Efforts to Address Climate Change and Nature-Related Issues
The Norinchukin Bank lends to members, agriculture, fishery and forestry businesses, and companies related to the agriculture, fishery and forestry industries. We lend funds via savings deposited by entities involved in the industries and community members in Japan Agricultural Cooperatives (JA) and Japan Fishery Cooperatives (JF). We also conduct other investments and loans in Japan and overseas. To this end, The Norinchukin Bank has a close relationship with nature upstream and downstream in the value chain. We recognize that nature-related risk management and capturing opportunities affect the sustainability of Bank business operations and organizational infrastructure directly.
Climate and nature are intertwined and efforts to address the risks and opportunities of related issues are inseparable. Given this correlation, we are committed to integrated climate and nature disclosures based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and the Task Force on Nature-related Financial Disclosures (TNFD).
Governance
Efforts to Address Climate Change and Nature-Related Issues
- Climate
- Nature
The Sustainability Committee discusses environmental and social issues, including climate and nature, under the Board of Directors with other management committees. If necessary, the Sustainability Committee submits proposals and reports to the Board of Directors and the Supervisory Committee. The Bank appoints Co-CSUOs (chief sustainability officers) to serve as the head of sustainability.
The Norinchukin Bank works to address climate and nature-related issues as management issues in our daily business activities.
Engagement With Indigenous Peoples and Local Communities
- Nature
The Board of Directors of the Bank established the Human Rights Policy as a policy to clarify our basic stance on respect for human rights in our business activities and pursue concrete initiatives. We established a structure to prevent and mitigate negative impacts on indigenous peoples and local communities in the course of our investments, loans, and other business activities. Under this structure, we conduct human rights impact assessments based on the Human Rights Policy. We also address human rights issues based on our Policy on Consideration of Environmental and Social Issues in Investment and Loans and the Equator Principles. The Bank recognizes the need to strengthen stakeholder engagement based on various TNFD guidances and identifying nature-related dependencies, impacts, risks, and opportunities.
Strategy
Overall Strategy and Core Principles for Solving Environmental Issues
- Climate
- Nature
The Norinchukin Bank Board of Directors establishes the Environmental Policy. This policy stipulates that the Bank is to contribute to solving climate change, biodiversity, and other environmental challenges through our business activities and reduce the environmental impact of such activities.
We also define the response to climate change and biodiversity in our materialities to achieve our purpose and the medium-term vision (Nochu Vision 2030) . As a financial institution, we pursue efforts that contribute to parallel solutions to these environmental issues to make the lives of people and the agriculture, fishery and forestry industries more sustainable.
Risk and Opportunity Recognition
- Climate
- Nature
Climate-related risks can be divided into transition risks and physical risks. Transition risks are those that occur in the transition to decarbonization (e.g., increased credit costs due to changes in policies, markets, and other areas). Physical risks are classified into acute risks (e.g., increased extreme weather events such as flooding), and chronic risks (e.g., the impact of prolonged high temperatures on agriculture and fisheries).
Nature-related risks refer to potential economic and financial impacts resulting from changes in the natural environment. This includes biodiversity loss and climate change. Changes in the natural environment correlate to causes and effects of climate change, resulting in ecosystem service degradation (from climate change) and changes in policy and consumption behavior. In turn, these changes affect financial systems.
We recognize climate and nature-related issues as risks in the short-, medium-, and long-term. At the same time, we recognize our responses to resolve such issues as business opportunities. As a financial institution, we strive to capture business opportunities by offering financing and other solutions to support the transition to decarbonized societies that coexist with nature.
Overview of Our Net Zero Efforts
- Climate
The Bank Group aims to achieve net-zero greenhouse gas (GHG) emissions by 2050 in response to the escalating nature of climate change. As part of this effort, the Bank became a member of the Net-Zero Banking Alliance (NZBA)*. As a member, we set targets, and engage in initiatives to reduce the GHG emissions of our investees and borrowers, and pursue various other initiatives. The Bank organized and systematized a series of related initiatives in our 2050 net zero transition plan.
