TCFD-Based Information Disclosure | Sustainability

Response to Recommendations of TCFD

In September 2020, Alps Alpine declared its support for the Task Force on Climate-related Financial Disclosures (TCFD). We will assess the risks and opportunities associated with climate change and reflect the findings in our business strategies with the intent of realizing sustainable growth and formulating an appropriate risk response.

Governance

The Board of Directors deliberates and resolves important matters, such as basic policies and measures to deal with climate change issues, by setting the “realization of a decarbonized society” and “realization of a circular economy” as items of business materiality. The representative director has the highest responsibility and authority for sustainability issues, including climate change issues, and a director appointed by the representative director is responsible for overseeing all sustainability measures as the chair of the Sustainability Promotion Committee.
In addition to the Environmental Working Group, which operates under the Sustainability Promotion Committee, relevant working groups report the status of initiatives on issues including the assessment of climate change-related risks and opportunities to the Sustainability Promotion Committee, which reviews the content and reports to the Board of Directors.
Specifically, the Board of Directors has decided to participate in the RE100 initiative and agreed on a mid-term emission reduction target of 2030 and a policy to engage in supply chain emission reduction activities actively.

Governance Structure of the Company for Climate Change-Related Issues

Body	Roles	Meeting Frequency
Board of Directors (Hideo Izumi, Representative Director,President)	Determine climate change and other sustainabilityrelated Policies and important matters Monitor responses to climate change	Report four times a year Deliberate on issues in a timely manner
Sustainability Promotion Committee (Chair: Satoshi Kodaira, Director, xecutive Vice President)	Implement measures to address climate change and other sustainabilityrelated issues while reporting on their progress and presenting recommendations in this regard to the Board of Directors	*Meet four times a year

Strategy

Through a scenario analysis conducted on climate change, we identified risks and opportunities and quantitatively assessed the impact on our business using internal criteria.

Scenario Analysis Process

A four-step process was adopted for scenario analyses.

Step 1 Assessment of Risk Materiality: We identified risks and opportunities affecting our business activities and rated their materiality based on the magnitude of their business impact.
Risks were evaluated in terms of transition risks (government policy and regulation, technologies, markets, and reputation) and physical risks (acute and chronic).
Opportunities were evolved based on the considerations of resource efficiency, energy sources, products and services, markets, and resilience.
Step 2 Selection of Scenarios: Analyses were conducted based on scenarios projecting average global warming of 1.5°C above pre-industrial levels as well as those projecting average global warming of 4°C.
The opportunities and risks were assessed using the following combinations of timings and scenarios due to the fact that differences in temperature in 2030 did not differ materially between the 1.5°C scenarios and the 4°C scenarios and the fact that it was difficult to project transfer risk and opportunities from a business perspec tive at 2050.

2030 2050

Transition risks 1.5°C or 2°C scenarios -

Physical risks - 4°C scenarios

Opportunities 1.5°C or 2°C scenarios -

Source: IPCC AR5 WGI SPM Figure SPM7(a)
Step 3 Assessment of Business Impacts: Assessments of the business impacts of the identified 13 items for transition risks, physical risks, and opportunities were performed based on internal and external information.
Specifically, business divisions verified the business impact and estimated the financial impact of the transition risk and opportunity items identified by the Sustainability Promotion Office.
Step 4: Identify potential responses: Action plans were formulated and enacted to address those risks and opportunities designated as having a potentially high financial impact.

	2030	2050
Transition risks	1.5°C or 2°C scenarios	-
Physical risks	-	4°C scenarios
Opportunities	1.5°C or 2°C scenarios	-

Results of Scenario Analysis

The scenario analysis found that the 4°C scenarios would require us to implement measures at bases around the world to counter the impacts of intensifying natural disasters associated with abnormal weather events while also enacting risk countermeasures across the entire supply chain. Conversely, the 1.5°C scenarios presented a need for ongoing decarbonization measures to mitigate transition risks along with aggressive action for seizing opportunities through the supply of products and services that cater to market changes.

Assessment of Risks and Opportunities

The results of the Group’s assessment of risks and opportunities in climate change are as follows.

