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Disclosure Based on TCFD Recommendations

Disclosure Based on TCFD Recommendations

Addressing Climate Change: Information Disclosure in Accordance with TCFD Recommendations

Our sustainability policy is to contribute to the sustainable development of society by "providing safe, reliable, and high-quality air services to all people at affordable prices". As essential elements for continuing our business activities in line with this basic policy, we have identified "Safety and Quality" and "Governance" as the "Business Foundation", and "Environment", "People", and "Communities" as "Materiality".

As a company engaged in the air transportation business, we cannot avoid GHG (greenhouse gas) emissions, and therefore, addressing climate change is one of our most important challenges. We analyze the impact of climate change on our business and finances from the perspective of risks and opportunities, and we also aim to achieve both reducing our environmental impact, and creating social value by promoting initiatives such as the introduction of aircraft with lower GHG emissions and SAF (sustainable aviation fuel). Information on these initiatives and their results, as well as other climate change-related information, will be compiled in accordance with the final recommendations of the TCFD, and will be actively disclosed.

About TCFD

TCFD stands for the Task Force on Climate-related Financial Disclosures. It was established by the Financial Stability Board (FSB) at the request of the G20, with Michael Bloomberg as Chair, to consider how to disclose climate-related information, and how financial institutions should respond.

In its final report published in June 2017, the TCFD recommends that companies and other organizations disclose information on the following items regarding climate change-related risks and opportunities:

  • Governance: How climate-related issues are overseen and integrated into company management.
  • Strategy: The short, medium, and long-term impacts of climate change on the business, and how the company plans to respond.
  • Risk Management: How climate-related risks are identified, assessed, and mitigated.
  • Metrics and Targets: The key metrics used to assess risks and opportunities, and how progress towards targets is measured.

Governance

Our sustainability policy, including measures on climate change, is decided through deliberations at the Board Meeting.

Based on the policy decided at the Board Meeting, the Sustainability Committee holds discussions, and determines initiatives and targets. The Committee is chaired by the Representative Director and Senior Managing Director, and is consisted of executive directors and corporate officers. The committee discusses important policies and measures on overall sustainability issues, including climate change.

The progress of the measures implemented by each department is reported to the Committee twice a year and will also be reported at Board Meetings to ensure appropriate supervision.

Sustainability Promotion Structure

Strategy

As the severity of climate change increases, aircraft with high GHG emissions are expected to face regulations, taxes, and a potential decrease in users. Therefore, addressing climate change is one of our company's most important challenges. We have examined the risks and opportunities that climate change poses to our business, referring to the items of each risk and opportunity outlined in the TCFD recommendations, in the following steps.

In addition, we conducted scenario analyses on transitions in policies and market trends (transition risks and opportunities) and physical changes due to disasters, etc. (physical risks and opportunities) using the 1.5°C to 2°C scenario and the 4°C scenario.

Scenario Analysis Process

  • 1.Identification and Assessment of Risks and Opportunities
  • 2.Definition of Scenarios
  • 3.Assessment of Financial Impact
  • 4.Consideration of Countermeasures

Climate Change Scenarios

  • 1.5°C to 2°C Scenario

    A scenario in which efforts aimed at achieving carbon neutrality to mitigate the impact of climate change are accelerated, aiming to limit the global average temperature increase to below 1.5°C to 2°C compared to pre-industrial levels. In the 1.5°C scenario, the impact of policy and legal regulation risks among transition risks is expected to be greater than in the 2°C scenario.

  • 4°C Scenario

    A scenario in which climate change measures do not progress from the current state, and the global average temperature is projected to rise by about 4°C towards the end of this century compared to pre-industrial levels. In this scenario, the impact of the intensification of extreme weather events and the risks of sea level rise in physical risks is expected to be significant.

