Responding to risks and opportunities

The Denka Group conducts scenario analyses based on the "below 1.5°C scenario ( Glascow Climate Pact)", and the "below 4°C scenario" to identify risks and opportunities posed by climate change. We continue to verify the impact expected in 2030 and the measures to be taken in response to these impacts. In terms of policies and regulations, the introduction of carbon taxes and emissions trading (carbon pricing) and the risk of European battery regulations and carbon border adjustment measures have been foreseen. On the other hand, our diverse product and business portfolio also presents opportunities for sales expansion, such as the use of LEAF, a carbonated concrete admixture, and electronic materials used in xEVs. Going forward, we will quantitatively grasp business risks and opportunities for the Denka Group as a whole, implement appropriate responses in line with the TCFD recommendations, and reflect these in our management plans and business strategies.
Furthermore, the Denka Group supports climate change-related laws and policies (such as the Act on the Rational Use of Energy and the Act on Promotion of Global Warming Countermeasures) and responds to these through various reports to governmental agencies based on law.

Extraction of risks and opportunities as Denka based on scenario analysis associated with climate change

Scenario	TCFD Classification	Item	Expected impact	Relevant Denka business division (Assumed relevant products)	Impact on business fields	Countermeasures
1.5℃ or less	Policies and regulations	Introduction of carbon tax and introduction of emissions trading system	Large	All departments	Increased cost burden related to overall emissions and/or emissions exceeding cap	Energy-saving measures and introduction of new technologies to reduce non-energy-derived CO 2 emissions in addition to the reduction of CO 2 emissions
		Setting and mandatory introduction ratio of bio-based raw materials Expansion of requests for plastic resource circulation (waste reduction)	Small	Polymer Solutions Electronic and Advanced Products Elastomers & Infrastructure Solutions	Replacement of one-way disposable resins with other materials introduction of bio-based raw materials has resulted in a decline in product properties and an increase in cost burden.	Introduction of chemical recycling, promotion of resource circulation of styrene resins, replacement of biopolymer blended products, improvement of properties, and cost reduction
	Technology and reputation	Decarbonization requests for products that emit large amounts of CO 2 during manufacturing and global promotion of CCUS	Large	Elastomers & Infrastructure Solutions (Cement products, special cement, carbide, chloroprene)	Increase in manufacturing costs If there is no response, alternative materials will be considered.	Quick introduction of CFP evaluation for information disclosure Energy-saving measures and introduction of new technologies to reduce non-energy-derived CO 2 emissions in addition to the reduction of CO 2 emissions Companies are seeking collaboration with surrounding companies and local governments at each business site.
	Resource efficiency	Emergence of technologies with LCA (CFP) advantages	Medium	Electronic and advanced products (e.g. heat dissipation materials)	Failure to disclose CFP calculation may hinder the export to EU region due to the progress of alternative materials.	Companies must expand production capacity in response to demand. Promoting/disclosing CFP calculation, reducing CO 2 during product manufacturing
	Energy sources	Transition to clean energy	Large	All departments	Increase in renewable energy ratio and hydrogen utilization	Expansion of hydroelectric power generation capacity, hydrogen energy utilization, and hydrogen production using hydroelectric power (water electrolysis)
	Products/Services	Sales expansion of existing products and development of related parts due to spread of electric vehicles	Medium	Electronics and cutting-edge products (Power conditioners installed in EV vehicles, silicon nitride ceramic substrates related to batteries, spherical alumina, heat dissipation materials, acetylene black products, etc.) Elastomers & Infrastructure Solutions (Arsenic and amorphous silica paper for LiB insulation and fire prevention)	Increase in demand for electric vehicle-related materials and products Determination of business viability for this application, mass production, and sales expansion Decline in demand for internal combustion engine components	Companies must expand production capacity in response to demand. Confirm required performance based on user work, promote prototype development through collaboration with other companies, and make business feasibility judgment for this need including price. Capital investment, new product development Expansion into new applications related to EVs
		Establishment of renewable energy supply systems	Medium	Electronic and advanced products (acetylene black) Elastomer (cable)	Increase in demand for materials used in storage batteries and power transmission network	Companies must respond to the needs of the market by expanding production capacity and developing higher functionality products.
４℃	Physical Risks	Droughts due to changes in precipitation patterns, damage to production facilities and plant shutdowns due to typhoons, heavy rains, and floods, and disruption of supply chains	Medium	All departments	Cost burden for recovery of production facilities and loss of opportunity benefit due to suspension of operation Suspension of production and sales activities due to damage to production facilities of raw material procurement sources and product users	Review of disaster levels and strengthening of facility maintenance measures Diversification of supply chains
	Products/Services	Increase in heatstroke and infectious diseases due to rising temperatures (new infections) Appearance of symptoms)	Medium	Life Innovation	Increase in demand for diagnostic reagents and vaccines including new infectious diseases	Development of new reagents and vaccines
		Increasing requests for infrastructure development to respond to natural disasters	Medium	Elastomers & Infrastructure Solutions	Increasing demand for infrastructure-related products and services associated with disaster prevention and mitigation	Companies must respond to the needs of the market by expanding production capacity and developing higher functionality products.