Mizuho Financial : TCFD Report 2023(Double page)

Table of contents
1. Message from the Group CEO
		4
2. Introduction
		6
1.	Status of Mizuho's Actions in line with the TCFD Recommendations (Executive Summary)	6
2.	Status of progress under the FY2022 Action Plan (key progress)	10
3.	Roadmap to Net Zero by 2050	11
4.	Mizuho's journey so far	12
3. Governance
		13
1.	Governance structure for climate-related initiatives	13
2.	Promotion framework for climate-related initiatives (business execution line)	17
3.	Compensation for executive officers	18
4. Strategy
		20
1.	Our approach and plans toward climate change	20
2.	Identification of priorities in the Transition Plan	25
3.	Recognition of opportunities and efforts to capture opportunities	27
4.	Sector-specific initiatives	35
5.	Recognition of risks posed by climate change	47
6.	Scenario analyses	51
5. Risk management
		59
1.	Risk management framework for climate-related risks	60
2.	Top risks management	61
3.	Risk control in carbon-related sectors	62
4.	Financing and investment responses based on climate-related risks	66
6. Metrics and targets
		69
1.	Overview of metrics and targets	69
2.	Detailed metrics and targets	70
3.	Measurement of financed emissions based on PCAF standards	72
7. Conclusion
		78
8. Appendix
		79
1.	Details of Scope 3 medium-term targets	79
2.	Details of measurement standards for Scope 3 emissions	84
3.	Overview of our Environmental and Social Management Policy for Financing and Investment Activity	88
4.	Reference: Transition risk scenario analyses	97
5.	Glossary	103

Date of issue: June 2023 (English version has been released in July 2023)

- 2 - Mizuho Financial Group

(The highlights here focus on areas of improvement from last year's TCFD Report)

*1. CSuO: Chief Sustainability Officer

*2. Total accumulated amount from FY2019 to FY2030

*3. Sustainability Transformation

*4. Environmental and Social Management Policy for Financing and Investment Activity

*5. Reduction rate from a FY2019 baseline

TCFD Report (Climate-related Report) 2023

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1. Message from the Group CEO

In our new medium-term business plan announced in May this year, Mizuho set forth "personal well-being" and "achievement of sustainable society and economy" as our vision for the future. To achieve this vision, we set out five areas of focus by back-casting from our vision for the future in 10 years' time. Among them, "Sustainability and innovation", is especially a key challenge that spans across the world.

Addressing the climate change is one of the most important issues in this area. We make efforts in linking private and public sectors and academia, in transforming industrial and social structures, in establishing next-generation technologies and in deploying finance required to achieve these for a decarbonized society.

Our clients in private sectors have been taking on bold challenges of technological innovation and business transformation that will lead to decarbonization over the medium to long term. We are committed to support our clients from

formulating strategy to providing finance as they navigate through their challenges, such as promoting carbon neutral energy, electrification as especially in the mobility sector and conversion of materials or fuel used for manufacturing.

A huge responses have been received to our "Transition Equity Investment Facility", which provides risk money to seed or early-stage businesses or technologies and supports clients' transitions. The total number of consultations we have received so far amounts to 190 and we invested in the 3 projects to date including one in the carbon capture and utilization (CCU) and another in the bio-manufacturing.

Furthermore, to strengthen the money flow to realize a sustainable society, we substantially raised our sustainable finance target to JPY 100 trillion by FY2030, of which JPY 50 trillion is earmarked for environment and climate-related finance. Mizuho will provide financings required for transitions to clients, who endeavor to tackle the decarbonization together.

