Response to TCFD Recommendations

E Environment

TCFD (Task Force on Climate-related Financial Disclosures)

Joined TCFD Consortium

Task Force on Climate-related Financial Disclosures (TCFD) was established by the Financial Stability Board (FSB) to discuss matters on climate-related disclosures. The Task Force recommends firms and other entities to grasp and disclose the risks and opportunities that climate change poses on their business.

In June 2022, we joined the TCFD Consortium, a group of Japanese companies and financial institutions that support the TCFD recommendations.

TCFD Consortium is an organization established to discuss how companies and financial institutions that support the TCFD recommendations can work together to promote effective corporate disclosure and how disclosed information can be used by financial institutions to make sound investment decisions.

Greenhouse Gas Emissions Reduction Plan

Nippon Signal will work on its own corporate initiative to reduce its greenhouse gas (GHG) emissions by 50% by 2030 and to achieve carbon neutrality by 2050.
Our plants (manufacturing bases) will be 100% powered by green electricity in 2022. We will concurrently make efforts to reduce emissions from the use of products we have sold.

Scope1 ： Direct GHG emissions of the company that occur from fuel combustion or industrial processes
Scope2 ： Indirect GHG emissions associated with the use of electricity, heat, or steam supplied by electric power companies and other external sources
Scope3 ： All indirect GHG emissions resulting from business activities that do not fall into Scope 1 or Scope 2

Initiatives for Environment Beneficial Products, R&D

CBTC：Communications-Based Train Control
SPARCS：Simple-structure and high-Performance ATC by Radio Communication System
CBM：Condition Based Maintenance
BRT：Bus Rapid Transit
LRT：Light Rail Transit
MVNO：Mobile Virtual Network Operator
PICS：Pedestrian Information and Communication Systems
I2X：Infrastructure to X

Disclosure in Accordance with TCFD Recommendations

● Governance

Nippon Signal regards the addressing of climate change as a significant sustainability challenge. Our Company-wide Environmental Committee, chaired by the Executive Officer responsible for TQM Promoting Department and involving heads of each site, manages the process in accordance with the targets and plans for each fiscal year. The Board of Directors provides supervision based on the reports on matters and progress.

● Strategy (scenarios adopted)

In considering scenario analyses, we have consulted AR6 SSP1-2.6 and SSP5-8.5 of the Intergovernmental Panel on Climate Change (IPCC) and set two scenarios, namely, (1) a world in which the average temperature rise in 2100 is below 2°C (2°C Scenario), and (2) a world in which the average temperature rise in 2100 is 4°C (4°C Scenario)

● Risk management

At Nippon Signal, we sort out, evaluate, and manage climate-related risks listed below and deliberate their validity at the Company-wide Environmental Committee.
(1) Transition risks (policy and regulations, market, technology, users’ behavioral changes)
(2) Physical risks (natural disasters, infectious diseases)

● Indicators and targets (life cycle CO₂emissions)

Nippon Signal will calculate its GHG emissions according to Scopes 1-3 of STB (Science Based Targets: an international initiative to help companies set and achieve GHG emissions reduction targets towards the goal of holding the increase in global temperature to “below 2°C” above pre-industrial levels) and work to reduce emissions. For Scope 3, we will measure emissions for each category and make efforts to reduce GHG emissions, particularly those related to the use and endof-life treatment of our products, with activities starting in the early design stages.

Strategy Based on Scenario Analyses

According to our analysis, the changes in society to keep the temperature rise below 2°C will bring about carbon taxation and other regulations, changes in market needs, and other changes, and will push up demand for Nippon Signal’s decarbonization solutions. If the temperature increased by 3-4°C, there will be a rise in physical risks associated with severe disasters caused by climate change, and it may seriously affect our supply chain including our own offices and plants. Our analysis also suggests that there will be a rise in demand for disaster-resistant products.

