Response to TCFD and TNFD

• Governance
• Strategy
• (1) Climate-related strategy
• (2) Nature-related strategy
• Risk Management
• Metrics and Targets

SOMPO’s approach to TCFD and TNFD

The Group recognizes climate change and nature-related issues that affect the security, health and wellbeing of people’s lives as important issues to address. We are working to actively and fairly disclose information to our stakeholders in a transparent manner regarding the risks, opportunities, and measures we are taking to address these issues through our responses to the TCFD and TNFD recommendations^*.
In 2018, we announced our support for the TCFD recommendations and joined the TCFD Insurance Working Group of the United Nations Environment Programme Finance Initiative (UNEP FI). In developing the TNFD framework, Sompo Japan Insurance and Sompo Risk Management also joined the TNFD Forum in 2021 and participated in the pilot test of the UNEP FI TNFD framework. Furthermore, Sompo Holdings registered as a TNFD Early Adopter in 2024, contributing to the dissemination and development of both recommendations.

• TCFD: Task Force on Climate-related Financial Disclosures
• TNFD: Taskforce on Nature-related Financial Disclosures

• SOMPO Climate Action

1. Governance

(1) Role of Board of Directors

The Board of Directors is responsible for setting Group-wide strategies and policies, as well as supervising the execution of operations by Executive Officers and Senior Vice Presidents to fulfill SOMPO’s Purpose of “For a future of health, wellbeing and financial protection.”

(2) Role of Executive Officers and Senior Vice Presidents

Group Chief Sustainability Officer (CsuO)

As the person chiefly responsible for sustainability, the Group Chief Sustainability Officer (CSuO) is tasked with promoting our Purpose and formulating and implementing strategies related to the Group’s sustainable management. Under the Group-wide sustainability promotion system we have established, the Group Sustainable Management Committee supports the decision-making of the Group CsuO, who chairs the committee, regarding sustainable management strategies for the Group, including climate change, biodiversity, business, and human rights, discussing response measures in light of related risks and opportunities.
We have established four working groups under the Group Sustainable Management Committee: Investment, Underwriting, Business and Human Rights, and Environmental Management. The working groups examine risks and opportunities related to climate change and biodiversity, share information and implement measures based on the discussions of the committee, and hold discussions at the operational level on issues related to underwriting and investment and on ways to enhance corporate value. We have also established the Sustainable Management Office to support the Group CSuO in carrying out the duties of the position.

Group Chief Risk Officer (CRO)

In addition, the Group has established a risk control system to manage risks based on the Sompo Group Basic Policy on ERM established by the Board of Directors. The Group Chief Risk Officer (CRO) comprehensively identifies and evaluates the risks to each business, designates risks that may have a significant impact on the Group as material risks, and the Group ERM Committee, a subordinate body of the Group Executive Committee (Group ExCo). The Group ERM Committee reviews and discusses the status of management and control, and regularly reports to the Board of Directors, the Group ExCo, and other committees.

<Organization chart>

(3) Stakeholder engagement

We have established a “Group Environmental Policy” which stipulates that we will be working proactively to resolve environmental issues, through active dialogue and engagement with stakeholders, and by addressing environmental issues in the course of our core business operations, so that future generations can inherit our irreplaceable Earth.
In addition, since our business activities, through underwriting and investment, could potentially infringe on the rights of local communities, indigenous peoples, and future generations, we perform human rights risk assessments targeting a wide variety of stakeholders, and have accordingly established the Group Policy for Human Rights. In these human rights risk assessments, we identify risks in the regions where investees and the companies for which we underwrite insurance policies are undertaking projects. For the human rights risks of the highest priority, we employ measures designed to mitigate such risks through engagement with these companies.
We report on stakeholder engagement on these environmental and human rights issues to the Group Sustainable Management Committee, chaired by the Group CSuO. The Group CSuO is responsible for communicating the content of the Group Sustainable Management Committee’s proceedings to the Board of Directors, and the Board of Directors is responsible for overseeing these matters.

