Response to the TCFD recommendations (Real Estate 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	Real estate 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°C or less from the pre-industrial level and a scenario where the increase in temperature at the end of the century will exceed 4°C from the pre-industrial level, and analyzed the effects of the temperature rises on the real estate business in both scenarios^*.

* If RCP1.9 (1.5°C scenario) does not include the parameters necessary for quantitative estimates of physical risks, the parameters of RCP2.6 (2°C scenario) are used.
* The scenario analysis involves the real estate business of Japan Post Real Estate Co., Ltd. and Japan Post Co., Ltd.

The risks and opportunities that climate change will present to the real estate business and their impact in the 1.5°C scenario and the 4°C 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	Important risks and opportunities and expected impact (scenario analysis)
Physical risks	Acute	Short term	Small to medium	Continued climate change may increase heavy rains, which may cause river floods and storm surges. As a result, there may be flood damage to assets owned by the Group in affected areas. The restoration will require considerable expense and time. [1.5℃ scenario] Increasing heavy rains are expected to cause river floods and storm surges, which in turn will likely affect assets owned by the Group to a certain extent. [4℃ scenario] Significantly increasing heavy rains are expected to have a greater impact than in the 1.5℃ scenario.
Physical risks	Chronic	Short term	Small to medium	Continued climate change may cause an increase in operating costs due to rising cooling load at operating properties as a result of rising average temperatures and may cause flood damage risks and asset value reduction risks due to rising sea levels. Due to higher temperatures in summer, the risk of delays in construction schedules at new properties being developed may be caused by a decrease in outdoor work efficiency and operating costs at operating properties may increase due to lower productivity in maintenance work at buildings and facilities. [1.5℃ scenario] Many different risks are expected to increase because the annual number of days with temperatures over 30°C will increase along with a rise in the average annual temperature. [4℃ scenario] Many different risks are expected to increase significantly because the annual number of days with temperatures over 30℃C 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	Stronger trends toward decarbonization may cause increases in capital expenditures related to energy conservation for properties being developed. The introduction of carbon tax may lead to increases in development cost and operating cost in the real estate business. [1.5℃ scenario] It is assumed that the government will impose carbon taxes as measures to reduce GHG emissions. [4℃ scenario] The possibility of the introduction of carbon tax is assumed to be low.
	Market trends	Medium to long term	Small to medium	Stronger trends toward decarbonization may lead to increases in vacancy rates due to a decrease in demand for outdated properties that are less energy efficient.
	Technology	Medium to long term	Small to medium	A shift of demand to properties that are more energy efficient may increase technology development costs and construction costs due to the need for the greater energy efficiency of the properties being developed.
	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 including the president at a shareholders' meeting or that they would withdraw their investment from Japan Post Holdings. Disclosure of information about climate change and energy conservation at the properties owned by the Group in real estate development may be regarded as inadequate and the Group may be criticized by stakeholders.
Opportunities				The Group will take measures against flooding and other measures, and prepare for disasters. The Group will also cooperate with local governments and provide emergency facilities, developing warehouses for emergency supplies and offering refuge to people affected by disasters. These initiatives may gain the recognition of stakeholders, which may enhance the Group's corporate value and the value of the assets owned by the Group. The Group develops real estate in an environmentally friendly manner and seeks to obtain environmental certifications,including CASBEE. That may lead to an increase in demand for the assets owned by the Group as tenants and customers' environmental awareness increases.

*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.

The response policies for controlling the impact of climate change on the real estate 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	Bolstering the resilience of existing properties: Visualize continued risks for each property Visualize continued risks for each property Formulate a BCP that considers the increased risk of flood-caused submergence and other issues Bolstering the resilience of properties to be developed in the future: Consider the potential of expanded high-risk areas in hazard maps and the increased incidence (frequency) of disasters in judgments because of greater risks of climate change when promoting development
Transition risks	Strengthen the decarbonization of properties	Strengthen the decarbonization of existing properties and those to be developed in the future Existing properties: Promote energy saving and renewable energy introduction to control increases in energy cost Properties to be developed in the future: Introduce eco-friendly technologies,further promote the acquisition of environmental certification, and materialize the plans for turning buildings into net zero energy buildings (ZEBs)
Opportunities	Create new earnings opportunities	Medium- to long-term responses Develop real estate leading to the decarbonization of the entire community and stronger resilience Promote synergy in the Group (e.g., EV infrastructure coordination)

Scenario Analysis for the Real Estate Business

Range of analysis

Definitions of the scenarios

Impact analysis and response policies in the real estate business

Future response policies