###### Response to climate change\n\nIn May 2022, ISEKI Group announced its endorsement of the TCFD Recommendations, and since\nthen, has disclosed information in line with the Recommendations.\n\n###### Governance\n\nAgriculture and the landscaping business, which benefit from nature, are closely connected to climate change. Given their potential for a major\n\nimpact on the business activities of ISEKI Group, an integrated manufacturer specializing in agricultural machinery, we have positioned taking\n\nmeasures for climate change as one of our priority management issues and are practicing environmental management.\n\nClimate change-related risks and opportunities are managed centrally by the ESG Committee. The Committee meets monthly in principle,\n\nexamining and deliberating on climate change-related risks and opportunities four times a year. The results of deliberations at the Committee\n\nmeetings are recommended to the Board of Directors, and important matters are deliberated and determined by the Board of Directors. This\n\nframework enables the management team to strengthen their involvement. (Please refer to p. 53 for information about the ESG Committee)\n\n###### Strategy\n\nIn 2021, ISEKI Group conducted a trial analysis on climate change scenarios to understand the impact of climate change on our business, manage\n\nassociated risks and opportunities, and factor these into our management decisions.\n\nBased on the two scenarios, namely, the 1.5°C/2°C Scenario in reference to external scenarios and the 4°C Scenario, we analyzed the entire value\n\nchain of the agricultural machinery business, the core business of ISEKI Group, both in Japan and overseas, and identified risks and opportunities\n\nas of 2050. Collection and analysis of data were conducted across the whole ISEKI Group (domestic sales, overseas sales, product planning, finance,\n\nprocurement, quality, and environment-related departments), with the Strategic Planning Section of the Corporate Planning Department playing a\n\ncentral role. Year 2030 is envisaged in qualitative and quantitative evaluations.\n\n**Risks, opportunities, and countermeasures based on scenario analysis**\n\n**World view of each scenario (envisaging 2030)**\n\n###### 4°C Scenario 1.5°C/2°C Scenario\n\n**Prioritize economic development resulting in** **Transform business towards decarbonization and**\n**aggravation of temperature rise and its effects** **success in curbing temperature rise**\n\nNatural environment Farm workers Natural environment Farm workers\n\n・ Decrease in areas for rice farming ・ Damage to agricultural soil caused by ・ Temperature rise and consistent ・ Face changes associated with the progress\n・ Increase in average temperature and concentrated torrential rains increases in the frequency of storm of decarbonization in agricultural\nsevere typhoon and flood damage ・ Radical changes in agricultural production and flood disasters machinery and agricultural methods\n\ninfrastructure\n\nInvestors and financial institutions Procurement Government Investors and financial institutions Procurement\n\n・ Emphasis on BCPs and risk management ・ Disruption in the supply chain due to ・ Full-scale introduction of policies toward ・ Expand ESG investments and loans, ・ Raw material price hikes and demand\ndue to concerns over disaster risks damage from storms and floods carbon neutrality and withdraw from businesses that surges caused by tightened\nconsume fossil fuels environment regulations\n\nImpact on ISEKI & CO., LTD. Impact on ISEKI & CO., LTD.\n\nPhysical risks Physical risks Opportunities Physical risks Transition risks Opportunities Transition risks Opportunities\n\n|Physical risks <Business suspension and increased countermeasure expenses> caused by temperature rise and catastrophic disasters|Physical risks Opportunities <Changes in demand for products> caused by changes in the agricultural environment|\n|---|---|\n\n|Physical risks < Business suspension and increased countermeasure expenses > caused by temperature rise and occurrence of storm and flood disasters However, the impact can be limited compared to the 4°C Scenario|Transition risks Opportunities <Changes in operational and procurement costs> associated with the progress in decarbonization policies and responses|Transition risks Opportunities <Changes in business opportunities> associated with advancement of demand for decarbonization|\n|---|---|---|\n\n|Col1|Col2|\n|---|---|\n|Impact on ISEKI & CO., LTD. Physical risks Physical risks Opportunities <Business suspension and increased <Changes in demand countermeasure expenses> for products> caused by temperature rise and caused by changes in catastrophic disasters the agricultural environment||\n\n|Col1|Col2|\n|---|---|\n|Impact on ISEKI & CO., LTD. Physical risks Transition risks Opportunities Transition risks Opportunities < Business suspension and increased <Changes in operational and <Changes in business countermeasure expenses > procurement costs> opportunities> caused by temperature rise and occurrence associated with the progress in associated with advancement of of storm and flood disasters decarbonization policies and responses demand for decarbonization However, the