Information disclosure in line with the TCFD and TNFD recommendations

Governance

Role of the Board of Directors and monitoring system

The President and CEO supervises the risks and business opportunities, targets, and specific initiatives associated with the environment including climate change, while the Chief Sustainability Officer (CSuO) takes responsibility for promoting actions. These issues are deliberated at the Sustainability Promotion Council and the Management Committee. The progress of each initiative is regularly monitored, and remedial measures are discussed when needed. The Board of Directors receives periodic reports of what the Sustainability Promotion Council and the Management Committee discussed, and on which points they made decisions and deliberates and supervises them from the perspective of maximizing corporate value. From 2022, we have aligned the evaluation indexes for inside directors and corporate officers with the initiatives in the long-term vision and  countermeasures against sustainability issues, including climate change, with the aim to strongly incentivize them to manage the Group from a long-term perspective and promote the sustainable growth of the Group. Furthermore, in March 2024, we revised our Corporate Governance Basic Policies to clarify the role of the Board of Directors in addressing climate change and protecting biodiversity. To achieve carbon neutrality, we are implementing initiatives through a company-wide Carbon Neutrality Project involving all CXOs and business units.

Strategy

Short-, Medium- to Long-term Nature-related Risks and Opportunities and Responses to Them

[1]Climate change-related

Amid the successful transition to a carbon-neutral society, the Group sees climate change as both
a risk and opportunity. The Group will exercise its social responsibility as a company and build further competitive advantages to reduce GHG emissions across the value chain by providing products and services that contribute to decarbonization, achieving co-creation with partners, improving energy efficiency, and increasing usage of renewable energy. In order to reduce emissions, we agreed to the Paris Agreement and expressed our commitment to obtaining SBT (Science Based Targets) certification in June 2025. Given the above, the Group analyzes risks and opportunities to evaluate the impact of climate change on the Group businesses under the following two scenarios: (1) The average global temperature will increase by 4°C or more and (2) The average global temperature rise can be kept well below 2°C and continue efforts to limit it to 1.5°C based on the Paris Agreement, which were released by the Intergovernmental Panel on Climate Change (IPCC) or the International Energy Agency (IEA). Based on the analysis, we determine the necessary countermeasures. Business impact assessments were conducted in the Semiconductor and Electronic Materials segments in 2023, followed by the Mobility and Innovation Enabling Materials segments in 2024. Assessments are scheduled to be completed for all businesses by 2025. We will make disclosures on this front starting with the segments for which impact assessments have been completed.

Transition risks affecting the entire company include increased operating costs due to rises in energy-related taxes such as carbon prices. Our company aims to reduce emissions by 30% from the base year 2013 result of 4.63 million t-CO₂, targeting approximately 3.24 million t-CO₂ by 2030. Assuming that the Scope 1 and 2 emissions in fiscal 2030 will be approximately 5 million t-CO₂ due to sales growth, and referring to the IEA's 2°C Scenario (SDS)* projections, the carbon price is set at 10,000 yen/t-CO₂. It is assumed that emissions trading as offsets for the unmet target portion will occur. If a 30% reduction is not achieved, operating cost impacts of about 18 billion yen per year will occur, whereas achieving the reduction will lead to suppression of operating costs. In addition, as a company that has various connections with society, we will continue to utilize scenario analysis to contribute to the realization of a carbon-neutral society in many social contexts, respond to risks, and achieve sustainable growth.

• *2°C Scenario (SDS): Sustainable Development Scenario

[2] Nature-related

In order to realize a nature-positive economy, we are working to address climate change through
our businesses and promote the realization of a circular economy, while taking into account our
dependency and impact on nature and making efforts to reduce and manage our impact and
conserve the environment. As part of these efforts, we analyzed the dependency and impact on
nature and nature-related risks and opportunities in our direct operations and value chains in
accordance with the LEAP approach recommended by the TNFD, which reaffirmed our need to
take action. In 2024, we conducted evaluations of our major businesses and suppliers.

Discovering connections with nature (Locate)

In the locate phase, we identified the locations of our manufacturing sites and major supplier sites and assessed the natural conditions of their surrounding areas. We assessed a total of 59 manufacturing sites and 40 major supplier sites in Japan and overseas. After identifying the biomes around each site, we carried out assessments at each site in accordance with the five criteria defined by the TNFD (importance for biodiversity, high ecosystem integrity, rapid decline in ecosystem integrity, water-related physical risks, and importance for ecosystem service provision) using data obtained from
external tools and other sources.
*  Assessments were conducted in accordance with these five criteria using the following data and tools.

• - Importance for biodiversity: Confirmed and assessed proximity to areas important for biodiversity (protected areas, Key Biodiversity Area, Critical Habitat Screening layer, WWF Global 200 regions).
• - High ecosystem integrity/rapid decline in ecosystem integrity: Confirmed and assessed based on the GLOBIO MSA and the Biodiversity Intactness Index provided by the National History Museum.
• - Physical water risks: Confirmed and assessed baseline water stress and flood risk (rivers and coasts) using Aqueduct.
• - Importance for ecosystem service provision: Confirmed and assessed proximity to areas managed by indigenous people and local communities (IPLCs) using Global Forest Watch.

