Main Shimizu Group Climate-related Risks and Opportunities

Cause			Impact on Business	Degree of Impact^*1	Timing of Impact^*2	Shimizu’s Response	Nature-related Risk and Opportunities →: Response Examples
Transition scenarios	Risks	Stricter regulations to achieve carbon neutrality	Introduction of regulations on new building construction to reduce the high burden on the environment will increase the cost of constructing new buildings and demand will decline. However, demand for renovation, etc. will increase, so Shimizu will need an organizational structure to respond to the changes in demand. The Investment and Development Business will see an increase in the cost of construction and building and facility operation due to the installation of energy-saving equipment, etc.	↓↓↓	Medium-term	Organize the BSP^*3 business, which is responsible for facility operation services. Fortify the renovation business. Develop human resources skilled in business management (use the Group company technical training centers). Provide buildings with high environmental performance with attention to cost performance.
	Risks	Introduction of carbon pricing	Carbon prices will be charged for CO₂ emitted in business activities. Alternatively, offsetting with CO₂ credits will be required and that will lead to an increase in costs.	↓	Short- to medium-term	Steadily advancing reduction measures to achieve the CO2 reduction targets under the Mid-Term Business Plan and the Group Environmental Vision “SHIMZ Beyond Zero 2050” Gathering information and examining necessary responses through voluntary participation in Phase 1 of the GX-ETS Collecting information and reviewing potential responses to the upcoming carbon levy system	Opportunities	Demand for forest, agriculture, blue carbon and other CO₂ credits will increase →Promote CO₂ credits for the technologies we own by using our knowledge and achievements
	Opportunities	Growing need for energy-saving buildings	Demand will increase for new ZEB^4 buildings and energy-saving renovation projects. The Investment and Development Business will see an increase in the value of properties that meet ZEB, BEMS^5, and other environmental standards. The need for structures and materials that effectively reduce CO₂ emissions will increase.	↑↑↑	Short- to medium-term	Pursue ZEB design and construction. Add value to existing buildings based on Shimizu’s record in sustainability renovation^*6 Pursue the Investment and Development Business and develop the Shimizu brand based on the Company’s ZEB construction record.
		Growing need for renewable energy	Business related to renewable energy will expand. Demand for construction of renewable energy facilities will increase.	↑↑↑	Short to medium-term	Pursue solar, wind, biomass, geothermal, and small-scale hydroelectric power and other renewable energy businesses. Supply low-carbon electric power through the electricity retail business. Shimizu is using a SEP vessel for construction of large offshore wind farms. Developing and operating tower cranes for the construction of large onshore wind turbines Develop and commercialize a hydrogen energy utilization system.	Risks	There will be a trade-off between renewable energy business and ecosystem protection →Incorporate techniques equivalent to environmental assessments from the planning stage and take measures to reduce impacts
		Higher ratings achieved through stronger CO₂ emissions reduction	Incentives are provided by the client for reducing CO₂ emissions during construction. Alternatively, reduction of CO₂ emissions during construction is a requirement for winning the order. ESG investment in companies that have successfully reduced CO₂ emissions will increase. Opportunities for green financing will increase. The need for structures and materials that effectively reduce LCCO₂ emissions will increase.	↑↑	Short to medium-term	All construction sites made subject to surveys on CO₂ emissions during construction to enhance reliability of data Reduction of CO₂ emissions at construction sites (Introduction of electricity derived from renewable energy sources, promotion of use of diesel fuel alternatives derived from biomass in heavy machinery, etc.) Promote widespread use of wood construction and wood structures. Development and deployment of CO₂ emissions forecasting platform (Construction：SCAT^※7,Civil Engineering：Civil-CO2^※8) for building construction and production Promotion of use of electric furnace steel in design and construction projects Continue to issue ESG bonds and access other forms of green financing.	Risks	Prices will increase and quantities will be restricted for biomass fuel due to rising demand for biomass (timber, waste cooking oil and food residue, etc.) → Improve environmental management capacity over the entire supply chain and strengthen partnerships