• Group Environmental Policy＆Group Policy for Human Rights

2. Strategy

(1) Climate-related strategy

The Sompo Group established SOMPO Climate Action in FY2021, which includes climate change adaptation and mitigation along with contributing to social transformation in our commitment to implementing a comprehensive approach to climate change risks and opportunities. This statement guides our climate-related initiatives.

(1) 1. Climate-related risks and opportunities

In addition to physical risks such as the increased severity and frequency of natural disasters, droughts, and chronically rising sea levels due to climate change, transition risks may arise as a result of changes in industrial structures and markets brought about by the strengthening of laws and regulations and development of new technologies for the transition to decarbonization that could affect corporate finances and reputations. These risks are accompanied by an increasing number of climate change lawsuits globally that seek to hold companies legally liable for the impact of climate change resulting from their business activities, investment and lending activities in highly carbon-intensive businesses, and improper disclosure. Such lawsuits may increase the risk of liability insurance payouts in the Group’s P&C insurance business. On the other hand, the stronger societal awareness of natural disaster risks and changes in social structure may bring business opportunities such as the creation of new service demands and technological innovations.
We have identified the risks and opportunities coverage of the entire value chain of insurance-related business activities (upstream in product and service development; midstream in sales, marketing, and asset management, downstream in accident response and claim payment) that climate change poses to our business based on the results of studies conducted by external organizations such as the Intergovernmental Panel on Climate Change (IPCC) and the Network for Greening the Financial System (NGFS), and we are assessing, analyzing, and responding to such risks and opportunities on a short- (within 2–3 years), medium- (3–10 years), and long-term (10–30 years) time horizon. The main environmental changes associated with physical and transition risks due to climate change, as well as risks and opportunities that are expected to have a significant impact on the Group, are shown in the following table and are continuously reviewed in light of changes in the internal and external environment.

(1) 2. Scenario analysis

A. Physical risks in underwriting

The Group’s P&C insurance business could be financially affected by higher-than-expected insurance payouts due to the increased severity and frequency of natural disasters, including typhoons, floods, and storm surges. In 2018, we started working with universities and other research institutions to quantitatively grasp risks based on scientific findings. Based on large-scale analysis using weather and climate big data, such as “database for Policy Decision making for Future climate change (d4PDF)^*1,” we are working to understand the long-term impacts of a climate with higher average temperatures with respect to changes in the average trends for typhoons, floods, and storm surges affected by sea level changes and trends in the occurrence of extreme weather events. We are also analyzing and evaluating the medium-term impact over the next five to ten years and incorporating this information into our business strategies.

The Group has estimated the impact of typhoons using a quantitative model^*2 based on the guidance issued by the UNEP FI TCFD insurance working group in January 2021. The estimated results are below.

Going forward, we will continue our analysis using the scenario analysis framework being developed by the Network for Greening the Financial System (NGFS), which works on financial regulatory responses to climate change risks.

*１Database of climate simulations developed by Japan's Ministry of Education, Culture, Sports, Science and Technology's Program for Risk Information on Climate Change. By using a number of ensemble simulations, future changes in extreme events such as typhoons and heavy rains can be evaluated stochastically and with greater accuracy. The results enable more reliable assessments of the impact on society of natural catastrophes caused by climate change.

*２Intergovernmental Panel on Climate Change (IPCC): A model that captures changes in the frequency and wind speed of typhoons between now and 2050 based on the RCP8.5 scenario used in the UN’s IPCC Fifth Assessment Report (AR5), and calculates changes in the amount of damage caused.

B. Transition risks and physical risks in asset management

To understand the short-, medium-, and long-term impact of the transition to a decarbonized society on our company, we analyzed the impact on Group assets using the Climate Value-at-Risk (CVaR)^*3 provided by MSCI for policy risks arising from tighter laws and regulations and global economic changes that will affect companies in the transition to a decarbonized society, as well as technology opportunities, physical risks to businesses posed by weather disasters caused by climate change, including chronic heatwaves, extreme cold, heavy snowfall, torrential rain, violent storms, acute typhoons, floods, and wildfires arising from climate change mitigation and adaptation initiatives, based on the NGFS scenarios^*4 in the following table.
In addition, since it is important to encourage companies that have not yet made progress in decarbonization efforts to reduce transition risks, we use the Implied Temperature Rise (ITR)^*5 provided by MSCI to quantitatively analyze whether our portfolio companies have set GHG emission reduction targets consistent with the goal of limiting global warming to 1.5°C by FY2100. For details, refer to “b. Implied Temperature Rise (ITR).”

