Sustainability

Climate Change Initiatives

Since the Paris Agreement came into effect in 2016, there has been a rapid increase in the demand for companies to address climate change risks and pursue decarbonization. We, Our Group, recognize the impact of intensified abnormal weather events, such as typhoons and heavy rainfall, and the transition to a decarbonized society as "climate change risks". As one of our key priorities, we have set the objective of "contributing to the realization of a decarbonized and circular society" and are progressing towards achieving a low-carbon and circular society by utilizing our business expertise and creating new business opportunities.

In addition to the above initiatives, we recognize the importance of climate-related financial disclosure and have expressed support for the Task Force on Climate-related Financial Disclosures (TCFD) recommendations.

The information to be disclosed in accordance with the TCFD recommendations, under the topics of "Governance", "Strategy", "Risk Management", and "Metrics and Targets", is as follows.

Disclosure of Information in Accordance with TCFD Recommendations

Governance

We, Our Group, have positioned “sustainability”, which aims to harmonize societal value and corporate value, as the central axis of our management operations from FY2022, and at the top of our medium-term management plan. To realize our vision for society and our company in 2030, we have identified materiality and set action items and KPIs. In April 2022, we established the Sustainability Committee chaired by our President and Director. In the Environmental and Regional Sub-Committee, a subsidiary organization of the Sustainability Committee, we discuss specific measures such as the exploration and creation of business opportunities, and the establishment of business operations systems to help reduce the burden on the environmental, with the aim of contributing to a decarbonized society and sustainable local communities through our business activities.
Moreover, the progress of our sustainability initiatives is regularly reported to the Board of Directors, and we are collectively committed to sustainability management throughout our company.

Corporate Governance

Strategy

In the Medium-Term Management Plan, we have positioned sustainability as a high-level management strategy concept that is at the heart of management. In this context, we defined materialities as critical issues that need to be prioritized in order to realize our vision and society in ten years' time, and formulated key strategies to solve these key issues using the backcasting approach. One of the materialities is "Achieving a Decarbonized and Circular Society", and we aim to contribute to solving social issues, including climate change, through the steady implementation of our key strategies.

Medium-term management plan

Assessment of Management Risks and Opportunities Brought About by Climate Change

Under the framework advocated by TCFD, we have conducted scenario analyses to evaluate the potential impact on our company due to intensifying abnormal weather events such as typhoons and heavy rains and the transition to a decarbonized society.

Scope

The evaluation was conducted for consolidated subsidiaries.

Process of Assessment and Management of Climate-Related Risks, Opportunities, and Dependencies/Impacts

The Sustainability Management Office of the Corporate Planning Dept., together with related departments, 1) identified climate-related "risks and opportunities” and “dependencies and impacts”, 2) assessed them, and 3) examined countermeasures. We also collect opinions at the Environmental and Regional Subcommittee, and the Sustainability Committee deliberates upon the matter. Our management, including Officers, who are standing members of the Sustainability Committee, and Directors participate in the assessment of impacts and discussion of possible countermeasures as we promote highly effective, company-wide initiatives on climate change and other environmental issues.

Definition of Timeframes (Short-term, Medium-term, Medium to Long-term, Long-term)

Adhering to the international framework for addressing climate change based on the Paris Agreement, we have established timeframes specifying when risks are likely to occur and their potential impact, in order to ensure cohesive action. These timeframes are defined as short-term, medium-term, medium-to-long-term, and long-term as follows:
Short-term (present ~ FY2025),
medium-term (FY2026 ~ FY2030),
medium-to-long term (FY2026 ~ FY2041),
and long-term (FY2031 ~ FY2050).

