Response to the TCFD recommendations (Postal and Domestic Logistics Business and Post Office Business)

Scenario	Physical risks: IPCC RCP1.9 (1.5℃ scenario)/RCP2.6 (2℃ scenario)/RCP8.5 (4℃ scenario) Transition risks: IEA WEO NZE 2050 (1.5℃ scenario)/WEO STEPS (2.5℃-4℃ scenario)
Business covered	Postal and domestic logistics business and post office business
Period	2030 and 2050

The Group has assumed a scenario where the increase in temperature at the end of the century will be limited to 1.5℃ or less from the pre-industrial level, and a scenario where the increase in temperature at the end of the century will exceed 4℃ from the pre-industrial level, and analyzed the effects of the temperature rises on the postal and domestic logistics business and post office business in both scenarios*.

If RCP1.9 (1.5℃ scenario) does not include the parameters necessary for quantitative estimates of physical risks, the parameters of RCP2.6 (2℃ scenario) are used.

Risks and opportunities that climate change will present to the postal and domestic logistics business and the post office business, and their impact under the situations in the 1.5℃ scenario and the 4℃ scenario are as follows.

Physical risks: Acute or chronic damages caused by climate change disasters
Transition risks: Risks posed by changes in policies, regulations, technological development, market trends and evaluation in the market, for example, due to transition to a low-carbon economy

Classification of risks and opportunities		Expected period of materialization^*1	Financial impact^*2	Material risks and opportunities and expected impact (scenario analysis)
Physical risks	Acute	Short term	Small to large	There is a possibility that the flooding of a river and a storm surge will occur due to an increase in heavy rain in a short period of time and part or all of the post offices in the basin of the flooded river or the coastal area where the storm surge occurred will collapse or be damaged. Costs and time will be required to repair the post offices. In addition, there is a risk that the Group will be unable to continue the businesses due to damage to post offices and the disruption of roads, which could pose an obstacle to the provision of universal services and result in a decline in sales. [1.5℃ scenario] Given an increase in heavy rain, it is expected that the flooding of rivers, storm surges and mudslides will have a certain impact on post offices. [4℃ scenario] Given a significant increase in heavy rain, it could involve the collapse of post offices more extensively than the cases in the 1.5℃ scenario.
Physical risks	Chronic	Short term	Small to medium	The risk of heatstroke to employees working outdoors will grow due to an increase in the number of days with temperatures over 30 ℃ and over 35 ℃ caused by climate change. This will increase costs, such as personnel expenses. [1.5℃ scenario] The heatstroke risk of employees is expected to grow because the annual number of days with temperatures over 30℃ will increase along with a rise in the average annual temperature. [4℃ scenario] The heatstroke risk for employees is expected to grow significantly because the annual number of days with temperatures over 30 ℃ will increase remarkably along with a significant rise in the average annual temperature.
Transition risks	Policy and regulations	Medium to long term	Small to medium	If regulations on GHG emissions are introduced or tightened, costs may increase for the replacement of facilities and vehicles to reduce GHG emissions and energy consumption and to change fuels. If a carbon tax is imposed (credits are purchased) based on fossil fuel consumption, costs may increase. [1.5℃ scenario] It is assumed that the government will impose carbon taxes to reduce GHG emissions. [4℃ scenario] The Group thinks that the possibility of the introduction of carbon tax is low.
Transition risks	Reputation	Short to medium term	Small to large	If investors regard that we do not have a positive stance toward climate change measures, there is a possibility that they would cast their vote against the election of directors at a shareholders' meeting or that they would withdraw their investment from Japan Post Holdings. Also, customers may grow more aware of environmental issues and choose products, services, etc. with a smaller environmental impact while products, services, etc. that are regarded to lack an adequate consideration of the environment may tend to be avoided and their sales may drop.
Opportunities				The Group may increase sales by meeting the needs of customers (use climate change as a business opportunity). To meet customer needs, the Group may install more quick chargers for electric vehicles for local residents and develop and provide environmentally friendly delivery services and products. The Group may curb increases in costs (avoid risk) by renovating facilities and introducing and increasing the number of electric vehicles if a carbon tax is imposed (credits are purchased).

*1 Expected period of materialization: The Group divides the period of materialization into three categories: short term (a year or less), medium term (three years or less), and long term (three years or more).
*2 The Group presently divides financial impact into three categories: small (less than ¥1 billion), medium (¥1 billion or more, less than ¥10 billion), and large (¥10 billion or more). The Group will continue to analyze qualitative impact.

To understand the impact of climate change risk on the postal and domestic logistics business and post office business portfolio, we conducted scenario analyses mainly on the physical risks associated with increasing extreme weather and the transition risks associated with changes in policies and regulations.
As for the financial impact of physical risk, we conducted calculations using weather data, hazard maps and other materials disclosed by Intergovernmental Panel on Climate Change (IPCC) and other organizations, assuming that the business scale, facilities and number of employees will be mostly the same as they are now.
For the financial impact of transitional risk, also, we conducted calculations based on the forecast carbon prices, carbon emissions coefficients and electricity prices disclosed by the International Energy Agency (IEA) and others, assuming that the business scale will be mostly the same as it is now. Carbon prices are expected to be 130 USD/t in 2030 and 250 USD/t in 2050, based on the forecasts by IEA.

