Disclosures Regarding Climate Change

The Group's Approach to Climate Change

Kumagai Gumi disclosed information on core content (Governance, Strategy, Risk Management, and Metrics and Targets) in accordance with Theme-based Sustainability Disclosure Standard No. 2 (Climate-related Disclosures), published in March 2025.

Kumagai Gumi announced its endorsement of the TCFD Recommendations in January 2023, and has positioned initiatives to address environmental issues as a key management priority in its "ESG Initiatives" and Medium-term Management Plan (FY2024-FY2026).

To strengthen its environmental initiatives, the company revised its former “Safety, Health, Quality, and Environment Policy” into a dedicated “Environmental Policy” in January 2025, establishing a set of “Guiding Principles”.

As a provider of construction services that society demands, Kumagai Gumi is committed not only to complying with environmental laws and related regulations, but also to addressing global-scale environmental challenges and realizing a sustainable society. Through its business activities, the company strives to maximize the use of its technical capabilities to reduce environmental impact and create a better environment.

1. Governance

1-1: Governance Structure Chart and Sustainability Promotion Committee Overview

An organizational chart illustrating Kumagai Gumi’s structure for promoting sustainability. It depicts the hierarchical flow from the Board of Directors to the Management Committee and the Sustainability Promotion Committee, as well as the positioning of the Human Rights Policy Subcommittee and the Carbon Neutrality Measures Subcommittee. A table outlines the committee's purpose, meeting frequency, composition (chair and members), secretariat, scope of activities (e.g., policy and system review, materiality management, responses to external evaluations, and integrated report editorial policy), and information disclosure channels.

1-2: Overview of Governance and Specific Disclosure Items (1)

Overview of governance and the roles of supervisory and executive bodies

The Kumagai Gumi Group recognizes addressing climate-related issues as one of its key management priorities. In addition to discussing these matters at the Management Committee (chaired by the President), we have established the Sustainability Promotion Committee as a body to assist the Management Committee.

This committee is composed of the general managers of each business division and reviews progress toward environmental goals and specific measures from an ESG perspective.

The Board of Directors receives reports on these efforts, and has established a system to continuously oversee the progress of metrics and targets linked to each identified risk and opportunity related to climate change.

Governance bodies and individuals responsible for overseeing climate-related risks and opportunities

Governance skills matrix:

We have appointed four members (as of the end of March 2026) who possess specialized experience and expertise in the ESG and SDGs areas as defined by the Corporate Governance Code.

Through lectures, training sessions, and exchanges of opinions with stakeholders, we believe we are deepening our understanding of societal trends related to climate change, expectations for our Group, and the issues we must address, thereby ensuring the capabilities necessary for the Board of Directors to perform its oversight function.

Frequency of reports to governance on climate-related risks and opportunities:

Information regarding climate-related risks and opportunities is reported to the Board of Directors through the following processes (A and B).

  1. Information provided by the Sustainability Promotion Committee: five times a year
    Information provided by the Carbon Neutral Countermeasures Working Group: twice a year
  2. Reports from the Management Committee: quarterly

Approach to climate-related risks and opportunities, corporate strategy, and trade-offs in major business decisions

Within the Kumagai Gumi Group, the Management Committee identifies climate-related risks and opportunities, sets targets, and evaluates and manages progress monitoring.
The results discussed and decided upon by the Management Committee are reported to the Board of Directors four times a year.
Based on the reports regarding matters decided upon by the Management Committee, the Board of Directors exercises appropriate oversight to enhance corporate value while considering the balance (trade-offs) between mitigating risks and expanding opportunities.

Overview of climate change-related performance metrics and our compensation system

We have introduced a system that reflects the achievement of ESG evaluation targets in executive compensation.The specific performance metrics are as follows.

