[ Japanese ]

The Sekisui House Group has established the ESG Promotion Committee as an advisory body to the Board of Directors to determine and implement action policies while confirming that all ESG management initiatives are reasonable and in line with societal expectations. The committee meets once every three months. Climate change response is positioned as one of the important agenda items of this committee, which evaluates the appropriateness of action policies and progress, and reports important matters to the Board of Directors.
　　The Company-wide, cross-departmental Environmental Subcommittee reports to the ESG Promotion Committee. Mainly composed of head office department heads involved in environmental management and individuals in charge of environmental management in each business division, this subcommittee meets once every three months to promote the alignment of organizational effort by sharing information on environmental matters and examining action policies and other resolutions, such as action policies. In addition, the Environmental Subcommittee broadly disseminates the decisions of the ESG Promotion Committee for adoption throughout the Group. The ESG Promotion Committee ensures effective, timely management oversight by providing the director of the Board responsible for each business and other managers with routine reports and instructions on the implementation of ESG initiatives.

The Sekisui House Group aims for steady progress toward the overall decarbonization of its businesses. Accordingly, to clarify the appropriateness of the Group’s strategy and issues, we anticipate various situations that may occur in the future, then conduct a scenario analysis while taking into consideration the specific circumstances of business activities and resources, as well as physical risks, including assumed business activities, duration, and the useful life of assets. We also evaluate transition risks based on potential scenarios for legislation, technology development and market conditions, and identify and address climate-related risks (physical and transition risks) and opportunities for our business activities.
　　We have already completed risk assessments and adaptation plans for most of our businesses. However, since we have expanded our business into new areas, including M&A over the past few years, we are planning to create transition plans for all existing businesses based on their specific circumstances by roughly 2028 in order to adapt to physical risks. In addition, we intend to establish a system for early risk assessment and response for 100% of our new businesses in the future, and disclose the necessary related information.
　　The scenario we refer to is the 1.5°C scenario shown in Table 1. However, even if regulations are strengthened to achieve the 1.5°C scenario, it is possible that individual countries will not be aligned in their actions, resulting in Table 1. Scenario Analysis Assumptions Item a world as projected in the 4°C scenario, where climate change is even greater. For this reason, we must prepare for both scenarios simultaneously.
　　In February 2025, Japan set a new greenhouse gas emission reduction target of 60% by FY2035 and 73% by FY2040 compared to the FY2013 levels, with a view to achieving net zero emissions. Based on this target, a direction has been set in the housing industry to ensure energy-saving performance equivalent to standards for newly constructed Net Zero Energy Houses (ZEH) and Net Zero Energy Buildings (ZEB) from FY2030 onward, aiming to achieve such performance across our entire housing and building stock by 2050. For the residential sector, policy directions are aimed at accelerating the transition to non-fossil energy sources and enhancing demand response capabilities of residential facilities. Specific governmental measures include promoting the introduction of energy-saving equipment for water heating, which currently accounts for approximately 30% of household energy consumption, as well as the installation of functions necessary to flexibly align its energy demand with supply. At the same time, energy suppliers will be called upon to take stronger action, such as stepping up information disclosure. For this reason, we have conducted a large-scale scenario analysis for all of our businesses and reviewed our strategies. Furthermore, in FY2025, we moved forward with preparations ahead of the mandatory disclosure of climate-related information in line with laws and regulations in each country. For Australia, we prepared for the submission of reports that comply with the Australian Sustainability Reporting Standards (ASRS), and for the State of California in the U.S., we sought to track trends and appropriately prepare for climate disclosure laws in California (Climate Corporate Data Accountability Act [SB253] and Greenhouse Gases: climate-related financial risk [SB261]). The potential financial impact of the major risks and opportunities identified through these initiatives, as well as our responses, are shown on the next page.
　　The financial impact and time horizons are defined as follows.
　　Financial impact: Large: ¥30 billion yen or more; medium: ¥10 billion or more; small: less than ¥10 billion yen
　　Time horizons: Short term: up to 3 years from 2025; medium term: up to 2030; long term: up to 2050

Damage to Company-owned assets and the supply chain due to weather-related disasters

The Sekisui House Group conducts risk management based on the following assumptions about rain or wind storms of a severity it has never yet experienced.

