Information Disclosure Based on TCFD Recommendations

Governance

Under the supervision of Board of Directors, Simplex Holdings, Inc. (“the company”) carries out company-wide risk management at its Executive Committee meetings, which are chaired by the Representative Director, President and CEO (“CEO”) and comprise the CEO and Executive Directors. However, authority is delegated to the Sustainability Council for the identification and assessment of climate change-related risks and opportunities. The Sustainability Council consists of the CEO as well as the Executive Directors of the Company and its subsidiaries, and is chaired by the CEO. Assessments of climate change-related risks and opportunities discussed at Sustainability Council meetings, as well as the progress of related goals and initiatives, are reported to and debated by the Executive Committee as part of company-wide risk management. They are also reported to the Board of Directors on a semi-annual basis, enabling effective board oversight. Based on these reports, the Board of Directors develops group-wide strategies and incorporates them into the medium-term business plan, risk management policies, and business strategies

Risk Management

The company defines risk as any hazard that could result in economic loss, business interruption or suspension, or loss of credibility or brand image, and we have implemented a risk management system to mitigate and avoid risk. At Sustainability Council meetings, each member reports on climate change issues based on the environment surrounding the Group, and a wide range of climate change-related risks are identified. These identified risks are then evaluated on two axes: the likelihood of occurrence and impact on the Group in the event of an actual occurrence, and the risk level of each risk is determined. Significant risks are reported to the Executive Committee and the Board of Directors.

For risks related to climate change that are considered material, the Sustainability Council sets targets, manages progress, and reports to the Board on a semi-annual basis. This provides a mechanism for regular monitoring of risks and helps ensure that the progress of measures is assessed and the severity of the risk is reviewed.

Strategy

As shown in the table below, we have identified risks and opportunities that could affect our Group’s operations as a result of climate change and analyzed two main scenarios: one assuming a global average temperature increase of around 2°C by the year 2100 and the other assuming an increase of 4°C.

In the 2°C rise scenario, we estimate risks and opportunities related to social change, such as changes in policy and legislation related to climate change initiatives and the increased importance of social trust in the marketplace. Meanwhile, in the 4°C rise scenario, we estimate acute physical risks and opportunities, including natural disasters, as well as chronic risks and opportunities caused by these events.

Type	impact item	Hypothetical risks and opportunities that could affect the Group	scenario	Impact on our Group
Risk	Carbon Pricing Mechanism	A new carbon tax could be imposed on the Group’s GHG emissions.	2℃	Costs could increase due to the introduction of a carbon tax.
	Changing Customer Behavior	Customers may choose data centers with lower environmental impact.	2℃	Sales opportunities could be lost due to using data centers with a high environmental impact. Cost burden to implement measures such as switching to a data center with a lower environmental impact.
	Sector condemnation	Demand for crypto asset trading platforms could decline due to the massive power consumption required to mine them.	2℃	Sales related to crypto asset trading platforms could decrease.
	More stakeholder concerns or negative stakeholder feedback	There is potential for long-term damage, etc., to the Group’s brand image if climate-related measures are inadequate.	2℃	Stock price could decline due to a loss of trust from customers or shareholders.
	Increased frequency of typhoons, floods, and other extreme weather events that cause extensive damage	Data center outages could result in service disruptions.	4℃	Business opportunities could be lost due to data center outages. The Group may need to compensate for damages caused by service outages.
opportunity	Financing for the development and/or expansion of low-emission services	Potential for favorable financing through sustainability bond issuing.	2℃	Lower financing costs through sustainability bond issuing.
	Development of solutions for climate adaptation, resilience, and insurance risk	Increased use of remote work to ensure business continuity due to restrictions on outdoor movement caused by disasters, temperature changes, and other factors could expand service provision opportunities as demand for ICT infrastructure increases.	4℃	Sales opportunities could expand for our remote work AI solutions.
	same as above	Our insurance product lineup could be diversified in response to climate change.	4℃	As climate change progresses, causing diversification of insurance products, there could be more opportunities to sell the insurance solutions we handle and to expand sales due to more development of new systems.
	same as above	Increased demand for integration and consulting on DX-based climate change response systems (e.g. weather derivatives).	2℃	Sales could expand due to orders for integration and consulting on DX-based climate change response systems.
	Acquisition of new employees, etc.	By taking proactive action on climate change, we could improve our social trust and image.	2℃	Increased competitive advantage in recruiting employees as well as lower recruiting costs. Stock price could increase due to increased trust from customers or shareholders.
	Improvement of employee working conditions, etc.	Work style reform via ICT and business efficiency process reform via DX could improve business continuity as well as help maintain and improve working conditions.	2℃	Cost burden of introducing new DX solutions Could reduce employee turnover as a result of better employee satisfaction. Better employee retention

Metrics And Targets

With regard to the Group’s greenhouse gas emissions as of the end of the fiscal year ending March 2023, we have calculated Scope 1 and Scope 2 emissions as below based on the government’s “General Guidelines on Supply Chain GHG Emission Accounting” (March 2022, MOE & METI) and have set reduction targets for the target fiscal year. We will continue to work on calculating Scope 3, setting reduction targets, and making every effort to meet those targets.

Item	Greenhouse gas emissions (t-CO₂)
Item	Actual values (FY03/2023)	Target value (target fiscal year)
Scope 1 (Direct Emissions)^＊1	0	0
Scope 2 (Energy-Derived Indirect Emissions)^＊2	445.8	0 (FY03/2026)
Scope 3 (Other Indirect Emissions)^＊3	Calculation is in progress	Calculation is in progress

Direct emissions from the company’s use of fuels and industrial processes are excluded from the calculation as they are negligible.

Energy-Derived Indirect Emissions are indirect emissions associated with the use of electricity and heat purchased by the company. We purchase electricity, etc., used at our business locations at (1) Toranomon Hills Mori Tower, (2) Atago Green Hills MORI Tower, etc. from the Mori Building. Since January 2023 (April 2023 for Toranomon Hills), we have been purchasing renewable energy based on the terms of our electricity contract.

For Other Indirect Emissions, we plan to calculate and disclose actual results and targets by the end of the fiscal year ending March 2024.