- 4 - Mizuho Financial Group

Through these efforts, we will promote the transition of the real economy and enhance the corporate value of

both our clients and us. Conversely, delayed or inadequate responses on our clients to address challenges in	CEO
business environment would result in a decline in their corporate value and an increase in our own risk. For this	message
reason, we envision a range of scenarios and strengthen our capabilities to identify or manage risk appropriately
from a medium and long-term perspective.
Recognizing these initiatives, Mizuho continues to promote a more integrated approach to address climate
Introduction
change, we have revised our Net Zero Transition Plan in April this year putting more emphasis on three areas -
contributions to transition in the real economy, capturing business opportunities, and appropriate risk
identification and management.
In addressing climate change, it is important that all stakeholders work together toward the shared goal. We,
Governance
Mizuho, not only prioritize engagement with our clients, but leverage our knowledge of industries and
environmental technologies to collaborate with governments and industry organizations and various initiatives.
Through such activity we will communicate our opinions, participate more actively in international rule-makings.
In particular, we will be active in constructing value chains for hydrogen and other next-generation energy, which
is vital to achieve a non-carbon society, and reinvigorating the carbon credit market.
Our corporate philosophy is: "Operating responsibly and transparently with foresight, Mizuho is deeply	Strategy
committed to serving client needs, enabling our people to flourish, and helping to improve society and the
communities where we do business." And our newly formulated purpose is "Proactively innovate together with
Risk
our clients for a prosperous and sustainable future." Under this philosophy and purpose, we will continue to
management
mobilize our Group's collective strengths and to work alongside our clients toward our unwavering goal of
pursuing the 1.5°C target of the Paris Agreement and achieving net zero by 2050.
	Metrics and
Masahiro Kihara	targets
President & Group CEO
Mizuho Financial Group, Inc.
	Conclusion
	Appendix

TCFD Report (Climate-related Report) 2023

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2. Introduction

1. Status of Mizuho's Actions in line with the TCFD Recommendations (Executive Summary)

At Mizuho, given our awareness that climate change is one of the most crucial global issues with potential to impact the stability of financial markets, we position addressing climate change as a key part of our corporate strategy and have been enhancing our initiatives in this area.

(Underlinedindicate enhancement since our previous disclosure in June 2022 in Japanese / July 2022 in English.)

	Governance		Disclose the organization's governance around climate-related risks and opportunities
	 Mizuho's stance on addressing climate change, our aims and actions, and our medium and long-term		pp.20-24
	strategies and initiatives are set out in the three documents - the "Environmental Policy", the
	"Mizuho's Approach to Achieving Net Zero by 2050", and the "Net Zero Transition Plan (2023
	Revision)" - and have been approved by the Board of Directors.
	 A supervisory and business execution governance framework has been established, centered on the		pp.13-16
	Board of Directors.
	[Supervisory] The Board of Directors and the Risk Committee conduct oversight on reported and
	deliberated matters first discussed by business execution line.
	[Business execution] The Sustainability Promotion Committee, the Risk Management Committee, the
	Executive Management Committee, and other committees regularly have deliberation and
	discussion, to be reported to the Board of Directors. The Group Chief Sustainability Officer (CSuO)
	(established in FY2022) and Group Chief Risk Officer (CRO) lead initiatives in their respective
	areas under the Group CEO's supervision.
	 The Climate Change Response Taskforce and five working groups have been established to enhance		p.17
	our promotion structure with regard to climate change topics being addressed jointly by multiple
	departments within the Group.
	 Sustainability-relatedindicators have been adopted for evaluating executive compensation, such as		pp.18-19
	sustainable finance amount, climate change initiatives, and assessments by ESG rating agencies.
	Strategy		Disclose the actual and potential impacts of climate-related risks and opportunities on the
		organization's businesses, strategy, and financial planning where such information is material
	 The Net Zero Transition Plan has been revised(established in 2022, revised in April 2023) to promote	pp.22-24
	the Group's climate change responses in a more integrated manner, from the perspectives of
	facilitating transitions in the real economy, capturing business opportunities, and enhancing risk
	management.
	 Identification of priorities in the Transition Plan:	pp.25-26

• [Materiality] "Environment and society" has been identified as one of the material issues.
• [Top risks / scenario analyses] "Worsening impact of climate change" was designated as one of the top risks for FY2023. Through scenario analyses, we recognized the importance of client responses to transition risks and client engagement.
• [Key sectors / next-generation technologies] The key sectors that Mizuho will focus on and engage with, and next-generationtechnologies related to decarbonization in each sector were identified from the perspective of the transition to net zero emissions,.