Looking at the trends in the assessment results, we found that some of our manufacturing sites were important for biodiversity and had high ecosystem integrity. One domestic site overlaps a key biodiversity area (KBA) and is close to a protected area, and was also deemed to have high ecosystem integrity. As another site in Southeast Asia also overlaps with a KBA, we recognized the need to prioritize the management of our impact on nature going forward. Furthermore, since water risks tend to be high at manufacturing sites in Southeast Asia, we recognized the need to prioritize measures such as water usage reduction and flood prevention. In terms of other criteria, no sites were found to have particularly notable results.

In the assessment results for supplier sites, some sites were found to be important for biodiversity and have high ecosystem integrity. We also discovered that water risks are particularly high in Southeast Asia. It became clear that we need to pay attention to risks throughout the supply chain and, if necessary, to implement activities to reduce risks and preserve the environment across our supply chain through engagement and other means.

Assess dependency and impact (Evaluate)

In the evaluate phase, we identified and evaluated the significant dependency and impacts on nature in our core businesses. We conducted assessments using ENCORE, a tool recommended by the TNFD, as well as our internal information, and compiled the results into a heat map. Direct operations were found to have a significant impact on disturbances such as emission of atmospheric pollutants and GHG emissions, discharge of hazardous substances to water and soil, noise, and light pollution associated with our manufacturing process. We also discovered that we have a high dependency on water, including water resource supplies and water purification.
In upstream value chains, we reaffirmed that the procurement of organic and metallic materials is heavily dependent and has a significant impact on nature in many items, including land use, water usage, pollution, and disturbance. While we have established sustainable procurement standards and Sustainable Procurement Guidelines to help facilitate the understanding of these standards, we still continue our efforts to understand and address the dependency and impact on nature across our supply chain.

Assess risks and opportunities (Assess)

In the assess phase, we identified and organized the nature-related risks and opportunities in our businesses based on the assessment results of the locate and evaluate phases.

[3] Climate and nature-related risks and opportunities and main response

• *The financial impact of climate and biodiversity-related opportunities and risks is being calculated sequentially, and will thus be disclosed in stages. As such, the impact of the same risks and opportunities may differ from those disclosed in the previous fiscal year.
• Large: We expect regulations and policies to tackle climate change to continue impacting the Group going forward. As a result, we estimate the annual impact on our operating income to be ¥10.0 billion or higher.
• Medium: Moves to address climate change are already underway, and we expect this to continue impacting the Group going forward. As a result, we estimate the annual impact on our operating income to range from ¥3.0 billion to less than ¥10.0 billion.
• Small: There are moves to address climate change. As a result, we estimate the annual impact on our annual operating income to be less than ¥3.0 billion.
• 〇: We have deemed there to be impact on climate change and biodiversity.
• - :  We have deemed there to be no impact on climate change and biodiversity. 

• *2This year, physical risks were analyzed at an additional 21 Group company sites in Japan and overseas (57 sites in total) using hazard maps and AQUEDUCT. In the event of a once-in-a-century disaster, combined with the analysis results of last year, it was discovered that 20 sites are exposed to risks. However, we set the impact as “small” because the annual impact taking into account the recurrence interval is small for both the 1.5/2°C and 4°C scenarios. We also analyzed risks at 40 major supplier sites, and confirmed that the impact on these businesses would be small.

Risk Management

Process to assess, identify, and manage risks

The Group conducts climate change and nature risk assessments for each business, assesses “transition risks” and “physical risks” arising from climate change, as well as dependency, impact, and risks related to nature. We then identify material risks for the Group and develop countermeasures against them. Material issues in identifying risks and developing countermeasures are reported to the Board of Directors. We will continue to conduct the risk assessments to update risks and countermeasures, along with monitoring the progress of the existing countermeasures.

Integration into enterprise risk management

Given the importance of building an enterprise risk management system, the Group pursues integrated risk management using a common framework across the Group. Information on
climate change, nature and other risks with the potential to impact the Group’s management is registered in an integrated manner into our risk management system via companywide risk identification activities. Key risks, which have very high significance or priority, are deliberated by a dedicated committee (Risk Management Committee). Important matters are submitted to the Management Committee for deliberation and decision before being reported to the Board of Directors.

Metrics and Targets

We are pursuing carbon neutrality leading up to 2050, to accomplish the goal of becoming a company that contributes to a sustainable global society as put forth by our long-term vision. We have also set a milestone target of reducing Scope 1 and 2 GHG emissions by 30% (compared to 2013) by 2030. In 2024, we switched 100% of its electricity usage to electricity derived from solar power at our Head Office, and the entire Resonac Group purchased 196,700 MWh of electricity derived from renewable energy. We reduced GHG emissions by 8.3% compared to 2013 by switching to non-fossil fuel energy sources such as solar power generation. Going forward, we will accelerate our efforts to achieve our targets and further promote information disclosure. For Scope 3, we are gradually disclosing figures on our website for categories where calculations have been completed. We will continue to improve the accuracy of these calculations while working to reduce our GHG emissions.

Non-financial KPI targets and results

Resonac positions sustainability at the core of its company-wide strategy and defines three material issues (materialities) of sustainability. In terms of the environment, we establish non-financial KPIs and initiatives linked to "Gain credibility through responsible business management," and through focused efforts, aim to achieve our long-term vision.

• * Emission performance has been revised due to the integration. Regarding Scope 3, calculations and disclosures are being conducted upstream, and target setting is under consideration.

Indicators and targets related to nature

We monitor and set targets for our environmental performance. Preparations are underway for the future disclosure of core global disclosure targets recommended by the TNFD, which we have not yet disclosed.