Complying with the TCFD Recommendations

TCFD Report
Overview
Governance
Strategy
Risk Management
Metrics and Targets

Recognizing that responding to climate change, which has a major impact on the environment, society and business activities, is an important issue, JAPAN POST BANK announced its agreement with the TCFD*1 Recommendations in April 2019. Since then, the Bank has incorporated various initiatives into its management strategies, increasing the level of its response to climate change.

*1:: Abbreviation of Task Force on Climate-related Financial Disclosures. An organization established at the proposal of the Financial Stability Board for the purpose of thoroughly realizing corporate information disclosure pertaining to climate change, in which the representatives of the central banks and financial supervisory authorities, etc., of key nations participate.

TCFD Report

Our initiatives related to the TCFD Recommendations are summarized in our TCFD Report. It can be downloaded here.

TCFD Report 2022（PDF/3,177KB）

Overview

Items	Recommended disclosures	Initiatives Summary of Japan Post Bank
Governance	Disclosure of the organization’s governance regarding risks and opportunities associated with climate change.	The Board of Directors supervises the formulation of policies and the status of sustainability initiatives to counter climate change, etc. Following discussions within the Sustainability Committee, Executive Committee, and the Board of Directors, issues relating to climate change have been incorporated into the Medium-term Management Plan and fiscal year management plan. The Sustainability Management Office, Corporate Planning Department facilitates the advancement of initiatives concerning climate change in unison with management strategies. Policies concerning the environment and climate change are stipulated in the JAPAN POST BANK Environmental Policy. Promotion of ESG management,^* which includes addressing climate change, has been incorporated as a performance-linked compensation evaluation indicator for executive compensation. *: The status of CO₂ reduction has been set as one KPI.
Strategy	Disclosure of the actual and potential impact of risks and opportunities associated with climate change upon the organization’s business, strategy, and financial planning.	Identify the impact (risks and opportunities) of climate change on the Bank. Scenario analysis has been employed to ascertain the impact of climate change-related risks on the Bank’s finance portfolio. Monitor the proportion of carbon-related assets in loans.
Risk Management	Disclosure of how climate change-related risks are identified, assessed, and managed within the organization.	Risks associated with issues related to climate change have been recognized as top risks. Responding to these risks has been reflected in management plans and are examined and managed on a quarterly basis. Undertaking investments based on an established ESG Investment and Financing Policy in order to mitigate social and environmental risks including climate change. Make ESG engagements with investees. Analyzing the impact climate change risk has on existing financial risks.
Metrics and Targets	Disclosure of the metrics and targets used for the assessment and management of climate change-related risks and opportunities.	Announced details of the Japan Post Bank Net Zero GHG Emissions Declaration and committed to achieving net zero emissions for the Bank (Scope 1 and Scope 2) as well as its finance portfolio (Scope 3) by 2050. Set a target to reduce GHG emissions for the Bank (Scope 1 and Scope 2) by 60% for FY2031/3 compared to FY2020/3. Set GHG emissions (Scope 3) targets for investments and lendings in FY2031/3 (power generation sector emissions intensity 165-213 gCO2e/kWh) Calculated the GHG emissions (Scope 3) of investees. Raised the Bank’s ESG-themed investment balance target to ¥4 trillion by the end of FY2026/3

Governance

Details concerning the formulation of policies regarding climate change and the status of initiatives are reported on a regular basis to the Board of Directors, which is responsible for the supervision of issues related to climate change.
In order to advance sustainability initiatives including issues related to climate change in unison with management strategies, the Sustainability Committee, which serves as an advisory body to the Executive Committee, Executive Committee, and Board of Directors incorporated details of their discussions into the Medium-term Management Plan (FY2022/3 through FY2026/3) while also identifying priority (materiality) issues and setting target KPIs.
The status of initiatives is reported on a regular basis to the Board of Directors. Moving forward, JAPAN POST BANK will continue to advance sustainability initiatives, including issues related to climate change, in unison with management plans.
JAPAN POST BANK has incorporated the status of ESG management promotion, which includes addressing climate change, as an evaluation indicator for executive compensation.

Related Information

Basic Sustainability Policy

JAPAN POST BANK Environmental Policy

Sustainability Promotion Framework

Supervision
	Board of Directors (Chair: Takayuki Kasama, Director, President and Representative Executive Officer) ○Resolves on basic management policies and other important business executions concerning management strategy / supervises the status of sustainability promotion

		Raising matters for discussion / reporting	Supervision
Execution
	Executive Committee (Chair: Takayuki Kasama, Director, President and Representative Executive Officer) ○ Discusses sustainability-related matters such as policy and targets / regularly reports to the Board of Directors on the status of sustainability promotion
		Raising matters for discussion / reporting	Direction
	Sustainability Committee (Committee Chair: Harumi Yano, the Executive in Charge of Sustainability) ○ Discusses and reports on the status of sustainability promotion, the formulation of action plans, and the progress of such matters
		Raising matters for discussion / reporting	Direction
	Corporate Planning Department Sustainability Management Office ○ Adjustment of plans concerning sustainability as well as confirming the sustainability promotion status of the departments in charge of each operation
		Reporting	Confirmation
	Department in charge ○ Planning and promotion of sustainability in each operation

Strategy

JAPAN POST BANK has identified the risks and opportunities related to climate change as follows.

