Sumitomo Mitsui Financial Group Inc

The Playbook has been reviewed by the Group's Sustainability Committee, an internal committee of the Board and approved by the Group Chief Sustainability Officer ("CSuO") who is responsible for the planning and management of sustainability-related measures. [...] The Playbook is to be revised and updated at least once a year, taking into account changes in regulations, guidance and guidelines. The evolution of technologies used for transition will also be assessed. [...] Clear governance oversights to implement the transition strategy

The Company has established and discloses a Transition Finance Playbook as a framework for assessing customers' transition plans. [...] We introduced "environmental and social due diligence" as a new assessment framework; we have in place a system for risk assessment based on assessments of our customers' transition plans, etc. [...] From this fiscal year, we have introduced an \"environmental and social due diligence\" in our corporate debtor evaluation, establishing a process to assess customers' environmental and social initiatives and risk mitigation measures. [...] If we are unable to confirm that our customers are taking specific steps toward transition after a certain period of engagement, we will carefully consider whether to continue business relationships with them.

In addition, after deliberation on the knowledge and experience expected of directors, the Nominating Committee formulates a skills matrix in order for the Board of Directors to determine the basic management policies that reflect various risks and opportunities including climate change and supervise the execution of duties by executive officers and directors. The current skills matrix includes knowledge and experience related to sustainability, and the Company has appointed directors who are expected to demonstrate knowledge and experience in this area. The Company is also working to improve the knowledge and skills of the Board of Directors as a whole through ongoing study sessions on sustainability for directors. Furthermore, the Company has established a Sustainability Committee as an internal committee of the Board of Directors which reports to and advises the Board of Directors. The Sustainability Committee, which is chaired by an outside director and includes experts as non-director members, deliberates on the progress of sustainability initiatives, including measures to address climate change, matters related to domestic and overseas sustainability trends, and other important matters related to sustainability. The Company also discloses the nature of the Sustainability Committee members' experience in the field of sustainability. In addition, the Company's Board of Directors annually analyzes and evaluates the effectiveness of the Board of Directors as a whole, including its oversight of sustainability initiatives including measures for climate change, and discloses its methods and results.

###### (2) Sustainability supervision structure

###### ① Board of Directors

The main roles of SMBC Group Board of Directors are as follows: decision-making for items that the Board of Directors should cover exclusively according to laws and regulations (for instance, basic policies for corporate management); and supervision of the execution of job duties by executive officers and directors. In addition, in principle, executive officers are entrusted with decision-making authority regarding execution of operations other than matters that should be exclusively covered by the Board of Directors, for the purpose of further strengthening the supervisory functions of the Board of Directors and speeding up business execution.

The Board of Directors is made up of diverse directors including those with expertise on sustainability. The Board of Directors conducts the final oversight on sustainability management and deliberates matters from the perspective of responding to climate related risks and opportunities. In the FY2021 Board of Directors meetings, the Group Chief Sustainability Officer (CSuO), who oversees and promotes overall sustainability initiatives, reported on the following climate change-related matters five times in total including the formulation of the Roadmap Addressing Climate Change, confirmation of the commitment to realize net zero emissions with regard to portfolio GHG emissions by 2050, and progress of sustainability promotion measures. In the meeting for this fiscal year, the Group CSuO will report on the formulation of reduction targets for portfolio GHG emissions and transition plan.

**Figure 2-4 Directors' skill matrix**

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###### ② Nomination Committee

The Nomination Committee determines the content of agenda items concerning the appointment and dismissal of Company directors to be submitted to the general meetings of shareholders. It also deliberates matters related the following: officer appointment and dismissal for the Company and its main subsidiaries; and selection of a successor for Company President of the Company, President of SMBC, and President of SMBC Nikko Securities. The Nomination Committee consists of one internal director and five outside directors; and from the perspective of ensuring the transparency of deliberations on officer appointments and dismissals, an outside director is appointed as the chairperson of the Nomination Committee.

This committee deliberates the appointment of the Group CSuO and the appointment of the Chairman and members of the Sustainability Committee.

###### ③ Compensation Committee

The Compensation Committee formulates the policies for determining the compensation of directors, officers, and executive officers of the Company, as well as the contents of the compensation, etc. for each director and officer of the Company based on the policies. In addition, the Committee deliberates the policies for determining officer compensation etc. at major subsidiaries as well as the contents of the compensation, etc. for each executive officer, etc. of the Company. The Compensation Committee consists of two internal directors and four outside directors, and from the perspective of ensuring the transparency of deliberations on officer compensation, an outside director is appointed as the Chairperson of the Compensation Committee. The compensation system and compensation levels are determined by the Compensation Committee, of which the majority is comprised of outside directors, based on the following: results of a third-party investigation on management compensation; economic and social conditions; business environment, etc.

This committee deliberates executive compensation based on the executive compensation system, which includes both quantitative and qualitative ESG evaluation items.

###### ④ Audit Committee

The Audit Committee audits the execution of job duties by officers and directors, prepares audit reports, appoints and dismisses the accounting auditor for submission at the general meeting of shareholders, and determines the content of agenda items regarding non-reappointment of the accounting auditor. In addition, members selected by the Audit Committee conduct investigations, etc. on the business and assets of the Company and its subsidiaries. The Audit Committee consists of two internal directors and three outside directors. From the perspective of ensuring the objectivity of audits and independence from business execution, an outside director is appointed as the chairperson of the Audit Committee, and in principle, at least one member of the committee should be a financial expert.

So far, this committee has reported on the following: status of sustainability initiatives; implementation status of the Sustainability Committee; and investigation of the management and operation system for sustainability promotion measures.

