NRI Group Low Carbon Transition Plan

Positioning of the Transition Plan

The NRI Group's long-term vision, "NRI Group Vision 2030 (V2030)", outlines priorities under its sustainability strategy (materiality), focusing on "Create a Sustainable Society" and "Achive NRI Group's Growth Strategy." As part of the theme "Contribute to Global Environment Through Collaboration with Business Partners," NRI has developed a "Low Carbon Transition Plan" to effectively manage its response to climate change, recognizing that protecting and restoring the environment is a collective global responsibility.

NRI Group's Efforts on Climate Change

The NRI Group has taken progressive steps on climate change, including issuing Japan's first yen-denominated green bond and spearheading the industry's shift to renewable energy for its data centers. Going forward, the group will continue to advance these initiatives, focusing on transitioning its offices to renewable energy and supporting its business partners.

Overall Picture (NRI Group Environmental Targets and Plans)

The NRI Group's Low Carbon Transition Plan is being implemented with the approval and oversight of the Board of Directors to meet the environmental targets revised in FY2023. From FY2023 to FY2030, NRI plans to invest approximately 2 to 3 billion JPY in renewable energy procurement and other related activities.

The plan will be regularly reviewed, expanded, and updated, with progress monitored by the Sustainability-related conferences.

Governance

The NRI Group positions sustainability, including climate change response, as an important management issue. Under the supervision of the Board of Directors, NRI has established a Sustainability Committee, chaired by the director responsible for promoting sustainability management. The Committee is supported by two sub-committees: the Value Co-Creation Committee and the Sustainability Activities Committee, both chaired by a Senior Managing Director. These committees work to advance sustainability efforts across the Group, including climate-related matters, and regularly report their progress to the Board of Directors. Additionally, regarding share-based compensation for Members of the Board (excluding external members), Senior Managing Directors, and other employees, we have adopted a system that considers actions toward achieving NRI Group sustainability indices, including the expansion of human capital and the reduction of greenhouse gas emissions.

Strategy

The data centres owned and operated by the NRI Group strive to achieve net-zero power consumption through a dual approach of transitioning to renewable energy sources and reducing overall power consumption.

As of the end of March 2023, all electricity consumed in these data centres is sourced exclusively from renewable energy.
In addition, the NRI Group regularly convenes the Data Centre CO2 Reduction Promotion Meeting to advance initiatives aimed at reducing energy consumption and upgrading systems. These meetings focus on optimizing power usage and exploring options, such as solar panel installations.

The Group has consistently prioritized enhancing the environmental performance of its data centres. For instance, at Tokyo Data Center 1, which has been operational since November 2012, several energy-saving facilities have been implemented. These include a "double-deck system," which separates the server equipment floor from the air conditioning and facility-related equipment floor, enabling more efficient and flexible air conditioning. Additionally, a "cold-water vertical heat storage tank" has been installed to enhance cooling efficiency further.

Migrating systems to these energy-efficient data centres has contributed to a 26.2% reduction in the Group's GHG emissions between FY 2016 and FY 2022. Moving forward, the Group remains committed to adopting designs and technologies that drive further energy savings.

In addition to the data centers, which account for 80% of the electricity used by the NRI Group, we are working to transition the electricity consumed in our offices to renewable energy to achieve 100% renewable energy usage by 2030.

Achieving this target depends on ensuring a reliable supply of renewable energy and securing the necessary amount for our operations. Currently, we procure renewable energy primarily through options provided by power companies. To mitigate the risk of supply constraints and ensure a stable, long-term energy source, we are exploring additional measures, including the potential introduction of Virtual Power Purchase Agreements (PPAs) to secure more reliable, long-term renewable energy supplies.

• ※ A Virtual Power Purchase Agreement (PPA) is a renewable energy procurement model where buyers purchase environmental benefits, such as renewable energy certificates (RECs), under a long-term contract. This allows consumers to claim the environmental benefits of renewable energy produced at distant generation sites, even if they are not directly connected to the physical supply.