impact can be limited compared to the 4°C Scenario||\n\n|Risk category Technology Market risk Policy Transition Reputation Market|Col2|Details Decline in competitiveness caused by delays in technological development|1.5°C/2°C Scenario|Col5|4°C Scenario|Col7|Timescale for measures Short term|Direction of strategies and measures ● R&D of carbon-free agriculture ● R&D of agricultural machinery that supports agriculture adapted to natural disasters and rising temperatures|Existing initiatives ● Sales of products featuring straight-travel assist systems (tractors, combine harvesters, and rice transplanters) ● Starting limited sales of electric riding lawn mowers (Dec. 2022) ● Starting sales of biofuels (HVO)-compatible products|Future initiatives ● Enhancing lineup of automatic steering-enabled & robotic agricultural machinery ● R&D of electric agricultural machinery ● R&D of agricultural machinery adapted to natural disasters and rising temperatures|\n|---|---|---|---|---|---|---|---|---|---|---|\n||||Financial impact Medium|Potential Medium|Financial impact Medium|Potential Medium|||||\n||Market|Decline in sales due to decline in demand caused by needs and social infrastructure status|Large|Small|Medium|Small|Short term||||\n||Policy|Increase in operation cost due to introduction of carbon tax and emissions trading scheme Basis for calculation of financial impact Supplementary information on P51|Medium 1.1 billion yen/ (year of increased ) cost burden|Medium|Small 0.35 billion yen/ (year of increased ) cost burden|Medium|Mid term|● Provision of increasingly detailed TCFD information disclosures ● Comprehensive understanding of greenhouse gas emissions and stocktake of reduction plans|● Identification of climate change risks and opportunities, scenario analysis ● Understanding and disclosure of greenhouse gas emissions (Scope 1, 2 & 3) ● Introduction of International Renewable Energy Certificate (I-REC) at overseas business bases (from 2022)|● Regular revision of climate change risks and opportunities and reflection in management plans ● Understanding of greenhouse gas emissions, including sales bases, and revision of scope of reduction targets ● Consideration of the introduction of ICP|\n||Reputation|Deterioration of reputation among shareholders and other stakeholders, divestment, or plummeting share price|Small|Medium|Small|Medium|Mid term||||\n||Market|Changes in supply chain caused by climate change result in higher manufacturing costs, making it difficult to provide products|Small|Medium|Small|Medium|Long term|● Close monitoring of global material prices caused by climate change and improvement of material input efficiency ● Close monitoring of status of water resources with respect to climate change|● Understanding of input of material and water resources ● Setting reduction targets for water consumption (global production bases) ● Reducing weight of parts using iron, reducing processing waste|● Reducing weight of parts using iron, reducing processing waste ● Recycling of cooling water, use of reclaimed water (stormwater, etc.)|\n|Physical risk|Acute|Suspension of product and service provision systems due to damage suffered by the Company/supply chain caused by severe typhoon and flood damage Basis for calculation of financial impact Supplementary information on P51|Medium 4.8 billion yen/ (year reduction ) in sales|Medium|Medium 6.8 billion yen/ (year reduction ) in sales|Medium|Short term|● Understanding of detailed flood risks to production and sales bases and supply chain ● Formulation of BCP that encompasses supply chain|● Formulation of BCP (offices, production, and sales sites in Japan) ● Mapping of domestic suppliers, formulation of diversification plan|● Understanding of detailed flood risk of the entire supply chain, including overseas bases ● Formulation of BCP that encompasses global supply chain|\n|||Decline in value of existing products|Medium|Small|Large|Medium|Long term|● Rebuilding of product sales channels in line with changes and reduction of farmable areas ● Promotion of procurement of renewable electricity and energy conservation|● Fuel switching and introduction of cogeneration facilities ● Establishment of energy conservation targets (global production bases) ● Recognition as risks ● Preparation of draft decarbonization plan at each production site ● Creation of a decarbonization roadmap for the entire Group|● Setting targets for renewable energy ratio to energy consumption ● Establishment of renewable energy power generation facilities ● Energy consumption efficiency improvement through production optimization ● Detailed survey of long-term changes in farmable areas|\n||Chronic|Increase in energy price caused by rise in temperature|Small|Large|Small|Large|Long term||||\n|||Rebuilding of product sales channels in line with changes and reduction of farmable areas due to progression of climate change|Small|Small|Small|Small|Long term||||\n|Opportunities|Products and services|Increase in demand for agricultural machinery that contributes to energy conservation and greenhouse gas reduction|Large|Small|Medium|Small|Short term|● R&D of carbon-free agriculture ● R&D of agricultural machinery that supports agriculture adapted