###### ⑤ Risk Committee

The Risk Committee, which is chaired by an outside director, deliberates the following: matters related to the management of environmental awareness and risks as well as Risk Appetite operations; matters related to the operation system for risk management; and other important matters for risk management. It also provides advice to the Board of Directors.

Regarding responses to climate change, the Sustainability Committee deliberates the formulation and progress of the overall policies. On the other hand, at Risk Committee meetings, which are held on a quarterly basis in principle, the Group Chief Risk Officer (CRO) reports and deliberates environmental awareness and risks related to climate change issues, Risk Appetite, execution status of risk management-related measures, etc., and then provides advice to the Board of Directors.

###### ⑥ Sustainability Committee

The Sustainability Committee was newly established in July 2021 and consists of a total of six members comprising two outside directors, two internal directors, and two internal or external experts. The Sustainability Committee deliberates the following: the progress of sustainability promotion measures such as measures for climate change; domestic and international sustainability-related trends; and other important sustainability-related matters. It submits reports and advice to the Board of Directors every six months, in principle.

Regarding matters related to domestic and international situations surrounding sustainability as well as the progress of sustainability-related measures in SMBC Group, the Group CSuO reports and presents proposals for sustainability-related action policies. Directors and outside experts supervise and deliberate the contents. In the 2021 Sustainability Committee meeting, specific policies for participating in NZBA and achieving net zero emissions were deliberated.

The Playbook has been reviewed by SMBC Group's Sustainability Committee, an internal board committee, and approved by the Group's Chief Sustainability Officer (CSuO), who is responsible for planning and managing sustainability-related initiatives. We have also received a second-party opinion from DNV Business Assurance Japan. Considering the updates and changes in technological innovation, various regulations, taxonomies, and guidance, the Playbook is updated at least once a year, and a second-party opinion is obtained annually. [...] Guided by these beliefs, SMBC Group has developed the Transition Plan that consolidates future objectives and a series of actions. This plan, which refer to guidance from the TCFD and GFANZ, was established through SMBC Group Management Committee and Board of Directors. Progress on the Transition Plan is regularly reported and overseen at the Group Management Committee and Board of Directors meetings (including internal committees), with some metrics tied to the compensation of executives. [...] The Sustainability Committee deliberates on matters related to the progress of sustainability promotion measures, including climate change measures, matters related to domestic and international conditions surrounding sustainability, and other important matters related to sustainability, and in principle reports and advises the Board of Directors once every half year. [...] The Group CSuO discusses the formulation of sustainability-related medium-term management plans and business operation policies, along with domestic and international conditions surrounding sustainability, and the progress report of sustainability-related measures and the policy of sustainability-related initiatives in the company, which are overseen and deliberated by directors and external experts.

**Governance Structure and Approach to ESG Risks**

**(1) Governance Structure**

SMBC Group has established the Sustainability Committee, an internal committee of the Board of Directors, as a supervisory body and the Sustainability Promotion Committee as an executive body to manage our sustainability initiatives and to deliberate on responses to environmental and social issues. The Sustainability Committee deliberates on matters related to the progress of the Group's sustainability promotion measures, matters related to domestic and overseas trends surrounding sustainability, and other important matters related to sustainability. It reports and provides advices to the Board of Directors on a regular basis.

The Sustainability Promotion Committee, meanwhile, deliberates and decides on plans to realize sustainability. These plans are put together in a groupwide basis by the Corporate Sustainability Department of SMFG.

In addition, the Risk Committee, which is an internal committee of the Board of Directors, acknowledges the environment and risks surrounding the Group, and discusses matters related to the handling of risk appetite, matters related to the implementation structure for risk management, and other important matters related to risk management, as well as giving advices to the Board of Directors. Regarding climate change issues, the Sustainability Committee deliberates on the formulation and progress of overall climate change countermeasures. At the Risk Committee, meanwhile, the Group CRO (Chief Risk Officer) regularly reports on the awareness of environment and risks, risk appetite in connection with climate change issues, and the execution of risk management measures related to climate change countermeasures. The Risk Committee deliberates on these matters and provides advices to the Board of Directors.

For specific transactions with substantial environmental and social risks that would likely impact enterprise value adversely or result in a loss of trust in SMBC Group, a body in which Management Committee officers participate, from the perspective of complex risk management, discusses whether to proceed with the transaction as necessary.

Regarding climate change issues as one of our significant management issues, we are continuously improving our sustainability management system under the leadership of the Group CEO. [...] In 2021, we appointed the Chief Sustainability Officer as one of the formal CxOs and established the Sustainability Committee as an internal committee of the Board of Directors. In the Sustainability Committee, lively discussions on risk awareness and strategic direction are held as well as gaining knowledge of outside directors and experts. [...] Reflecting discussions of the Board of Directors and the Sustainability Committee swiftly in business execution [...] The commitment to 2050 carbon neutrality announced in August 2021, recent establishment of medium-term reduction targets of financed emissions and the revision of executive compensation are good examples of introducing specific measures reflecting the high-level discussions at the Board of Directors, the Sustainability Committee, and the Compensation Committee.

Describe the process(es) your organization has in place to ensure that your engagement activities are consistent with your overall climate change strategy[…]The progress/status of our engagement activities are reported to the management periodically. Based on these reports, we receive reviews upon the alignment of our engagements to our climate related strategies from the management.

Does your organization have a public commitment or position statement to conduct your engagement activities in line with the goals of the Paris Agreement?[…]Yes

Describe the process(es) your organization has in place to ensure that your external engagement activities are consistent with your climate commitments and/or climate transition plan?[…]The progress/status of our engagement activities are reported to the management periodically. Based on these reports, we receive reviews upon the alignment of our engagements to our climate related strategies from the management.