Information Disclosure based on TCFD Recommendations

Support for the Task Force on Climate-related Financial Disclosures Recommendations

Iino Kaiun Group has established a basic policy on sustainability that includes proactive measures to address climate change. As part of our response to climate change and greenhouse gas (GHG) reduction, we have identified "initiatives toward a decarbonized society" as a materiality (sustainability priority issue).

In promoting initiatives to address climate change and reduce GHG emissions, in July 2021, we support the Task Force on Climate-related Financial Disclosures Recommendations (hereinafter referred to as the "TCFD Recommendations"*). Also, we are strengthening our analysis and response to the risks and opportunities that climate change poses to our business, while expanding the disclosure of related information.

* The Task Force on Climate-related Financial Disclosures (TCFD) was established by the Financial Stability Board at the request of G20 finance ministers and central bank governors. The task force has published recommendations to encourage companies to ascertain and disclose information about the business risks and opportunities presented by climate change.

Governance

IINO LINES group considers environmental issues to be an important management issue and is working to address them across the entire group. We have established Safety and Environment Committee, chaired by the President and Representative Director, with members including all exective directors and the presidents of major group companies, to discuss environmental issues. The Safety and Environment Committee operates under the Risk Management Committee, which oversees the company's overall risk management activities. It is responsible for developing and promoting policies related to safety and the environment that are common to the company and its group companies, and holds regular meetings once a month. Additionally, the Safety and Environment Committee evaluates the environmental aspects of IINO LINES group's services and activities. For sustainability-related issues deemed important, we have established a monitoring and supervisory framework involving the Risk Management Committee, the Executive Committee, and the Board of Directors. Furthermore, the President and Representative Director is the responsible for climate change issues in IINO LINES group.

Furthermore, IINO LINES group has identified the realization of a decarbonized society as a materiality and has also set the creation of social value as a key strategy in our Mid-term Management Plan. We will actively promote ESG management with the participation of all executives and further strengthen management with a focus on sustainability.

* Check Enhancing Governance for details about Governance structure.

Risk Management

Our group has established Safety and Environment Committee, chaired by the President and Representative Director, and composed of all exective directors and the presidents of major group companies, to identify, assess, and manage climate-related risks and opportunities. In addition, Sustainability Promotion Department and the cross-functional Environmental Promotion Working Team within the department collaborate to develop plans and proposals for environmental issues, including climate change, and report regularly to Safety and Environment Committee.

Climate-related risks that have been identified and assessed as significant for business operations are incorporated into the our overall risk management process and managed by Risk Management Committee, which is responsible for our risk management policies and controls.

Climate-related risks are also reflected in the Mid-term Management Plan "The Adventure to Our Sustainable Future" (April 2023 to March 2026), and are incorporated into our strategies, including the formulation of a roadmap for achieving carbon neutrality by 2050, the transportation of clean energy that contributes to reducing environmental impact, and investment in next-generation fuel vessels.

Strategy

Future Global Scenarios

Based on the TCFD Recommendations, the IINO Group has identified important risks and opportunities in the shipping industry based on the respective future global scenarios assumed in the Decarbonization Scenario and BAU (Business as usual) Scenario.

Expected Results of Each Scenario

The scenarios for our group businesses (shipping and real estate) are as follows.