Evaluation of initiatives relating to the following non-financial targets set forth in the Medium-Term Management Plan undertaken during the plan period
(Percentage of the overall compensation structure accounted for by ESG evaluation performance metrics: 5%)

[ESG evaluation performance metrics]

  • CO2 emissions reduction activities (Scope 1+2/Scope 3 emissions reduction rates)
  • Improvement on employee engagement (engagement rating)
  • Improvement of safety management standards (frequency ratio)
  • Establishment of internal and external systems to prevent legal violations

Among the above, the metric that relates to climate change is CO2 emissions reduction activities.

Management's role in governance processes, controls, and procedures for monitoring, managing, and overseeing climate-related risks and opportunities

  1. Name(s) of delegated executive body (or bodies): Management Committee, Sustainability Promotion Committee
  2. Monitoring process of the delegated executive body (or bodies): Formulation of climate-related measures, assessment of risks and opportunities, setting of targets, and progress management are reviewed by the Sustainability Promotion Committee (an assistant body of the Management Committee) and deliberated upon by the Management Committee.
    The Board of Directors receives quarterly reports on these important matters and provides oversight and guidance.

Integration with controls, procedures, and other internal functions for overseeing climate-related risks and opportunities

Through the monitoring, management, and oversight of climate-related risks and opportunities, we work to accurately identify and address the risks associated with our business activities. For this purpose, we have established a Risk Management Committee chaired by the President.

Internal controls and evaluation procedures for monitoring climate-related risks and opportunities are operated in accordance with the Group's Basic Policy to Establish Internal Control Systems.

2. Risk Management

2-1. Processes and Related Policies for Identifying and Monitoring Climate-Related Risks

Information on inputs, etc. for risk management

A. Sources of data Identification of risks and opportunities: financial data based on SASB sector-industry standards
Climate change and emissions: internal data, various regulations, IEA and IPCC scenarios, GHG protocol
Business and scope: information published by relevant government agencies, etc.
B. Information on scenario analysis for identifying climate-related risks We conduct scenario analyses based on information from various initiatives used in climate-related scenario analysis.
C. Information on prioritization of climate-related risks We disclose climate-related risks that we have determined to be financially material. We do not assign separate priorities to climate-related risks versus non-climate-related risks.
D. Information on monitoring of climate-related risks Based on information from the Sustainability Promotion Committee and each business division, as well as analyses of internal and external environments, the Management Committee evaluates risks from the perspectives of both "financial impact" and "likelihood of occurrence," and identifies significant items.
The Board of Directors has established a system to monitor climate-related risks after receiving reports on matters discussed and decided upon by the Management Committee at least once every quarter.
E. Process for monitoring climate-related risks There have been no changes to governance processes for risk management since the previous fiscal year.
F. Information on methods for assessing the nature, likelihood of occurrence, and magnitude of the impacts of climate-related risks

For identified risks and opportunities, we assess the nature of the risk and the financial impact by applying thresholds for financial impact and likelihood of occurrence.
Thresholds for financial impact and likelihood of occurrence are as follows.

Definition of financial impact threshold
Risks and Opportunities
Large At least 10 billion yen
Medium 1 billion yen or more but less than 10 billion yen
Small 1 billion yen or less
Definition of likelihood of occurrence
Definition of frequency Current fiscal year and short term Medium-term frequency Long-term frequency
Almost certain
(99-100%)		 An event is guaranteed to occur once every year.
Very high probability
(90-100%)		 An event occurs once during a single fiscal year at the specified likelihood of occurrence. An event occurs approximately once a year over a three-year period. An event occurs approximately once a year over a nine-year period.
High probability
(66-100%)		 An event occurs twice or more over a three-year period. The event occurs once a year for a total of six or more times over a nine-year period.
50% probability or higher
(50-100%)		 The event occurs once a year over a three-year period at a probability of 50% or higher. The event occurs once a year over a nine-year period at a probability of 50% or higher.
Around 50% probability
(33%-66%)		 The event occurs once or twice over a three-year period. The event occurs approximately three or more times but less than six times over a nine-year period.
Unlikely
(0-33%)		 The event occurs less than once every three years. The event occurs less than approximately three times over a nine-year period.
Very low probability
(0-10%)		 The event occurs at the specified frequency for a three-year period. The event occurs approximately zero times to once over a nine-year period.
Exceptionally low probability
(0-1%)		 The event occurs virtually never over a nine-year period.

