The Group recognizes climate change as an urgent social issue to be resolved and, at the same time, as an important business opportunity that connects to business growth. Based on this recognition, we identify climate-related risks (transition risks and physical risks) that could reasonably be expected to affect our business, together with climate-related opportunities arising from the development and provision of financial products and services—our core business. Specifically, taking into account the effects understood through scenario analysis and through interviews with each business division, we assess and prioritize climate-related risks and opportunities. Thereafter, following discussion at the Sustainability Promotion Committee or the Executive Management Committee, we report to the Board of Directors.

The time horizons are defined in light of consistency with the Group's management plan and global standards. Specifically, given that the Medium-term Management Plan spans three years, "short-term" refers to less than three years, "medium-term" to three to less than five years, and "long-term" to five years or more. For details on the scenarios and uncertainties, and our approach to Climate Resilience, please refer to "4. Strategy (4) Resilience Assessment of Our Strategy Based on Climate-related Risks."

Transition risks include: increased costs at investees and managed companies due to changes in policy such as carbon pricing, and the resulting deterioration in earnings (policy/legal); increased costs at investees and managed companies due to changes in energy-related technologies, and the resulting deterioration in earnings (technology); declining fund management performance and balances due to the transition to a decarbonized society, and the resulting decrease in trust fees and sales-related revenue (market); and reputational damage from insufficient climate action or from investment and underwriting related to businesses with a heavy environmental load (reputation).

Physical risks include: stagnation of underwriting and M&A-related business, and declining fund management performance with a resulting decrease in trust fees and sales-related revenue, due to damage to business partners, investees, and managed companies from abnormal weather and wind and flood damage (acute/chronic); reduced value and sales opportunities for invested properties such as solar and wind power facilities due to torrential rain and powerful typhoons, and the resulting deterioration in earnings (acute/chronic); and increased restoration and repair costs due to financial system failures caused by intensifying natural disasters, or damage to the Group's sites and data centers (acute/chronic).

Opportunities include: increased underwriting of financing required for green projects and the transition to a decarbonized society; greater opportunities to provide new financial products and expanded earnings opportunities from market change; capital inflows into investment trusts that incorporate companies with decarbonization technologies; and expanded business opportunities from an improved reputation through net-zero initiatives.

Under appropriate risk management, the Group addresses the climate-related risks it has identified while promoting initiatives that connect the climate-related opportunities arising from the transition to a decarbonized society to business growth.

As an integrated securities group, the Group offers a wide range of financial services—from support for the asset formation of individual customers to support for corporate fundraising and growth, and asset management. As of March 31, 2026, we operate 182 branches in Japan and businesses in 22 countries and regions overseas, responding to the increasingly diverse and sophisticated needs of our customers through our Wealth Management, Asset Management, and Global Markets & Investment Banking businesses. In recent years, we have also pursued inorganic growth through strategic investments and collaboration with external partners, strengthening our business portfolio and enhancing competitiveness.

As a financial institution, the Group's policies and initiatives on climate change may affect the trust and evaluation it receives from all stakeholders, including customers, shareholders and investors, business partners, and investees and borrowers. These may have a financial impact on the Group through its stock price, the sale of and transactions in its products and services, and its fundraising terms. In addition, among the assets held by the Group—including business sites and investees—carbon-intensive assets that fall under climate-related exposures are at risk of losing value as decarbonization advances and as policy and regulatory trends change. Furthermore, the more frequent and intense abnormal weather associated with climate change may reduce the value of real estate held by the Group and of the assets of investees and managed companies, with a possible financial impact on the Group.

In 2021, the Group formulated the Daiwa Securities Group Net Zero Carbon Declaration and aims to achieve net zero GHG emissions within our own operations (Scope 1 and Scope 2) and within our investment and loan portfolios, etc. (Scope 3). In the Medium-term Management Plan "Passion for the Best" 2026, decided by the Board of Directors in FY2023, we set "GHG emissions within our own operations" and "Financed Emissions" as sustainability KPIs and are promoting reduction initiatives. For details and progress on specific initiatives to achieve carbon neutrality, please refer to "4. Strategy (3) Transition Plan to Realize Carbon Neutrality."