Definition of Possibility of Occurrence (High, Medium, Low)

By integrating public information, expert information, and internal intelligence, we have set three levels of risk possibility: high, medium, and low. We evaluate the likelihood of occurrence by considering the progress of response measures and other factors.
High: High probability of occurrence
Medium: Possibility of occurrence but cannot be confidently predicted
Low: Low probability of occurrence

Definition of Impact Level

We, Our Group, have identified the impact level of risks and opportunities on the company's operation in financial terms, set the following categories for the definition of impact, and evaluated each risk and opportunity according to these levels. The impact values of risks and opportunities written below represent the total amounts from FY2020 to FY2030. However, we have excluded events that have yet to occur as of the calculation time in July 2023. The thresholds for the impact amounts are rounded numbers calculated based on the performance results of FY2022, considering the Tokyo Stock Exchange disclosure criteria for performance forecast revisions.

High impact : 10% or more of total transaction volume or operating revenue, or 30% or more of ordinary profit or financial expenses
Medium impact: 5% or more but less than 10% of total transaction volume or operating revenue, or 15% or more but less than 30% of ordinary profit or financial expenses
Low impact: Less than 5% of total transaction volume or operating revenue, or less than 15% of ordinary profit or financial expenses

The definitions of the accounts and amounts used for the impact value, and the classification of their use, are as follows:

Transaction Volume: The total volume of products and services handled by our company in our business activities
→ Used to indicate the impact on the business scale.
Operating Revenue: Revenue (sales) derived from primary business activities
→ Used to indicate the direct impact on our business.
Ordinary Profit: Profits earned from business activities (including profits from non-core businesses)
→ Used to indicate the impact on overall profitability or profits.
Financial expenses: Costs that change depending on the success or failure of green initiatives in raising funds from investors, financial institutions, and other external sources
→ Used to indicate investors' evaluation of our environmental and other initiatives.

	Transaction Volume	Operating Revenue	Ordinary Profit	Financial Expenses
High	Over 600 billion yen	Over 20 billion yen	Over 7 billion yen	Over 3 billion yen
Medium	From 300 billion yen to less than 600 billion yen	From 10 billion yen to less than 20 billion yen	From 3.5 billion yen to less than 7 billion yen	From 15 billion yen to less than 3 billion yen
Low	Less than 300 billion yen	Less than 10 billion yen	Less than 3.5 billion yen	Less than 1.5 billion yen

Scenarios Used in Analysis

To accurately understand the impact of climate change on our business to the greatest extent possible, we used the following two scenarios:

1.5℃ Scenario: This scenario limits the temperature rise by the end of the 21st century to about 1.5℃ compared to pre-industrial revolution levels. It anticipates the emergence of risks and opportunities associated with the transition to a carbon-neutral society, such as tighter GHG emissions regulations and the shift from gasoline-powered vehicles to electric vehicles (EVs).
4℃ Scenario: This scenario anticipates a temperature rise of about 4℃ by the end of the 21st century compared to pre-industrial revolution levels. It predicts an increase in severe disasters due to sea-level rise and abnormal weather conditions.

We have used the 1.5℃ scenario as the basis for risk and opportunity analysis and set reduction targets aimed at achieving carbon neutrality by 2050. However, for ""Business continuity risk due to increased abnormal weather conditions, such as typhoons and heavy rains (physical risk)""under risks and opportunities, we have adopted the 4℃ scenario to analyze and calculate impact values in preparation for the worst-case scenario.

Recognition of Climate-Related Risks and Opportunities

As a disclosure item related to the TCFD recommendations, we have identified climate-related risks and opportunities for our company.
As a result of this evaluation, the risks and opportunities identified as impacting our business are listed in the table below.