Other risks

Before purchasing land for resale either in Japan or overseas, we require the use of hazard maps and predictive data from water risk analysis tools such as the WRI Aqueduct developed by the World Resource Institute (WRI) to conduct an analysis of possible risks. When constructing large buildings, such as condominiums, we also refer to hazard maps during planning to minimize the risk of damage. However, the impact of climate change is growing year by year, and the scale and frequency of natural disasters may increase, so the Sekisui House Group will continue to study how to deal with related risks.

Confirmation of the resilience of the Sekisui House Group’s existing strategies

The review found that the Sekisui House Group’s strategy has already begun to address decarbonization and extreme weather events in all of its business activities, and it has been determined that no fatal impacts are currently apparent, either in terms of transition risk to a decarbonized society or physical risk due to climate change.

As part of the Group-wide risk management process, the Sekisui House Group conducts assessments to determine climate change-related risks and opportunities based on the TCFD recommendations. Risks and opportunities are identified for the entire Group, led by the principal department of each business, and the results are aggregated by the Environmental Subcommittee, which conducts a financial impact assessment. Major risks and opportunities that are identified based on this process are reviewed by the ESG Promotion Committee, an advisory body to the Board of Directors, before being reported to the Board of Directors, which considers risk mitigation, transfer, acceptance, and control, as required. Furthermore, matters related to operational risks and hazard risks are shared with the Risk Management Committee, and reviewed and managed within the Group’s overall risk management structure.

In 2008, the Sekisui House Group declared its Vision 2050, which aims to achieve zero CO₂ emissions from housing by 2050. The Group has already begun various initiatives to achieve net zero CO₂ emissions in all business activities, including the use of renewable energy. As a milestone toward achieving this goal, by 2030, compared with FY2013 levels, we aim to reduce our own CO₂ emissions in Scope 1^*7 (direct emissions: fuels consumed for factories, offices, vehicles, etc.) and Scope 2^*7 (indirect emissions: energy consumed by the Company, such as electricity) by 75%, and those in Scope 3, Category 11^*7 (use of sold products) by 55%. These targets have been set by the Science Based Targets initiative (SBTi)^*8 in line with a 1.5°C trajectory. Currently, we have set equivalent reduction targets with FY2023 results as our base year, and simultaneously established a target of net zero across the entire value chain by 2050. Both targets have been approved by the SBTi. Since we already met the 50% reduction target in FY2022, we have revised the targets for Scope 1 and Scope 2 reductions upward to a more ambitious goal for 2030.
　　As a RE100 member company, we are committed to converting to renewable sources of electricity for our business operations, adopting targets of 50% by 2030 and 100% by 2040. Various concrete measures have already been initiated to achieve these targets, with the 50% target for 2030 being achieved in FY2023.

Figure 1. The Sekisui House Group’s Scope 1 and 2 CO₂ Emissions Reduction

Figure 2. The Sekisui House Group’s Scope 3 CO₂ Emissions Reduction

Future issues for the Sekisui House Group

As indicated thus far, the Group has already taken measures to address the anticipated risks from climate change and does not expect any significant financial burden. However, in order to ensure that the Group continues to implement decarbonization management as it has in the past, we will continue to monitor the major risk factors with significant financial impact that have been identified in this analysis and strengthen the necessary initiatives while further quantifying risks and improving the accuracy of the analysis. As for challenges going forward, we believe that the mission of the Group is to contribute to the transition to a sustainable society by further quantifying and improving the accuracy of risks related to newly consolidated Group companies.
　　In addition, climate change involves many uncertainties, so we need to gather a broad range of intelligence from outside the Group. In order for the Group to demonstrate leadership in the international community, we will further focus on stakeholder engagement through participation in various domestic and international initiatives, including the United Nations Framework Convention on Climate Change (UNFCCC) and the Global Alliance for Buildings and Construction (GlobalABC), of which we are the only member in the Japanese private sector.