To contribute to increasingly sophisticated climate-related disclosure and to rule-making on investment and lending decisions, we participate in various discussion forums in Japan and overseas and participate in, sign, and endorse various initiatives. Amid progress in discussions on sustainability disclosure standards, the Group's officers and employees serve as a trustee of the IFRS Foundation—which includes the International Sustainability Standards Board (ISSB) under its umbrella—and as a member of the SSBJ, which formulates domestic sustainability disclosure standards. We also participate in the Partnership for Carbon Accounting Financials (PCAF), which develops methods for measuring and disclosing GHG emissions through investment and lending, and in the GX Future Consortium. We will continue to work on improving our reputation through participation in various initiatives, appropriate disclosure, and dialogue with stakeholders.

The Group also receives various external ESG evaluations. Daiwa Securities participates as a market maker in the Tokyo Stock Exchange's carbon credit market and, having received the Good Market Maker Award in FY2023 and FY2024, achieved the criteria for both energy saving and renewable energy (electricity) in FY2025 and received the Best Market Maker Award. For other external ESG evaluations, please refer to "Appendix 1. External Evaluations."

The Group regularly monitors its holdings of assets that fall under climate-related exposures and, through scenario analysis, assesses their resilience to future climate-related changes, developments, and uncertainties. For details of the scenario analysis and its results, please refer to "4. Strategy (4) Resilience Assessment of Our Strategy Based on Climate-related Risks."

The Group has also formulated the Environmental and Social Policy Framework and, in principle, prohibits new investment and loans, etc. that fund the new construction of coal-fired power generation or the expansion of existing facilities, working to reduce the medium- to long-term risks associated with carbon-intensive assets while weighing the trade-offs between risk and opportunity. In addition, through participation in various discussion forums and initiatives in Japan and overseas, we contribute to the decarbonization of the entire value chain, which leads to a medium- to long-term reduction in the carbon-intensive assets held by the Group.

As a physical-risk response, we prepare for the risk that key sites such as the head office (the Group's headquarters functions), branches, and data centers could be damaged—and business continuity disrupted—by the shutdown of social infrastructure due to abnormal weather or wind and flood damage. Specifically, we have formulated a business continuity plan (BCP) that anticipates events such as site damage and system shutdowns, which we review regularly, and we enhance our business continuity system by securing alternative sites, distributing operations, and strengthening our IT and data infrastructure. Through these initiatives, we increase resilience to physical risks associated with climate change and strive to minimize impacts on our business activities.

The Group's Asset Management Division comprises securities asset management, real estate asset management, and alternative asset management. With the structuring and management of investment trusts at its core, it manages a broad range of assets, including real estate, venture capital, private equity, and renewable-energy-related assets. Aiming to secure stable management outcomes through the creation of investment opportunities that reflect domestic and overseas market conditions and medium- to long-term growth themes, it also actively pursues investment and management that incorporates sustainability considerations.

In securities asset management, revenue centers on a fixed rate based on assets under management (AUM) or on performance-linked fees; the Group's revenue declines when valuations fall due to market fluctuations or changes in customers' asset management behavior, or when AUM declines due to increased redemptions. In real estate asset management, revenue comprises fees based on AUM and real estate transaction amounts as well as development profits and rental income; declines in valuations, profitability, transaction volumes, or prices, or rises in costs such as development land and construction materials due to real estate market fluctuations, may adversely affect performance. In alternative asset management, we conduct fund management operations that invest fund capital in domestic and overseas venture companies and SMEs, and principal investment operations that invest our own capital in domestic and overseas SMEs and in the energy and infrastructure fields. Revenue from fund management operations is derived primarily from management fees and performance fees, while revenue from principal investment operations is derived primarily from income gains during the investment period and capital gains upon exit. However, owing to various factors—including the business uncertainty of investees, longer investment recovery periods, low liquidity, regulation, political conditions, natural disasters, and trends in foreign exchange, interest rates, and resource prices—expected returns may not be achieved, or valuation or sale losses may arise.

Investees and managed companies in the Asset Management Division include some companies, stocks, bonds, and real estate affected by the transition to a decarbonized society or by abnormal weather. For example, policy changes such as carbon pricing, and progress in technological innovation and the energy transition, may affect the financial condition and performance of investees and managed companies. In addition, if investees and managed companies are damaged by more frequent and intense abnormal weather and wind and flood damage, their business activities may stagnate. These climate-related risks may reduce the performance and AUM of some investment trusts and funds managed by the division, ultimately reducing the balance of assets held on behalf of customers and the Group's investment income. In the real estate asset management field, repair, maintenance, and management costs may increase to improve the environmental performance of properties and meet tenant needs against a backdrop of rising ESG expectations.

