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 "contribution to environmental protection" 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.
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 bond portfolios
One of the great issues facing the analysis of nature-related risk in portfolios is that, generally speaking, the data, methods, and tools are still in the development stage. As a first step in addressing this challenge, we have used ENCORE (*) (a tool developed by the Natural Capital Finance Alliance to analyze nature-related risks) in an attempt to analyze which natural environments our equity and corporate bond portfolios have particularly strong dependencies and influences on. The results showed that our equity and bond portfolio is strongly dependent on nature, mainly in relation to water resources and wind and flood control. It also has the potential to have a strong impact on the natural environment, mainly in relation to water use and land use.
- *
- 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://encore.naturalcapital.finance
DOI: https://doi.org/10.34892/dz3x-y059
Major nature-related dependencies and impacts of our equity and bond portfolios
| The major dependencies and impacts of our equity and bond portfolio on nature and our investments in related business categories | Examples of related business categories | |
|---|---|---|
| Evaluation of dependencies Very High | Wind and flood control 15.4% | Electricity, telecommunications, etc. |
| Surface water (rivers, etc.) 13.6% | Electricity, food, beverages, etc. | |
| Climate adjustments 10.6% | Electricity, etc. | |
| Evaluation of impacts Very High |
Impact of land use 16.7% | Electricity, integrated oil and gas, construction, real estate, etc. |
| Impact of water use 15.9% | Electricity, integrated oil and gas, building materials, chemicals, etc. | |
| Impacts on freshwater ecosystems 11.5% | Electricity, integrated oil and gas |
Calculation method:
Based on ENCORE's evaluation of the dependencies and impacts of various business categories on nature, we calculated the investment ratio by summing up the investment ratio in business categories rated as "Very High" for each factor.
In terms of the dependencies, our exposure to wind and flood control is significant, with electricity and telecommunications (power and telecommunications infrastructure preservation and mitigation) being the relevant business categories. On the other hand, in terms of impacts, our exposure to land use is significant, with electricity (dam facilities), integrated oil and gas (pipelines), construction, and real estate (infrastructure construction and development) being the relevant business categories.
In the future, 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.