Physical scenarios	Risks	Rise in average summer temperature	The problematic shortage of skilled workers will worsen due to deterioration in the outdoor working environment. Heatstroke and other health hazards will increase, mainly for workers who work outdoors.	↓↓↓	Medium-term	Use robots, ICT, AI, and other technologies to reduce the number of workers needed and increase productivity at job sites. Improve the working environment through workstyle reforms, heatstroke prevention measures, etc. Use the Monozukuri Training Center and Takumi Training Center to develop employees and skilled workers.	Risks	Trees and plants will grow poorly and the optimal planting period will shorten
	Risks	Increased frequency and severity of weather-related disasters	Damage from disasters at suppliers will make it difficult to procure materials, labor, etc. It will become difficult to operate job sites and the risk of harm to third parties will also increase. If the lifeline of owned properties in the Investment and Development Business is damaged due to disaster, the need for compensation of business losses and reputational risk will increase.	↓↓↓	Short to medium-term	Strengthen alliances with suppliers, mainly through Group companies and subcontractors. Consider prevention measures that include third parties in temporary structure plans for construction. Formulate disaster prevention and mitigation plans, including measures to prevent flooding before designing and building infrastructure-related facilities.
	Opportunities	Stronger policies on reinforcing national resilience	Infrastructure construction, maintenance, and building renovation construction to prevent flooding and torrential rain and wind damage will increase.	↑↑↑	Short to medium-term	Fortify activities to obtain orders in the infrastructure maintenance business. Establishing a responsive structure to meet reconstruction needs in the event of a disaster
		Market changes caused by climate change	The market for new building construction and renovation will expand in anticipation of more severe natural disasters. The need to relocate facilities will increase due to natural disasters and rising sea levels. Demand will increase for community development to prevent natural disasters and health hazards caused by climate change and protect communities and lives.	↑↑↑	Short-term	Fortify BCP response proposals (use hazard maps in design proposals, etc.). Build smart cities that enable residents to live in safety and health.
		Market changes caused by climate change		↑↑↑	Medium to long-term	Create new businesses in the emerging frontier field Use satellite data for natural disasters. Develop GREEN FLOAT environmental island and other future concept projects. Investments in space startup companies, etc.
		Acceleration in opening infrastructure maintenance and operation business and other public services to the private sector	Recovery from natural disasters will strain government finances so the market for the infrastructure maintenance and operation business will be opened to private companies. This will generate new business opportunities.	↑↑	Medium-term	Pursue the public infrastructure facility operation business based on Shimizu’s record in the PFI business.	Opportunities	Cases will emerge requiring green space management and other technologies in the PFI business → Utilize technologies and human resources which realize and differentiate natural performance^*9

The degree of impact : ↓↓↓ (large), ↓↓ (medium), ↓ (small) for risks and ↑↑↑ (large), ↑↑ (medium), ↑ (small) for opportunities.
Periods of impact are short term: 3 years or less; medium term: more than 3 years and up to 10 years; long term: more than 10 years
BSP: An abbreviation of Building Service Provider. Refers to the provision of comprehensive facility operation and management services after completion of construction.
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
BEMS: An abbreviation of Building Energy Management System. Refers to a system for managing building energy.
Sustainability renovation: Refers to the renovation of existing buildings mainly to improve environmental performance, BCP performance, and health and comfort.
SCAT: An abbreviation of SHIMZ Carbon Assessment Tool.
Civil-CO₂: A CO₂ emissions visualization platform that automatically calculates emissions from material production, transportation, and on-site activities in civil engineering work using accumulated data.
Natural performance: This is the degree to which the construction methods and measures implemented with a target set for the state of nature have a positive impact on nature. For example, the number of animal species and population actually able to move around by setting up migration routes for small animals.