The Group is strengthening the development of sustainability-conscious products and services and its investment and lending. Daiwa Asset Management certifies as "ESG funds" those investment trusts whose main investees are companies engaged in ESG initiatives and the achievement of the SDGs toward the transition to a sustainable society, and monitors after certification whether actual management is consistent with the fund certification criteria.

Among ESG funds, the "Decarbonization Technology Fund" (nickname: Carbon ZERO)—a thematic fund that selectively invests in companies with technologies and services that contribute to a decarbonized society—is a core sustainable investment product for the Group. The fund regularly measures the GHG emissions of its investees and is designed to contribute to net zero across the fund through a carbon offset mechanism. A portion of the trust fees is donated to a tree-planting project run by the certified NPO Environmental Relations Research Institute. Trees are planted at local forestry cooperatives around May–June each year and maintained for ten years thereafter. In 2025, 2,714 trees were planted in Ashigawa-cho, Fuefuki City, Yamanashi Prefecture, bringing the cumulative total to 24,243 trees; planting sites now span six locations nationwide. Going forward, we will pursue an investment approach that flexibly reviews themes and constituents using AI, aiming to create sustainable investment opportunities.

The Group promotes sustainability-conscious sourcing and investment, centered on the renewable energy field. Daiwa Energy & Infrastructure has set the "sustainability-related investment balance" as a sustainability KPI and actively promotes strategic investment in the renewable energy and infrastructure fields, seeking to achieve both a sustainable society and higher corporate value. In the renewable energy field, in FY2023 it acquired shares in Aurora Infrastructure, which operates a power distribution business for the industrial sector in Finland, and, through collaboration with the domestic energy-tech company ENECHANGE, acquired multiple solar power projects in Australia. It also acquired the business of CO2OS to strengthen solar power development, assessment, maintenance, and asset management functions, and invested in a battery storage business in Sapporo. In FY2024, it made a co-investment in onshore wind and solar power projects in the U.S. managed by InfraRed Capital Partners Limited. In FY2025, it acquired an interest in Moray East OFTO, a UK offshore-wind Offshore Transmission Owner, from International Public Partnerships Limited, a UK-listed infrastructure investment company—strengthening its commitment to the UK renewable energy and transmission infrastructure fields and contributing to a sustainable society. It has also begun full-scale investment in battery storage, launching the development of several large grid-scale battery storage projects in Japan, the U.S., and Europe, and has newly begun investing in domestic data centers in the infrastructure field.

At Daiwa PI Partners, in November 2024, the private equity fund "Daiwa PIC Business Support No. 1 Investment Limited Partnership" managed by its wholly owned subsidiary Daiwa PI Capital raised a total of ¥26.0 billion. The fund has already made new investments and will continue to focus on enhancing the value of existing investees while sourcing new deals. In addition, in August 2024, Daiwa Energy & Infrastructure sold part of its shares in Electricity North West Limited, a UK power distribution company acquired in 2019, to the Spanish energy company Iberdrola S.A., realizing a capital gain that contributed significantly to the Group's profit. Going forward, leveraging the investment know-how, track record, and external partnerships it has built, the Group will expand investment in solar power and battery storage businesses in Japan and overseas, and—including exits such as FIT mega-solar funds—execute investments in high-quality deals with optimal exits to build a strong track record and leverage this track record to expand its asset management business.

Daiwa Real Estate Asset Management has set the "green building certification ratio" as one of its sustainability KPIs and manages ESG-conscious real estate to improve reputation and asset value. Daiwa Office Investment Corporation and Daiwa Securities Living Investment Corporation, whose assets it manages, have established finance frameworks and promote ESG investment by raising funds through bonds and loans. They continue to obtain environmental certifications such as DBJ Green Building certification and CASBEE for Real Estate for their properties, contributing to reductions in energy use and GHG emissions by tenant companies through improvements in properties' environmental performance. The company is also entrusted with the management of solar and biomass power plants and, in September 2021, began managing the "DSREF Core Amaterasu Investment Limited Partnership," a private placement fund investing in solar power generation established with funding from domestic institutional investors. In January 2025, it newly began managing grid-scale battery storage operations.

