Response to Climate Change(Disclosure Based on the TCFD Recommendations)

In May of 2019, MGC declared its support for the recommendations of the Task Force on Climate-related Financial Disclosures (the "TCFD").

Tackling climate change is a major challenge that calls for initiatives on a global scale if we are to achieve a sustainable society. MGC recognizes that solving energy and climate change problems is an important issue, and is working to solve these issues in terms of both mitigating and adapting to climate change.

Specifically, MGC has formulated targets for reducing Scope 1 and 2^*1 greenhouse gas (GHG) emissions and is working toward their steady reduction. At the same time, MGC is proactively disclosing information on Scope 3^*2 GHG emissions and is taking action to reduce them in collaboration with its suppliers. MGC is working to improve energy efficiency and the carbon cycle of raw materials, and to promote energy transition toward the goal of achieving a zero-carbon society by 2050. MGC will also contribute to solving energy and climate change problems through business operations by deploying innovative process technologies and factoring whole-lifecycle GHG emissions into its design and development processes.

In March 2021, MGC announced a new objective for achieving carbon neutrality by 2050 with the goal of limiting the increase in average temperature to below two degrees Celsius. MGC encourages the building of energy systems to achieve carbon neutrality, and aims to expand the range of products conducive to carbon neutrality.

• *1 Scope 1 emissions are GHG emissions directly generated by MGC. Scope 2 emissions are indirect GHG emissions associated with the use of energy (mainly electric power) purchased from external suppliers.
• *2 Scope 3 emissions are indirect GHG emissions generated in supply chains through organizational activities such as raw material sourcing, manufacturing, distribution, sales and waste disposal.

1. Governance

The Sustainability Promotion Council, composed of directors and chaired by the President, deliberates and makes decisions on addressing climate change risk and other key Sustainability issues (materiality).　Important matters to be deliberated at the Sustainability Promotion Council is resolved by the Board of Directors.

The participation of corporate sector heads on the Sustainability Promotion Committee, an advisory body to the Sustainability Promotion Council, ensures key Sustainability issues are adequately deliberated.

To develop a response to climate change, MGC has established the Carbon Neutrality Promotion Technical Committee, a Sustainability Promotion Expert Committee that advises the Sustainability Promotion Committee. As the administrative office for dealing with TCFD and CDP requirements, the Climate change Action Technical committee promotes cross-business initiatives.

Long-term objectives for reducing GHG emissions have been incorporated in the Medium-Term Management Plan, with management taking a leading role in their implementation.

2. Strategy: Responding to Climate Change Risks and Opportunities

Assumptions behind the Analysis and Assessment of Transition Risks and Business Opportunities

• Assessment years: 2030, 2050
• Scenario
  Main external information referred to in the decarbonation scenario
  • -IEA WEO2021 SDS
  • -IEA WEO3033 APS
  • -SSP1
  
  
  Main external information referred to in the business-as-usual scenario
  • -IEA WEO2021 STEPS
  • -IEA WEO2022 STEPS
  • -SSP1
• Analysis subjects
  Specialty Chemicals Business Sector (hydrogen peroxide, electronic chemicals, optical materials, polycarbonate, oxygen absorbers, electronic materials)
  Green Energy & Chemicals (GEC) Business Sector (MXDA, MX Nylon)
• Quantitatively assess the impacts of risks and opportunities on the existing business portfolio and formulate response measures

3. Risk Management

MGC has identified key issues (materiality) related to the environment, society and governance, and manages risk through cross-company materiality management. One material issue that has been identified as extremely important from the perspective of stakeholders and MGC itself is a proactive response to environmental problems. MGC intends to take the initiative on this issue, a requirement for continuing our business operations and activities.

Under this scenario analysis, the result showed that the financial impact of climate change on the MGC Group is limited. Analyzing this result, we found that the reason is that the Group’s business sites are generally not subject to high hazard risk due to the characteristics of their locations. However, we will conduct a more detailed analysis on the sites evaluated as highly hazardous as necessary going forward, and also strengthen our business continuity planning (BCP), while proceeding with measures such as developing multiple manufacturing sites, optimizing raw material and product inventories throughout the supply chain, and reducing equipment stoppage risk.

To gain a quantitative understanding of climate change risks, in April 2021 MGC introduced an internal carbon pricing system. In capital investment plans involving an increase or decrease in CO₂ emissions, the cost or effect of applying and converting the internal carbon price (10,000 yen/MT-CO₂ equivalent) will be used to help make investment decisions, promote CO₂ emissions reductions, and encourage the creation of technologies and products that contribute to building a low-carbon society.

4.Metrics and targets

MGC group has established long-term objectives for reducing GHG emissions as it works toward achieving carbon neutrality by 2050. To achieve these objectives, MGC has established key performance indicators (KPIs) for GHG emissions and GHG emissions intensity. We are moving forward with short, medium and long-term emissions reduction strategies that include promoting energy savings activities, deployment of renewable energy, and Circular Carbon Methanol production.