	Decarbonization ScenarioScenario in which societal changes caused by transition to carbon-free society impact business	BAU(Business as usual)ScenarioScenario in which climate change mitigation measures prove unsuccessful, and continued global warming impacts business
Scenarios developed by external bodies	IEA, World Energy Outlook 2023 Net Zero Emissions by 2050 Scenario(NZE) Announced Pledges Scenario(APS), etc.	IEA, World Energy Outlook 2023 Stated Policies Scenario, etc.
Assumed global scenarios	Promotion of ambitious policies and environment-related technological innovations to realize sustainable development while holding rise in average temperatures to less than 1.5°C until the end of this century.	Countries implement policies aimed at achieving their targets in accordance with the Paris Agreement, but insufficient cooperation, inadequate environmental technology development and energy conversion, etc., result in Earth's average temperature rising about 2.5°C by the end of this century.
	Shipping Business	Shipping Business
	【Policies/Regulations】 Policies balancing economic growth and climate change countermeasures Global carbon pricing & rising carbon prices IMO further strengthens its environmental regulations 【Economies/Markets】 Advance of modal shift Advance of shift from fossil fuels to renewable energy Customers show preference for carbon-free services 【Technologies】 Widespread use of next-generation ships and fuels	【Policies/Regulations】 Prioritization by each country of their own economic growth 【Economies/Markets】 Strong global economic growth Dependence on fossil fuels, flat trend in fossil fuel prices 【Environment】 Intensification of storms & flooding disasters and extreme meteorological phenomena Acceleration of chronic changes, such as rising sea levels and air and water temperatures
	Real Estate Business	Real Estate Business
	【Policies/Regulations】 Strengthening regulations on building energy performance Expansion of disclosure requirements for companies Global carbon pricing and increase in carbon prices 【Economies/Markets】 Preference for environmentally certified buildings by companies that value the environment, health, and comfort Decrease in emission factor of grid-connected power and electricity cost due to change in power source composition (shift to renewable energy electricity) 【Technologies】 Progress in environmental technologies related to energy conservation in buildings	【Policies/Regulations】 Formalized regulations on building energy performance 【Economies/Markets】 Dependence on fossil fuels and rising fossil fuel prices 【Technologies】 Stagnant growth in R&D investment in environmental technologies 【Environment】 Increase in severity of weather-related disasters, weather extremes Acceleration of chronic changes in air and water temperature rise, etc.

Main Risks and Opportunities in each Scenario

Main risks and opportunities in two future global scenarios are as follows.

	Decarbonization ScenarioScenario in which societal changes caused by transition to carbon-free society impact business	BAU(Business as usual)ScenarioScenario in which climate change mitigation measures prove unsuccessful, and continued global warming impacts business
Main risks arising in each scenario	Shipping Business	Shipping Business
	Lower sales due to reduced demand for fossil fuels Higher operating costs due to carbon pricing Higher ship construction costs due to tighter fuel consumption regulations Higher introducing new technologies and fuel costs resulting from compliance with fuel consumption regulations (use of next-generation fuels)	Increase in fuel costs due to geopolitical tensions and increased demand for fossil fuels resulting from supply chain instability Higher ship operating costs owing to need to alter shipping routes and increased cost of hull and equipment repairs due to damage caused by stormy weather Increase in ship repair costs due to rising air and sea temperatures Lower sales due to decline in agricultural produce yields
	Real Estate Business	Real Estate Business
	Increase in construction and renovation costs related to energy conservation buildings Decline in rents, occupancy rates, and asset prices if the environmental performance etc. of owned buildings is inferior to adjacent buildings environmental performance in the area where they are located	• Increased capital investment and operating costs and decreased earnings due to severity of weather-related disasters
Main opportunities arising in each scenario	Shipping Business	Shipping Business
	Higher sales thanks to increased demand for clean energy sources (hydrogen, ammonia, biofuels, etc.) New business generated by need to transport materials related to offshore wind-power generation, and transport CO₂ in connection with CO₂ capture, storage and effective utilization (CCUS) activities, etc. Lower ship operating costs through shifting to low-carbon operations and decline of next-generation fuels in the medium- to long-term price	Higher sales driven by increased demand for fossil fuels with lower GHG emission factors (LNG, etc.) Increase in sales due to higher demand for LNG to stabilize energy procurement Sales related to demand for transport of materials for construction of coastal disaster prevention infrastructure necessitated by rising sea levels
	Real Estate Business	Real Estate Business
	Increase in rental income from buildings with environmental certifications Decrease in utility costs through energy conservation and energy creation in owned buildings Decrease in construction costs for energy conservation and energy creation due to advances in environmental technology	Improving resilience through systematic building repair and reinforcement Increase in rental income due to increased demand for disaster- resistant properties

Transition Risks in Shipping Business

Transition risks, Response Measures and Opportunities

Risk	Time Scale	Response measures and opportunities
A change in resource transportation to reach a decarbonized society	Short-term*¹	Strengthening efforts aimed at vessels powered by next-generation fuels
	Medium-to-long-term*²	Engagement in clean cargo transportation including LNG and ammonia Pursuing investments in assets that help reduce the impact on the environment

*1 Short-term refers to a relatively short period of time, around two years.