For details on the scenario analysis of physical damage from wind and flood disasters at the renewable energy facilities the Group holds in Japan and overseas, and its results, please refer to "4. Strategy (4) Resilience Assessment of Our Strategy Based on Climate-related Risks."

Renewable energy power plant asset management track record

Number of projects: 32 (Hokkaido, Tohoku, Hokuriku, Kanto, Chubu, Kansai, Chugoku, and Shikoku regions).

Output: solar power approx. 325 MW (excluding land-only assets), biomass power approx. 20 MW, grid-scale battery storage approx. 38 MW.

Balance of assets under management: approx. ¥119.3 billion.

• *as of March 31, 2026

To support customers' transition to decarbonization from a financial perspective, the Group strengthens engagement with stakeholders, including issuers and investors. For example, based on the Environmental and Social Policy Framework, having recognized the risks of businesses that could have significant negative impacts on the environment or society, we work toward appropriate responses through engagement with investees and borrowers. In addition, Daiwa Asset Management has defined "Best Practice," the ideal management approach that companies should pursue to realize sustainable improvement in corporate value and uses it as a tool to deepen discussions on enhancing corporate value in its dialogue with investees. On climate change, it actively engages with high-emitting issuers to encourage emissions reduction and the acquisition of SBT certification, seeking medium- to long-term improvement in corporate value and the development of sustainable management. The company employs a "trinity" engagement structure comprising corporate research analysts, fund managers, and stewardship analysts; in the current term (July 2024–June 2025), the three together conducted 1,435 engagement activities with investees, of which ESG themes accounted for 25.6%.

The Group's Global Markets & Investment Banking Division comprises the global markets and global investment banking businesses, integrating the financial markets business in equities, bonds, foreign exchange, and derivatives with the investment banking business centered on capital markets and M&A advisory. It provides diverse financial solutions to institutional investors and corporate customers to support market access, risk hedging, fundraising, and the execution of growth strategies. In the sustainability field, it engages in sustainable finance as a core business and has organized its M&A advisory structure in Japan and overseas to address M&A needs in sustainability-related areas, including the renewable energy sector.

In trading operations in Global Markets, such as cash and derivative transactions, in addition to the risk of lower earnings from reduced customer demand amid market trends, there are the risk of losses when the market value of held positions moves unfavorably due to rapid and large market fluctuations, and the risk of expanded losses when low-liquidity positions cannot be smoothly disposed of. Underwriting and M&A advisory operations in Global Investment Banking are characterized by rapid fluctuations in transaction size and volume depending on securities market conditions; if underwritten securities cannot be smoothly sold to investors due to a market decline, there is a risk of losses on holding them. Position risk in underwriting can involve a single, very large position for which timely and effective risk avoidance may not be possible, making it potentially more serious than position risk in ordinary trading.

If issuers or corporate business partners are damaged by abnormal weather or wind and flood damage associated with climate change, disruptions to business activities and damage to facilities and equipment may lead to deteriorating business performance and increased credit risk. This may lead to revisions of fundraising plans and postponement of investment decisions, reducing the division's underwriting, M&A-related business, and customer transactions. As disasters become more intense and frequent, such impacts may become prolonged and structural, potentially amplifying the impact on the trading environment of the entire capital markets.

The Group supports fundraising that contributes to solving environmental and social issues—such as financing for green projects and transition projects toward a decarbonized society, and impact finance. Market interest in such sustainable finance has grown in recent years; amid increasing diversification—including blue bonds and orange bonds in addition to green bonds and transition bonds—we underwrite under appropriate risk management while balancing the overall portfolio. While fundraising support has long been one of our core businesses, we see the addition of sustainability elements as a new business opportunity that increases the added value we can offer customers. To date, we have contributed to market growth by supporting the structuring of large SDG bonds in the domestic public bond market, and have subsequently promoted diversification through SDG bonds with new product features and themes. In the climate transition field, for example, we have contributed to building the foundations of transition finance and improving market function through our involvement in the government bond market. In Japan, the second phase of the emissions trading scheme (GX-ETS) began in FY2026, and market demand is growing for fundraising that supports the transition to a decarbonized society.