*3Climate Value-at-Risk (CVaR)

• A method to measure the impact on corporate value associated with climate change-related policy changes and disasters.
• The future costs and profits arising from climate change-related risks and opportunities are discounted to their present value, and the impact is calculated as of March 31, 2024, taking into account the market value weighting of each security in the Group's asset management portfolio.

*4NGFS (Network for Greening the Financial System) scenarios
Analyzed three climate change scenarios published by the NGFS in November 2023 as Phase 4: Delayed transition, Net Zero 2050, and NDCs.

*5Implied Temperature Rise (ITR)

• One of the forward-looking assessment methods that evaluates the degree of likelihood of 1.5°C and 2°C of global warming by 2100.
• The contribution to temperature rise is based on the difference between the projected GHG emissions of portfolio companies (calculated based on current emissions and reduction targets set by the companies) and the carbon budget, and is calculated as of March 31, 2024, taking into account the market value weight of each stock in the Group's asset management portfolio.

a. Climate Value-at-Risk (CVaR)

(NGFS scenarios - comparison by asset type)
The impact of policy risks and technology opportunity is greatest in the Net Zero 2050 (1.5°C) scenario for all assets, indicating that even with an orderly transition, there are significant policy risks to achieving the 1.5°C target. On the other hand, the impact of physical risk is greatest in the NDCs (3°C) scenario, with the exception of foreign stocks (see bottom left-hand of graph on right), indicating that the physical risk posed by rising temperatures is significant.
In the comparison by asset type, the impact of policy risk and technology opportunity is the largest for domestic stocks (see graph below: top left), at –32.6% and 6.1% under the Net Zero 2050, respectively. Domestic stocks also face the greatest physical risk, declining 10.7% under the NDCs (3°C) scenario. However, we have confirmed that the impact on loans for the Group is limited.

<SOMPO Group CVaR analysis of Policy/physical risks and technology opportunities by asset types and NGFS scenarios>

• Impact is limited because the bonds are never redeemed at more than their face value

(NGFS scenarios - comparison by short-term, medium-term, and long-term time horizon)
Comparing short-term, medium-term, and long-term time horizons, we can see that the majority of risks in the Group’s portfolio will become apparent after 2034. In particular, the Delayed Transition scenario (2°C; disorderly: rapid transition to decarbonization) assumes a rapid policy transition after 2030, so the long-term impact is particularly pronounced. The policy risk is also highest in the Net Zero 2050 (1.5°C) scenario at -14.96%, which shows that even in an orderly transition to achieving the 1.5°C target, long term policy risks remain large. Physical risk will have relatively greater long-term impact in the Delayed Transition (2°C) scenario and the NDCs (3°C) scenario, which involve rising temperatures, but the overall impact will be limited.

<SOMPO Group CVaR analysis results of Policy/Physical Risks and Technology Opportunities by time horizon>

b. Implied Temperature Rise (ITR)

The percentages of companies with ITRs below 2°C for domestic stocks, foreign stocks, domestic corporate bonds, and foreign corporate bond portfolios are 55%, 100%, 68%, and 85%, respectively, on a market value basis. The percentages of companies with ITRs below 1.5°C for domestic stocks, foreign stocks, domestic corporate bonds, and foreign corporate bond portfolios are 37%, 100%, 50%, and 72%, respectively, and with the exception of domestic stocks, more than half of companies have set GHG emission reduction targets that are consistent with the 1.5°C target set by the Paris Agreement. On the other hand, for the portfolio as a whole, the ITRs for domestic stocks, foreign stocks, domestic bonds, and foreign bonds are 2.16°C, 1.77°C, 2.07°C, and 2.36°C, respectively, exceeding 1.5°C for all categories despite some improvements.

