Climate-Related Financial Disclosures Disclosures based on The Task force on Climate-related Financial Disclosures (TCFD) recommendation

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According to a report by the Intergovernmental Panel on Climate Change (IPCC) the average global temperature has risen by about 1℃ compared to before the industrial revolution, and is expected to rise higher as global warming progresses. Natural disasters caused by climate change may increase, and there are concerns about the financial impact on companies as well as the impact on society.

To address these issues, TCFD which was established by Financial Stability Board (FSB), released its Final Report in June 2017, which contains recommendations on the disclosure of information to stakeholders concerning the risks and opportunities from climate change for companies in four thematic areas: Governance, Strategy, Risk Management, and Metrics and Targets.
Shimizu recognizes the impacts from climate change on our businesses as an important management issue, and has determined that the disclosure of related information is essential from the perspective of ESG management. We endorsed the TCFD recommendations and joined the TCFD Consortium in October 2019, and recently disclosed climate-related information in line with the recommendations.

TCFD: Task Force on Climate-related Financial Disclosures

TCFD Recommendations: Thematic Areas of Climate-related Information Disclosure

Governance the organization’s governance around climate-related risks and opportunities.
Strategy the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning.
Risk Management the processes used by the organization to identify, assess, and manage climate-related risks.
Metrics and Targets the metrics and targets used assess and manage relevant climate-related risks and opportunities.

Source: “Practical guide for Scenario Analysis in line with the TCFD recommendations,” 2nd edition, Climate Change Policy Division, Ministry of the Environment, Government of Japan, March 2020

Governance

In SHIMZ VISION 2030 and Mid-Term Management Plan (2019-2023), Shimizu and its group companies (hereafter, the “Shimizu Group”) have positioned environmental issues, including climate change, as one issue that will have a material impact on management and we have appointed an officer in charge of the environment. We have also established the SDGs and ESG Promotion Committee (chaired by the President) to deliberate on basic policies and measures concerning environmental issues. This committee consists of the officers in charge of various areas such as the officer in charge of Safety Administration and Environment , the officer in charge of SDGs and ESG, and the officers in charge of Building Construction, Engineering Business, and LCV Businesses and Frontier Business. The committee deliberates on the results of specification and evaluation of climate-related risks and opportunities and also manages progress on achieving the greenhouse gas (CO2) emission targets in Ecological Mission 2030-2050. The results of these deliberations are reported to the Board of Directors.
Important decisions on environmental issues in the Shimizu Group are communicated to business divisions (including branches) and Group companies through Environmental Management Supervisors Committee and Group Company Environmental Council. They are also shared with subcontractors and Shimizu is also building an environmental governance structure that includes its main suppliers.

Shimizu Group Governance Structure for Environmental Issues

Shimizu Group Governance Structure for Environmental Issues

Strategy

Climate-related risks and opportunities that impact Shimizu Group businesses include those concerning strengthening the policies and regulations needed to build a zero-carbon society and market changes and other transitions. It can also include acute and chronic physical changes due to global warming.
Shimizu launched the company-wide, cross-organizational TCFD Working Group to extract and categorize the risks and opportunities presented by these transitions and physical changes as impacts on each level: procurement, direct operations, and product demand. The Working Group analyzed the impact and the response of the Shimizu Group. While the quantitative impact has not been calculated, the relative impact on business activities was predicted and expressed as three levels: Large, Medium, and Small.
As the first stage in disclosure of information based on the TCFD recommendations, the Working Group analyzed the Construction Business and Real Estate Development Business, which is one of the non-construction businesses.
The following representative scenarios were also used to examine the risks and opportunities in transitions and physical changes.

  • Transition Scenario: One of the International Energy Agency (IEA) scenarios in which the rise in temperature at the end of this century is 1.5℃ or lower, compared to before the industrial revolution (SDS)
  • Physical Scenario: One of the Intergovernmental Panel on Climate Change (IPCC) scenarios in which the rise in temperature by the end of this century exceeds 4℃, compared to before the industrial revolution (RCP 8.5)

As factors that would cause a large impact, the working group selected the three factors of “expansion in the need for energy-efficient buildings,” “expansion in the need for renewable energy,” and “policies that improve national resilience” as opportunities, and the single factor of “rise in summer average temperature” as a risk. Shimizu’s response to these factors was verified. The SDGs and ESG Promotion Committee confirmed that the responses were consistent with the business strategy in SHIMZ VISION 2030 and Mid-Term Management Plan (2019-2023), and the results were reported to the Board of Directors.

Main Shimizu Group Climate-related Risks and Opportunities

Main Shimizu Group Climate-related Risks and Opportunities
  1. BSP: An abbreviation of Building Service Provider. Refers to the provision of comprehensive facility operation and management services after completion of construction.
  2. ZEB: An abbreviation of Zero Energy Building. Refers to a building in which the primary energy produced and used results in net zero energy use
  3. BEMS: An abbreviation of Building Energy Management System. Refers to a system for managing building energy.
  4. Sustainability renovation: Refers to the renovation of existing buildings mainly to improve environmental performance, BCP performance, and health and comfort.
  5. ecoBCP: Refers to facility and community development that achieves both energy efficiency and energy savings during normal operation through the implementation of ecological measures (eco) and business continuity during disasters through the implementation of measures to ensure business continuity (BCP).

Risk Management

Trends in responses to climate change in Japan and the world are reported in SDGs and ESG Promotion Committee meetings and the committee discusses climate-related risk management for the company.
In fiscal year ended March 31, 2020, this committee examined aspects of external environmental changes that will impact the Shimizu Group and revised the Environmental Management Policy which specifies the company’s basic stance on environmental management and provides guidelines for action. The Shimizu Group is aiming to minimize climate change-related risks and business risks related to the environment and maximize opportunities based on this policy. The committee has also established targets for the reduction in greenhouse gas (CO2) emissions as one means of managing the risk of global warming. It has decided on specific measures to achieve the targets (in the construction business, shift from fuel oil to electric power as the form of energy used at construction sites, expand the use of electric power from renewable energy sources, etc.), and is regularly monitoring emissions volume.
The Shimizu Group will address the increasingly diverse and widespread climate change-related risks through the management of these risks.

Metrics and Targets

To evaluate and manage the impact of climate-related issues on management, the Shimizu Group has specified total volume of greenhouse gas (CO2) emissions as an indicator (KPI) and has set targets for reduction based on SBT* (certification acquired from the SBT Initiative in September 2019).

SBT: Science Based Targets
Company targets for reduction in greenhouse gas emissions that are in line with scientific knowledge and aimed at controlling the rise in average global temperature (to lower than 2℃ (1.5℃).

Greenhouse Gas (CO2) Reduction Targets

Scope Base Year Target Year Target
Scope1*1+Scope2*2 2017 Short term: 2023 -10%
Medium term: 2030 -33%*
Long term: 2050 -63%*5
Scope3*3(Category11*4 Short term: 2023
Medium term: 2030 -20%
Long term: 2050 -43%
  1. Scope 1: Emissions from use of heavy equipment and machinery (direct emissions)
  2. Scope 2: Emissions from electric power and heat purchased and used (indirect emissions from electric power companies, etc.)
  3. Scope 3: Other indirect emissions from the supply chain
  4. Category 11: (From use of products sold) Volume of CO2 emissions from operation of buildings that Shimizu designed and built
  5. The medium and long-term targets for Scope 1 + Scope 2 have been certified by the SBT Initiatives as WB2D (Targets that are low enough to control the rise in temperature to under 2℃).

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