Risks and Opportunities	Details	Period^*2	Financial impact^*3
Physical Risks	Damage to the Bank’s assets such as ATMs due to natural disasters, etc., and an increase in the credit risk of investee companies.	Short term	Small
Transition Risks	Securities holdings of the companies in which JAPAN POST BANK is investing (companies that are greatly affected by environmental regulations) will suffer a decline in value due to a tightening of regulations.	Medium to long term	Medium
Opportunities	Enhancement of evaluations of JAPAN POST BANK in capital markets and society through appropriate initiatives and disclosures on environmental issues. More opportunities to invest in renewable energy projects and green bonds, etc.	Short to long term	Medium

*2:: The period of time until the applicable risk occurs or becomes more apparent. Short term: Less than one year; Medium term: 1–3 years; Long term: 3 or more years.
*3:: The financial impact on the balance sheet and profit and loss statement. Small: less than ¥1 billion per year; Medium: ¥1 billion to ¥10 billion per year; Large: ¥10 billion or more per year.

Related Information

ESG Investment and Financing

In order to identify the impact of climate change-related risks on the Bank’s finance portfolio, JAPAN POST BANK undertook a transition risk scenario analysis for the securities (bonds and equities) that comprise the majority of the portfolio. The impact of increased carbon costs on the earnings of investee companies for the subject period was calculated for each individual company, and the results of calculating the sum total of the impact is presented as follows.
Looking ahead, JAPAN POST BANK will continue to monitor the impact of climate change and support the initiatives of investees through engagement and other means, while undertaking a variety of measures including analyses that take into consideration the long-term impact of climate change on an ongoing basis based on the aforementioned analysis.

The table below shows the balance and percentage of carbon-related assets and sustainable finance as a percentage of loans as of March 31, 2023.

（unit：billion）

Carbon-related assets		Sustainable Finance
Carbon-related assets outstanding	¥355.4	Sustainable Finance Outstanding		¥79.2
			Green Loans, Social Loans, Sustainable Loans	¥28.1
			Sustainability-linked corporate loans	¥6.4
			Others^※	¥44.7
Percentage of carbon-related assets	6.3%	Percentage of Sustainable Finance		1.4%

*: Positive impact finance, transition finance, credit for renewable energy sector, etc.

note：: Loan balance as of March 31, 2023 is ¥5,604.3 billion.

Transition Risks

Scenario	New Network for Greening the Financial System (NGFS) scenario disclosed in 2021^*4 (Scenario model: REMIND-MAgPIE2.1-4.2)
Scope	Securities (bonds and equities)^*5 that account for the majority of the Bank’s finance portfolio
Analytical Method	Analysis of the impact of increased carbon costs^*6 of investee companies due to laws and regulations on the earnings of investee companies Note: The effects of earnings-improvement and other measures undertaken by investee companies have not been taken into account.
Target Period	Bonds: Up to the end of the redemption date of each bond Equities: Up to 2100
Analysis Results	Approximately –¥600.0 billion (maximum amount of decrease in fair market value)
Financial Impact	The transition risk scenario analyses that are generally conducted by commercial banks calculate the amount of increase in credit management costs associated with the incidence of non-performing loans. The aforementioned analysis calculates the amount of decrease in the value of securities in conjunction with the Bank’s business model. The impact of the increase in carbon costs on the earnings of investee companies is fully factored into the fair market value of investments under the aforementioned analysis. In reality, however, the impact on financial strategies is limited owing to the gradual manifestation of the amount of decline in fair market value and deterioration in earnings of investee companies, expectations toward the implementation of measures to improve investee company earnings, and the fact that the analysis covers market traded securities that can be sold in the interim.

For physical risk, JAPAN POST BANK conducted a quantitative analysis of the impact on the Bank’s ATMs, devices at counters, and other equipment installed and owned by the Bank nationwide. According to inundation depth predictions and the current assumption of such water-related disasters as floods, the amount of damage to the Bank’s facilities was estimated at approximately ¥25 billion on a cumulative basis over the next 100 years. While climate change is expected to roughly double the frequency of floods under the 2°C scenario and increase the incidence of floods roughly four times under the 4°C scenario, the risk of damage to the Bank’s facilities on a simultaneous basis is considered low due to the spread of facilities over a nationwide network. Taking into account the aforementioned, the impact on JAPAN POST BANK’s financial strategies is expected to be limited.

