughout the supply chain and help achieve the Long-Term Vision

*1 The task force and corresponding framework designed to promote disclosure of the impact of climate change, comprised of central banks and financial institutions from the world’s leading countries. It requires the disclosure of potential impact of climate change on business operations in the context of at least two potential scenarios.

*2 This scenario assumes that temperature rise is contained within a sustainable range due to the implementation of stricter regulations and introduction of technological innovations that lead towards a decarbonized society.

*3 This scenario assumes that no effective measures to reduce CO2emissions are implemented, resulting in continued temperature rise and an increase in abnormal weather and natural disasters.