< SOMPO Group ITR analysis by asset types >

(1) 3. Resilience improvement initiatives

A. Responding to risks

<Physical Risk>
Our P&C insurance and reinsurance contracts are primarily short-term contracts, and by reviewing our insurance underwriting conditions and reinsurance policies in light of the increasingly severe trends in meteorological disasters, we can reduce the risk of claim payments exceeding our expectations. We also aim to ensure resilience against physical risks through a multifaceted approach that includes global geographic diversification, quantification based on short- and medium-term climate forecasts, and identification and evaluation of significant risks through long-term scenario analysis.

<Transition Risk>
As for our own GHG emissions, we have set a target of a 60% reduction (compared to 2017)^*１ in Scope 1, 2, and 3 (excluding insurance underwriting, investments and loans) by 2030 and a net zero emissions by 2050. To achieve this goal, we have set a target of 70% introduction of renewable energy by 2030, ^*２ in addition to working to conserve energy by switching to LED lightings and taking other steps to reduce electricity consumption, which accounts for a particularly large proportion of GHG emissions. We are working on the roadmap to achieve this goal, including switching to renewable energy sources for power generation in our buildings.

1. Science-based targets consistent with the Paris Agreement's 1.5℃ target (a reduction of at least 4.2% each year)
2. Including use based on renewable energy certificates

With regard to investments and loans, in addition to the interim target of reducing GHG emissions (Scope 3 Category 15) of the investment portfolio to net zero by 25% in 2025 (compared to 2019), a new interim target of “reducing intensity in the 50-60% range in 2030 (compared to 2019)” was set in fiscal 2024. To achieve this target, we have been focusing on engaging with the top 20 high GHG emitters among our equity holdings and shifting to low GHG emitting sectors when replacing the assets under management held by the Group.

B. Responding to opportunities

In addition to developing and providing climate risk consulting services and working to improve natural disaster resilience through insurance products and services, the Sompo Group is developing and providing insurance products and services that contribute to carbon neutrality by promoting renewable energy and collaborating with business partners.
In FY2024, we set a Transition Insurance Target for insurance products that contribute to decarbonization in both domestic and overseas markets. We also calculated We also calculated GHG emissions associated with insurance underwriting (Insurance-Associated Emissions) using data from companies that disclose GHG emissions (Scope 1, 2) by utilizing a method for measuring GHG emissions in the commercial insurance sector developed by Partnership for Carbon Accounting Financials (PCAF) in November 2022.
In accordance with the principles of the Japan’s Stewardship Code, Sompo Japan Insurance conducts an ESG survey (Survey on ESG/Sustainability Initiatives) every year to confirm the policies and status of the companies in which it holds stocks regarding the enhancement of their corporate value and sustainable growth. In FY2024, it sent the survey to 1,329 companies in which it holds stocks, and 226 companies responded. The survey is used to understand the needs of each company and create opportunities for collaboration, supporting sustainability efforts, including decarbonization, in addition to being used in exercising voting rights.
Various organizations and groups around the world are actively discussing the formulation of regulations and guidance to realize a net-zero carbon society. By proactively participating in and leading these rule-making efforts, the Group will not only contribute to societal transformation but also seek to create and expand business opportunities for the Group, such as attracting collaboration partners both by accumulating knowledge and by enhancing our reputation through these efforts.

• Climate Change-related Initiatives

(2) Nature-related strategy

Alongside climate change, nature-related environmental issues such as biodiversity loss, ecosystem collapse, and natural resource shortages are increasingly being recognized as global risks. Some of our investees and the companies for which we underwrite insurance policies face the risks of future instability in raw material procurement and operations, cost increases associated with compliance, and decreased sales due to their dependencies and impacts on nature. If these risks materialize, such as a decrease in reinsurance coverage or an increase in claim payments, the risks of the Group’s P&C insurance business may increase, resulting in a decrease in premiums written or an increase in claims paid.
On the other hand, the transition to nature-positive economy, as advocated by the Kunming-Montreal Global Biodiversity Framework, is expected to create business opportunities in Japan worth approximately 47 trillion yen by 2030 (estimated by Ministry of the Environment Government of Japan). Such new business opportunities could lead to improved earnings at our investees and the companies for which we underwrite insurance policies, and provide the chance for us to offer products and services that benefit the natural environment.