3. Strategy

3-1: Overview of Strategy and Approach to Disclosure

A flowchart illustrating the process by which Kumagai Gumi identifies climate-related risks and opportunities and incorporates them into its business strategy and resilience assessments. The process is presented in five numbered steps: environmental analysis using scenario analysis; determination of key risks and opportunities; assessment of impacts on the business model and value chain; strategy formulation based on climate adaptation and mitigation; and disclosure of resilience assessment results, including key uncertainties.

3-2: Relationship Between Strategy, Metrics, and Targets

A table outlining the strategic items, metrics, and targets regarding Kumagai Gumi’s climate-related disclosures. Risks and opportunities related to climate change, human capital, and corporate conduct are listed on the left, while cross-industry metrics—such as greenhouse gas emissions, transition risks, physical risks, opportunities, capital expenditure, internal carbon pricing, and remuneration—are detailed on the right. Additionally, the table summarizes requirements for disclosing industry-specific metrics and for setting and tracking progress on strategic goals, including greenhouse gas emission targets.

3-3: Identified Risks and Opportunities Related to Climate Change (1)

　Based on scenario analyses for climate change ranging from 1.5°C to 2°C and 4°C, and with reference to SSBJ Disclosure Standard No. S2 (Climate Change), the Kumagai Gumi Group conducts analyses and makes disclosures regarding the identification of short-term, medium-term, and long-term risks and opportunities, and their financial impacts.
　(1) Details of identified short, medium, and long-term risks, opportunities, and financial impacts
　The following is an overview of the Group's identified risks, opportunities, and financial impacts, etc. based on the 1.5°C to 2°C and 4°C warming scenarios.

Factors Details Value
chain		 Likelihood of
occurrence		 FY
2025		 Short term Medium
term
3 years		 Long
term
9 years
Transitional risks Policies and legal restrictions
  • Stricter regulations related to GHG emissions
  • Growing societal demand for carbon neutrality
 Transition costs and challenges in implementation associated with achieving carbon neutrality Direct operation High probability
(66-100%)		 -
Physical risks Acute
  • Frequency and intensity of natural disasters
 Increased response costs due to damage to construction sites and injury to on-site employees caused by natural disasters such as typhoons and heavy rains, and construction delays, etc., resulting from supply chain disruptions Direct operation Very low probability
(0-10%)		 - 1.5℃ warming scenario
Approx. 16 million yen

4℃ warming scenario
Approx. 137 million yen 		1.5℃ warming scenario
Approx. 32 million yen

4℃ warming scenario
Approx. 274 million yen 		1.5℃ warming scenario
Approx. 95 million yen

4℃ warming scenario
Approx. 821 million yen
Decrease in value of owned and investment assets due to natural disasters, and incurred restoration costs - Approx. 21 million yen Approx. 61 million yen Approx. 181 million yen
Chronic
  • Changes in rainfall and weather patterns
  • Rise in average temperature
  • Progressive rise of sea levels
 Increased labor costs due to reduced work efficiency at construction sites Direct operation High probability
(66-100%)		 - - Assuming a 22% labor cost
Approx. 8.0 billion yen

Assuming a 30% labor cost
Approx. 16.4 billion yen 		Assuming a 22% labor cost
Approx. 24.0 billion yen