*Glasgow Financial Alliance for Net Zero (GFANZ) is an international initiative among banks to achieve net-zero greenhouse gas emissions through investment and loan portfolios by 2050.
Transition Plan Toward Net Zero by 2050
Roadmap to Net Zero by 2050
Reduce GHG Emissions by Investment and Finance Clients
- Climate
Reducing Investee and Borrower GHG Emissions
The Bank sets progressive emission reduction targets for high-emissions sectors (power, oil and gas, steel, coal, agriculture, real estate, transportation, cement, and aluminum), as defined by the NZBA, across our loan portfolio.
Considering the importance of the ratio of investment assets in our investment and loan portfolio, the Bank established emissions reduction targets across our investment portfolio, referencing the Net Zero Initiative framework for institutional investors.
Loan Portfolio
The Bank set targets for the power sector immediately upon joining the NZBA in March 2023. In March 2024, we announced additional targets set for the oil and gas, coal, and steel sectors.
The Bank engages with our borrowers to achieve these targets. Based on our understanding of risks and other factors associated with climate change, we engage in dialogue with our borrowers regarding their current status, issues, and measures. We then develop and provide solutions based on the information we obtain.
We will continue to consider targets and approaches from the perspectives of loan balances, GHG emissions, and other factors. In particular, The Norinchukin Bank will focus on the agriculture sector, a foundation for our business. We will continue to identify areas in which to set targets, taking a high-level approach to the value chain consisting of materials, production, processing, and distribution for agriculture and food products.
Overview of Engagement With Borrowers
Providing Solutions to Borrowers Based on Their Individual Situations and Issues
Investment Portfolio
Emission reduction goals in our investment portfolio target equities and corporate bonds. The Norinchukin Bank invests the majority of our investment portfolio indirectly through funds. Accordingly, we view fund asset managers as our primary engagement partners. We continue to expand investment asset classes targeted in light of developments in GHG measurement practices at the Bank.
Secure the Amount of the Forest Carbon Sink, together with JForest Members
The Norinchukin Bank established a forest carbon sink target of 9 million tCO2 per year by fiscal 2030 based on area forecasts derived from nationwide forestry cooperative targets.
Forests play an important role in absorbing CO2 and conserving biodiversity. At the same time, forests face challenges that include low prices for standing timber, costs associated with reforestation, and finding willing entities to engage in forest leadership. The Bank supports the sustainable forestry practices of forestry cooperatives, aiming to ensure CO2 absorption.
*Forest management, including new planting (reforestation), undercutting, clearing, thinning, and final cutting
Reducing GHG emissions at the Bank Group Facilities
We aim to achieve net-zero GHG emissions from the Bank Group facilities by fiscal 2030. To achieve our targets, we work to incorporate renewable energy and other energy conservation measures in the buildings we occupy.
Climate-Related Risk Assessment and Scenario Analysis
- Climate
We conduct scenario analysis of the impact of climate change-related risks on credit portfolios, etc., based on sector-specific risk assessments.
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Nature-Related Risk Assessment and Scenario Analysis
- Nature
To understand our nature-related risks and opportunities, the Bank analyzed our dependencies and impacts throughout our investment and loan portfolios for business enterprises and conducted a trial scenario analysis.
Analysis results confirmed the Bank dependencies and impacts are focused in the food-related and energy sectors. The food-related sector is closely intertwined with our foundation in agriculture, fishery and forestry industries, while the electricity sector compromises a large portion of our investments and loans.
Efforts to Grasp Nature-Related Opportunities
- Nature
Nature-Related Engagement
We engage in dialogue with investment and finance clients on current status and issues, recognizing the importance of natural capital and biodiversity and the risks associated with future changes. As we engage in these dialogues, we plan and propose solutions based on priority issues. As one of our efforts, the Bank and the Norinchukin Research Institute Co., Ltd. provide solutions including TNFD disclosure support and support in developing nature-related risk management strategies.