Risks were evaluated in terms of transition risks (government policy and regulation, technologies, markets, and reputation) and physical risks (acute and chronic).

Category		Climate Change Impacts	Details of Risks	Timeline^*	Financial Impact	Response Measures
Transition	Response Measures	Carbon pricing mechanisms	Increase in energy procurement costs reflecting the introduction of carbon taxes Increase in costs associated with measures to reduce CO2 emissions and purchases of emission credits due to introduction of emissions trading scheme	Mediumterm	Medium	Establishment of RE100 WG under Sustainability Promotion Committee; planning and promotion of energy conservation and renewable energy procurement activities
Physical	Acute	Rising severity and frequency of cyclones, floods, and other abnormal weather events	Decrease in sales as a result of discontinued operations at our plants, increase in costs due to continuation and recommencement of production Increase in costs for flood countermeasures at three overseas bases deemed to be at high risk of flooding	Mediumterm	Small	Reinforcement of business continuity plans through means such as　production relocations and purchasing from multiple suppliers based　on natural disaster risks threatening production bases
Physical	Acute		Decrease in sales due to discontinued supplies of raw materials and components stemming from supply chain disruption; increase in costs for procuring alternative items Decrease in sales as a result of reduced production or discontinuation of operation at customer plants; increase in costs due to abnormal processing costs following production adjustments	Mediumterm	Small
Physical	Chronic	Higher average temperatures	Increase in air-conditioning costs at offices and factories due to higher average temperatures and increase in electricity costs due to growing demand for renewable energy	Longterm	Medium	Target of achieving 2% reduction in energy use per year in plan for adopting renewable energy in order to limit projected increases in energy use through energy conservation

* Short-term: within one year. Medium-term: within three years. Long-term: more than three years (currently up to 2030)

Opportunities were evolved based on the considerations of resource efficiency, energy sources, products and services, markets, and resilience.

Opportunity Type	Climate Change Impacts	Risks / Opportunities	Timeline^*	Financial Impact
Products / Services	Development of new products or services through R&D and innovation	Expansion of EV market leads to expansion of business for current sensors	Mediumterm	Small
		Expansion of EV sound products (pedestrian warning sound systems, engine sound generators, road noise cancellation) business due to EV market expansion	Mediumterm	Medium
	Development and/or expansion of low emission goods and services	Business expansion through the provision of products using new decorative technologies (e.g. optical decoration) that replace plating and painting, which have a high environmental impact	Mediumterm	Small
Resource Efficiency	Use of more efficient production and distribution processes	Market introduction of logistics trackers to contribute to efficient distribution Contributing to IoT in factories by introducing analog meters to the market	Mediumterm	Small
Resource Efficiency	Use of more efficient modes of transport	Reduction of CO2 emissions from transportation by producing at a plant near the final sales location	Mediumterm	Medium

* Short-term: within one year. Medium-term: within three years. Long-term: more than three years (currently up to 2030)

Risk Management

We recognize that to achieve sustainable corporate growth and increase corporate value, we must assess the impact and importance of various risk items surrounding our business and formulate and respond to measures over the medium to long term. The Company has developed a risk map as a framework for examining risk preparedness, and climate change-related risks are assessed as a managerial risk. As a specific activity, the Environment Working Group conducts a risk survey once a year, where the risks identified are evaluated and managed by the Sustainability Promotion Committee. Risks with significant financial impact are reported to and discussed by the Board of Directors.

Indicators and Targets

We are promoting activities to achieve zero GHG emissions throughout our value chain by fiscal 2050. Our mid-term target is to reduce GHG emissions (Scope 1 and 2) by 90% in fiscal 2030 compared to fiscal 2020. In addition, we joined the “RE100” initiative, declaring our commitment to achieve 100% introduction of renewable energy by fiscal 2030.
We will contribute to reducing GHG emissions by promoting thorough energy-saving activities and active use of renewable energy.

2050 Target: Zero GHG emissions throughout the value chain
2030 Target: GHG emissions reduction (Scope 1 and 2): 90% (compared to FY 2020)
Percentage of renewable energy used: 100%