For the FY2024 measurement of actual values, as in the previous fiscal year, measurements included all sectors that were not limited to high-emitting sectors among the asset classes that are subject to calculation in PCAF. In addition, emissions from investees and borrowers were measured not only as a total of Scope 1 and 2, but also including Scope 3. They were expanded to all sectors.

• Sectors
  All sectors
• Asset classes
  Listed equity, unlisted equity, corporate bonds, commercial real estate, business loans, project finance
  • *Subjects are Daiwa Securities Group Inc.'s invested companies, assets managed by the Asset Management Division (own holdings, excluding unlisted stocks via funds), and companies managed by Daiwa Next Bank, Ltd.
  • *Not applicable for commercial real estate and business loans. In addition, for other asset classes, if there is no subject, a hyphen will be displayed, and if the number is rounded down, 0 will be displayed.
  • *Some estimates are based on the PCAF Database (excluding subjects that cannot be referenced in the Database)

In FY2024, financed emissions increased from the previous year, driven mainly by the acquisition of electric power bonds due to changes in the interest-rate environment. Additionally, approximately one-tenth of the increase was attributable to improved data quality.

We will continue monitoring activities, informed by developments in international guidance and related trends, and strengthen our engagement with investees and borrowers.

• *1excluding steel and aluminum
• *2buildings etc.

• note:that emissions may change when investees or borrowers revise their measurement scope or calculation methods; this should be considered when comparing results with prior years.

In FY 2023, we set an interim target to FY2030 for project finance in the power generation sector, which currently accounts for the largest proportion of emissions within our investment and loan portfolios. The actual results for FY2024 are lower than the actual results for FY2023^*, due to GHG emissions reduction of investees and borrowers and progress in renewable energy investment and loan.

Measurement of investment and loan portfolio emissions is still in the development stage, and measurement results may be significantly affected by revisions to estimation methods, etc.

• *FY2023 actual values are 243 g-CO₂e/kWh

• *Emission Scope is Scope1.

• *1Some calculations are based on estimated values

For the following reasons, we first set interim target by FY2030 for emissions from project finance in the power generation sector.

1. 1.Total emissions from project finance in the power generation sector currently account for the largest proportion of emissions within our investment and loan portfolios.
2. 2.The power generation sector accounts for approximately 40% of Japan's total industrial emissions. Additionally, it is a sector where demand is expected to increase as the industry as a whole moves towards decarbonization.
3. 3.In the power generation sector, progress is being made in disclosing GHG emissions records, transition paths toward net zero in 2050, and various international guidance.

Since it is necessary to support the increasing demand for electricity while promoting clean energy at the same time, we will use the emission intensity (emissions per amount of electricity generated), which indicates GHG emission efficiency, as a measurement index. We consider that if absolute emissions are set as a target indicator, it may hinder the flow of funds for the growth and expansion of power generation businesses with low emission factors.

Based on the IEA's NZE and APS scenarios, we have set reduction targets in a range that is well below the 2°C target of the Paris Agreement and consistent with the 1.5°C target. We set the targets based on our engagement with investees and borrowers, as well as the outlook for existing investments and loans and anticipated transition scenarios. We also take into consideration each local government's GHG reduction goals and room for introducing renewable energy.

In the power generation sector, we will strengthen engagement with investees and borrowers and provide financing for renewable energy in order to achieve the mid-term target in FY2030 and net zero in 2050.

Among our project finance in the power generation sector being measured, a business with the largest emissions is the coal-fired power plant project in Hokkaido. This project started with the hope that local production and consumption of coal would revitalize the region and secure a stable power source. Even in the harsh natural conditions of Hokkaido's vast expanses of snow and cold, thermal power plants can generate power stably, 24 hours a day, 365 days a year, as a base power source that is unaffected by constraints such as weather conditions and therefore those enable stable power supply. Additionally, because the coal-fired power plant already co-fires biomass fuel, GHG emissions per unit of power generation are limited compared to other domestic coal-fired thermal power plants. From the perspective of further strengthening our response to climate change, the Group has been conducting engagements regularly and supporting the formulation and realization of the following transition strategies.

• Expansion of biomass co-firing
  The coal-fired power plant is currently co-firing about 30% of its biomass, and it aims to increase co-firing to more than 50% by FY2030. In the future, it will consider switching to dedicated combustion through additional capital investment. It has taken voluntary efforts to ensure the sustainability (legality) of the wood pellets and PKS used as fuel based on the business planning guidelines established by the Agency for Natural Resources and Energy. Even as it increases co-firing in the future, it will procure fuel while taking environmental and social responsibility into account.
• Utilization of CCUS
  The coal-fired power plant aims to start utilizing CCUS by FY2030, while monitoring national initiatives, policies, and other companies' research and development trends to promote carbon recycling.

Daiwa Energy & Infrastructure Co. Ltd., a member of the Group, aims to solve social issues by building new energy systems through investment and loan in renewable energy fields such as solar, biomass, and wind power plants. In addition to domestic investment and lending, it is also actively exploring investment opportunities in Europe, the United States and Australia, and we will continue to contribute to the diversification of energy sources and the reduction of environmental burden.