The Board of Directors oversees a response to strategies and policies related to sustainability, including climate change. The Board of Directors receives reports as needed in accordance with the rules of the Board of Directors on strategies and policies related to sustainability discussed at the Sustainability Promotion Committee or deliberated on by the Executive Management Committee. Additionally, the Board of Directors makes resolutions on items that are core management matters and items deemed important by the Board of Directors established as resolution items in the rules of the Board of Directors.

The Board of Directors determined our Vision 2030, which includes our basic sustainability policy, together with the Medium-Term Management Plan. In addition, thus far, the Board of Directors determined, for example, the formulation or revision of the Environmental and Social Policy Framework and the Net Zero Carbon Declaration. Furthermore, we report on the status of operation and issues for the Environmental and Social Policy Framework and the status of progress for the Net Zero Carbon Declaration. In our Risk Appetite Statement, starting in FY2021, we stipulated climate change risk, and have appropriately identified, assessed, and effectively managed climate change based on the estimated amount of losses from scenario analysis.

In FY2023, the Board of Directors decided on the Medium-Term Management Plan "Passion for the Best" 2026 (including revision of Vision 2030). In this plan, sustainability topics, including climate change were also raised. The sustainability KPI in the Medium-Term Management Plan has been confirmed at a subsequent Board of Directors meeting at the time financial results were approved and the Medium-Term Management Plan was reviewed. Additionally, a total of five reports were considered as agenda items at FY2025 Board of Directors meetings with the implementation of the current status report on the annual state of the promotion of sustainability, as well as resolutions and reports on individual themes (a resolution to revise the Environmental and Social Policy Framework, a report on the details of climate-related disclosure, a report on the deliberation status of materiality assessment for compatibility with SSBJ standards, and a report on addressing natural capital related disclosures (TNFD disclosure)).

To strengthen executives' incentives related to sustainability initiatives, including climate change, we have incorporated the sustainability KPIs in the evaluation system for performance-linked remuneration. The climate-related KPIs include the SDGs bond league table and GHG emissions. For details of executive remuneration, please refer to "6. Metrics and Targets (4) Executive Remuneration."

Governance Structure for Climate Change

There are Directors with deep knowledge of sustainability on the Board of Directors, with a system in place to provide highly effective oversight of initiatives toward sustainability-related issues. To evaluate directors' knowledge and experience from multiple perspectives, a skills matrix is formulated after deliberation by the Nominating Committee. For the "Sustainability" criterion, the presence or absence of sustainability-related work experience—including experience in roles that promote the Group's sustainability strategy—is considered.

Regular discussions are held at the Sustainability Promotion Committee chaired by the President and CEO on strategies and policies related to sustainability, including climate change. For example, the Committee has discussed the formulation or revisions of the Environmental and Social Policy Framework and the Net Zero Carbon Declaration. Apart from this, agenda items at FY2025 Sustainability Promotion Committee meetings included the details of climate-related disclosure, the deliberation status of materiality assessment for compatibility with SSBJ standards, addressing natural capital related disclosures (TNFD disclosure), and GHG emissions related to investment and loans and underwriting.

The Committee is composed of the Head of Sustainability, who is responsible for promoting sustainability based on the rules for Corporate Executive Officers (Shikkoyaku) approved by the Board of Directors, several Internal Directors, and three external experts with specialized knowledge in sustainability. The details of discussion at the Committee are reported to, deliberated on and determined at the Executive Management Committee, as appropriate.

Policies and measures related to risk management, including climate change, are discussed at the Group Risk Management Committee chaired by the President and CEO, a subcommittee of the Executive Management Committee, and attended by the Chief Risk Officer (CRO), who is responsible for risk management. Climate scenario-based quantitative analysis results are reported to the Group Risk Management Committee each year and reported to the Executive Management Committee based on discussion at the Sustainability Promotion Committee.

We have established individual working groups (WG) concerning areas including the planning and implementation of sustainability-related business, enhancing information disclosure, and strengthening ESG responses as a Group-wide system to promote sustainability. The content of the discussion at each of these WG is reported to the Sustainability Promotion Committee as appropriate. The Sustainable Business WG monitors sustainability KPIs and promotes sustainability-related businesses under the Sustainability Managers at each division of Daiwa Securities and major Group companies. To date, we have shared the issues and considered the response measures and improvement proposals for the following fiscal year in light of the status of progress in sustainability KPIs and the status of initiatives, as well as identified and sorted out sustainability-related risks and opportunities including climate change and natural capital. The ESG Response WG shared explanations and questions for preparing the FY2025 integrated report and feedback from institutional investors concerning the report and the status of ESG initiatives and also shared the evaluation details of the ESG rating agencies.