Changes in Global Average Temperature Relative to 1850-1900

Source: Reproduced from Figure SPM.8 in the Summary for Policymakers of the Working Group I contribution to the Sixth Assessment Report of the IPCC (provisional translation by the Ministry of Education, Culture, Sports, Science and Technology (MEXT) and the Japan Meteorological Agency)

Impacts and Countermeasures for Major Risks and Opportunities

Risk Factor Impact on Business Timeframe Financial Impact Countermeasures
Transition Risk Policy/
Regulation
Introduction of Carbon Tax Increased costs due to taxation on CO2 emissions from business activities Mid-Long-Term Medium to Large Reduce CO2 emissions through the introduction of fuel-efficient aircraft, operational improvements, and promotion of SAF utilization
SAF Mandate Impact on revenue, operations, and passengers due to high SAF prices and supply shortages Short-Long-Term Large Secure SAF supply through strategic investments and participation in public-private partnerships, sales of environmental value from SAF, etc
Technology Mandate for fuel-efficient aircraft and new technologies Increase in development and implementation costs Short-Long-Term Large Collaboration with manufacturers and requests for support from the government, etc
Market Increased public awareness of climate change issues Decrease in air travel demand due to modal shift to railways, increase in virtual meetings, etc Mid-Long-Term Medium Strengthen efforts to reduce CO2 emissions, actively promote environmental initiatives, collaboration with industry associations
Acute Frequent and intensified natural disasters Increase in costs for restoring aircraft and airport infrastructure due to disasters Short-Long-Term Large Upgrade to highly durable equipment
Opportunities Resource Efficiency Improvement of aircraft fuel efficiency Reduction in fuel costs through improved operational efficiency and aircraft fuel efficiency Short-Long-Term Large Transition to fuel-efficient aircraft, operational improvements
Energy Source Expansion of SAF use Reduction of carbon regulation costs through CO2 emission reduction, stabilization of fuel supply through fuel diversification Short-Long-Term Large Establish methods for selling the environmental value of SAF to expand SAF introduction
Products and Services Appropriate response to climate change Acquisition of customers due to increased value from low-carbonization, etc Mid-Long-Term Medium Actively promote environmental initiatives, collaboration with industry associations

Risk Management

Process for Identifying and Assessing Climate-Related Risks

Our company has established a risk management system centered on the Risk Management Committee for the purpose of recognizing and addressing various risk factors surrounding the business environment.

The Risk Management Committee is held in principle four times a year and identifies "Priority Risks" that the company should manage from among all risk items. Furthermore, it clarifies the department in charge and implements the formulation of countermeasures, verification of their progress, effectiveness, and achievement status. In addition, the status of these risk management activities is reported to the Board Meeting to ensure appropriate supervision. As a result of the Risk Management Committee's assessment, "Climate-Related Risks" are positioned as "Priority Risks", and countermeasures are formulated and initiatives are promoted within the PDCA cycle centered on the Sustainability Committee.

Process for Managing Climate-Related Risks

Policies related to sustainability, including "Climate-Related Risks" identified as "Priority Risks" by the Risk Management Committee, are deliberated and decided by the Board Meeting, and more specific details such as targets and initiatives are considered by the Sustainability Committee.

The Sustainability Committee is chaired by the Representative Director and Senior Managing Director, and is composed of executive directors and corporate officers. It discusses important policies and measures related to all sustainability issues, including climate change. The Sustainability Committee also plays the role of implementing the PDCA cycle for each measure, receiving reports on the progress of initiatives from each department in principle twice a year, confirming the contents, and reporting to the Board Meeting.

Process for Integrating Climate-Related Risks into Company-Wide Risk Management

The details and reports from the Sustainability Committee are reported to the Board Meeting as needed. The Board Meeting provides the content of the Sustainability Committee's reports to the Risk Management Committee as necessary, thereby integrating risks related to sustainability in general, including climate change-related risks, into the overall risk management of the organization.

Please refer to this page for details on our company's corporate governance.

Metrics and Targets

Our company calculates GHG emissions as a metric for evaluating and managing climate-related risks and opportunities. Regarding GHG reduction targets, we will set more specific targets, such as setting GHG emission targets for 2030 with the achievement of carbon neutrality in 2050 in mind, and implement emission reduction initiatives.

Metrics and Targets for Evaluating and Managing Climate-Related Risks and Opportunities

Item Actual Value Target Value
2019 2020 2021 2022 2023 2030 2050
CO2 Emissions from aircraft
(1,000tons)
683.5 402.1 542.1 675.3 703.9 747.0 Virtually Zero
Aircraft CO2 emissions /Revenue
ton-kilometers(kg-CO2/RTK)
1.16 1.76 1.68 1.22 1.13 1.00

2030 (Mid-Term) Target

Replace 10% of aviation fuel usage with SAF.

2050 (Long-Term) Target

Achieve carbon neutrality in aircraft operations.