Responding to the TCFD Recommendations

In December 2020, we announced our support for the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD). Based on this framework, we have organized our approach to climate change using the four different recommended areas: governance, strategy, risk management, and metrics and targets. This will help us maintain good communication with a wide range of stakeholders, including shareholders and investors.

In order to accelerate our efforts to address climate change, we have established specific initiatives for all four areas, and we are continually working to improve these efforts.

In order to achieve the “sustainable growth” set out in the Group Management Vision, we treat climate change and other global environmental issues as priority issues. Furthermore, our aim is to be an energy group that helps to alleviate climate change, practicing “harmony and symbiosis with the global environment,” which is part of our Basic Concept of Sustainability. For this reason, Chapter 4 of the Cosmo Energy Group Code of Conduct, which is entitled, “We take care of the global environment,” states that we will proactively and continuously work to preserve the global environment. We also have an Environmental Policy in place to ensure that all of our business activities are conducted in harmony with the environment.

Cosmo Energy Group Code of Conduct

Group’s Environmental Policy

At Cosmo Energy Holdings, governance related to climate change has been incorporated into the governance structure for overall sustainability strategies.

Please refer to the link below for more information on the matters deliberated on by the Sustainability Strategy Council and the reports to the Board of Directors.

Sustainability Management Promotion System

At the Company, the Sustainability Strategy Council and Executive Officers’ Committee deliberate on and make decisions regarding matters concerning important operational execution and policies, including climate change-related issues. Matters deemed to have a major impact on the entire Group are discussed and reported to the Board of Directors, thereby ensuring appropriate oversight by the board.

The Sustainability Strategy Council treats climate change as one of the Company’s key management issues and deliberates on matters including policy for responding to climate change, plans to reduce GHG emissions, and the related metrics. Drawing on multiple climate change scenarios, the Council recognizes the climate-related risks and opportunities that could affect the Group’s business activities, oversees the progress of measures to reduce the environmental impact of those activities, and continuously monitors the creation of business opportunities leveraging our response to climate change.

In fiscal 2025, the Sustainability Strategy Council deliberated on matters including our approach to emissions trading schemes, the identification of financial impact risks, the monitoring of progress on GHG emission reduction measures, and the revision of our Roadmap for Achieving Net Zero Carbon by 2050. Important matters were submitted to and reported to the Executive Officers’ Committee and the Board of Directors.

Matters deliberated on by the Sustainability Strategy Council meetings are shared by members with their respective departments, and are also communicated and reported to Group companies at the Sustainability Liaison Committee meetings.

Under the Seventh Consolidated Medium-Term Management Plan (fiscal 2023 to fiscal 2025), we worked on the climate-related material issues of “climate change countermeasures,” “provision of clean energy, products, and services,” and “structural reform of profitmaking businesses,” as well as on “strengthening of Group risk management.”

As indicators for measuring progress in addressing these material issues, we have established targets for expanding our renewable energy businesses and reducing GHG emissions. We are also working hard on climate change countermeasures while incorporating the perspective of risks and opportunities.

In formulating the Eighth Consolidated Medium-Term Management Plan, which began in fiscal 2026, we reviewed our material issues and identified three new climate-related material issues: “contributing to a carbon-neutral society,” “sustainable growth strategy,” and “strengthening risk resilience.” For these material issues, we continue to use the indicators of volume of renewable energy supplied and GHG emission reductions — both set as climate-related KPIs under the Seventh Consolidated Medium-Term Management Plan — and we are managing our progress accordingly.

We assessed the significance of climate-related risks and opportunities anticipated in the Group’s business activities, based on the TCFD’s climate-related risk categories, taking into account changes in the business environment driven by external factors.

The following is a list of the major risks and their impacts, as well as opportunities, as identified by the Group.

Scope: Petroleum development, refining/sales, electric power (renewable energy, IPP), petrochemicals

Time span Short-term= within 1 year, medium term= within 1 to 5 years, long-term= 5 to 20 years

Impact level when risk emerges: Small=Less than 1 billion yen; medium=1 billion yen or more but less than 10 billion yen; large=10 billion yen or more

With external factors affecting society and the economy expected to fluctuate even more significantly, we envisioned multiple possible futures and developed three different social scenarios as we formulated the Eighth Consolidated Medium-Term Management Plan, to ensure that we would be able to respond with agility to unpredictable situations. By using multiple scenarios, we aim to advance climate change response strategies that address uncertainties such as rapid environmental changes and unforeseen risks.