 Recognition of opportunities and initiatives to capture opportunities:	pp.27-34
- We recognize transformations in industrial and business structures toward the transition to a non-
carbon society and investments and their social implementation in practical applications of new
technologies as our business opportunities.
- We selected "sustainability and innovation" as one of our five areas of focus in the new medium-
term business plan (FY2023 through FY2025).

• • Establishment of foundations and scaling up the initiatives for decarbonization: We have set up the Transition Equity Investment Facility and expanded the target scopefor economic and industrial structural transformations and practical applications of technologies. We disseminate initiatives to SMEs in Japan and to Asia through strategic collaborations with external partners.
  • Capability building: We have strengthened our sustainability transformation talents and enhanced sustainability-related expertise related to environment technologies (targets set for FY2025).
• Sector-specificinitiatives:
• • We set mid-term GHG emission reduction targets, monitor results and performances, and pursue engagement with clients for each key sector, such as Electric Power and Oil & Gas, based on their positioning for decarbonization and on Mizuho's opportunities and risks.
• Risk recognition:
• • We define climate-related risk as "the risk of tangible and intangible losses as a result of transition risks1 and physical risks2 from climate change manifesting or amplifying other risks".
  • We ascertain the entirety of risks associated with climate change by identifying the risks manifested or amplified by transition risks and physical risks and assessing their importance in each risk category (qualitative evaluations). We recognize credit risk (deterioration of client business performance) and market risk (decline in the value of equity holdings) to be of particularly high consequence.
  • Transition risks: Envisioned transition risks include credit risk related to financing and investments in clients who are impacted by more stringent carbon taxes, fuel efficiency regulations, or other policies or by delays in shifting to low-carbon and other environmental technologies; and reputational risk associated with financing fossil fuel projects.
  • Physical risks: Envisioned physical risks include operational risk associated with damage or deterioration of the Group's assets due to temperature increases or increased severity of natural disasters; and credit risk associated with reduced client revenue due to business stagnation or labor force reductions.
• Scenario analyses:
• • Transition risk

	Scenarios		Network of Central Banks and Supervisors for Greening the Financial System (NGFS)3
		Current Policies, Below 2°C, Delayed Transition, and Net Zero 2050 (1.5°C) scenarios

	We specify parameters for evaluating the impact of risks and opportunities faced by clients in
Analysis	the sector being analyzed. We then analyze the increases in Mizuho's credit costs caused by
method	transition risks by formulating an outlook for the impact on clients' financial results, based on
	how the parameters change under the scenario.
Targeted	Electric utilities, oil and gas, coal, steel, automobile, maritime transportation, and aviation
sectors	sectors (worldwide)
Period	2050
	Cumulative increase in credit costs through 2050 (Difference from Current Policies scenario)
Increase in	Below 2°C: JPY 360 billion
credit costs	Delayed Transition: JPY 1.17 trillion
	Net Zero 2050: JPY 1.65 trillion

• While credit costs will increase over time in all scenarios and may have a commensurate

	financial impact on Mizuho in the medium to long term, the impact on Mizuho's short-term
Implications	financial soundness will be limited.

• The analysis affirms the importance of early transition by clients and the orderly transition by society as a whole.
• We will pursue in-depth engagement with clients to encourage early business structural
  Futuretransformations.

	actions	• We will assist governments in developing and implementing policies for orderly transitions
		in each country.

pp.35-44

pp.47-50

pp.51-55

CEO message

Introduction

Governance

Strategy

Risk management Metrics and targetsConclusion

• • Based on our sustainable business strategy, we actively support clients' transitions to a decarbonized society and their measures to address climate change.
  • • Financing for a decarbonized society: We raised our sustainable finance target over the FY2019 to FY2030 period to JPY 100 trillion, of which JPY 50 trillion is earmarked for environment and climate-relatedfinance.
• 6 - Mizuho Financial Group

2	Physical risks: Risks such as the loss or damage of assets as a direct result of temperature increase itself, as well as reduced client revenue	Appendix
1	Transition risks: Risks stemming from widespread policy, reputational, technological, and market changes which occur as the result of

transitioning to a decarbonized economy.

due to business stagnation or labor force reductions and other impacts as an indirect result of climate change.