Assuming a 30% labor cost
Approx. 49.3 billion yen
Opportunities Energy sources
  • Renewable energy
    Increased demand for related businesses
 Increase in construction demand and sales resulting from increased investment in renewable energy Upstream
Direct operation
Downstream		 High probability
(66-100%)		 - -
Products/services
  • Growing societal demand for carbon neutrality
  • Increased demand for medium- and large-scale wooden structures
  • Increased demand for energy-efficient buildings
 Increased sales of medium- and large-scale wooden structures with low GHG emissions that enable fixation of CO2 Upstream
Direct operation
Downstream		 High probability
(66-100%)		 -
Increased sales of highly energy-efficient buildings (ZEB, etc.) and environmentally friendly buildings with low BEI values Upstream
Direct operation
Downstream		 Almost certain
(99-100%)		 -
Market
  • Expansion of the national resilience market
  • Expansion of the wooden construction market
  • Decline in forest resources in timber-exporting countries and expansion of the domestic timber market
  • Changes in the component elements of real estate value
  • ESG investment and ESG finance
 Increased sales opportunities for disaster prevention, mitigation, and recovery projects under Japan's National Resilience Plan Upstream
Direct operation		 Very high probability
(90-100%)		 - -
Increase in ESG investment driven by efforts to address climate change Upstream
Direct operation
Downstream		 Around 50% probability
(33%-66%)		 - - Approx. 11.94 billion yen
-
Approx. 23.88 billion yen		 -

3-4: Time Frame for Climate-Related Risks and Opportunities

The Kumagai Gumi Group defines the time frame for climate-related risks and opportunities (including the definition of the time frame) as follows.

Time frame Period Definition
Short term FY2026 The consolidated fiscal year following the current consolidated fiscal year
Medium term FY2027 to FY2029 Aligned with the duration of the current Medium-term Management Plan
Long-term FY2027 to FY2035 (*) Aligned with the business plan under the long-term vision

(Note) The medium-term time frame is included within the long-term time frame.

3-5: Impact on Business Models and Value Chains

The Kumagai Gumi Group recognizes the significant impacts that climate change has on the business models and value chains of each of its businesses, as outlined below.

Item Impact on business models and value chains
Purchasing activities
  • Increase in funding costs due to the procurement of construction materials and introduction of charges and emissions trading systems for GHG emissions during construction
Manufacturing
  • Decreased labor productivity at construction sites during the summer
  • Temporary suspension of construction site operations due to typhoons or heavy rains, etc.
Funding and shipping activities
  • Increased transportation costs within the supply chain
  • Soaring material and fuel prices from the design phase through to the completion of buildings
  • Delays in material procurement, etc., due to supply chain disruptions caused by typhoons and heavy rains
Sales and service activities
  • Increase in sales due to increase in renewable energy related investments
  • Increased sales of medium and large-scale wooden structures
  • Increased sales of highly energy-efficient buildings (ZEB, etc.) and environmentally friendly buildings with low BEI values
  • Increased sales from disaster prevention, mitigation, and recovery projects under the National Resilience Plan
Areas within business models and value chains where climate-related risks and opportunities are concentrated
Business Domestic Civil Engineering Business, Domestic Building Construction Business, Overseas Construction Business, and other businesses
Geographic regions Japan, Taiwan
Types of facilities and assets Company-owned assets (fixed assets), construction sites
Procurement, sales, and distribution channels Entire value chain (direct operations, upstream and downstream)

3-6: Climate Transition Plan Overview

The Kumagai Gumi Group has placed the achievement of carbon neutrality at the core of its business strategy and is committed to the development and widespread adoption of environmentally friendly technologies.
In our Medium-term Management Plan (FY2024–2026), we have identified the renewable energy business, medium- to large-scale wooden structures, and disaster prevention and mitigation-related initiatives as key growth areas.
To achieve our goals in these strategic areas, we are strengthening our executive structure and expanding investment in research and development and human resources to further solidify our business foundation.
Our specific plans for the future are as follows.