List of identified risks and opportunities

Scenario	Category	Changes in Externalities	Timeframe	Possibility of Occurrence	Orico's Risks & Opportunities	Total Impact Value (Sum Within The Period)	Level of Impact	Countermeasures
Used Gasoline Cars Risk	Transition Risk	Regulatory and consumer preference changes will drive a shift to EVs, shrinking the market for new and used gasoline-powered vehicles	Medium-to-long-term	High	Decrease in volume of autoloans for used gasoline-powered vehicles	Transaction Volume Approx. -130 billion yen	Low	Expansion of transaction volumes for new EVs, overseas EVs, and EV leasing Formation of a suitable second-hand EV market through initiatives like MOBI
Increased Financing Expenses Due to Delays in Sustainability Initiatives	Transition Risk	Increasing demand for green social aspects from institutional investors and others will increase the importance of sustainable finance	Medium-term	Medium	Higher financing costs due to the deterioration of our image and reputation for handling autoloans for gasoline-powered vehicles	Financial expenses Approx. -4.5 billion yen	High	Continue to implement ESG financing Publicize our high level of ESG awareness and initiatives in various disclosures
Introduction of Carbon Tax	Transition Risk	Government policy to become carbon neutral (net zero) by 2050 will lead to further carbon taxation	Medium-to-long-term	Medium	Increased business costs due to the introduction of the carbon tax	Ordinary Profit Approx. -1.5 billion yen	Low	Reduction of energy emissions Introduction of renewable energy Installation of high-efficiency energy-saving equipment Purchase of certificates and credit
Business Continuity Risk Due to Increased Extreme Weather Such as Typhoons and Heavy Rain	Physical Risk	Increased risk of business continuity due to frequent disasters such as typhoons, floods, and other similar events *Following the 4°C scenario	Medium-to-long-term	Low	Increased business continuity risk in the event of a power outage at our data center	Operating revenue -500 million yen （Assuming 1 day down Approx.）	Low	Support for business continuity during disasters
Formation of the Used EV Market	Opportunity (Market)	Appropriate valuation of used EVs (market formation) and increased EV ownership (change in consumer behavior)	Medium-to-long-term	High	Establishment of EV battery valuation method and correct evaluation of the value of used EVs will lead to an influx of EVs into the used car market, in which we have a large market share, and increase our transaction volume both in Japan and overseas	-	-	Formation of a suitable second-hand EV market through initiatives like MOBI
Ethical Shift	Opportunity (Market)	Trends in regulatory authorities and consumer awareness and behavior become more environmentally and socially conscious, creating momentum for ethical consumption	Medium-to-long-term	Medium	A shift in consumer awareness toward environmentally and ethically conscious products has increased demand for products and services such as solar power generation, V2H, and social contribution cards, leading to an increase in our transaction volume	Transaction Volume Approx. +870 billion yen	High	Fulfilling needs for environmentally friendly products (both in credit provision and sales) Differentiation of our products (sales of set environmentally friendly products) Expansion of partnerships for social contribution cards
Reduction of Financing Expenses through Enhanced Sustainability Measures	Opportunity (Market)	Increased importance of sustainable finance due to growing demand for green social aspects from consumers, financial institutions, and institutional investors	Medium-term	High	Increased potential for lower financing costs through new financing instruments such as sustainability-linked loans/bonds in response to the expansion of ESG investments	Financial expenses Approx. -100 million yen	Low	Establish KPIs that are valued by investors Improvement of ESG ratings
Disaster Prevention and Mitigation Demand	Opportunity (Market)	Increased demand for financing for disaster prevention and mitigation due to increased disasters such as typhoons, floods, and other similar events	Medium-to-long-term	Medium	Increased demand related to disaster prevention and mitigation, increasing opportunities for our support Increased disaster resilience of our stakeholders and our business continuity	Transaction Volume Approx. +150 billion yen	Low	Prompt response to the demand for funds for disaster prevention, mitigation, and recovery Collaboration with local governments on disaster prevention and mitigation

*The impact value of risks and opportunities is reported as the total from FY2020 to FY2031. However, events that have yet to occur as of the calculation time, July 2023, are excluded from the calculation.
*Regarding “Formation of the Used EV Market”, we have not calculated the impact value for this analysis.

Risk Management

We, Our Group, have established a "Risk Management Basic Policy" to comprehensively understand and manage various risks within the group. Divisions and Groups in charge are entrusted with managing individual risks, while the Risk Management Group oversees the overall management of these risks. To ensure effective control, we has established various committees, including the Comprehensive Risk Management Committee, that monitor and evaluate risks at the management level. The status of risk management across the entire Orico group is regularly reported to the Board of Directors and discussed in Executive Management Meetings.