In FY2025, through supporting issuances such as ITOCHU's orange bond and Sekisui Chemical's green bond, we shifted the focus of our sustainable finance from quantitative expansion of issuance to strengthening qualitative value. By exploring issuers' business strategies and social impact and engaging in constructive dialogue with investors, we promote sustainable finance that goes beyond formal frameworks to reflect each issuer's unique story and effectiveness. Through these efforts, we ranked 1st in the SDGs bond league table for the second consecutive year and, in the Financial Services category of the 7th "ESG Finance Awards Japan" hosted by the Ministry of the Environment, received our first Gold Award. We have set the "SDGs bond league table" and the "Ranking of GX Transition Bond Primary Dealer Bids" as sustainability KPIs and monitor them regularly.

The Group also continuously issues green bonds through domestic public offerings. Funds raised under the Green Finance Framework formulated and disclosed in January 2024 were allocated to the redemption of bonds related to investment and lending for renewable energy power generation projects carried out through consolidated subsidiaries.

To respond to medium- to long-term changes in the market environment and customer needs, the Group has worked to develop and enhance its M&A advisory structure in sustainability-related fields, including the renewable energy sector. Specifically, through a capital and business alliance with Green Giraffe, which provides financial advisory services specialized in the renewable energy field, we continuously leverage that firm's specialized knowledge and networks as part of the Group's advisory base.

In the Group's Wealth Management Division, we provide comprehensive financial services suited to each life stage—from asset formation to asset management and succession—centered on individual customers. In addition to a broad product lineup including equities, bonds, investment trusts, and insurance, we support medium- to long-term asset formation through consulting. We are also enhancing the customer experience through the use of digital tools and the provision of high-value-added solutions, and provide products and services that incorporate sustainability considerations.

In the Wealth Management Division, earnings may decline significantly if a market downturn weakens customers' demand for securities investment, strengthens risk-averse investment behavior, or increases reluctance to hold risk assets. Some investment trusts sold by the division include stocks, bonds, and real estate of companies affected by the transition to a decarbonized society or by abnormal weather. For example, policy changes such as carbon pricing, and progress in technological innovation and the energy transition, may affect the financial condition and performance of investees. If investees are damaged by more frequent and intense abnormal weather or wind and flood damage, their business activities may stagnate. These climate-related risks may reduce the management performance and AUM of some investment trusts offered by the division owing to falling prices of constituent issues, ultimately reducing the balance of assets held on behalf of customers and the Group's trust fees and sales-related revenue.

The Group has set the "number of customers who have purchased sustainability-related products" as a sustainability KPI and supports customers' medium- to long-term asset formation through products and services that incorporate sustainability considerations, including ESG funds and SDG bonds. While providing consulting that reflects investees' ESG information and climate-related risks, we work to create new earnings opportunities by expanding thematic products. At the same time, recognizing the potential impact of climate change on fund value and balances, we assess and organize climate-related risks and strive to provide appropriate information and disclosure. In March 2024, we introduced ESG and SDGs analysis as a new feature of the "asset management planning" service in Daiwa's Future Designer.

ESG and SDGs Analysis in the Daiwa Future Designer

As global awareness of sustainability issues such as climate change and social inequality continues to grow, institutional investors, including financial institutions, incorporate sustainability data, such as ESG ratings, into their investment decisions to enhance performance.

Our ESG and SDGs analysis service, powered by MSCI, is the first of its kind in Japan to utilize the WealthBench™ portfolio risk analysis solution. It uses MSCI ESG Ratings to assess companies' sustainability efforts, evaluates companies' initiatives across the 17 goals, and estimates portfolio emissions to assess its alignment with the global 2°C target (with an aspirational goal of 1.5°C) under the Paris Agreement^*. This enables investors to factor in corporate sustainability when selecting investments, with the potential to improve medium- to long-term portfolio performance.

• *The Paris Agreement aims to limit global warming to 2°C above pre-industrial levels, with efforts toward 1.5°C. MSCI's ITR metric assesses portfolio alignment with the 1.5°C target.

Recognizing the importance and urgency of addressing climate change—one of the most serious issues the world faces—and in order to make a medium- to long-term contribution, the Group has formulated the Daiwa Securities Group Net Zero Carbon Declaration. Based on this declaration, we aim to achieve (1) net zero GHG emissions within our own operations (Scope 1 and Scope 2) by FY2030 and (2) net zero GHG emissions within our investment and loan portfolios, etc. (Scope 3) by 2050. In addition, (3) as support for a smooth transition to a decarbonized society through our financial business, we will continue to support customers' decarbonization efforts and new technologies that contribute to a decarbonized society.