To address these nature-related risks and opportunities, the Group has assessed, analyzed, and taken actions based on the LEAP approach* recommended by the TNFD with a focus on our core Domestic P&C Insurance Business and our Overseas Insurance and Reinsurance Business.

• An integrated assessment process for nature-related risk and opportunity management, LEAP stands for the four phases of Locate, Evaluate, Assess, and Prepare

Analysis flow using the LEAP approach

(2) 1. Identifying and assessing nature-related risks and opportunities

A. Analysis of nature-related risks and opportunities, and impacts of the Group

The Group assessed, analyzed, and responded to risks and opportunities across the value chain— upstream in product and service development; midstream in sales, marketing, and asset management; and downstream in accident response and claim payments—with a focus on the P&C insurance business. This included physical risk and opportunities associated with the deterioration of ecosystem services, and transition risks and opportunities associated with the strengthening of policies and regulations aimed at achieving nature positivity, technological advances, and changes in market preferences. In identifying and assessing risks and opportunities, we referred to the results of 2-1. Identifying and evaluating dependencies and impacts in underwriting, investments and loans.
We set the time frames for the assessments as short- (within 2–3 years), medium- (3–10 years), and long term (10–30 years) time horizon. The table below lists the main environmental changes related to nature and the risks and opportunities that are expected to have a significant impact on the Group. We will continuously review these risks and opportunities in light of changes in the internal and external environment.

Nature-related risks and opportunities

B. Results of identifying nature-related risks in high-risk sectors

Among the nature-related risks mentioned above, the Earnings deterioration owing to degradation of ecosystem services would cause the performance of business partners to deteriorate in line with windstorm damage, rising temperatures, water shortages, etc. (physical risk), while Fluctuations in revenue owing to the transition to a nature-positive economy: would cause the performance of business partners to deteriorate in line with stricter regulations, technological innovation, market changes, etc. (transition risk). Both of these factors would lead to a decline of Group earnings. Therefore, among our business partners, we have identified risks in high-risk sectors for business partners that have significant transaction amounts with the Group as well as significant dependencies and impacts on nature, and conducted a risk assessment for the Group based on this identification.
In particular, we confirmed expected risks based on risks identified in 2-1. Identifying and evaluating dependencies and impacts in underwriting, investments and loans and the disclosure of companies in high-risk sectors, i.e., construction, transportation (including passenger transportation), warehousing, chemicals, and automobiles and auto parts.

• Earnings deterioration owing to degradation of ecosystem services (physical risk): High-risk sectors that have significant impacts on nature, i.e., construction, transportation (including passenger transportation), and warehousing
• Fluctuations in revenue owing to the transition to a nature-positive economy (transition risk): High-risk sectors that have significant impacts on nature, i.e., (construction, transportation (including passenger transportation), warehousing, chemicals, automobiles and auto parts)

The risks identified as a result of this confirmation for each high-risk sector are as follows. We believe these risks could cause a deterioration in the performance of our business partners, which could have an impact on the Group, including an increase claim payments and a decrease in investment returns.

1) Earnings deterioration owing to degradation of ecosystem services (physical risk)

2) Fluctuations in revenue owing to the transition to a nature-positive economy (transition risk)

(2) 2-1. Identifying and evaluating dependencies and impacts in underwriting, investments and loans

Some of the Group’s business partners (including investees and the companies for which we underwrite insurance policies) engage in business activities that have dependencies and impacts on nature, which may lead to nature-related risks and opportunities for the Group. Therefore, to gauge which dependencies and impacts on nature that are material to the Group, we used the ENCORE^*1 tool to identify and assess the dependencies and impacts on nature for each sector of the Group’s investees and the companies for which we underwrite insurance policies. We classified business partners into 23 sectors and targeted the 18 priority sectors outlined in the TNFD’s additional guidance for financial institutions^*2. (See A. Results of identifying and evaluating dependencies and impacts)
Furthermore, as a reference for 1. Identifying and assessing nature-related risks and opportunities, we identified sectors that may pose high risks to the Group from the perspective of nature (high-risk sectors) using the following procedure.

