Response to the TCFD Recommendations

Climate change is a major global problem that could destabilize financial markets. One of our important roles as a financial institution is to provide products and services that support the transition toward a more sustainable society that aligns with the objectives of the Paris Agreement. Stakeholder engagement is crucial to this role.

Aware of the importance of disclosing climate-related financial information, DBJ declared its approval of the concepts behind the Task Force on Climate-related Financial Disclosures (TCFD), which was established by the Financial Stability Board in June 2018. In addition, DBJ took part in the TCFD Consortium, which was created in May 2019 for companies and other financial institutions to come together to discuss the TCFD recommendations.

We played a leading role in the formulation of the Guidance for Utilizing Climate-related Information to Promote Green Investment (Green Investment Guidance)* and analyzed scenarios with assistance from the Ministry of the Environment’s support program for analyzing climate risks and opportunities in line with the TCFD recommendations. Recognizing the risks and opportunities presented by climate change, DBJ is advancing and examining the expansion of information disclosures based on the TCFD framework.

As a Supporter of the Green Investment Guidance in the TCFD Consortium, DBJ evaluates and engages in dialogue with companies receiving investments and loans with reference to said guidance, ascertaining their responses to climate change and their disclosures of information based on TCFD recommendations. In this way, we support their efforts to increase corporate value over the medium and long term.

* Published at the TCFD Summit (October 8, 2019) to guide investors and other people on how to read and understand information disclosures based on TCFD recommendations

Governance The DBJ Group engages in business activities while considering its impact on the environment and society. In this light, DBJ created its Policy on Sustainability in May 2017 with the objective of contributing to the realization of a sustainable society while balancing economic value and social value. On the Sustainability Committee, directors and executives discuss and monitor the risks, opportunities, and actions related to climate change. The findings of the Sustainability Committee are reflected in the Group’s business strategies, risk management, and decision-making process for investments and loans.
Strategy When crafting its long-term vision, Vision 2030, DBJ identified climate change and natural resources and energy as externalities that could have a major impact on stakeholders of the DBJ Group. DBJ has realized that responding to the various climate-related risks and growth opportunities is a key aspect of its business strategies.
In fiscal 2019, with assistance from the support programs of the Ministry of the Environment, DBJ began a scenario analysis to evaluate new business opportunities and business resilience to uncertainties related to climate change. A particular focus was placed on evaluating transitional opportunities. In fiscal 2021, DBJ is focusing on risk analysis, and working to identify and assess physical and transitional risks in its portfolio. DBJ will also continue to increase information disclosure while refining and advancing its analysis with reference to global discussions about climate-related risks.
Risk Management DBJ identifies, evaluates, monitors, and controls a variety of risks related to climate change. In August 2021, DBJ created its Investment Policy with Environmental and Social Considerations for financial transactions with specific sectors (coal-fired power generation, palm oil, weapons, and forestry) and businesses likely to pose major risks to, or have negative influences on, the environment and society. DBJ will carefully screen investments and loans in accordance with this policy and further enhance its investments and loans in ways that take greater account of the environment and society. DBJ identifies, evaluates, and manages environmental and social risks associated with large-scale projects in accordance with the Equator Principles, which it adopted in 2020, based on guidance from the Environmental & Social Assessment Office.
Metrics and Targets DBJ gauges the progress of its environmental initiatives in terms of the Greenhouse Gas Protocol’s Scope 1 (direct) and Scope 2 (indirect) categories, which are concerned with the amount of greenhouse gas (GHG) emissions associated with corporate activities. Specific targets are set for DBJ and for each department in regard to the environmental aspects of investment and loan operations and environmental protection initiatives such as educational programs that encourage dialogue on relevant issues. In these ways, DBJ works systematically and consistently to help preserve the environment.
DBJ has set a target of ¥5.5 trillion in investments and loans related to its GRIT Strategy over the five-year period of its Fifth Medium-Term Management Plan. In line with this target, we will proactively support efforts to tackle climate change at companies receiving investments and loans from us.

Scenario Analysis of Transitional Opportunities

Analysis Conducted with Focus on Transitional Opportunities from Development and Proliferation of Climate Change– Mitigation Technologies

Financial institutions must draw up various socioeconomic forecasts while taking into account future uncertainties associated with climate change, and then consider changes to their portfolios and other actions accordingly. As an initial approach to scenario analysis, DBJ analyzed and evaluated the possible impact on its operations through 2050 with a focus on transitional opportunities brought about by government policies and regulations, as well as technological innovations toward a low-carbon or decarbonized society. More specifically, DBJ is emphasizing five types of technologies (carbon capture and storage, electric vehicles, biomass, hydrogen, and renewable energy) on an experimental basis from among the technologies strongly related to climate change. For each scenario, DBJ analyzes and evaluates growth opportunities and business resilience in sectors covered by the analysis, with due consideration paid to technological development and proliferation.

Use of Shared Socioeconomic Pathways in Scenarios

Even assuming a uniform rise in temperatures occurs as a result of global warming, we believe there will be varied degrees of expectations for technological progress and social acceptance of solutions for the issue of climate change, depending on population and economic growth forecasts in each country, among other factors. In light of these uncertainties about socioeconomic trends around the world, DBJ has adopted the Shared Socioeconomic Pathway (SSP) approach to devise its scenarios to use as future assumptions and conduct an analysis based on projected socioeconomic trends in scenarios where global temperatures rise 1.5 ºC, 2.0 ºC, and 4.0 ºC.

Analysis and Evaluation of Growth Opportunities by Scenario in Each Sector

For each envisioned scenario, DBJ analyzes the degree of impact from the five aforementioned types of technologies in both qualitative and quantitative terms, and it conducts a comprehensive evaluation of growth opportunities and business resilience in each analyzed sector, with consideration made for Japan’s strengths.

DBJ will continue to expand the scope of its analysis and update the results, while monitoring the latest trends related to climate scenarios. Using forecasting and scenario analysis to generate a vision of the world in 2050, DBJ is engaging in internal and external dialogue and discussion about topics including how best to transition to a carbon-free society. DBJ will further refine and advance its analysis in an attempt to better its understanding of related risks in the external environment, including climate change. While engaging in deeper conversations with customers and other stakeholders, DBJ will provide financial assistance with the aim of moving closer to a low-carbon or decarbonized society, in addition to taking appropriate actions to address climate change in terms of the opportunities that may arise.

Summary of Scenario Analysis Summary of Scenario Analysis