• A network of central banks and financial regulators addressing issues such as climate change risk.

TCFD Report (Climate-related Report) 2023

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- Physical risks

pp.56-58

Types of

Acute risks

Chronic risks

risk

Scenarios

NGFS Current Policies and Net Zero 2050

NGFS Current Policies and Net Zero 2050

scenarios

scenarios

Damage to assets and business stagnation

Asset deterioration and impact on labor force

associated with changes in natural disasters

reductions associated with temperature

caused by temperature increases

increases

Direct impacts

Direct impacts

• Amount of damages from damage of Group

• Amount of damages from deterioration of

Analysis

assets

Group assets

method

• Credit costs from damage of real estate

• Credit costs from deterioration of real

collateral

estate collateral

Indirect impacts

Indirect impacts

• Credit costs from reduced revenue

• Credit costs from reduced revenue

associated with client business stagnation

associated with client labor force

reductions

Areas: Domestic, Overseas

Areas: Domestic, Overseas

Analysis

Targets: Mizuho Group and credit clients

Targets: Mizuho Group and credit clients

scope

(Small and Medium Enterprises,

(Small and Medium Enterprises,

large corporations)

large corporations)

Maximum increase if a stress event

Maximum increase if a stress event

Increase in

materializes (Current Policies, 2100, single

materializes (Current Policies, 2100, single

damage

year)

year)

costs /

Cyclones and floods: Approx. JPY 90 billion

Temperature fluctuations (as a factor in labor

credit costs

Wildfires: Approx. JPY 30 billion

force reductions, increased air conditioning

Droughts: Approx. JPY 1.5 billion

usage): Approx. JPY 40 billion

Although the likelihood of the above disasters occurring simultaneously is low, the analysis

Implications

confirmed the possibility of additional losses of approximately JPY 90 billion in a single year if

the largest stress event (cyclones and floods) materializes

Future

We have recognized the importance of controlling operational risk by improving the Group's

actions

asset portfolio

Risk management

Disclose how the organization identifies, assesses, and manages climate-related risks

 Identification of climate-related risk and its integration into our risk appetite framework and

pp.59-60

comprehensive risk management.

• We identify transition risks and physical risks arising from climate change and integrate them into our risk appetite framework and our comprehensive risk management framework for managing credit, operational, and other types of risk.
• We have established the Basic Policy for Climate-related Risk Management in the interest of establishing an effective management system based on the characteristics of climate-related risks.

 Top risk management: As part of our management of top risks, which are risks designated by top	p.61
management as having major potential impact on Mizuho, we designated the Worsening impact of
climate change as a top risk. We examine additional risk control measures for risks designated as top
risks and report on the status of their implementation to the Board of Directors and other committees.
 Risk control in carbon-related sectors	pp.62-65

• • We have established a risk control structure to assess risk in carbon-related sectors (electric utilities, oil and gas, coal, steel, and cement sectors) along two axes - the client's sector and the status of the client's transition risk responses - in order to identify and monitor high-risk areas.
  • We control risk in high-risk areas under the following exposure control policy.
  • • We pursue greater engagement with clients to support them in formulating effective strategies for transition risks, in disclosing their progress, and in embarking at an early stage on business structural transformations in order to move into a lower risk sector.
    • In order to facilitate a client's business structural transformations, we provide necessary transition support after verifying that the client has set valid targets and has planned an appropriate transition strategy in line with international standards. (In FY2022, we established criteria and a process to confirm transition strategies.)
    • We carefully consider whether to continue business with a client in the event that the client is not willing to address transition risks and has not formulated a transition strategy even one year after our initial engagement.
    • In the ways described above, we reduce our exposure over the medium to long term.
• 8 - Mizuho Financial Group

