Initiatives for Biodiversity Conservation
Together with climate change, the protection of the natural environment and the ecosystems that support it is a critical issue of global importance. Having established "Contribute to environmental conservation that nurtures abundant nature" as one of our Social Challenges (Materiality) to Address with Priority, we are engaging in the following initiatives to fulfill both the SDGs and our own sustainable growth.
Initiatives for the Taskforce on Nature-related Financial Disclosures (TNFD) Recommendations
The TNFD is an international initiative to develop a framework for the appropriate evaluation and disclosure of business risks and opportunities related to natural capital. Its final recommendations were published in September 2023.
We support the philosophy of TNFD and joined the TNFD Forum in June 2023 to support its activities. In accordance with the framework of the TNFD recommendations, we will continue to analyze and disclose information on natural capital and biodiversity.
Initiatves for Biodiversity Conservation and Natural Capital
At our Company, the Sustainability Committee, chaired by the Executive Officer in charge of the Sustainability Promotion Department, and the Risk Management Committee, chaired by the Chief Risk Officer (CRO), review and discuss various issues related to biodiversity conservation and natural capital, and the status of examinations and discussions is reported to the Executive Committee.
In addition, the Company has established a system to identify and assess the risks of negative impacts on biodiversity conservation and natural capital risks on a company-wide basis, with the Sustainability Promotion Department in charge of risk assessment and the Risk Management Department in charge of overall risk management, and reports the results to the Risk Management Committee. The Company will continue to identify and assess risks at least once a year, and further enhance our risk management system. The results are also reported to the Sustainability Committee as part of our initiatives in response to address TNFD recommendations.
Initiatives as an Operating Company
In order to protect biodiversity and conserve the global environment, we are working to reduce the amount of plastic and paper we use, take an environmentally-conscious approach to printed materials, and carry out cleanup activities at the local communities at each of our bases. In addition, we support afforestation and other activities through our donations to environmental conservation organizations. We will continue to make considerations for the environmental impact in our corporate activities as we strive to achieve sustainable growth for our Company and the establishment of a sustainable society.
Initiatives as an Institutional Investor
Nature-related risks and opportunities in investment activities
As an institutional investor, we have a hand in the activities of our portfolio companies, including when these activities relate to the natural world. Our investment and loan portfolio can therefore be considered to have the following nature-related risks and opportunities.
Nature-related risks and opportunities in investment and financing activities
| Type | Our Recognition |
|---|---|
| Physical Risks | Increased costs for portfolio companies due to the decline, deterioration, and depletion of natural assets and ecosystem services on which portfolio companies depend, such as water resources, and loss of value of portfolio assets due to production disruptions |
| Physical Risks | Increased costs for portfolio companies due to stricter environmental protection laws and social demands, litigation risk, and loss of value of investment assets due to increased reputational risk |
| Opportunities | Increase in the value of portfolio companies and expansion of investment and financing opportunities due to the need for environmentally protective technologies and alternative products and services with a smaller environmental impact |
Major nature-related dependencies and impacts of our equity and corporate bond portfolios
Companies depend on natural capital to conduct their business activities, but also impact natural capital through those business activities. To determine the nature-related dependencies and impacts that we should emphasize in our portfolio, we prepared sector-based heatmaps. We selected sectors based on (1) assessments of the degrees of dependence and impact of each sector performed using ENCORE*1, 2 (a nature-related risk analysis tool developed by the Natural Capital Finance Alliance etc.), (2) our investment balance in each sector, and (3) the TNFD priority sectors, and attempted to visualize the nature-related risks we should focus on.
- *
- Natural Capital Finance Alliance (Global Canopy, UNEP FI, and UNEP-WCMC) (2022).
ENCORE: Exploring Natural Capital Opportunities, Risks and Exposure. [On-line], [11/2022], Cambridge, UK: the Natural Capital Finance Alliance. Available at: https://encorenature.org/en
Heatmap of major nature-related dependencies and impacts of our equity and corporate bond portfolios
<Method of Selection of Sectors Shown in the Heatmaps>
(1) Based on the ENCORE assessment of dependence and impact in each sector, we put the overall degrees of dependence and impact for each sector into numerical form.
(2) We specified sectors in the top one-third for (1) degrees of dependence and impact and in the top one-third for our investment balance.
(3) From among the sectors in (2), we selected ones corresponding to the TNFD "priority sectors"
Regarding dependence, the results revealed heavy reliance on water resources in sectors such as electric utilities, food & beverages, and integrated oil & gas. As for impact, the results showed effects on terrestrial, freshwater, and marine ecosystems from infrastructure construction etc. in sectors such as electric utilities, integrated oil & gas, and construction & engineering, as well as effects caused by water use and pollution/waste in many sectors. We will therefore need to keep a close eye on the situation with these impacts.
This analysis is in its initial stages, assuming each industry in general. Going forward, we plan to analyze and disclose the risks and opportunities of our portfolio with respect to nature in terms of the TNFD framework. In addition, based on the results of our analysis and demands from society, we will incorporate nature-related issues into our investment decisions, engage appropriately with portfolio companies on nature-related topics, and make investments that contribute to the maintenance and improvement of the natural environment.
Investment Examples
Investment in Blue Bonds issued by the Republic of Indonesia
We invested in Blue Bonds(*) issued by the Republic of Indonesia, the world's largest island nation.
The funds raised through this bond issue will be used for projects that contribute to the development of the blue economy as defined in the SDGs Government Securities Framework developed by the Government of Indonesia.
- (*)
- Bonds whose use of funds is limited to projects related to the water environment, such as improvement and conservation of the marine environment, sustainable fishing, and prevention of marine pollution.