2℃ Scenario

Risks	Implications for Nippon Signal	Responses of Nippon Signal
Transition risks
Carbon tax on suppliers, introduction of emissions trading system	Rise in business costs (carbon tax, emissions trading) Rise in purchasing prices led by the transfer of costs of materials (iron), etc. to the prices	Drive energy saving efforts and use of renewable energy (introducing energy-efficient equipment, purchase of non-fossil certificate) towards achieving GHG emissions reduction targets^*1 (6th Stage Environmental Action Plan). Expand decarbonization policy to Group companies Present Green Procurement Guidelines including those in line with the Framework Convention on Climate Change and keep track of compliance
Rapid change in procure- ment and investment behaviors aimed at a decarbonized society	Increased competition in environmental performance (products with greater environmental impact will lose competitive power Failure to respond appropriately will lead to the loss of trust in society and business opportunities Additional costs arising from having to make environment-related capital investments ahead of schedule Rise in costs for adapting to circular economy	Reduce environmental impact of Nippon Signal’s main products in accordance with SBT Scope 3^*2 Develop products and services that will help reduce GHG emissions Support TCFD and conduct scenario analyses, disclose information in accordance with the framework

*1. Long-term targets for GHG emissions reduction (SBT Scope 3) will be presented in the 6th Stage Environmental Action Plan.
*2. SBT, or Science Based Targets, are the GHG emissions reduction targets required under the Paris Agreement. Scope 3 covers indirect emissions.

4℃ Scenario

Risks	Implications for Nippon Signal	Responses of Nippon Signal
Physical risks
Increased severity and sharp rise in the frequency of natural disasters	Wind and flood damage to production bases Suspension of parts supply due to supply chain disruption Decline in new capital investments due to customers being hit by disasters Restriction on outdoor work due to extreme heat, rise in air conditioning costs	Business continuity planning: disaster preparedness at production bases, manufacture of same product at multiple production bases, diversifying suppliers, securing means of transportation Secure in-house power generation and power storage capacity Develop disaster-resistant products (waterproof, etc.) Improve outdoor work environments (roofs, spot air conditioning, etc.)
Regional epidemic of infectious diseases	Decline in operation rates of production plants including parts factories Reduction of production due to disruption in parts supply Decline in new capital investments due to weaker dominance of public transportation	Automate production processes, utilize IT for business talks Secure parts and product inventory Develop products for use against infectious diseases (temperature check, traceability, etc.)

Opportunities

Opportunities	Implications for Nippon Signal	Responses of Nippon Signal
Expand sales of products and solutions that support customers’ decarbonization efforts	Rise in orders to replace existing products for the purpose of decarbonization Increased requests for proposals for decarbonization solutions	Decarbonization plan consisting of design improvement and change of products (including discontinuing products) Develop solutions that will help reduce GHG emissions
Expand sales of products and solutions that support the strengthening of customers’ infrastructure	Rise in orders to replace existing products following customers’ works to strengthen infrastructure Rise in orders for products for securing substitute power source in case of power failure and products to prepare for flooding Increased requests for proposals for solutions that enable speedy recovery from disasters	Develop products that can stay functional during a disaster Develop products that contribute to speedy recovery from disasters
Expand sales of solutions that will help counter infectious diseases (new normal)	Increased requests for proposals for solutions that enable capturing of congestion information and equalizing of the flow of people Increased requests for proposals for solutions that enable full automation of site works	Develop and propose solutions to capture the flow of people and forecast congestion Develop and propose remote monitoring and operation solutions
Create and expand new businesses	Increased requests for proposals for disaster detection solutions	Development plan for technologies to detect disaster occurrence to infrastructure

Trends in Life Cycle CO₂ Emissions

● Trends in Scope 1, 2 emissions

● Emissions from main Scope 3 categories and calculation method

We estimate CO2 emissions from categories that are thought to account for a large portion of total emissions from our corporate activity. We plan to cover more categories and also review the calculation method to improve the accuracy of figures.