to natural disasters and rising temperatures|● Sales of products featuring straight-travel assist systems (tractors, combine harvesters, and rice transplanters) ● Starting limited sales of electric riding lawn mowers (Dec. 2022) ● Starting sales of biofuels (HVO)-compatible products|● Enhancing lineup of automatic steering-enabled & robotic agricultural machinery ● R&D of electric agricultural machinery ● R&D of agricultural machinery adapted to natural disasters and rising temperatures|\n|||Increase in sales of products and services that accommodate changes in the agricultural environment caused by climate change|Large|Medium|Large|Medium|Short term||||\n|||Increase in demand for solutions that contribute to reducing greenhouse gas emissions from farming soil|Medium|Medium|Small|Medium|Mid term|● Close monitoring of trends in subsidy schemes of national and local governments ● Deliberation of solutions that respond to farm producers' needs ● Establishment of sustainable infrastructure for agricultural production|● Innovation in environmentally sound agriculture based on collaboration with companies and local governments ● Business alliance with Faeger Co. Ltd. related to J-Credit ● Sales of tractors and rice transplanters that are compatible with a farming management system (variable fertilizing map) that utilizes AI|● Formulation of business plans as for-profit business ● Demonstration of model cases, nationwide rollout of business|\n\n--NEW-PAGE--\n\n###### Response to climate change\n\n Management of risks and opportunities\n\nRisks and opportunities identified in the scenario analyses are categorized and assessed on two axes (four quadrants); one is the magnitude of financial\nimpact and the other is the degree of the potential of such financial impact. This helps us determine the timescale for measures to address the risks and\nopportunities. The ESG Committee has established a system for categorization, assessment, and follow-up of risks and opportunities. It will continue to\nreview the system on a yearly basis, including examining and deliberating on strategies and confirming new risks in line with environmental changes.\nManagement of risks that may affect business activities in the short term is integrated into management by the Risk Management Working Group (WG).\nIn doing so, we strive to prevent risks from materializing and minimize losses, to contribute to smooth business operations and preserve assets within\nour operational processes in accordance with risk management regulations. (Please refer to P79-80 for information about the Risk Management WG)\nMeeting bodies that discuss future directions of product planning, development themes, and other issues, such as the Product Development Strategy\nCommittee and the Advanced Technology Strategic Committee, evaluate and deliberate opportunities for climate change-related products and solutions and\nincorporate the results with certain importance in the development planning with the approvals of the Directors' Operation Committee and the Board of Directors.\n\n###### Indicators and targets\n\nISEKI Group strives to contribute to the creation of a carbon-neutral and sustainable society by 2050 through "providing innovative products and\nhigher quality of services to the customers."\n\nIndicators Targets (mid- to long-term environmental targets)\nCO2 emissions for entire ISEKI Group (Scope 1 & 2) 2030 46% reduction compared with 2014 (Total)\nEco-product ratio in domestic sales 2025 65% ratio in domestic sales\n\nInitiatives throughout the entire value chain\n\nScope 3 Category 1 In April 2022, we asked suppliers to establish their own voluntary CO2 reduction targets\nWe aim to formulate CO2 reduction targets in collaboration with suppliers that account for 70% of transaction amount\n\nScope 3 Category 11 We are conducting R&D on electrification of agricultural machinery and agricultural machinery that uses alternative energy sources such as hydrogen\n\nWe participate in decarbonization demonstration projects in the agricultural industry in collaboration with local governments and other partners.\nOther\nSuch projects include the promotion and expansion of environmentally sound agriculture.\n\n*Please refer to P61 for progress in achieving mid- to long-term environmental targets in 2023. Information about the eco-product certification system and past results are posted on the Company's website.\n\n###### CO2 emissions from value chain\n\n|higher quality of services to the customers."|Col2|\n|---|---|\n|Indicators|Targets (mid- to long-term environmental targets)|\n|CO2 emissions for entire ISEKI Group (Scope 1 & 2)|2030 46% reduction compared with 2014 (Total)|\n|Eco-product ratio in domestic sales|2025 65% ratio in domestic sales|\n\n|Col1|Initiatives throughout the entire value chain|\n|---|---|\n|Scope 3 Category 1|In April 2022, we asked suppliers to establish their own voluntary CO2 reduction targets We aim to formulate CO2 reduction targets in collaboration with suppliers that account for 70% of transaction amount|\n|Scope 3 Category 11|We are conducting R&D on electrification of agricultural machinery and agricultural machinery that uses alternative energy sources such as hydrogen|\n|Other|We participate in decarbonization demonstration projects in the agricultural industry in collaboration with local governments and other partners. Such projects include the promotion and expansion of environmentally sound agriculture.