TCFD measures

Climate change is a global threat to the life of humanity and the health of the planet. It will also affect our business, our customers and our supply chain. The scientific assessment from the United Nations’ Intergovernmental Panel on Climate Change (IPCC) released in 2021 called for urgent deep decarbonization in this decade in order to avoid the worst climate impacts and maintain a livable planet.

We believe businesses have an important role in fighting climate change. We recognize that climate change presents both risks of increased cost and disruption for our business as well as new opportunities for Murata to create value while meeting the needs of society. The next decade presents immense opportunities to expand our business into new domains, while living out Murata’s mission of contributing to the advancement of society by creating innovative products and solutions.

Murata endorsed recommendations by the TCFD established by the FSB^*1. We will analyze risks and opportunities brought on by climate change and work to disclose information related to governance and strategies in accordance with the TCFD recommendations.
The followings outlined Murata’s efforts in the four thematic areas specified in the TCFD recommendations, namely, governance, strategy, risk management, and metrics and targets.

*1.
Financial Stability Board.

Link: Reinforcement of climate change countermeasures

	Murata Group's approach	Progress of fiscal 2022 initiatives
Governance	The Board of Directors has overall accountability for the management of all risks and opportunities including climate change, and supervises the Climate Change Committee and others upon receiving reports from them on measures and decisions The CSR Management Committee, chaired by the President, receives a biannual report from the Climate Change Committee, chaired by the Executive Vice President, on climate change countermeasures, and supervises the Committee at the management level Progress management of environment targets and review of decarbonization-related investment decisions Responsible department promotes company-wide climate change prevention measures based on the decisions made by the Climate Change Committee Introduction of a remuneration system with remuneration fluctuating based on the achievement level of social value targets for part of the officers' stock-based compensation (excluding auditors, etc.)	The Climate Change Committee held three meetings (including special meetings) Subjects reviewed: Exploration and disclosure of transition risk/ opportunity analysis of climate change in line with TCFD Decided to embark on CFP calculation for manufacturing with the main aim to visualize the energy conservation effect Signing of virtual PPA and physical PPA agreements for the first time in the Murata Group
Strategy	Set "reinforcement of climate change countermeasures" as one of the priority issues (materiality) Formulate Scope1+2 GHG emission reduction target (1.5°C) and Scope3 GHG emission reduction target (WB 2°C) in conformity with the Paris Agreement (SBTi-certified) Join RE100 and formulate a long-term plan for introducing renewable energy for business use Reinforce active efforts for renewable energy and energy conservation measures that utilize the sustainability investment promotion system (including the internal carbon pricing system)	Implemented measures for achieving the medium-term targets established in Vision2030 Introduced a new system combining solar panels and storage batteries at 4 plants in Japan; CO₂ emission reduction effects at the 4 plants reached a cumulative 1,897t-CO₂e over a year Environmentally friendly multistory parking garage with double-sided power generation panels and wall-mounted solar panels installed was built at the China plant Entered into an agreement with Mitsubishi Corporation for scalable renewable energy-based power procurement (approx. 70 MW) based on the virtual PPA (power purchase contract) scheme Had dialogues with suppliers and started the validation of modal shift in collaboration with transport service providers for Scope3 reduction
Risk management	Incorporate risks deriving from climate change into the group-wide risk management items under the Risk Management Committee and identify and assess them as major risks for the group. Match with risks based on scenario analysis, and monitor efforts Extract all transition risks and physical risks that derive from climate change impact. Assess the impact level of each risk For the operation aspect, obtain ISO 14001 certification for offices and promote continuous improvements while assessing environmental risks	Implemented and disclosed risk/opportunity analysis according to transition scenarios Introduced the internal system "sustainability investment promotion system" as a measure for introducing carbon pricing in different countries Captured the global trends related to climate change and applied them to corporate efforts and countermeasures
Metrics and targets	Fiscal 2050 target Switch over power for business use completely to renewable energy Fiscal 2030 targets GHG emissions Scope1+2: 46% reduction (vs. fiscal 2019) GHG emissions Scope3: 27.5% reduction (vs. fiscal 2019) Renewable energy sourcing in power procurement for business: 50%	Fiscal 2022 performance GHG emissions Scope1+2: 16% reduction (vs. fiscal 2019) GHG emissions Scope3: 6% reduction (vs. fiscal 2019) Renewable energy sourcing: 23.7%