NRI Net-Zero Journey

The NRI Group believes that achieving ‘Net-Zero by FY2050’ across its entire value chain requires collaboration with various stakeholders. To support this, the NRI Group is advancing the ‘NRI Net-Zero Journey,’ an initiative to work alongside its business partners toward realizing the net-zero goal.

As illustrated in the image below, the NRI Group is committed to growing alongside its business partners, highlighting the importance of these collaborations in achieving the goal of "contributing to the creation of a sustainable future society."

Visualization of Scope 3

The current calculation method for Scope 3 emissions is based on multiplying activity levels by an emission intensity factor. This approach results in a formula where an increase in activity leads to a proportional increase in greenhouse gas emissions, regardless of any reduction efforts.

The NRI Group believes it is essential to review this calculation method to ensure that reduction efforts are properly reflected. To this end, we have been participating in the CDP Supply Chain Program* since FY 2021 and have collected data on the GHG emissions of our clients. We also believe that encouraging our clients to disclose climate-related data through the CDP Supply Chain Program is a meaningful step toward achieving net-zero emissions across the entire value chain and society.
Based on the data collected through this program, we are considering changes to our calculation method, focusing on Scope 3 Category 1 since FY 2022. We have studied this while incorporating input from CDP experts and have concluded that it is possible to reflect reduction efforts in the figures—even in the case of an increase in activity volume—by switching from the Ministry of the Environment's conventional emission intensity factor to each client's own emission intensity factor.

To ensure that reduction efforts across the value chain are appropriately reflected in Scope 3 reductions, we will disclose greenhouse gas emissions after reassessing the calculation method. We also aim to obtain third-party assurance for the results of the post-reassessment Scope 3 emissions calculation.

• * CDP Supply Chain Program: An environmental information disclosure initiative managed by CDP, an international environmental NGO. Through this program, CDP requests suppliers of its member companies to provide environment-related data. CDP then analyzes and returns the collected information to its members.

Engagement with Business Partners

The "NRI Group Procurement Policy" reflects our commitment to building a sustainable society through strong collaboration with our business partners. When selecting suppliers, we consider not only their business performance, product and service quality, delivery times, and pricing but also conduct a thorough evaluation of their environmental, social, and governance (ESG) initiatives. Additionally, our sustainable procurement practices ensure compliance with relevant laws, regulations, and social norms while prioritizing environmental and social impacts.

In FY 2021, we introduced the "NRI Group Business Partner Code of Conduct", which establishes clear guidelines for compliance with laws, environmental considerations, and human rights. This Code was designed to align with the NRI Group’s sustainability objectives and the Responsible Business Alliance (RBA) Code of Conduct. It identifies key areas for collaboration with our business partners to achieve shared sustainability goals.

We have obtained written agreements to this Code, which serves as a company-to-company contract. It stipulates the suspension or termination of business transactions in the event of violations or failure to make necessary improvements after our requests.

Additionally, we require business partners to complete a Self-Assessment Questionnaire (SAQ) and regularly engage with them based on both the Code of Conduct and the SAQ. Based on these results, we assess the situation and support companies in making improvements, including organizing briefings and workshops focused on reducing greenhouse gas emissions. (See next page for details).

In the future, the NRI Group aims to enhance collaboration with business partners by promoting "preferential procurement," prioritizing those who have achieved significant greenhouse gas emissions reductions (e.g., partners who have set targets validated by the Science Based Targets initiative, SBTi).

We are working closely with each of our business partners to reduce greenhouse gas emissions and drive the decarbonization of the entire value chain.

Through ongoing dialogues and the organization of seminars, we actively support our partners’ decarbonization efforts.

Engagement | Public Policy Engagement

The NRI Group is actively collaborating with stakeholders to help achieve the goals of the Paris Agreement.As a think tank, we provide policy recommendations to government agencies, conduct research on legislation, and engage in environmental policy advocacy.

To contribute to Japan's mid- to long-term greenhouse gas emission reduction targets, we endorsed METI's GX (Green Transformation) League Basic Concept in March 2022. Building on this commitment, we declared our intention to join the GX League in March 2023, recognizing that decarbonization is vital not only for the NRI Group but for society as a whole.

