Basic Approach

At the NLM Group, we fully recognize the impact that our business activities may have on the environment. We have established a basic environmental policy, under which we are taking initiatives to realize sustainable businesses and a sustainable society voluntarily and proactively, beyond complying with related laws and regulations. We have identified action on climate change as one of the NLM Group's material issues. We will strive to enhance the content of the information we disclose in accordance with the TCFD recommendations.

Governance

To build a structure for taking action on climate change, we have set up the Environmental Committee and the CSR Committee, which are chaired by the president. Guided by these committees, we formulate plans of action to promote sustainability, including action on climate change. In addition, a taskforce consisting of members selected widely from within the NLM Group engage in activities themed on achieving carbon neutrality by 2050 and the promotion of recycling.

Changes in CO₂ Emissions (Scopes 1, 2 and 3), Indicators, and Targets

In FY2021, total emissions increased from the previous fiscal year due to the increase of production. However, we achieved the FY2021 target for CO₂ emissions per unit of sales.

Moving forward, we will set a new Scope 3 emissions target in addition to the Scopes 1 + 2 target and push forward with initiatives to ensure that greenhouse gas emissions (emissions per unit of sales) in 2030 will be 30% lower than the level in FY2013 (Scopes 1 + 2: 2.07 tons CO₂/million yen, Scope 3: 5.60 tons CO₂/ million yen), with the goal of achieving carbon neutrality by 2050.

[Basis for Calculations]
* Boundary: 31 domestic consolidated subsidiaries (manufacturing) 13 overseas consolidated subsidiaries (manufacturing)
* Greenhouse gas emissions (Scopes 1 and 2) are calculated based on the Act on the Rational Use of Energy and the Act on Promotion of Global Warming Countermeasures, and the following CO₂ emission factors are used./Electricity in Japan: The CO₂ emission factor with T&D losses of each previous fiscal year announced by the Electric Power Council for a Low Carbon Society/Electricity overseas: CO₂ emission factors of the respective countries shown in CO₂ FCOMB 2017 from the IEA/Fuel: The CO₂ emission factor for each fuel is set by a ministerial ordinance from the Ministry of the Environment (The CO₂ emission factor for electricity in Japan was used for the hydroelectric power generated at the Kambara Complex of Nippon Light Metal Co., Ltd.)
* Actual values only relate to energy-derived CO₂ emissions.

Risk Management

At the NLM Group, we regard climate change risks as one of the most important sets of managerial risks. To manage these risks, we conduct scenario analyses regarding the risks and opportunities for the period until 2030. For the risk items that are determined to be highly important, we will conduct quantitative analyses before enhancing disclosures and will push forward with initiatives to achieve our targets. While only Nippon Light Metal Co., Ltd. is the subject of analysis at present, we plan to expand the scope to analyze the impact on the Group as a whole as we move toward the next fiscal year. Following this, we aim to conduct scenario analyses from a longer perspective for the period until 2050.
We will report details of the analyses to the Environmental Committee and the CSR Committee for the formulation of risk management plans. At the same time, we will regularly report to the Board of Directors, thus strengthening the measures for addressing climate change risks

Strategy

To disclose information in accordance with the TCFD recommendations, the NLM Group conducts analyses based on two scenarios to clarify the difference in the impact between the scenarios. One is the 4.0°C scenario which assumes that climate change will not be addressed. The other is the 1.5°C scenario, which assumes that the strongest regulations will be imposed. We have set FY2030 as the target year to ensure that the analysis results will be sufficiently persuasive. Further, because we work in a wide range of business fields, we started with the analysis of Nippon Light Metal Co., Ltd. this fiscal year. We are calculating the degree of impact that risks and opportunities will have on Nippon Light Metal Co., Ltd. with a focus on the chemicals business and rolled products business, which are major segments of the company.
At present, we have projected what the world will be like in FY2030 based on reference materials from external sources and listed risks and opportunities that may occur there. Then, we evaluated the level of impact of each item in each predicted scenario from two perspectives, the probability of occurrence and the level of impact if the event occurs, and mapped them. The major items are as follows.

Category			Description of the risk/opportunity in the scenario	Degree of impact 4.0°C scenario	Degree of impact 1.5°C scenario
Risks	Transition	Policy and regulatory risks	There is a risk that the introduction of a carbon tax or an increase in carbon prices will increase the cost of procuring raw materials and manufacturing costs related to the company's products, pressuring profit.	Low	High
	Transition	Policy and regulatory risks	There is a possibility that raw material costs will increase due to changes in the regional balance of the supply chain, which may result from differences in the reduction targets of countries, in addition to the possibility of the occurrence of direct costs related to CO2 emissions trading.	Low	Medium - High
	Transition	Technological risks	There is a possibility that our competitive advantage in the market will be reduced due to delays in the development of new technologies, in addition to the possibility that investment costs will increase to achieve decarbonization and develop new recycling technologies.	Low - Medium	Medium - High
	Transition	Market risks	If action on climate change is delayed, businesses could be negatively affected by a failure to meet the standards required by customers. It could also lead to an increase in financing costs reflecting the decarbonization policies of financial institutions.	Low	Medium - High
	Physical	Acute	The frequent occurrence of giant typhoons and torrential rains will result in the risk of damage to equipment and other property, incurring costs to repair them, and an increase in non-life insurance premiums, in addition to the risk of production suspensions and supply chain disruptions, which could result from floods.	Medium	Medium
Opportunities	Transition	Products and services	It is expected that more aluminum components will be used in eco-friendly vehicles and other law-carbon products, which will result in an increase in sales through the promotion of sales and contribution to a low-carbon society that can be made throughout the product's lifecycle.	High	High
	Transition	Resource efficiency	With an increase in the recycling rate and the promotion of horizontal recycling, it will be reaffirmed that aluminum is a material with high resource efficiency, resulting in an increase in the demand for and visibility of aluminum products.	Medium	Medium - High

It is expected that, toward 2030, the ratio of eco-friendly vehicles in automotive sales will increase in not only the 1.5°C scenario but also in the 4.0°C scenario, which assumes that climate change will not be addressed.
The number of vehicles sold will begin to decline gradually in 2030 in Japan but is expected to increase globally. It is believed that both the number of eco-friendly vehicles sold globally and the percentage of all vehicles that are eco-friendly vehicles will continue to increase.
At the NLM Group, we expect an increase in the demand for aluminum products resulting from an increase in eco-friendly vehicles, including demand for materials for batteries to be installed in these vehicles and materials for heat dissipation for cooling, in addition to the need to decrease vehicle weight to increase travel distance.