Past Initiatives

• Energy efficiency improvements
  • Equipment upgrades (e.g., air conditioning, LED)
  • Operational optimization
• Switching to renewable energy using tracked non-fossil certificates
  • Switching all domestic offices of Daiwa Securities (from January 2024) and Daiwa Institute of Research (from April 2024) to renewable electricity

Future Initiatives

• Continued efforts to improve energy efficiency
• Electrification of company vehicles
• Exploring renewable energy adoption at overseas offices
• Utilizing carbon offsets
  • Purchasing carbon credits such as J-Credits

• *1GHG emissions within our own operations (domestic + overseas) are aggregated for sites accounting for approximately 98% on an employee basis.
• *2From the FY2025 results, emissions from the use of company cars are included in Scope 1 (previously Scope 3, Category 8). Calculated on the previous basis, the total of Scope 1 and Scope 2 would be 2,270 t-CO₂e.

Toward carbon neutrality by FY2030, we promote net zero GHG emissions within our own operations (Scope 1 and Scope 2). The trend in Scope 1 and Scope 2 emissions is shown in the figure above. Specific initiatives include continuing energy-saving activities and switching purchased electricity to renewable energy.

For energy saving, we will continue the energy-saving technologies and systems introduced at each facility and improvements in energy efficiency. For purchased electricity, since April 2021 all Group companies in the head office building (GranTokyo North Tower) have used renewable energy via tracked non-fossil certificates; we then completed the switch to renewable energy at all domestic offices of Daiwa Securities in January 2024 and of Daiwa Institute of Research in April 2024. When selecting renewable energy plans for offices and other sites, we consider not only the GHG reduction effect but also an internal carbon price—comparing anticipated future costs calculated based on the J-Credit price^* with the additional cost of introducing renewable energy, using data on anticipated GHG reductions obtained from power companies. Going forward, we will continue to review price settings in light of the J-Credit price and utilize the internal carbon price.

Going forward, we will introduce renewable energy at overseas offices and convert company cars at domestic sites to EVs, and for portions that are difficult to reduce through our own efforts, we will consider the use of carbon credits and the like, aiming to achieve net zero for Scope 1 and Scope 2 by FY2030. Achieving net zero is expected to entail commensurate costs, but the financial impact is limited compared with utility expenses. The volume of non-fossil certificates and credits required at the Company's business scale is also sufficiently procurable relative to market supply.

• *J-Credit price was ¥3,246/t-CO₂ in FY2025.

Toward a decarbonized society, companies are required to manage and reduce not only their own emissions but also emissions across their entire supply chains. Financial institutions in particular are required to manage Scope 3 Category 15 emissions, including financed emissions (Financed Emissions) and GHG emissions related to capital markets operations such as underwriting (Facilitated Emissions).

To reduce Financed Emissions, we take action in line with the following process.

The Group joined PCAF and the PCAF Japan Coalition in December 2021 and measures GHG emissions using PCAF's knowledge and database. In FY2023, for project finance in the power generation sector—which accounts for the largest proportion of the Group's financed emissions—we set interim targets up to FY2030. For details, please refer to "6. Metrics and Targets."

GHG emissions related to capital markets operations such as underwriting (Facilitated Emissions)—a core Group business—are also under international discussion, and we are closely watching developments. Having consulted with relevant departments, the Group began monitoring in FY2025. Daiwa Securities focuses on contributing to a decarbonized society through capital markets operations, including promoting transition finance, and will continue to strengthen these efforts.

As an integrated securities group, we continue to support customers' decarbonization efforts through our financial business. For details, please refer to "4. Strategy (2) Initiatives to Deal with Climate-related Risks and Opportunities."

Recognizing the effects that climate-related risks have on our business, the Group conducts scenario analysis as a resilience assessment against future climate-related changes, developments, and uncertainties. For transition risks, using the NGFS climate scenarios^*1, we estimate valuation losses on the portion of our assets classified as carbon-intensive sectors under climate-related exposures. For physical risks, using the climate scenarios published by the IPCC^*2, we estimate physical damage from wind and flood disasters caused by climate change—covering owned real estate (May 2024), domestic renewable energy facilities (May 2025), and overseas renewable energy facilities (May 2026).