Partnerships With Financial Institutions
In February 2023, the Bank established the Finance Alliance for Nature Positive Solutions (FANPS) with the Sumitomo Mitsui Financial Group, Inc., MS&AD Insurance Group Holdings, Inc., and Development Bank of Japan Inc. In March 2024, we began offering a simple tool to evaluate TNFD compliance status and published a solution catalog contributing to nature positivity. Going forward, our four-company alliance will develop gradual cooperative efforts to support the corporate shift to nature positivity.
Risk Management (Risk and Impact Management)
Basic Risk Management Policy
- Climate
- Nature
The Norinchukin Bank Board of Directors formulated the Risk Management Policy defining our basic risk management system to properly manage risks throughout the company. This management policy stipulates the types of risks to be recognized and the management system and methods. Under this policy, the Bank works to advance our risk management system regularly. Based on this policy, the main risks that the Bank manages include credit risk, market risk, liquidity risk, model risk, and operational risk. We manage and control environmental and social risks (including climate and nature-related risks) based on individual risk characteristics under each risk category.
Risk Appetite Framework
We select top risks (risk events that require special attention in the future) based on the business environment and risk perception in accordance with our risk appetite framework, analyzing possible future scenarios.
The Bank selected addressing climate change, biodiversity, and other sustainability-related issues as a top risk. The Bank recognizes major risks that may inflict significant impacts on the sustainability of the Bank, the agriculture, fishery and forestry industries that form the foundation of the Bank, and our local communities. These major risks include stranded assets in our portfolio stemming from the transition to a decarbonized economy (as a result of climate change); wind, flood, and other such damage; and the degradation of natural capital and biodiversity. By selecting top risks, we aim to align the perspective of our organization with risk recognition, thereby building greater sophistication in our risk management structure.
Upgrade environmental and social risk management systems
- Climate
- Nature
The Bank assesses and determines climate and nature-related risks associated with our investments and loans. We consider environmental and social risks, based on environmental and social risk management (ESRM) system. We additionally establish a framework for the risk management department to control and contain risks, under which decisions may be escalated when necessary. We will work on advancing the sophistication of our ESRM system in stages, aiming to incorporate the system into integrated risk management.
The Norinchukin Bank establishes various policies to resolve environmental and social issues. These policies include the Environmental Policy and the Human Rights Policy, as well as other environmental and social policies for investment and loans in sectors that have the potential to cause significant negative environmental and social impacts. We conduct appropriate risk management in order of priority.
We also adopted the Equator Principles, monitoring large-scale development projects to ensure that we give appropriate consideration to the natural environment and local communities when financing such projects.
ESG Integration in Risk Management
The Bank implements integrated operations with credit risk management in our internal rating system for evaluating the credibility of credit clients. We use the Environmental and Social Risk Check Sheet as a qualitative factor to assess clients in certain sectors, mainly those in sectors facing high transition risk due to climate change. The Environmental and Social Risk Check Sheet is a tool that fosters an understanding of response status to environmental and social risk factors according to the sector. The Bank will discuss reviewing and expanding target sectors in this initiative in, taking external environments into account.
Metrics and Targets
Climate-Related Metrics and Targets
- Climate
We organize our climate-related metrics and targets in our net zero transition plan.
Nature-Related Metrics and Targets
- Nature
The Bank calculates and discloses, on a trial basis, the financial exposures we face from the dependencies and impacts on nature in our portfolio, as well as our nature-related footprint metrics.
Climate & Nature Report
The Norinchukin Bank publishes an integrated report to disclose our efforts based on the TCFD and TNFD recommendations.
- Sustainability
- Sustainability Management
- Highlights of Initiatives
- Our Purpose and Vision
- Philosophies and Policies
- Sustainability Promotion Structure
- Sustainability Advisory Board
- Important Issues to Achieve Our Purpose
- Stakeholder Engagement
- Participation in Initiatives
- Sustainable Finance
- Initiatives for Creating and Visualizing Impact
- Initiatives to Manage Environmental and Social Risks
- Agriculture, Fishery, Forestry Industries, and Regions
- Environment
- Social
- Governance
- Report/Index