Governance

Murata is strengthening its governance system for climate change measures. The Board has overall accountability for the management of all risks and opportunities, including climate change. Our President and an Executive Vice President, who are Executive Directors of the Board, chair Murata’s CSR Management Committee and Climate Change Committee respectively and are ultimately accountable for the oversight of our climate change agenda.

The Climate Change Committee is responsible for governing Murata’s overall strategies in response to climate change and monitoring the delivery of climate-related objectives across the Murata group of businesses. The committee reports its activity track records to the CSR Management Committee and the CSR Management Committee reports these results after thorough examination to the Board of Directors. The Board of Directors takes the risks and opportunities that occur due to climate change into consideration, and directs business plans and business strategies while considering related policies and current initiatives of Murata.
In addition, a Presidential award and Committee award system was established for initiatives to reduce CO₂ at each office as part of our incentives. These awards are primarily given for cases selected according to economic efficiency, reasonableness, and other unique standards adopted by Murata based on CO₂ reduction through energy conservation and renewable energy.

The Committee is composed of persons responsible for the Manufacturing Department, Research and Development Department, Environment Department, Sales Department, and other business units. Meetings are held two or more times per year to make decisions on matters for discussion proposed by the subcommittees. Meetings concerning specific themes are also held on an ad hoc basis as the themes occur. The committee held discussions concerning Murata’s climate change measure policies with the 3 subcommittees including Climate Initiatives Subcommittee, Renewable Energy Subcommittee, and Energy-saving Subcommittee, and had considered CFP calculations with aims to further generate energy saving measures as well as held discussions considering the introduction of systems which fused solar panels and storage batteries into domestic business sites and the introduction of renewable energy such as by signing agreements for virtual PPA in fiscal 2022.

Link: Overview of Murata’s Corporate Governance System

Subcommittees

■Climate Initiatives Subcommittee: Established in 2019 Led by the Environment Department department manager, composed of senior managers of related departments. In addition to considering the viability of climate related strategies, shares successful cases of cross-departmental cooperations and initiatives.
Fiscal 2022 results

Probes deeply into opportunities of migration scenarios and risk analyses for TCFD, and reflects results onto information to be disclosed
Had dialogues and interviews with more than 10 suppliers with an aim to reduce Scope3

■Renewable Energy Subcommittee: Established in 2021 Led by senior managers of the Battery Department, Business Development Department, Environment Department, etc. Since joining “RE100,” considers initiatives to promote the introduction of renewable energy across the company such as the maximum introduction of solar power generation where possible at domestic business sites and long-term procurement contracts of power based on renewable energy.
Fiscal 2022 results

Initiated introduction of systems that fused solar panels and storage batteries into 4 domestic business sites
Signed agreements for virtual PPA and physical PPA

■Energy-saving Subcommittee: Established in 2022 Led by the Environment Department as well as senior managers of each division and business sites. Murata believes continued energy conservation is crucial to reduce GHG emissions, and the subcommittee promotes visualization of energy consumption and GHG emissions from product development to manufacturing as well as energy conservation measures.
Fiscal 2022 results

Began considering CFP calculation to investigate further possibilities of GHG reduction in production processes as well as generating new energy conservation measures
The Murata Group worksites alone planned 570 energy conservation measures (expecting an annual reduction of approximately 47,000 t-CO₂e)

Strategy

Murata identifies climate change countermeasures as critical issues for a manufacturing company and sets “reinforcement of climate change countermeasures” as one of the materiality issues in Vision2030 and the medium-term management plan. By capturing climate change in both aspects of opportunity and risk, Murata seeks to practice corporate social responsibility and establish further competitiveness.