1. A nature-related risk assessment tool jointly developed by the Natural Capital Finance Alliance (NCFA), the UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC), and other entities.
2. TNFD Additional guidance for financial institutions version 2.0

A. Results of identifying and evaluating dependencies and impacts (Step 1)

Below is the heat map showing how the sectors for the Group’s underwriting, investment, and loans dependencies and impacts on nature.

Heat map of Dependencies and Impacts

B. Consideration of transaction amounts in each sector (Step 2)

We identified high-risk sectors for the Group by multiplying the amount of insurance underwritten and the amount of investments and loans in each sector by the magnitude of the dependencies and impacts identified in Step 1.

C. Identification of high-risk sectors (Step 3)

We have identified four sectors as high-risk sectors that have significant dependencies and impacts on nature and have a large amount of transactions with Sompo Japan and its subsidiaries in the Overseas Insurance and Reinsurance Business: construction, transportation (including passenger transportation), warehousing, chemicals, and automobiles and auto parts.

High-risk sectors identified

(2) 2-2. Identification of priority locations at directly operated business sites

With the aim of grasping the organization’s interface with nature and identifying areas that should be prioritized, we used tools such as the WWF Biodiversity Risk Filter^* to identify the directly operated business sites of Sompo Japan, Sompo Risk Management, and the subsidiaries of the Overseas Insurance and Reinsurance Business that fall under the priority locations defined by the TNFD. Our directly operated business sites are located in Japan, Canada, Russia, Australia, Guam, Vietnam, Myanmar, Cambodia, India, the United Arab Emirates, South Africa, the U.S., Mexico, Brazil, Bermuda, Indonesia, Malaysia, Singapore, Thailand, Turkey, Italy, the U.K., and Luxembourg. As a result of the confirmation, we determined that the operations at our directly operated sites involve office activities such as property and casualty insurance and consulting, and consider their dependencies and impacts on nature to be small. We thus determined that none of our directly operated business sites fall within the priority locations and that there are no significant points of contact with nature for the Group.

• A tool developed by the WWF (World Wildlife Fund) to help companies assess and address risks that affect biodiversity in their business and supply chains.

(2) 3. Initiatives to address nature-related risks and opportunities

Please refer to the following for the Group's main initiatives in its businesses.

• Nature-related Initiatives

3. Risk Management

To realize the Group’s Purpose and the goals of the Management Plan, we have established a risk appetite framework, clarifying both risks to be taken and risks to be avoided to increase the certainty of achieving the goals.
For natural catastrophe risk, we clarify risk appetite and quantitatively assess the claim payments we expect in the event of a natural catastrophe, based on meteorology and other scientific knowledge, and the characteristics of Group products. We then formulate and manage reinsurance policies and Groupwide risk retention strategies based on the impact on financial soundness, profitability, and profit stability, as well as trends in the reinsurance market.
We control climate change-related risks through a multifaceted approach within the risk control system framework of our Enterprise Risk Management (ERM). This involves material risk management, capital adequacy management, stress testing, risk limit management, and liquidity risk management.
We are implementing SOMPO Climate Action to assess short-, medium-, and long-term climate-related risks and opportunities through a climate change risk framework, conducting scenario analysis (physical risk and transition risk) based on the framework, as well as various initiatives to improve our resilience to these risks and opportunities.