Physical Risks

Scenario	IPCC RCP2.6 (2°C scenario)^*7	IPCC RCP8.5 (4°C scenario)^*7
Scope	ATMs, devices at counters, and other equipment installed and owned by the Bank nationwide
Analytical Method	Calculation of the anticipated amount of flood-related damage under certain assumptions using inundation depth predictions
Target Period	Over the next 100 years
Analysis Results	Approximately –¥50 billion	Approximately –¥100 billion
Financial Impact	The risk of damage to the Bank’s facilities on a simultaneous basis is considered low due to the spread of facilities over a nationwide network. Taking into account the aforementioned, the impact on JAPAN POST BANK’s financial strategies is expected to be limited.

*4:: Climate scenarios released in June 2021 by the Network for Greening the Financial System (NGFS).
*5:: Excluded from the scope of calculation in the event required data (GHG emissions, financial related data, etc.) is incomplete.
*6:: Costs incurred by investees as a result of an increase in the carbon price under the scenario.
*7:: Scenario of the average increase in global temperatures over the next 100 years announced by the Intergovernmental Panel on Climate Change (IPCC).

Risk Management

JAPAN POST BANK has introduced a Risk Appetite Framework (RAF) and positions risks related to climate change, etc., as one of the top risks facing the Bank. These risks are reflected in the Bank’s management plans, and the ESG team which has been established in the Corporate Planning Department acts as necessary following regular checks of the status of control.

JAPAN POST BANK is advancing global asset allocations based on its ESG Investment and Financing Policy, which is based on sectors with a significant impact on climate change and various international agreements, etc. In the years to come, the Bank will consider enhancing this policy from the perspective of fulfilling and contributing to climate change obligations as an institutional investor.

JAPAN POST BANK took steps to engage with companies that have a significant impact on climate change. Details of examples are presented as follows.

Company	Main content of dialogue
Electricity sector Company A	Efforts are being made to achieve established GHG emission reduction targets. As a part of these efforts, steps are being taken to develop mixed combustion and other technologies with the aim of restarting nuclear power plants while garnering the understanding of local residents.

Related Information

ESG Investment and Financing Policy

Metrics and Targets

JAPAN POST BANK announced details of the Japan Post Bank Net Zero GHG Emissions Declaration and committed to achieving net zero emissions for the Bank as well as its finance portfolio by 2050.

Classification^*8	FY2031/3 Target	2050 Target
JAPAN POST BANK (Scope 1 and Scope 2)	–60% (FY2020/3 comparison)	Net Zero
Finance Portfolio (Scope 3 Category 15)	Power Generation Sector Emissions Intensity 165-213 gCO2e/kWh	Net zero

The following targets have been set as KPIs in our Medium-term Management Plan.

60% reduction in the Bank’s CO₂ emissions^*9 compared to FY2020/3 by FY2031/3. (48,000 t-CO₂ → 19,000 t-CO₂)
Balance of ESG-themed investments^*10 target of ¥4 trillion by the end of FY2026/3 (double the initial KPI of ¥2 trillion)

*8:: GHG Protocol classification. CO₂ is a target and subject to management at JAPAN POST BANK.
Scope 1: Direct emissions of greenhouse gases by the business itself
Scope 2: Indirect emissions from the use of electricity, heat and steam supplied by other companies
Scope 3: Emissions of other companies related to the activities of the business (category 15: investment)
*9:: Scope 1 + 2 (JAPAN POST BANK non-consolidated)
*10:: ESG bonds (green bonds, social bonds, sustainability bonds, etc.) and loans to the renewable energy sector, regional vitalization funds, etc.

*11:: A level that is in line with the SBT's 1.5℃ level reduction target (4.2% or more reduction each year) and Japan's reduction target (goal of carbon neutrality by 2050, a 46% reduction compared to FY2014/3 by FY2031/3), which is also consistent with the Paris Agreement.

Related Information

Climate Change Initiatives: "Targets and Results for Reducing GHG Emissions"

About participation in the Bank of Japan's Funds-Supplying Operations to Support Financing for Climate Change Responses

Japan Post Bank has been selected to receive financing under the Bank of Japan's Funds-Supplying Operations to Support Financing for Climate Change Responses.

Related Information

About participation in the Bank of Japan's Funds-Supplying Operations to Support Financing for Climate Change Responses (Japanese version only)

Disclosure of criteria and specific procedures for judging suitability for eligible investments and financing related to the Funds-Supplying Operations to Support Financing for Climate Change Responses (Japanese version only) (PDF/66KB)