 Environmental and Social Management Policy for Financing and Investment Activity (ES Policy)

pp.66-68

• We have established and implement the financing and investment policy that specifies businesses and sectors with a particularly high likelihood of leading to adverse impacts on the environment and society (such as transition risk sectors, coal-fired power generation, coal mining (thermal coal), and oil and gas).
• The business execution and supervisory lines periodically review changes in the external business landscape and the outcomes of the policy's implementation and revise the policy and improve its implementation as necessary.
• Major changes made in March 2023
• • Coal mining (thermal coal) sector: Prohibited financing and investment used for infrastructure linked with thermal coal mining.
  • Oil and gas sector: Added a due diligence item for oil and gas extraction (are there sufficient GHG reduction measures in place?) and clarified the due diligence items for oil sands and shale oil and gas extraction.

	Metrics and targets		Disclose the metrics and targets used to assess and manage relevant climate-related
		risks and opportunities where such information is material
								pp.69-77
		Major monitoring metrics			Targets		Recent results
		Scope 1 and 2		Carbon neutral by FY2030
			(maintaining carbon neutrality		FY2021: 150,987 tCO2e
		emissions4
			thereafter)
		Scope 3 (emissions from		Net zero by 2050		(Targets and results disclosed by sector)
		financing and investment)
			- Electric power		FY2030: 138 to 232 kgCO2e/MWh		FY2021: 353 kgCO2e/MWh
					FY2030		FY2021
			- Oil and gas		Scope 1 and 2: 4.2 gCO2e/MJ		Scope 1 and 2: 6.5 gCO2e/MJ
				Scope 3: -12 to -29%		Scope 3: 43.2 MtCO2e
						(compared to FY2019 levels)		(-29% (compared to FY2019 levels))
			- Coal mining		OECD countries: Zero by FY2030		FY2021: 1.7 MtCO2e
			(thermal coal)		Non-OECD countries: Zero by FY2040
					Total for FY2019 to FY2030: JPY 100		Total for FY2019 to FY2022: JPY 21.2
		Sustainable finance /		trillion
				trillion
		environment and climate-		(JPY 50 trillion of this amount is
				(JPY 8.1 trillion of this amount on
		related finance amount		earmarked for environment and
				environment and climate-related finance)
					climate-related finance)
		Outstanding credit		Reduce the outstanding credit balance		March 31, 2023: JPY 235.5 billion
		balance of coal-fired		to 50% of the FY2019 balance by
		power generation plants		FY2030, and achieve an outstanding		(down 21.4% from March 31, 2020)
		based on the ES Policy		credit balance of zero by FY2040
		Exposure to high-risk
		areas in transition risk		Reduce over the medium to long term		March 31, 2023: JPY 1.6 trillion
		sectors
		Status of client transition		―		March 31, 2023: Steady progress in the
		risk responses					targeted sectors
		SX talents KPIs
		- Sustainability		FY2025		March 31, 2023:
			management experts		- 1,600 experts		- Approx. 1,300 experts
		- Environment and		- 150 consultants		- Approx. 130 consultants
			energy sector
			consultants
	Data for disclosure aside from monitoring metrics:
		・	Sector-by-sector credit exposure in line with the TCFD Recommendations	p.64
		・	GHG emissions from financing and investment ("Financed Emissions") based on the PCAF	pp.72-76
			methodology

• Expanded assets and sectors to be measured (proprietary investments and other sectors aside from sectors included in the TCFD Recommendations)

• Targets of analysis / scope of data collection: Seven group companies (Mizuho Financial Group, Mizuho Bank, Mizuho Trust & Banking, Mizuho Securities, Mizuho Research & Technologies, Asset Management One, and Mizuho Americas), with adjusted emission factors / market based

TCFD Report (Climate-related Report) 2023

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CEO message

Introduction

Governance

Strategy

Risk management Metrics and targetsConclusion

Appendix