(1) Climate change risk framework (risk identification, assessment and management)

Climate change can impact various aspects of the Group’s business, including our non-insurance business, and the impacts will be long-term and are highly uncertain. To manage climate change risks, including risks associated with natural disasters, we have developed a climate change risk framework to complement our existing risk control system and to identify, assess, and manage risks by taking an in-depth look at scenarios in which the Group is affected through various pathways over the long-term. To gauge the complex impacts of climate change, the climate change risk framework uses the following three steps to assess and organize 1. Climate-related risks and opportunities described in (1) Climate-related strategy section.

In assessing risks, we have assumed low, medium, and high environmental change scenarios, which are a combination of IPCC scenarios showing changes in average temperature and NGFS scenarios showing possible policy transition patterns (see Patterns of environmental change below). We also assumed the pathways and nature of the impacts on the Group under the scenarios (see Scenarios of risk spillover and impacts (example) below), and have assessed risks for each pattern.

< Scenarios of Risk Spillover and Impacts (Example) >

Based on the assessment results, risks that require continuous monitoring are visualized as a climate change risk map, which indicates the impact, likelihood, timing of occurrence, and trends of risks that affect underwriting and investment. These are discussed by the Group ERM Committee and reported regularly to the Board of Directors and other executive bodies.

< Risk map based on assessment results (Medium SSP2-4.5/Disorderly) >

Additionally, we believe that Group business activities other than underwriting and investment are subject to other risks, such as the legal impact of litigation. We believe the impact and likelihood of each scenario in the risk assessment to be moderate, and will continue to collect and analyze information to understand the risks.

Table: Risks to our group businesses other than underwriting and Investment. Note that assessments have been conducted regarding impacts on underwriting and Investment.

(2) Integration with existing risk management frameworks

Risk awareness identified in the climate change risk framework is reflected in the main scenarios for material risks and managed accordingly (see table below).

We will also incorporate the knowledge gained through the climate change risk framework into our existing risk control system framework, which involves capital management, stress testing, risk limit management, and liquidity risk management, thereby enhancing the overall sophistication of our risk management.

4. Metrics and Targets

(1) Metrics for assessing risks and opportunities

We are evaluating our climate-related actions based on the recognition that implementing them will reduce risks and capture new business opportunities for the Group. We are also referring to the global core disclosure indicators in the TNFD framework for nature-related indicators and including them in the following indicators for our evaluation.

1. The scope of the indicators covers domestic consolidated companies and overseas consolidated companies (JGAAP basis).
2. "GHG emissions (Scope 3 Category 15 investments and loans)", "Intensity (Scope 3 Category 15 investments and loans)" and "Weighted Average Carbon Intensity (WACI) (Scope 3 Category 15 investments and loans)” are the results for FY2023.
3. Calculated for Scope 1 and 2 of listed equities and corporate bonds in Japan and overseas using data provided by MSCI ESG Research. (Coverage: 84 % of listed equities and 79% of corporate bonds in FY2023 on a market value basis.)
4. GHG emissions are our company's share of the investee's EVIC (Enterprise Value Including Cash) base.
5. Intensity is the amount of GHG emissions per unit of investment. The amount of investment in overseas business is calculated in yen using the exchange rate in 2019 (base year).
6. WACI is the weighted average of GHG emissions per unit of sales for each investee's portfolio holdings.
7. The adoption rate of renewable energy includes usage via renewable energy certificates.
8. It shows the amount of water used by our Group. We will continue to check whether this applies to areas with water scarcity.

(2) Indicators for evaluating nature-related dependencies and impacts

The TNFD’s additional guidance for financial institutions* encourages financial institutions to disclose their financial exposure to sectors in which they expect to have significant nature-related dependencies and impacts.
With reference to the priority sectors in the guidance, the percentage of the Group’s insurance underwriting, investments and loans amounts for the 18 sectors listed in (2) Nature-related strategy, 2-1. Identifying and evaluating dependencies and impacts in underwriting, investments and loans, including chemicals, automobiles and auto parts, transportation (including passenger transportation), and warehousing, is as shown below.

• TNFD Additional guidance for financial institutions version 2.0

(3) Targets for managing risks and opportunities

The Sompo Group has set the following targets and is managing its progress.
Going forward, we will also consider setting nature-related targets.