*2 Medium- to long-term refers to a period of time longer than two years.

Physical Risks in the Shipping Business

Physical Risks, Response Measures and Opportunities

Risk	Time Scale	Response measures and opportunities
Typhoons and other abnormal weather	Short-term*¹	Collecting meteorological and oceanographic data via satellite communications Use of optimal route selection support services provided by weather information services (based on meteorological and oceanographic forecasts)
Typhoons and other abnormal weather	Medium-to-long-term*²	Promoting investment in dual-fuel main engine vessels and zero-emission vessels capable of reducing greenhouse gas emissions as part of action on climate change

*1 Short-term refers to a relatively short period of time, around two years.

*2 Medium- to long-term refers to a period of time longer than two years.

Costs to Address Risks (use of IT systems)

Due to the use of vessel operation and management systems, the communication equipment used for ship-to-shore and ship-to-ship communications, and other items, costs of approximately 14 million yen were incurred.

Potential Financial Impact

If a typhoon forms along the route of a voyage, a vessel must divert (deviate) from the route to avoid it. Approximately 983 million yen in additional charges could be incurred as costs when diverting annually.

Physical Risks in the Real Estate Business

Physical Risks, Response Measures and Opportunities

Risk	Time Scale	Response measures and opportunities
Water damage, such as flooding	Short-term*¹	Formulating BCP enabling a swift response in the event of a natural disaster For office buildings at risk of flooding according to hazard maps, set up spaces where important facilities such as electrical control rooms are installed on higher floors Install tide protection facilities in buildings located at relatively low tidal elevations where damage from rainwater intrusion is expected Enroll in insurance against disasters for all office buildings owned in Japan
Water damage, such as flooding	Medium-to-long-term*²	Rising real estate values through response measures

*1 Short-term refers to a relatively short period of time, around two years.

*2 Medium- to long-term refers to a period of time longer than two years.

Costs to Address Risks

It is necessary to enroll in insurance against disasters for all office buildings owned in Japan, and costs of around 10 million yen will be incurred for some office buildings.

In addition, some Company-owned office buildings may be located at low tidal elevations and risk of rainwater intrusion. To address this risk, approximately 45 million yen will be incurred to install first-floor tide protection embankments and underground waterproof plates.

Potential Financial Impact

As a result of a risk assessment performed by a risk consulting firm on some of the office buildings we own, there was determined to be a flooding risk with potential damages of around 3.7 billion yen. The amount of damages would be covered by the aforementioned insurance in which the Company is enrolled.

Future Strategies

Shipping Business

Through scenario analysis, we have identified the impact that the transition to a decarbonized society will have on us. While demand for maritime transport of fossil fuels, our main cargo, is expected to decline, new transport demand for clean energy fuels and other products is also expected to appear. We recognize that by appropriately responding to these changes, we can expect an increase in sales from new business opportunities that will exceed the decline in sales resulting from the reduction in fossil fuel transport.

IINO LINES group is actively promoting the transportation of clean energy that contributes to reducing environmental impact and investing in next-generation fuel ships with a view to transitioning to a decarbonized society.

Real Estate Business

We are already implementing measures to reduce greenhouse gas (GHG) emissions for our owned buildings, including purchasing non-fossil fuel-certified electricity, introducing carbon-neutral city gas, converting lighting to LED, installing solar panels, and operating equipment and facilities in an energy-efficient manner.

As the transition to a decarbonized society goes on, we will consider further energy conservation and renewable energy utilization in office buildings.

Indicators and Targets

GHG Emission Reduction Targets

IINO LINES group has set the following reduction targets for FY2030 and FY2050 in order to respond to climate change and realize a decarbonized society, and is working to reduce GHG emissions.

	Targets
Shipping Business	FY2030：20% reduction compared to FY2020 (per ton-mile) FY2050：Carbon Neutrality
Real Estate Business	FY2030：75% reduction compared to FY2013 (total amount) FY2050：Carbon Neutrality

Data List (GHG/CO₂ emission reduction rates)