In the current calculation of the financial impact, among the risks associated with the postal and domestic logistics business and post office business, we selected the following as items for which the correlation is relatively clear among the data disclosed by the IPCC, IEA and other organizations and the said businesses, and conducted calculations based on certain assumptions.
Going forward we hope to expand the scope of quantified items and carefully examine the calculation results by carrying out further analyses.

**Physical risks**
Operating and recovery costs	Amount of loss when operations are disrupted due to damage from torrential rains and floods as a result of extreme weather and the costs required for recovery
Insurance premiums	Premiums for property insurance and personnel insurance caused by a rise in the rate of disaster due to increasing extreme weather
Decline in productivity of outdoor work	Impact in case of declining labor productivity due to an increase in extremely hot days (35℃ and higher)

**Transition risks**
Cost of fossil fuels	Impact of fluctuations in fossil fuel prices
Electricity costs	Impact due to fluctuations in electricity costs or increased air-conditioner use as a result of rising temperatures
Carbon tax	Impact due to the introduction of the carbon tax (Scope 1 and Scope 2)

Increased cost　 Decreased cost（Unit: 100 million yen）
Classification	Factors causing impact	4℃ scenario		1.5℃ scenario
Classification	Factors causing impact	2030	2050	2030	2050
Physical risks	Operating and recovery costs	160.1	287.9	75.3	108.6
	Insurance premiums	15.2	35.8	10.8	14.8
	Decline in productivity of outdoor work	37.5	92.7	18.2	21.8
Transition risks	Cost of fossil fuels	10.5	24.6	45.2	60.3
	Electricity costs	31.5	72.6	36.6	94.9
	Carbon tax	0.0	0.0	83.1	69.5

Notes:
1. The above calculations apply to the postal and domestic logistics business and post office business of Japan Post Co., Ltd.
2. The above calculations represent a simulation of future risks using forecast data disclosed by IPCC, IEA and other organizations and are not meant as a business plan.
3. Calculations may fluctuate in the event that the data used as assumptions are revised or changed, and we will continue to reinforce our understanding of risks by reassessing the impact of climate change on our business portfolio.

The response policies for controlling the impact of climate change on the postal and domestic logistics business and post office business portfolio and creating new earnings opportunities are indicated in the following table. Going forward we will continue to consider and implement specific countermeasures based on these response policies.

Classification		Response policies
Physical Risks	Visualize the risks of torrential rains and floods and bolster resilience toward such risks	Short-term initiatives: Visualize risks for each facility Formulate a business continuity plan (BCP) for facilities with a high risk of disaster damage, shorten the recovery time after a disaster and establish alternative functions, and establish measures to secure the safety of employees, etc. Medium- to long-term initiatives: Rebuild the logistics network, consolidate or relocate logistics facilities, etc. Relocate facilities to avoid and mitigate the risk of damage from disasters and utilize hazard maps when building new bases, etc.
Physical Risks	Maintaining the productivity of outdoor work	Short-term initiatives: Develop plans for adopting mitigation measures assuming the existing operations Medium- to long-term initiatives: Look into mitigation measures based on a re-examination of services and methods of offering services
Transition Risks	Strengthen the decarbonization of facilities and vehicles	Reduce GHG emissions through the adoption of energy-saving technology and renewable energy Materialize plans (consider viability) for turning buildings including post offices into net zero energy buildings (ZEBs)
Transition Risks	Strengthen the decarbonization of facilities and vehicles	Switch vehicles used for post and parcel deliveries to EVs Switch approximately 13,500 light vans and approximately 28,000 motorcycles to EVs in the five years to the fiscal year ending March 31, 2026 Develop an EV expansion plan for the fiscal year ending March 31, 2027, and beyond (including Scope 3) Make essential transport carbon neutral Promote carbon neutrality by combining transport modes that are even lower carbon Switch to vehicles and fuels that are even lower carbon, keeping in mind factors such as technology and costs Participate in examinations for the social implementation of fuel cell vehicles (FCVs)
Opportunities	Create earnings opportunities that look toward a decarbonized society	Build a system for gathering customer needs relating to environmental quality through sales activities and sharing such needs within Japan Post Develop and expand products and services high in environmental quality that capture customer needs Build a system in which the sales staff understand and can explain to the owner of the goods issues including climate change risk and the Group's initiatives
Management	Decarbonized management	Monitor GHG emissions of each product and service Consider introducing internal carbon pricing (ICP).

Scenario Analysis for Postal and Domestic Logistics Business and Post Office Business

Range of analysis

Definitions of the scenarios

Impact analysis and response policies in the postal and domestic logistics business and the post office business

Financial impact assessment

Quantified Items

Results of calculations of the financial impact of risks and opportunities of climate change (2030/2050)

Future response policies