The Group supervises response policies, targets and progress related to environmental and social risk and opportunities including climate change on a regular basis through the Board of Directors. Additionally, business risks including climate change are chiefly supervised by the Risk Management Committee as a part of the Group's risk management efforts.

The Sustainability Committee formulates sustainability policies and strategies aimed at solving environmental and social issues, deliberates over and determines the metrics to be adopted as targets, and carries out initiatives that span the Group. The committee reports on its progress and delivers recommendations to the Board of Directors as appropriate. The committee is chaired by a director or executive corporate officer and its members comprise those deemed appropriate by the Board of Directors in light of its purpose.

The Risk Management Committee comprises the Representative Director and the directors of Group companies as a company-wide risk management structure. With the Representative Director serving as the Chief Risk Management Officer, the committee identifies and assesses risks, pursues activities to avoid or minimize the impacts of these risks in advance, and delivers regular reports and recommendations under the supervision of the Board of Directors.

PARK24’s Corporate Planning Department is primarily responsible for climate-related targets and their progress, which it promotes by coordinating between the Sustainability Committee, Risk Management Committee and Group companies.

To achieve its medium-to-long-term vision and attain sustainable business growth, the Group recognizes the need to align with shareholders and other stakeholders and develop a more rational and transparent compensation system.

To that end, as permanent long-term incentives the Group has introduced a restricted stock compensation system and incorporated ESG assessment metrics for the system. We believe that doing so will enable us to carry out sustainability related initiatives with greater vigor.

1. 1) As base compensation for a single fiscal year, a compensation structure is determined based on a compensation table designated in light of factors including the duties assigned to a director, their roles and responsibilities, and the size of profits in the business.
2. 2) Short-term incentive (STI) is calculated by taking the basic amount set for that position and multiplying it by a factor corresponding to the degree of achievement of the target evaluation indicator based on consolidated operating profit and consolidated recurring profit. The reason consolidated operating profit was chosen as an indicator is because it represents profit from core business operations without the effects of exchange rates, interest rates, or other factors and can therefore be used to measure contributions to core business performance. Consolidated recurring profit was chosen as an indicator of contributions to shareholder returns, which it directly influences as the final stage of profit. The performance of directors in relation to their roles is assessed using qualitative indicators, as well as quantitative indicators in the form of consolidated operating profit and consolidated recurring profit.
3. 3) For long-term incentive (LTI), we introduced a system of restricted stock compensation. For the period of the stock restriction that applies to directors and employees in the Company and subsidiaries, the restriction remains in force until immediately after retirement, determined in advance by our Board of Directors. The restricted stock allocation is made within the limits of the share amount and monetary value resolved at the General Meeting of Shareholders and is calculated based on consolidated recurring profit, ROIC, and ESG as evaluation indicators, while taking into account the business environment and other factors. Our four ESG indicators are formulated from environmental, social, and governance perspectives. For the environment, we use two indicators to evaluate to what extent our medium- to long-term sustainability targets have been achieved: “Increasing the ratio of HVs and EVs in newly introduced vehicles compared to the previous year” and “3% reduction in CO2 emissions per km traveled by vehicles compared to the previous year.” For society, we make evaluations based on the employee engagement index. For governance, we use the average of ESG-related evaluation indices from external evaluation organizations.

Analysis was performed on the Parking Business Japan and Mobility Business, which accounts for the majority of operating profit in the Group. In addition, the year 2050 was designated as the fiscal year for analysis.

The impact of future climate change on the Group's business was identified with reference to climate change reports and other materials from outside organizations in terms of the risks and opportunities of the shift to a decarbonized society (policy and regulations, industry and markets, technology), and in terms of the physical risks and opportunities attributable to climate change (chronic and acute). Then the major risk and opportunity items expected to be highly associated with the analyzed businesses were identified.