The results of these scenario analyses, and the Group's strategies and response policies based on them, are reported to the Executive Management Committee following discussion at the Sustainability Promotion Committee. The scenario details and analysis assumptions are as follows.

• *1Scenarios for assessing impacts on the financial system, developed by the NGFS (Network for Greening the Financial System), in which central banks and financial supervisory authorities of various countries participate.
• *2GHG emission scenarios published by the IPCC (Intergovernmental Panel on Climate Change).

Stagnation and contraction of the economy and industry, changes in financial markets (falling stock prices, increased credit risk, etc.), damage from torrential rain and floods, and health impacts from abnormally high temperatures were noted as relatively concerning factors. Applied to the scenarios, transition risks are expected to become relatively pronounced under (ii) Disorderly transition and (iii) Too little, too late, where CO₂ emission reductions cause economic and social turmoil, while physical risks are expected to become relatively pronounced under (iv) Hot House World, where CO₂ emission reductions are delayed.

On the other hand, the impact of the energy transition combines negative effects on existing businesses from reduced fossil resources with positive effects from new business opportunities associated with the rise of new energy such as renewables, and overall is positioned as a roughly neutral factor; the impact is expected to change according to the burden of transition costs and taxes. Climate action such as CO₂ emission reductions may also affect corporate reputation and thus indirectly affect business as a whole. Having comprehensively considered these positive and negative effects, the Group is assessed to have a certain level of Climate Resilience. Furthermore, to mitigate negative effects, we have formulated disaster mitigation measures and a BCP against the risk of direct damage from torrential rain and floods, and by steadily implementing climate action and maintaining our reputation, we believe we can curb negative effects even if the macroeconomy stagnates.

For the analysis of non-trading account assets through 2050, cumulative losses under (iv) Hot House World were approximately ¥60.7 billion, and for the analysis of trading account assets through 2030, cumulative losses were approximately ¥3.6 billion (both relative to the base scenario). Valuation losses were calculated based on figures in the Group's consolidated financial statements for the fiscal year ended March 2026.

Based on these results, the short-term impact of climate-related risks and opportunities on our financial soundness—including the current and next fiscal years—is considered limited, and we do not expect them to cause material adjustments to the carrying amounts of assets and liabilities reported in the related financial statements. We will continue to examine the results and aim to reduce, over the medium to long term, carbon-intensive assets with particularly high impact. Reducing carbon-intensive assets also requires society's overall transition to decarbonization, and the Group actively participates in various discussion forums and initiatives in Japan and overseas to contribute to the early realization of a decarbonized society.

Given the increase in abnormal weather associated with climate change, impacts are anticipated on real estate-related exposures—which account for a meaningful share of the Group's strategy—and on non-operational real estate held by the Group. Scenario analysis showed cumulative estimated damage from wind and flood disasters through 2050 of approximately ¥1.4 billion under the RCP8.5 scenario, which assumes the highest temperature increase. As the Group's real estate is largely located in areas less susceptible to wind and flood damage and consists mainly of robust structures and high-rise properties, the financial impact on the Group is considered limited.

In addition, as the transition to a decarbonized society progresses, commensurate physical risks are anticipated for renewable energy facilities. Scenario analysis for domestic facilities showed cumulative estimated damage from wind and flood disasters through 2050 of approximately ¥0.99 billion under the SSP5-8.5 scenario, and analysis for overseas facilities showed approximately ¥1.88 billion. The results indicate that risk is concentrated at certain facilities located in mountainous areas that are particularly susceptible to wind and flood damage; nonetheless, the financial impact on the Group is considered limited. Owned real estate, domestic renewable energy facilities, and overseas renewable energy facilities were calculated based on figures in the Group's consolidated financial statements for the fiscal years ended March 2024, December 2024, and March 2026, respectively. These physical-risk target assets total approximately ¥600 billion, equivalent to roughly 30% of total assets across all sectors.

The current scenario analysis was conducted by setting assumptions based on presently available information and data and by limiting the scope of analysis. The range of climate-related risks to be considered is broad, and their timing and scale can vary widely as financial markets (stock prices, credit risk, etc.), policy and law, and the evaluation of ESG responses change rapidly. Going forward, by obtaining more information and related data and understanding the medium- to long-term effects on financial position, financial performance, and cash flows, we will reduce material uncertainties. By executing our strategy while taking the understood effects into account, we will further enhance our Climate Resilience.