Items of the transition plan Details
Overview of key assumptions and dependencies underpinning the transition plan Based on scenario analyses for 1.5–2°C and 4°C climate change scenarios, and referring to Theme-based Sustainability Disclosure Standard No. 2 and other relevant guidelines, we have made the following projections regarding future market trends, regulatory changes, and technological advancements for the transition plan.
Future market trends According to the IEA's WEO 2025, Japan's macroeconomic GDP growth rate for 2024–2035 is projected at an annual growth rate of 0.6%, and we are basing our projections on this assumption.
Regulatory changes Given the fossil fuel levy of approximately 1,000 yen/t-CO2 projected by 2030, we anticipate the full-scale introduction of a carbon tax in Japan and a significant increase in the Global Warming Countermeasures Tax.
Technological advancements We anticipate an increase in the share of clean energy and a decline in the use of fossil fuels.
1: Strategic alignment To achieve our greenhouse gas reduction targets by FY2035, we are undertaking the following activities.
  1. (1) Scope 1 and 2: Introduction of renewable electric power, non-fossil certificates, biofuels, and decarbonized construction machinery
  2. (2) Scope 3: Mitigation of business risks and implementation of reduction measures in Category 1—from procurement to disposal—in collaboration with the supply chain in our construction business
  3. (3) Disclosures based on metrics and targets in the cross-sectoral metrics category
2: Assumptions for the plan Identification of risks and opportunities under the 1.5–2°C, and 4°C climate change warming scenarios, implementation of action plans aimed at mitigating risks and expanding opportunities, implementation of financial plans, budgets, and related investment plans to support the transition plan
3: Mitigation of impacts on risk items and high-priority opportunity items
  1. Transition costs and implementation challenges associated with achieving carbon neutrality
  2. Increased sales driven by expanding construction demand resulting from increased investment in renewable energy
  3. Increased sales of medium- and large-scale wooden structures that enable CO2 fixation and have low GHG emissions
  4. Increased sales of highly energy-efficient buildings (ZEB, etc.) and environmentally friendly buildings with low BEI values
  5. Increased sales opportunities for disaster prevention, mitigation, and recovery projects under Japan's National Resilience Plan
4: Action plans The medium-term action plan for the transition plan aims to mitigate the financial impact of risks and expand high-priority opportunities.
Key costs and countermeasures for achieving carbon neutrality include: (1) efforts to shift the energy mix from carbon-emitting energy sources to hydrogenated biofuels and reduce GHG emissions; and (2) business expansion (opportunities) through the promotion of technological development related to reducing GHG emissions.
We plan to implement climate resilience countermeasures and execute investments in accordance with 5: Financial Plan.
5: Financial plan As part of our medium-term initiatives, we plan to invest 10 billion yen in the Renewable Energy Business during the Medium-term Management Plan (FY2024–2026) period.
6: Scenario analysis We have established multiple scenarios—including 1.5–2°C, and 4°C warming scenarios, and defined short to long-term time frames based on the results of our risk and opportunity analyses.

3-7: Climate Resilience

Scenario analysis

The Kumagai Gumi Group regards addressing climate change risks as a key priority, and conducts scenario analysis to identify and evaluate risks and opportunities related to climate change and to understand their medium- to long-term impact on its business activities.

Related scenarios Scenario outline
1.5°C warming scenario to below 2°C warming scenario Transition scenario
  1. NZE (Net Zero Emissions by 2050 scenario): This scenario limits warming to less than 1.5°C with a 50% probability. It assumes the most stringent transition regulations, in which global greenhouse gas (GHG) emissions are reduced to net zero by 2050
  2. APS (Announced Pledges Scenario): This scenario limits warming to 1.7°C with a 50% probability. It assumes that all country-specific reduction pledges and net-zero targets announced by nations worldwide are fully achieved by their deadlines.
Physical scenario
  1. RCP1.9／SSP1-1.9: Assumes warming of 1.0–1.8°C (average 1.4°C).
    It is the most ambitious sustainable scenario, focused on achieving the Paris Agreement's 1.5°C target.
  2. RCP2.6／SSP1-2.6: Assumes warming of 1.3–2.4°C (average 1.8°C).
    It is a global warming mitigation scenario aimed at limiting warming to less than 2°C by the end of the 21st century.
4℃ warming scenario Transition scenario STEPS (Stated Policies Scenario): 50% probability of warming of 2.4°C. It is a business-as-usual scenario, assuming that only the policies currently being implemented by countries around the world and specific measures that have already been announced will continue.
Physical scenario
  1. IPCC RCP8.5: Assumes warming of 2.6–4.8°C (average 3.7°C) compared to the baseline period (1986–2005).
    It is the highest-emission scenario in the IPCC Fifth Assessment Report (AR5).
    It assumes trends resulting from a lack of effective global warming mitigation measures.
  2. SSP5-8.5: Assumes warming of 3.3–5.7°C (average 4.4°C) compared to pre-industrial levels.
    It is the highest-emission scenario in the IPCC Sixth Assessment Report (AR6).
    it assumes the worst-case scenario in which economic development continues to rely on fossil fuels.