For scenarios, we referenced reports and other materials about future predictions issued by the IPCC, IEA and other governmental and international organizations, and adopted two scenarios, 1. decarbonization scenario (1.5ºC - 2ºC scenario) and 2. global warming scenario (2.7ºC - 4ºC scenario).

A world in which the average rise in temperatures is kept below 2ºC up to the end of the 21st century

Scenario in which regulations and policies aimed at decarbonization are strengthened and progress is made with action on climate change to keep the rise in temperatures compared with pre-industrial levels to 1.5ºC - 2ºC. Under this scenario, it is predicted that customers' preferences for products and services will change, companies will face strong pressure to respond to climate change, and if companies do not adapt, their transitional risks will increase, including an outflow of customers and increased reputational risk. However, it is predicted that the physical risks would be relatively low due to the increasing severity and frequently of climate-related disasters being kept to a certain level.

A world in which the average rise in temperatures increases to 4ºC by the end of the 21st century

Scenario in which sufficient climate change action is not implemented, and average temperatures rise to around 4ºC from pre-industrial levels. Under this scenario, physical risks are predicted to rise, including increasingly severe natural disasters, rising sea levels and an increase in abnormal weather events. It is believed that this will increase the competitiveness of products and services that offer superior BCP performance. However, there is predicted to be low transitional risks, due to governments not enacting stricter regulations, etc.

Report sources used to set scenarios and parameters

• IPCC Fifth Assessment Report
• UNEP The Emissions Gap Report 2015
• IPCC Global Warming of 1.5°C
• IEA Energy Technology Perspectives 2017
• IEA World Energy Outlook
• Ministry of Land, Infrastructure, Transport and Tourism "Manual for Economic Evaluation of Flood Control Investment" (April 2020)
• Technical Committee of Flood Management Plan Considering Climate Change "Planning Approach of Flood Management Considering Climate Change - Recommendations" (2019)

In the decarbonization scenario, the electric vehicle (EV) target declared by the Japanese government is relatively higher than the global warming scenario, and it is expected that adoption costs associated with vehicles will increase as EV-related costs in accordance with this target.

In addition, the use of non-EV vehicles that comply with the government targets is expected to decline. This risk can be minimized by replacing vehicles at an early stage, and we believe that this will enable us to maintain our competitiveness in the market while earning the trust of customers. For physical risks, abnormal weather is expected to become more severe than it is now, but since the impact is expected to be lessened to a certain degree and measures are being implemented to minimize the risks compared with the global warming scenario, even if a disaster were to occur, it is assumed that the expected monetary impact from damages would be insignificant.

As for opportunities, the costs associated with operating mobility vehicles (equivalent to current fuel expenses) will decrease and it is also assumed that with the development of EV chargers, sales will increase by rolling out services as an electricity supplier.

* Electric vehicles (EVs)
For the purpose of this report, an EV refers to a Battery Electric Vehicle (BEV). In the environment surrounding the Company, we anticipate that it will be especially important to adapt to BEVs in the future.

In the global warming scenario, it is assumed that the costs of adapting to government EV targets would increase to a certain extent because technologies related to zero greenhouse gas emissions will not spread as widely as the decarbonization scenario, and cost reductions are not expected.

Physical risks are also expected to rise in this scenario. While the monetary costs due to damage from natural disasters (flooding, etc.) would be minor, they would be greater than in the decarbonization scenario, but as with the decarbonization scenario, the expected monetary costs of damage are expected to be insignificant.

As for opportunities, compared with the decarbonization scenario, it is assumed that government policies and regulations will not be made stricter, and that the costs of adapting to transition risks will be relatively lower.

In December 2021, the Group announced medium-to-long-term sustainability goals. The targets also encompass goals related to climate change (the environment), and initiatives will be implemented based on these goals. Based on the results of this risk assessment and business impact assessment, we will promote initiatives to avoid or mitigate the risks, and consider active business expansion to take advantage of opportunities, with the aim of enhancing our strategic resilience in each business.

