Daiwa Asset Management addresses ESG issues, including risks relating to climate change, in accordance with our General Policy on Stewardship Activities, which has been decided on by our Stewardship Committee, and with our ESG Investment Policy, which incorporates sustainability considerations. Related activities and policies are deliberated on and monitored by the Stewardship Committee. The Stewardship Committee reports to the Board of Directors on monitoring status in relation to the TCFD.

The risks and opportunities relating to climate change are reflected in the company's evaluation model, and are utilized in the selection of investee companies.

We also aim, through our engagement activities, to guide companies toward a focus on decarbonization management, so as to enhance investee companies' corporate value. Particularly in regard to climate change, we perform scenario analysis using indicators that include conditional value at risk (CVaR) to verify portfolio risk and resilience.

The company offers various investment funds aimed at achieving a carbon-neutral society. For details, please see 3. Strategy (5) Climate-related Strategies ① Development and Provision of Products and Services that Contribute to a Carbon-neutral Society.

The company identifies climate change as a material issue and engages with investee companies. For details, please see 3. Strategy (5) Climate-related Strategies ⑦ Strengthening Engagement with Stakeholders.

The company uses information disclosed by companies, data from external vendors, the research and engagement conducted by us itself, and dialog with companies, to monitor climate-related risks and opportunities for investee companies.

We have also put in place a framework for utilizing external vendors' data as a basis for measuring GHG emissions, and conducting climate change risk scenario analysis, for individual funds and individual asset classes, and monitors and manages risk through periodic analysis.

In terms of climate change, the company uses the total GHG emissions, carbon footprint^*1, and carbon intensity^*2 of its portfolios as GHG emissions related indicators for individual funds and asset classes, and performs monitoring and analysis of them. On the basis of this data and its own original research, we undertake engagement activities with companies to encourage them to decarbonize management.

• *1A measure of the emissions in relation to portfolio size (market capitalization)
• *2An indicator for the carbon emissions of investee companies per unit of sales

The company has compared the total carbon emissions, carbon footprint, and weighted average carbon intensity for each of the asset classes that we invest in against respective benchmarks per class. For each of these, climate change risk management is performed appropriately by performing analysis and monitoring. As shown in the figure below, Scope 3 emissions were categorized as upstream or downstream, and the relevant emissions for each were calculated. We intend to actively promote the decarbonization of its entire supply chain, by establishing a detailed understanding of the total carbon emissions of our investee companies, including Scope1, Scope 2, and Scope 3 emissions, with a particular emphasis on Scope 3, and making effective use of this information in engagement activities with investee companies.

Carbon footprint and weighted average carbon intensity for overseas equities were found to exceed the benchmark values. This was attributable to increased investment in the stocks of Indian corporations. In the case of Japanese corporate bonds, although the carbon footprint was affected by the inclusion in the portfolio of the corporate bonds of electric power companies, at a weight higher than the benchmark, the disparity with the benchmark was smaller than in the previous year, and there was also a fall in weighted average carbon intensity. Using engagement by us itself and by outsourced fund managers, we are encouraging companies with high emissions to reduce their emissions. Going forward, we will continue to utilize engagement activities, etc. to encourage investee companies to implement measures in relation to climate change.

For details, please see the Sustainability Report 2023.

The Asset Manager has established the Climate Change and Resilience Policy, the policy for responding to risks and opportunities related to climate change and working to make business and strategy resilient to climate-related issues.

In accordance with the policy, Chief Climate-Related Issues Officers (general managers of departments engaged in sustainability promotion) make regular reports to the Chief Executive Officer for Climate-Related Issues (President and Representative Director) at Sustainability Promotion Committee meetings. The reports cover matters related to responses to climate change, including identification and evaluation of impacts of climate change, management of risks and opportunities, progress of initiatives for adaptation and mitigation, and indicator and target setting. The Sustainability Promotion Committee deliberates and discusses issues related to climate change, after which the Chief Executive Officer for Climate-Related Issues makes final decisions. Under this system, climate-related issues are supervised by the President and Representative Director.

To factor climate-related risks and opportunities into the Investment Corporation's real estate management business, the Asset Manager conducted a scenario analysis of the Investment Corporation's portfolio. The Asset Manager referred to climate outlooks published by international organizations and other entities, in order to identify risks and opportunities of climate change brought to the Investment Corporation and assess financial impacts on the Investment Corporation's business. Using a 1.5°C/2°C scenario and a 4°C scenario, a qualitative analysis was conducted.

For each scenario, the Asset Manager classified the financial impacts of identified risks and opportunities into short-term, medium-term and long-term impacts and examined relative scales of impacts on the Investment Corporation. Shown below are medium-term and long-term risks from climate change that have a certain degree of financial impacts.

The Investment Corporation's Climate Change and Resilience Policy sets out processes to identify, assess, and manage the impacts of climate change risks and opportunities on the corporation's management activities, strategies, financial plans, etc.

Each Investment Corporations sees the transition to a carbon-neutral society as an opportunity. The following target KPIs have been established as key monitoring indicators in the process of managing climate change risks and opportunities.

For detail, please refer to Daiwa Office Investment Corporation and Daiwa Securities Living Investment Corporation.