Time frame used for scenario analyses

Time frame Period and overview
Short- and mid-term
  • Until 2030 (period reflecting the impact of current management plans and business strategies)
Long-term
  • 2040–2050 (period for evaluating long-term risks and opportunities, such as the transition to a decarbonized society)

Scope of business used in scenario analyses

Business Region covered
Domestic Civil Engineering Business, Domestic Building Construction Business, and other businesses Japan
Overseas Construction Business Taiwan

Climate-related policies within the scope of business operations

Scenario Period and overview
The Current Policies Scenario: Details of Japan's specific energy-saving regulatory tightening
  • Following the revision of the Top Runner Program from 2025 to 2027, Minimum Energy Performance Standards (MEPS) will be established for air conditioners, water heaters, window glass, and televisions.
  • Based on the Building Energy Conservation Act amended in 2022, all new buildings will be fully obligated to meet the newly revised energy conservation standards.
The Stated Policies Scenario: Measures to promote adoption announced by Japan
  • As part of the Home Energy Conservation Campaign (2024), subsidies will be introduced for insulation retrofit work and high-efficiency water heaters.
  • Existing efficiency regulations for home appliances and buildings will be extended and strengthened.

Climate resilience assessment

The impact of climate-related scenario analysis results on the evaluation of corporate strategies and business models, and corresponding responses
Impact of identified risks and opportunities on business models:

In FY2025, countermeasures to mitigate climate change risks and expand opportunities will be implemented, based on the climate transition plan and other initiatives, taking into account short- to long-term financial impacts.

Reassessments of identified climate change-related risks and opportunities:

We plan to conduct these reassessments from both qualitative and quantitative perspectives.
Areas of significant uncertainty considered in the climate resilience assessment
Areas of significant uncertainty in the climate resilience assessment:
Japan and Taiwan
The ability to adapt strategies and business models to climate change over the short, medium, and long term
Availability and flexibility of existing financial resources to address impacts identified in climate-related scenario analyses:

We will conduct an annual reassessment of risks and opportunities from both qualitative and quantitative perspectives and revise our investment plans and countermeasures—in conjunction with the climate transition plan—to mitigate climate change risks and expand opportunities.
An overview of the action plan for resilience measures and expanding opportunities is provided in the preceding section, Impact on Strategy and Decision-Making.
The Company's ability to reallocate, repurpose, upgrade, or dispose of existing assets within the Group:

Based on the results of the reassessment, we may implement measures such as the reallocation, demolition, or disposal of existing fixed assets, etc. as a response to materialized risks. (*)

  • (*)In FY2025 and in the short term, we have no plans to implement measures such as the reallocation, demolition, or disposal of existing fixed assets as a response to materialized risks.
Investments in climate-related mitigation, adaptation, and opportunities, and their impact:

Based on the results of the reassessment, we will continue to make investments aimed at strengthening climate resilience and flexibly review our plans.
Through these initiatives, we expect that the minimization of financial impacts associated with risks and the maximization of financial benefits derived from seizing opportunities will gradually materialize in the future.

4. Metrics and targets

The Kumagai Group sets and discloses climate change-related metrics and targets in accordance with Theme-based Sustainability Disclosure Standard No. 2.

Cross-sectoral disclosure metrics (a) GHG emissions, (b) climate-related transition risks, (c) climate-related physical risks, (d) climate-related opportunities, (e) capital investment, (f) internal carbon price, (g) compensation

(1) Climate-related metrics

Methodology for measuring greenhouse gas emissions

  • Scope 1
    Direct emissions primarily from diesel fuel, city gas, propane gas, gasoline, kerosene, etc., used in heavy machinery at construction sites
  • Scope 2
    Indirect emissions from the use of electricity, heat, and steam, which are supplied from other companies
  • Scope 3
    Emissions across the entire supply chain related to business activities other than Scopes 1 and 2 (e.g., material procurement, building operations, exhaust emissions, etc.)