In the Parking Business, we will keep close watch on trends concerning the widespread adoption of EVs and promote the installation of EV chargers at our parking facilities. When doing so, we will consider the possibilities of utilizing subsidies related to charging infrastructure and collaborating with related companies. Additionally, in relation to physical risks, we will work to minimize damage and speed up recovery at parking facilities by making them more lightly equipped (e.g., flapless).

In the Mobility Business, we will keep close watch on trends concerning the widespread adoption of EVs and promote the adoption of EVs for our mobility services. When introducing EVs, we will consider options such as the utilization of EV-related subsidies. For risks related to changing energy demand and similar developments, we will consider procuring renewable energy-based electricity and renewable energy certificates.

For the increasing severity of abnormal weather events, which is a physical risk that is common to the Parking Business and Mobility Business, we will pursue improved BCP aimed at early recovery for both businesses.

The Group has established a Risk Management Committee chaired by the head of the legal and compliance division appointed by the Board of Directors. The committee's members are made up of the officers and employees of Group companies. The Risk Management Committee creates a risk map that lists the risks that could impact Group management including climate change-related issues, monitors important risks, and periodically adds, modifies, assesses and reviews the identified risks. The results of these activities are reported to the Board of Directors quarterly, in order to deal with risks and prevent them from materializing.

By preventing or reducing losses from risks that have an impact on Group management, and by minimizing the impact when risks materialize, the committee plays an important role in ensuring ongoing business stability and improving corporate value.

To deal with climate risks, the Risk Management Committee, Sustainability Committee and PARK24 Corporate Planning Department work together to formulate various policies and strategies for minimizing risks and seizing opportunities. A management system to monitor these initiatives has also been put in place.

The Risk Management Committee also plays a leading role in periodically reviewing climate-related risks and opportunities.

In terms of specific risk management measures, by monitoring the achievement status of medium-to-long-term sustainability goals with the Group's materialities as a guide, we help enhance the Group's risk management structure in relation to sustainability, including climate change.

To coincide with the identification of the materialities of the PARK24 GROUP in December 2021, the Group set medium-to-long-term sustainability targets.

Among these, goals related to climate change (the environment) are as follows.

Utilization of parking and mobility services shrank significantly in the fiscal year ended October 2021 due to a decline in traffic caused by the spread of COVID-19. The impact of COVID-19 waned in the fiscal year ended October 2022 and CO2 emissions increased due to the recovery of our services. In the fiscal year ended October 2023, CO2 emissions also increased because of the expanding scale of our services operations. On the other hand, in the Mobility Business, the increased percentage of electrified vehicles (HVs and EVs) in our fleet is continually reducing CO2 emissions per kilometer traveled by vehicles.

• * Scope 1 and Scope 2 are the total values of domestic Group companies.
• * Scope 1 includes gas consumption paid for by customers (rental car).
• * Scope 1 and Scope 2 aggregated data for the fiscal year ended October 2022 was revised from the perspective of refining the figures.
• * We are currently working to ascertain the Group’s domestic CO2 emissions, including Scope 3 emissions. These will be disclosed in the Integrated Report from 2024 onwards.

On this occasion we conducted a scenario analysis covering our domestic businesses. The analysis showed that while we cover a certain degree of resilience against future physical risks, we need to pay more careful attention to transition risks including energy trends and trends in EV uptake. Going forward, the Group will work out where its opportunities lie while pursuing analyses in greater depth, and explore initiatives to mitigate and avoid risks. We will also expand the businesses covered in our analyses, pursue the quantitative monitoring of risks and opportunities, and reflect those findings in medium- and long-term planning to achieve a sustainable global environment and society through growth in the Parking Business and Mobility Business, in keeping with our Group philosophy of "creating new forms of comfort and convenience by responding to the needs of today and anticipating the needs of tomorrow."

PARK24 GROUP TCFD Report（PDF）(423KB)