The Group set metrics and targets to assess its performance on climate-related risks and opportunities.

In FY2024, we announced new sustainability KPIs as part of our Medium-term Management Plan.

Under the Daiwa Securities Group Net Zero Carbon Declaration, the Group aims to achieve net zero GHG emissions within our own operations by FY2030 (Scope1 and Scope2). We monitor GHG emissions every year to achieve these targets.

For our measurement approach, please refer to Appendix 1. Scope of Aggregation and Calculation Method for GHG Emissions.

In FY2023, to lay out a concrete path toward our goal of "Net zero GHG emissions within our investment and loan portfolios, etc. by 2050 (Scope3)" set forth in the declaration, we set intermediate targets for FY2030 for project finance in the power generation sector, which currently accounts for the largest proportion of emissions in our own investment and loan portfolios. This target was set through resolutions by the Executive Management Committee and the Board of Directors.

Regarding GHG emissions in FY2022, we conducted measurements for the following 10 high-emitting sectors and asset classes that are subject to calculation by PCAF.

First, we set an FY2030 target for project finance in the power generation sector, which currently accounts for the largest proportion of emissions within our investment and loan portfolios. We will continue to consider setting targets, starting with high priority sectors.

Since it is necessary to support the increasing demand for electricity while promoting clean energy at the same time, we used the emission intensity (emissions per amount of electricity generated), which indicates GHG emission efficiency, as a measurement index. The target was set within a range based on the IEA's NZE and APS scenarios, which is well below the Paris Agreement's 2°C target and consistent with the 1.5°C target.

Going forward, we will strengthen engagement with clients and provide financing for renewable energy to achieve the medium-term target in FY2030 and net zero in 2050. For detail, please refer to Measures to achieve net zero GHG Emissions within Our Investment and Loan portfolios.

With the transition to a carbon-neutral society, carbon-related assets with high GHG emissions risk significantly losing value and may also pose reputational risks if retained. Scenario analysis results indicate that climate-related risks could affect our carbon-related assets in the medium to long term. Therefore, as an indicator of assets vulnerable to climate-related transition risks, we disclose the amount of our carbon-related assets based on the TCFD recommendations' supplemental guidance definition.

This time, we expanded the scope to include our consolidated subsidiaries in investments and equity holdings, with a total amount of approximately 560 billion yen as of the end of FY2023.

We will review these results and work towards reducing carbon-related assets, particularly those with high risk, over the medium to long term.

Remuneration of Directors and Corporate Executive Officers consists of Base remuneration, Stock-linked remuneration and Performance-linked remuneration, and determined at the Compensation Committee.

The Company refers to KPIs, which are set as the Group numerical goals in the Medium-Term Management Plan "Passion for the Best" 2026 to calculate Performance-linked remuneration. These KPIs include SDGs bond league table and a GHG emissions target.

The performance assessments used in calculating Performance-linked remuneration reflect the financial performance evaluation, which is based on the Performance KPIs using the financial information and the quality evaluation, which is a comprehensive assessment of the KPIs other than the Performance KPI. The Financial Performance Evaluation and the Quality Evaluation are determined by the Compensation Committee.

Performance-linked remuneration is calculated by multiplying the reference amount determined for each position by the performance evaluation, and reflecting the degree of individual contribution. The same calculation formula is applied to all positions for performance evaluation.