Murata analyzed risks and opportunities in the two scenarios announced by IPCC^*1 and IEA^*2, namely “4°C or higher global average temperature increase” and “keeping the global average temperature increase to below 2°C (1.5°C or below in some parts), agreed upon in the Paris Agreement,” and re-acknowledged reinforcement of climate change countermeasures as a Murata priority issue. Specifically, Murata will continuously promote product development with competitiveness in terms of smaller size, higher efficiency, and longer service life in order to respond to the demand for high-efficiency parts required for changes in society, such as increasing energy conservation and renewable energy needs, the transition in automotive industry related to the shift to EVs, and further speed and capacity increase in information communications infrastructure. Murata also aims to contribute to a decarbonized society and explore new business opportunities by rolling out energy conservation and renewable energy measures both internally and externally, combining the solar power generation system introduced at Murata sites and Murata products such as storage batteries and energy management systems.
The results of scenario analysis conducted in fiscal 2022 will be reflected in future management plan strategies to formulate concrete plans for action.

*1
Intergovernmental Panel on Climate Change (IPCC)
*2
International Energy Agency (IEA)

■Summary of analysis■

Transition opportunity/risk analysis

Target: World in 2030 with a view to 2050
Adopted scenarios:
4°C scenario: IPCC RCP 8.5, IEA/STEPS
1.5/2°C scenario: IPCC RCP 1.9 and 2.6, IEA/SDS (partly IEA/NZE)
Timing:
Short-term: Within the next 3years
Medium-term: Within 3 to 5 years
Long-term: 5 to 10 years
Impact levels:
Large: 20 billion+ JPY
Medium: 10 billion JPY to 19.9 billion JPY
Small: Below 10 billion JPY
Scenario analysis target: Current business

Physical risk analysis:

Target: World in 2050
Adopted scenarios: IPCC RCP 2.6, RCP 8.5
Climate models/data sets: CMIP5^*3, GFS (temperature data), GPM (flood/precipitation data)
Timing:
Medium-term: 2030
Long-term: 2050
Analysis target: 20 major manufacturing sites and offices primarily in Japan, China, and Southeast Asia (covering 80% based on the number of employees in the Group)
Specific risks: Examined the impact of 10 climate hazards (extreme typhoons and extreme heat, extreme drought and landslide, extreme rainfall flood and sea-level rise, extreme precipitation, storm surge, river flood or snowmelt) to the selected portfolio of assets. This research focused on the direct physical impact on the assets, and we are planning to analyze the impact on the whole value chain, such as suppliers and product transportation

*3
Coupled Model Intercomparison Project (CMIP5) is a collaborative framework led by World Climate Research Program (WCRP) with the aim to foster climate model improvements and support national and international assessments of climate change impact.

Value-at-Risk (VaR)

Reflects the estimated financial loss that can incur to the selected portfolio or asset in a year, with a certain probability, if all the estimated hazard events occur under the considered scenarios and period.
VaR is estimated based on a macro view of the following two aspects:
Loss from physical damage to an asset: Evaluated with reference to historical events, asset types and cost of construction for the specific locations
Loss from business interruption: Evaluated based on macro-economic factors such as country GDP, population, land use (e.g. farming, commercial, residential, manufacturing, etc.), urbanization

The assessed VaR, in the range of few hundred million to 1 billion JPY, is not expected to have a material impact on the Company’s financial position. As a reference, the potential financial loss would account for less than 0.4% of Murata’s net profit in fiscal 2022. We aim to conduct analysis based on Murata-specific information in the future, and depending on the results, VaR may increase.
Business Continuity Plan (BCP) to minimize the impact of hazards on our operations.

