Declaring Our Support of the TCFD Recommendations

In September 2020, Denka announced its support of the TCFD and began participating in the TCFD consortium. A taskforce established by the Financial Stability Board in 2015 upon the request of the G20, the TCFD issued guidelines on the disclosure of information associated with climate change’s financial impact on businesses with the aim of ensuring a smooth transition to a low-carbon society and stabilizing the financial market. In response, a number of business corporations and other organizations around the globe (1,669 entities, including 332 domestic entities as of December 24, 2020) have declared their support of these guidelines.
Going forward, we will carry out ongoing assessments focused on risk and opportunities arising from climate change and other relevant factors, including changes in government policies, regulations and market conditions as well as technological breakthroughs in the course of across-the-board initiatives aimed at realizing a low-carbon society and the decarbonized society envisioned by the Paris Agreement. In line with the following process flow suggested by the TCFD recommendations, we will thereby identify what impact our businesses would face going forward.

Verifying Risks and Opportunities via Scenario Analysis

The TCFD calls for businesses to verify risks and opportunities arising from climate change over the medium to long term and affecting their activities, asking for the incorporation of the results of such verification in their business strategies and risk management and the disclosure of information regarding the financial impact of these risks and opportunities.
As the first step of our initiatives acting upon the TCFD recommendations, we performed the identification and analysis of climate change-related risks and opportunities based on the “2°C scenario” and “4°C scenario” with the aim of contributing to the goal of the Paris Agreement, namely, keeping the global temperature rise in this century to less than 2°C above pre-industrial levels. While the former scenario assumes the acceleration of technological advancement associated with reduction in GHG emission volumes and the strengthening of relevant government regulations, the latter scenario assumes that these initiatives will remain unchanged from the current level. Based on the 2°C scenario, we have determined that, in the course of the transition to a low-carbon economy, we will confront such risks as the introduction of environmental taxation backed by governmental policies placing emphasis on global warming countermeasures; surges in carbon pricing due to the strengthened regulations on GHG emissions; and a decline in demand for plastic-based products in the wake of a social trend breaking away from the use of plastics. At the same time, we anticipate opportunities arising from demand for products and technologies employing Denka’s unique strengths in step with the popularization of solutions capable of helping curb GHG emissions and global warming.
Based on the 4°C scenario, on the other hand, we forecast a growing threat attributable to physical risk as a growing number of natural disasters induced by global warming will inflict damage on our production facilities and force us to suspend business operations. Simultaneously, we expect to be called upon to offer products and technologies designed to help enhance countermeasures against abnormal weather and protect social infrastructure and people’s well-being in the growing scope of business fields.
Toward the realization of a “decarbonized society,” we need to accelerate initiatives to raise the ratio of renewable energy to overall energy consumption, introduce CO₂ separation and recovery technologies, and establish a plastic recycling system while pushing ahead with the review of our business operation structure and the reform of our business portfolio in an effort to expand our operations associated with eco-friendly products. As we believe that robustly responding to risks will position us to meet major business opportunities via, for example, the creation of new technologies, we will strive to secure medium- to long-term improvement in our corporate value through our response to these risks and opportunities.
Looking ahead, we will also increase the sophistication of scenario analysis as explained above as we maintain information disclosure in line with the TCFD recommendations.