Since FY 2022, the NRI Group has served as the secretariat and overall coordinator of the GX League. In this capacity, we identify the diverse needs of Japanese companies in advancing GX initiatives and ensure these needs are reflected in policymaking.

Engagement | Initiatives

Through a wide range of partnerships with both domestic and international industry associations, the NRI Group is actively promoting and expanding its efforts to address climate change. This includes participation in sustainability initiatives such as aligning with the Paris Agreement and contributing to Japan's government-led efforts for the mid-to long-term reduction of greenhouse gas emissions. The Sustainability Activities Committee regularly reviews whether these initiatives are consistent with NRI's core policies on climate change and their alignment with the Paris Agreement.

The majority of the NRI Group's electricity consumption and greenhouse gas emissions are in Japan, and we are engaged in policy advocacy with the understanding that expanding the renewable energy market in Japan is crucial for achieving our environmental goals. As part of these efforts, in January 2021, through the Japan Climate Initiative (JCI), we advocated for an increase in Japan's renewable energy target for 2030, from the current, 22-24% to 40-50%. In June 2022, the NRI Group also called on the government to ensure that the Clean Energy Strategy, scheduled for formulation that year, focuses on promoting the development of renewable energy sources such as wind and solar power, facilitating the achievement of the 40-50% target by 2030.

The NRI Group participates in the WBCSD, a coalition of approximately 200 CEOs of companies committed to sustainable development, working together to help businesses transition to a sustainable society. The NRI Group has been involved in three projects from 2022 to 2023: the ‘Partnership for Carbon Transparency,’ ‘Avoided Emission,’ and ‘CFO Network.’ In the ‘Partnership for Carbon Transparency’ project, NRI contributed to the development of the ‘Pathfinder Framework ver. 2.0’ (published in January 2023), which structures the framework for calculating, certifying, and distributing PCF data. With its expertise in both consulting and IT solutions, the NRI Group played an integral role in this initiative.
For the ‘Avoided Emissions’ project, NRI contributed to enhancing the guidance by participating in weekly workshops and sharing insights based on our experience with reduction contributions in Japan. WBCSD emphasizes the importance of alignment with governments and policy authorities and has developed this guidance in accordance with the European Commission's CSRD. The guidance requires transition plans to align with the 1.5°C target. NRI supports this approach and is actively participating in the project.

Additionally, the NRI Group took part in the ‘SBT Campaign 2023-2024,’ organized by the international environmental NGO CDP in October 2023, as a member of the CDP Supply Chain Program. In this campaign, 307 financial institutions and 60 companies, including the NRI Group, encouraged companies to set science-based greenhouse gas emission reduction targets (SBTs) consistent with the 1.5°C scenario for approximately 2,100 influential companies worldwide.

Scenario Analysis

Risk Management

Risk Management System

To ensure comprehensive risk management across the NRI Group, including climate-related risks, NRI has appointed a Risk Management Director and established the Integrated Risk Management Section to oversee the process. This section is responsible for developing and maintaining the risk management framework, identifying, assessing, and monitoring risks, and continuously enhancing the system. Chaired by the Risk Management Director, the committee meets twice a year to evaluate the PDCA (Plan-Do-Check-Act) cycle of risk management, discuss mitigation measures, and report the outcomes to the Board of Directors.

The risks associated with the NRI Group's operations are classified into 13 categories, each with specific risk items. These are periodically evaluated by the department responsible for risk management, with a focus on their severity and potential impact. Each year, the Integrated Risk Management Committee selects the most critical risks as 'Key Themes for Risk Management.'
One of the 13 categories is 'strategy risk,' which includes 'risks related to sustainability management,' such as climate change response.

To address climate-related risks, the Sustainability Activities Committee, established under the direction of the President, works alongside the Integrated Risk Management Committee to promote sustainability management. Since FY 2018, the committee has been reviewing and deciding on measures to identify, assess, and address climate-related risks and opportunities, taking into account both the external environment and the progress of internal initiatives. Significant climate change-related considerations are also reported to the Sustainability Committee for further review and decision-making.

Indicators and Targets