Link: Business Continuity Plan

Critical transition risks and action policies

Climate change element		Item	Action policy	Impact level^*5
Transition risk	Increase in decarbonized product needs Short to medium-term^*4	Customer loss due to incapability to respond to decarbonization needs	Continuous product development with competitiveness in terms of smaller size, higher efficiency, and longer service life Reduction in CO₂ emissions in collaboration with suppliers Active introduction of renewable energy for the promotion of decarbonization in the manufacturing process	High
	Increase in environmental awareness Short to medium-term^*4	Deterioration of corporate value due to changes in investors' criteria	Continuous dialogues with investors Timely and appropriate disclosure of information through the TCFD framework or CDP Climate Change Committee monitors the progress of achievement of environment management targets	Low
	Stricter energy conservation standards medium to long-term^*4	Increase in plant building and operating costs	Decrease in cost burden through active use of energy conservation subsidies and preferential tax treatment Offsetting increased building costs by reducing running costs through energy conservation Active adoption of low-environmental burden building materials for constructing plants	High
	Strained balance between mineral supply and demand medium to long-term^*4	Increase in material procurement costs due to the strained balance between the supply of and demand for rare metals, etc.	Efforts to reduce the amount of materials used, associated with downsizing of products Recycling process efforts and exploration of alternatives	High
	Introduction of carbon pricing medium to long-term^*4	Increase in fuel and power costs	Energy conservation efforts at manufacturing sites Reduction in fossil fuel-derived power consumption due to active introduction of renewable energy New attempts at realizing alternative energy sources, such as using hydrogen Introduction of internal carbon pricing system in fiscal 2021 aimed at promoting investments in energy conservation and renewable energy measures	Medium
	Instability in power supply due to active implementation of renewable energy medium to long-term^*4	Loss of business opportunities due to insufficient BCP response	Enrichment of BCP at individual manufacturing sites Ensuring a backup system at key manufacturing sites	Low

Critical transition opportunities and action policies

Climate change element		Item	Action policy	Impact level^*5
Transition opportunity	Increase in decarbonized product needs Short to medium-term^*4	Increase in the demand for high added-value, low-power consumption devices	Provision of the latest electronic parts that contribute to the evolution of hardware Continuous product development with competitiveness in terms of smaller size, higher efficiency, and longer service life	High
		Expansion of business opportunities due to supporting energy conservation and renewable energy needs	Contribution to a decarbonized society through battery and power supply business Promote stakeholders' understanding of the competitiveness of energy conservation and renewable energy efforts of Murata's products through information disclosure based on TCFD and participation in environmental initiatives (RE100, SBT, CDP responses) Creation of new businesses related to energy conservation and renewable energy Environmental monitoring using modules and sensors (in-house technologies)	Medium
	Progression of EV shift Short to medium-term^*4	Increase in the demand for electronic parts for automobiles (CASE) and automobile infrastructure	Acquisition of opportunities due to the expansion of the parts market associated with the shift to EVs Provision of new value including software solutions drawing on findings in the field of communications Exploration of business opportunities in the Out-Car area	High
	Progress in the social implementation of information infrastructure^6 Short to medium-term^4	Increase in the demand for electronic parts for high-speed, large-capacity communications and sensing society	Promotion of the development of products that can respond to the technical requirements for the upcoming 6G society Efforts for low power consumption and reduced loss Continuous development of sensing techniques and devices	High
	Energy conservation and improved efficiency in business operations Short to medium-term^*4	Reduction in power costs through introducing renewable energy and storage battery facilities in plants and promoting energy conservation	Promotion of energy conservation efforts at manufacturing sites Reduction in costs to purchase non-fossil fuel-derived power by actively introducing renewable energy and storage batteries	Low

*4
Short-term: Within the next 3 years, Medium-term: Within the next 3 to 5 years, Long-term: Within the next 5 to 10 years
*5
Impact levels: Large: 20 billion+ JPY, Medium: 10 billion to 19.9 billion JPY, Small: Below 10 billion JPY
*6
Elements that indirectly constitute opportunities