Climate-related Risk Management

We recognize that the impact of business continuity risks is limited, as we do not hold any business interests directly affected by climate change, and have established business continuity plans and conducted BCP training anticipating emergencies such as large-scale disasters.
However, in light of the impacts of climate change on our business and society, as well as the rapidly accelerating efforts in policy and industry, we recognize “the impact on business due to the introduction/change of new regulations related to climate change” as a serious risk. Therefore, we have selected it as one of our top risks, intensified monitoring, and are reporting management conditions to the Board of Directors.

For more information, please visit: Risk Management

Indicators and Targets

Based on the TCFD recommendations, we are quantifying Scope 1, Scope 2, and Scope 3 emissions as indicators contributing to our understanding of climate-related risks and opportunities. The emissions for the past three years are as follows:
We will continue our reduction efforts to achieve net zero emissions in 2050, with the goal of achieving the 1.5℃ target of the Paris Agreement.

unit:t-CO2

Items	FY20	FY21	FY22	FY23
Items	Emissions in each year
Scope 1	4,246	4,549	4,869	4,745
Scope 2（Market-Based*1）	11,647	11,506	10,709	8,956
Scope 2（Location-Based*2）	11,614	11,160	10,092	9,803
Scope 1& 2（Market-Based*1）	15,893	16,055	15,579	13,701
Scope 1& 2（Location-Based*2）	15,860	15,709	14,961	14,548
Scope 3 Category 1（Purchased Goods and Services）	6,623	5,196	4,790	4,545
Scope 3 Category 3（Not Included in Scope 1 or 2）	2,361	2,279	2,065	2,735
Scope 3 Category 4（Upstream Transportation and Distribution）	299	449	459	448
Scope 3 Category 5（Waste Generated in Operations）	86	83	85	97
Scope 3 Category 6（Business Travel）	1,200	1,152	1,124	1,188
Scope 3 Category 7（Employee Commuting）	2,296	1,953	2,116	2,367
Scope 3 Category 11（Use of Sold Products）	537	731	467	614
Scope 3 Category 13（Downstream Leased Assets）	180,410	0	0	103,705
Scope 3　Total	193,812	11,843	11,107	115,699
Total	209,705	27,897	26,685	129,400

Reduction Targets

unit:t-CO2

	FY27 Reduction Targets	Against FY20	FY30 Reduction Targets	Against FY20
	Short-Term Target		Intermediate Target
Scope 1 + Scope 2 （Market-Based*1）	11,221	29.4% reduction	9,218	42% reduction
Scope 3	159,895	17.5% reduction	145,359	25% reduction

*1: Emissions calculated by applying the emission factors of electric power companies. However, for the emissions of domestic and foreign consolidated subsidiaries, the calculation was based on the location-based approach described below.
*2: Emissions calculated based on emission factors for the entire power system in Japan. For overseas subsidiaries (Thailand, the Philippines and Indonesia), figures published by IGES (Institute for Global Environmental Strategies) and the Indonesian Government were used.

Note: The scope of calculation covers our consolidated subsidiaries. The emissions of Orico Auto Leasing Co. ,Ltd. and Orico Business Leasing Co. ,Ltd. , which became consolidated subsidiaries after October 2023, are included in Scope 1, 2, and 3 for the base year FY2020 and the second half of FY2023 respectively, in accordance with the GHG Protocol. GHG emissions for FY2021, FY2022, and the first half of FY2023 do not include the two subsidiaries that were not consolidated during these periods.

Assurance Report

To ensure the accuracy and transparency of our energy consumption and CO2 emissions data, our group have Independent Assurance Report from an independent third-party organization, SOCOTEC Certification Japan.

Area of Coverage : Scope1・2（consolidated group）and Scope3 category4・6・7（non-consolidated）

PDF:Independent Assurance Report

Sustainability