Emissions are calculated based on the following criteria.

Site Emission factors used to calculate emissions
Domestic sites
  • We use the latest emission factors published by the Ministry of the Environment, in accordance with the provisions of the Act on Promotion of Global Warming Countermeasures.
  • For annual activity levels, we use the latest factors published by industry associations, in accordance with the GHG Protocol.
Overseas offices
  • As a general rule, we use country-specific factors, in accordance with the GHG Protocol.
  • When data is difficult to obtain, we use country-specific factors from the IEA.

[Overview of greenhouse gas emissions measurements based on the GHG Protocol (2004)]

The Kumagai Gumi Group has selected the financial control approach as the following method for measuring greenhouse gas emissions, in accordance with the GHG Protocol (2004).

[Total absolute greenhouse gas emissions]
The Group's Scope 1 through Scope 3 emissions are disclosed on the following pages.

Decarbonization Initiatives Environmental Data

(2) Internal carbon price

  • Method for applying the internal carbon price
    We determine the internal carbon price based on the assumed price per ton of GX-ETS credits, taking into account the trading prices of J-Credits, non-fossil certificates, and other instruments.
  • Internal carbon price
    Price per metric ton of greenhouse gas emissions: Approx. 4,000–10,000 yen

3. Compensation

  • Method for incorporating climate-related evaluation criteria into executive compensation
    Specific climate change-related performance metrics and compensation systems are described in the Governance section.
  • Percentage of total executive compensation accounted for by climate-related evaluations
    ESG-related evaluation criteria account for 5% of executive compensation, and climate-related evaluation criteria are included as part of these ESG-related evaluation criteria.

(4) Industry-specific metrics

  • Metrics used to monitor climate-related risks and opportunities
    As a result of referring to and considering the applicability of the industry-specific metrics related to the disclosure topics in the ISSB Industry-based Guidance, we use the following metrics to monitor climate-related risks and opportunities.
    • Scope 1 and 2 emissions reduction rates
    • Scope 3 emissions reduction rates

(5) Other climate-related metrics

  • Metrics used to measure and monitor climate-related risks and opportunities expected to impact the company's outlook
    Performance related to the identified climate-related risks or opportunities is described on the Strategy page.

(6) Climate-related targets (identification of climate-related targets)

Metrics used to set targets We set climate-related targets by referring to and considering the applicability of industry-specific metrics related to the disclosure topics in the ISSB Industry-based Guidance published by the ISSB.
We use the following metrics to monitor each climate-related risk and opportunity.
  • Scope 1 and 2 emissions reduction rates
  • Scope 3 emissions reduction rates
Quantitative targets set for these metrics
  • Scope 1 and 2 reduction target: 42% (basis year: 2019, target year: 2029)
  • Scope 3 reduction target: 25% (basis year: 2019, target year: 2029)
Purpose of the targets for these metrics We have established these targets for these metrics in support of international policies such as the Paris Agreement, Japan's NDC (Nationally Determined Contribution), climate change-related laws and regulations (such as the Energy Conservation Act and the Act on Promotion of Global Warming Countermeasures), and various other policies. We view adaptation to changes in the business environment caused by climate change as an opportunity for further growth.
Scope of the company to which the targets for these metrics apply (boundary) Businesses: Domestic Civil Engineering Business, Domestic Building Construction Business, Overseas Business, and other businesses of the Company and its consolidated subsidiaries
Region: Japan, Taiwan
Period from the basis year to the target year to which the targets for these metrics apply FY2019 to FY2029
  • Quantitative targets for these metrics are defined as absolute volume targets.
  • The wording in Article 2 of the Paris Agreement—"continue efforts to hold the increase in the global average temperature to well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C"—is reflected in our targets for climate change metrics.
Sustainability