Physical risks and action policy

	2°C scenario		4°C scenario
	Impact level	Overall	Impact level	Overall
Extreme typhoons and extreme heat	Medium to high level of risk	Over 25% increase in the risk of one or a group of these assets being affected by extreme climate hazards in 2050 from that in 2020 Value at Risk (VaR): estimated to be several hundred million JPY	High to very high level of risk	Over 80% increase in the risk of one or a group of these assets being affected by extreme climate hazards in 2050 from that in 2020 Value at Risk (VaR): estimated to be approximately 1 billion JPY
Extreme drought and landslide	Medium level of risk		Medium level of risk
Extreme rainfall flood and sea-level rise	Low level of risk		Low level of risk
Extreme precipitation, storm surge, river flood or snowmelt	Not material		Not material
Actions	Energy conservation: Initiatives to lower our demand for electricity, a major source of our CO₂ emissions Renewable energy: Introducing solar power generation facilities and purchase of renewable energy and renewable energy certificates Internal systems: An internal carbon pricing system was introduced in 2021 to align investment decision-making with Murata's commitment to CO₂ emissions reduction Targets: Joined RE100, committing to implementing 50% renewable energy by 2030 and 100% by 2050 Established Scope1, 2, and 3 reduction targets in conformance with SBT standards

Risk management

CSR Management Committee regularly evaluates the materiality of a wide range of social, environmental, and economic issues through a structured process. In the most recent materiality assessment, climate change was identified as a critical risk and endorsed by the Board of Directors as an important issue that Murata should prioritize management oversight and actions.
Link: Material issues

On a strategic level, the Climate Change Committee provides oversight on Murata’s climate change agenda, including the continuous monitoring of evolving climate-related risks.
In fiscal 2021, we mainly used physical scenario analysis to evaluate the potential risks and opportunities posed by future climate change and the resilience of our business strategy. In fiscal 2022, we performed an in-depth analysis of transition opportunities and risks. Other efforts include a full-scale introduction of the sustainability investment promotion system in fiscal 2022, and low-carbonization initiatives with the perspective of unprecedented discontinuous challenges, including the adoption of the internal carbon pricing system. We have also embarked on Scope3 emissions reduction initiatives, and in fiscal 2022, visited and interviewed more than 10 suppliers.

On the operational level, ISO 14001 is enforced in our production facilities to drive continuous improvement while assessing environmental and climate change risks. Since 2018, Murata has also been capturing the latest information on global climate change in a timely manner through its regular membership with JCLP and has applied it to corporate efforts and actions.

Risks arising from climate change are incorporated into company-wide enterprise risk register under the supervision of the Risk Management Committee. For example, guidelines for responding to severe weather conditions are provided in our Business Continuity Plan (BCP) to minimize business disruption.
Link: Reinforcing risk management

Our participation in industry associations, such as Japan Climate Leaders' Partnership (JCLP) and JEITA, and global alliances, such as RE100, can help us gather insights into emerging risks and opportunities related to climate change.
For the participation in an industry association or the review thereof, Murata periodically checks for any significant discrepancies or deviations from the missions of the industry association in light of conformity with Murata’s aims and business activities. Withdrawal from an industry association will be considered if conformity with its missions is considered difficult.

Metrics and targets

In order to contribute to global initiatives to limit the average temperature increase to 1.5°C, Murata acquired SBT certification.
Specifically, we have set Scope1+2 and Scope3 GHG emissions targets according to the 1.5°C scenario and WB 2°C scenario, respectively.
As a member of RE100, we have also committed to achieving 50% renewable energy by 2030 and 100% by 2050.
(Refer to ESG data collection for a breakdown of CO₂ emissions by scope/category.)

Murata Group's environment targets
(Reinforcement of climate change countermeasures)

Fiscal 2050

Renewable energy sourcing: 100%

Fiscal 2030

Renewable energy sourcing: 50%
GHG emissions (reduction rate compared to fiscal 2019)
- Scope1+Scope2: 873 kt-CO₂e (46% reduction: 1.5°C target)
- Scope3: 3,246 kt-CO₂ (27.5% reduction: WB 2°C target)

Murata and the Environment

Basic approach of TCFD measures