|\n\nScope of calculations:\nConsolidated companies of ISEKI Group\n(including overseas sites)\n\n- These figures are calculated with reference to the Basic Guidelines on\nAccounting for Greenhouse Gas Emissions Throughout the Supply Chain of the\nMinistry of the Environment and Ministry of Economy, Trade and Industry.\n\n- Category 11 includes future emissions based on the assumption that the\nproducts sold in the respective years will be used for their useful lives.\n\n- Category 12 includes future emissions during the disposal of products sold in\nthe respective years.\n\n- Scope 3 emissions of overseas sites are calculated based on the emission\nintensity database for Japan.\n\n- For details of emissions in each category, please refer to the Company's website.\n\n**Excluding categories 8, 9, 10, 13, 14**\n**and 15**\n**Other categories**\n6%\n\n1,100,000 tons\n\n**Category 11**\n51%\n\n###### Supplementary information\n\n**Scope 1**\n3%\n\n**Scope 2**\n2%\n\n**Scope 3**\n95%\n\n**Category 1**\n38%\n\n|2023 Results|Col2|\n|---|---|\n|Total of Scope 1, 2 & 3|1,100,000 tons|\n|Scope 1|28,000 tons|\n|Scope 2|27,000 tons|\n|Scope 3|1,050,000 tons|\n|Category 1|420,000 tons|\n|Category 11|560,000 tons|\n|Other categories|67,000 tons|\n\n**External scenario mainly referenced in the scenario analysis**\n\n1.5°C/2°C Scenario\nIEA's NZE scenario, and APS scenario\n\n4°C Scenario\n\n**Basis for calculation of financial impact**\n\n|1.5°C/2°C Scenario|IPCC AR6 SSP1-1.9, SSP1-2.6 (Climate policy scenario in which post-industrial temperature increase can be curbed to less than 1.5°C/2°C), IEA's NZE scenario, and APS scenario|\n|---|---|\n|4°C Scenario|IPCC AR6 SSP3-7.0, SSP5-8.5 (scenario in which no climate policy is introduced due to regional conflicts and dependence on fossil fuels)|\n\nIncrease in operation cost due to introduction of carbon tax and emissions trading scheme\n\n- Increased tax burdens associated with ISEKI Group's total GHG emissions in 2030 were calculated by multiplying ISEKI Group's emissions volume in FY2020 (64,000 tons/year [Scope 1 & 2]) by the\nrelevant carbon price (1 U.S. dollar = 140 yen).\n\n- For the 1.5°C/2°C Scenario, the carbon price used was 130 U.S. dollars/ton in 2030 (the carbon price for advanced economies in Net Zero by 2050: A Roadmap for the Global Energy Sector, published by\nthe International Energy Agency [IEA]).\n\n- For the 4°C Scenario, the carbon price used was 39 U.S. dollars/ton in 2030 (an assumption based on the carbon price for Europe in the IEA World Energy Outlook 2020's Stated Policies Scenario [STEPS]).\n\nSuspension of product and service provision systems due to damage suffered by the Company/supply chain caused by severe typhoon and flood damage\n\n\n\n- The financial impact of flooding was calculated for ISEKI's production bases, and for the production bases of suppliers from which we purchase 100 million yen or more of raw materials or parts per year.\n\n- The impact on our own production bases was surmised by prorating average net sales from 2020 to 2021; the impact on suppliers was surmised by prorating the value of supplies purchased in 2021\nfrom the aforementioned suppliers.\n\n- Flood risk was determined by creating a risks and hazards map for each base using theWorldWildlife FundWater Risk Filter\n\n##### Foundation for sustainable growth\n\nCONTENTS\n\nSustainability in ISEKI Group ..........................................................................53\n\nStakeholder engagement ................................................................................54\n\nIntellectual property strategies ....................................................................55\n\nHuman resource strategies .............................................................................57\n\nEnvironmental management .........................................................................61\n\nEfforts to improve quality and customer satisfaction .......................63\n\nDX Promotion ........................................................................................................65\n\nInitiatives for society ..........................................................................................66\n\nMessage from an Outside Director .............................................................67\n\nCorporate governance ......................................................................................69\n\nMessages from newly appointed Outside Directors ..........................74\n\nList of officers .........................................................................................................75\n\nDialogue with shareholders and investors .............................................77\n\nRisk management ................................................................................................79\n\nCompliance .............................................................................................................81