Blue scenario: Equivalent to the IEA’s CPS (Current Policies Scenario / 4°C scenario), in which Japan’s CO2 emissions in 2040 are 50% lower than in fiscal 2013.

Turquoise scenario: Equivalent to the IEA’s STEPS (Stated Policies Scenario), in which Japan’s CO2 emissions in 2040 are 62% lower than in fiscal 2013.

Green scenario: Equivalent to the IEA’s NZE (Net Zero Emissions by 2050 Scenario / 1.5°C scenario), in which Japan’s CO2 emissions in 2040 are 73% lower than in fiscal 2013.

Based on the scenario analysis, we conducted a financial impact assessment using the Blue scenario as our 4°C scenario and the Green scenario as our 1.5°C scenario. We assessed the physical risk of natural disasters and the transition risk associated with declining demand under the Blue scenario, and the transition risks associated with declining demand and carbon pricing under the Green scenario.

Following discussions by our Sustainability Strategy Council on the scenario analysis results, we incorporated revisions to our Roadmap for Achieving Net Zero Carbon by 2050 and our approach to integrating climate change countermeasures with our management strategies into the Eighth Consolidated Medium-Term Management Plan.

For these scenario analyses, we targeted our mainstay petroleum, petrochemical, oil exploration and production, and electric power businesses, and we conducted financial impact assessments at the 2030, 2040, and 2050 time horizons.

On the opportunity side of climate-related risks, in Vision 2035, we have adopted the slogan “To create energy that shapes the future, energy that sustains society, and new forms of value,” and we have set “Value creation across the electricity supply chain” and “Pursuing next-generation energy and decarbonization” as our business directions. Going forward, we plan to expand investment in growth areas focused on these businesses and thereby increase the impact of these opportunities. We will also continue our work to align disclosure and management strategy, in line with the TCFD recommendations — for example, by examining how to reflect the revenue outlook for these opportunities based on the latest scenario analysis, and by ensuring the Sustainability Strategy Council reviews regular status reports.

The Group has positioned “strengthening risk resilience” as one of its material issues, establishing a system to identify potential risks relating to business activities, appropriately manage various risks, and minimize losses. We are striving to enhance risk management using a cycle of planning, implementation, evaluation, and corrective action.

Refer to Risk Management for more information on risk management at the Cosmo Energy Group.

We regard risks and opportunities related to climate change as important Group-wide management issues. We have established a system to promote ongoing discussion of this important management issue by the Sustainability Strategy Council, and we are conducting activities such as ascertaining risks and evaluating the progress of response measures.

To achieve net-zero carbon emissions by 2050, the Group will work to reduce GHG emissions (Scope 1 and Scope 2). While fulfilling our mission to ensure a stable energy supply, the Group is working to achieve a reduction of 21% or more by fiscal 2030. By fiscal 2050, we aim to achieve net-zero carbon emissions, including Scope 3 emissions, together with the broader society.

In fiscal 2025, we managed climate change-related risks under the material issue of “climate change countermeasures” and climate change-related opportunities under the material issues of “provision of clean energy, products, and services,” and “structural reform of profitmaking businesses.” We established metrics and targets for each and monitored progress accordingly.

Please refer to “Fiscal 2025 KPI Targets and Results for Material Issues” on the Sustainability Management Initiatives page for targets and results for climate change-related risks and opportunities.

The Group has set “reducing GHG emissions” as a KPI for climate-related risks.

In fiscal 2025, Scope 1 GHG emissions from the Group’s business activities were 6,749,000 t-CO2 and Scope 2 emissions were 258,000 t-CO2, resulting in total Scope 1 and Scope 2 emissions of 7,007,000 t-CO2, up 9% year on year.

Although our energy conservation measures progressed as planned, total Scope 1 and Scope 2 emissions rose by 579,000 t-CO2 year on year, driven by factors including higher facility utilization rates, reflecting the impact of scheduled maintenance. Compared with fiscal 2013, however, this still represented a reduction of 1,057,000 t-CO2.

Scope 1 and Scope 2 emissions, factoring in avoided emissions, totaled 6,369,000 t-CO2, represented a 19% reduction compared with fiscal 2013, making progress toward our 2030 GHG emissions reduction target of 30% versus fiscal 2013.

We expanded the previous scope of tabulation for Scope 3 emissions and tabulated all the relevant categories (1 through 7, 9, and 11 through 13, and 15). The total for Scope 3 emissions was 75,420,000 t-CO₂.

Detailed figures on results are available in ESG Data.

GHG emissions (Scopes 1, 2, and 3)