With extreme weather around the world causing a rising number of major natural disasters, JSR Group sees responding to the problem of climate change currently facing society as one of the most important issues for the company, and we are therefore actively working to reduce greenhouse gas (GHG) emissions both internally and externally.

In October 2020, we announced our support for the TCFD^*1 recommendations and began disclosing information based on the TCFD framework, working with all stakeholders to address climate change issues.

*1 TCFD (Task Force on Climate-related Financial Disclosures): Founded by the Financial Stability Board in 2015. In June of 2017, the TCFD recommended that financial institutions, companies, governments, and the like disclose their climate change impacts in their financial reports. Dissolved in October 2023, IFRS is now responsible for corporate climate change-related information.

JSR utilizes a supervisory structure, overseen by the Board of Directors, to examine and carry out appropriate responses to issues that could potentially pose business risks or represent business opportunities. With the aim of strengthening supervision of risks and opportunities related to sustainability, including responses to climate change, as well as progress management and regular monitoring of KPIs and targets, the Board of Directors receives reports twice a year, shares issues, and discusses and deliberates on future action plans and business strategies for the whole Group. In addition, the executive officer in charge of sustainability concurrently serves as a director. In this manner, we have established a system that enables the Board of Directors to thoroughly implement sustainability management (as of June 2024).

Furthermore, JSR has established the Sustainability Promotion Committee, chaired by the CEO and President, as a cross-functional meeting body to advance the implementation of sustainability activities. Under the Sustainability Promotion Committee, we established the Sustainability Planning Committee, Environment, Safety and Quality Committee, the Risk Management Committee, and the Corporate Ethics Committee (each chairperson of which concurrently serves as a member of the Sustainability Promotion Committee), with the Sustainability Promotion Committee overseeing all of these committees.

In particular, with regard to climate change response, the Sustainability Planning Committee, which is responsible for planning overall strategies on sustainability, sets the direction of company-wide activities, while the Environment, Safety and Quality Committee is responsible for approving the action plan related to climate change of the entire organization and evaluating and verifying the results of activities. The Risk Management Committee is responsible for managing the implementation of and improving response policies and response plans with regard to apparent and latent risks and opportunities identified through assessments. The Sustainability Promotion Committee supervises and guides the activities of these three committees and strives to strengthen management and advance activities through regular meetings held four times a year and extraordinary meetings. In principle, the Sustainability Promotion Committee reports its activities to the Board of Directors quarterly.

Starting in FY2023, as a new initiative, we are inviting outside experts to hold sessions in which all executive officers, including the CEO, learn about global trends and the latest trends related to sustainability. To date, we have held two sessions with the main theme of management and business strategy and sustainability integration. Going forward, we will continue to provide similar opportunities to secure connections between the management team and external experts, and to enhance JSR's various initiatives related to climate change response and sustainability.

• Sustainability Promotion Committee

• Progress of FY2022 actions and plan for FY2023 (April)
• Activity reports from each committee and results of ESG rating agency assessments (July)
• Progress of actions in the first half of FY2023 (November)
• Regular business report on sustainability (February)

Reference: All capital investment projects submitted to the Company's Executive Committee and Board of Directors for investment return calculation are subject to calculation of returns using Internal Carbon Pricing (ICP).

The yearly bonuses of the CEO and President are determined based on Group performance (90%) and a non-financial evaluation (10%). This means that bonuses are linked to progress on Group-wide sustainability management indicators such as reducing GHG emissions and promoting DE&I. The amount of remuneration based on non-financial evaluation is first discussed by the Remuneration Advisory Committee and then decided by the Board of Directors, who can set it to any amount from 0% to 200%.

The vision of JSR Group's Medium-Term Management Plan is to generate value for all stakeholders and to create a resilient organization that adapts to all environmental changes with the aim of achieving sustainable growth. The entire JSR Group is working on climate change as it is considered to be one of the most important themes to be addressed. In addition, utilizing the TCFD framework, we view climate change from the two aspects of “opportunity” and “risk,” and are advancing efforts to address corporate social responsibilities and to build further competitive advantages.

JSR Group analyzed risks and opportunities based on the two scenarios announced by the Intergovernmental Panel on Climate Change (IPCC), the International Energy Agency (IEA), and other organizations: namely, a global average temperature increase by 4°C or more and a global average temperature kept below 2°C as agreed in the Paris Agreement (partly within 1.5°C). In turn, we reaffirmed the need for JSR Group as a whole to take action to solve the climate change issue. Specifically, we will focus on the following themes for each business, incorporate them into future business plans, and quantify their financial impact.

Furthermore, we introduced an Internal Carbon Pricing (ICP) mechanism in May 2022 for the decision-making process for new investments required to advance each business. In investment financing and business plans involving new investments, additional expenses based on ICP are included as part of the required costs, and future cash flows are calculated/discounted and reflected in the investment return calculations. In this way, we incorporate into our decision-making process for investments not only the acceleration of our strategy and the economic perspective, but also the perspective of GHG emission control as a response to climate change.

　1.5/2°C: IPCC_RCP1.9/2.6, IEA_B2DS, etc.
　4°C: RCP8.5

　Small: Somewhat affects the strategy of JSR or business divisions
　Medium: Requires a major change in the strategy of a business division
　Large: Requires a major change in JSR’s overall business strategy

1. (1)Assumption scenarios: We selected scenarios that would serve as assumptions for the analysis, and comprehensively identified risks and opportunities that could affect our business in each of the 1.5/2°C and 4°C scenarios, from the perspective of both external factors such as laws and regulations and industry trends, and internal factors such as the current status and future strategies of JSR Group.
2. (2)Qualitative analysis: We qualitatively assessed the identified risks and opportunities through interviews with business divisions, using a time horizon (three levels: short, medium, and long term) and risk severity (five levels).
3. (3)Quantitative analysis: We estimate quantitative financial impact for some risks and opportunities. We expect to broaden the scope of the estimates in the future.
4. (4)Formulation of countermeasures: The Sustainability Planning Committee, which is in charge of overall sustainability strategy planning together with the Sustainability Promotion Department, took the lead in studying countermeasures to minimize risks and maximize opportunities, and set management indicators. The results of this analysis were reported at the Sustainability Promotion Meeting held in July 2022.

1. (1) Impact Scenarios and Degree of Business-Specific Impact

1. (2)Significant Risks and Opportunities and Direction of JSR Group’s Response
   Depending on the assessment results, we will proceed to address items from large to medium impacts.