Support for the TCFD recommendations

Tokyo Ohka Kogyo, which aims to achieve 2050 carbon neutrality by setting KPI targets for the short, medium, and long terms, newly established interim targets in February 2024 to align its growth strategy through 2030 with the Paris Agreement’s 1.5°C target. As an immediate milestone for steadily advancing these efforts, TOK clearly set CO2 emission reduction target values as quantitative goals in the new medium-term plan tok Medium-Term Plan 2027 as KPIs through 2027. TOK continues to pursue corporate value expansion centered on minimizing absolute CO2 emissions and maximizing reduction contributions through short/medium/long-term KPI target timelines.

The desired society and climate change-related
material issues

TOK pursues a sustainable future filled with happiness and considers carbon neutrality as the major premise to accomplish this objective. As a starting point for long-term initiatives to achieve this goal, TOK promotes initiatives to support the new material
issue of the “Contribution to the global environment for a sustainable future” and tok Medium-Term Plan 2027 by backcasting from tok Vision 2030.

Governance

Under the unique material issue “Evolution of sustainability governance,” TOK focuses on 2050 carbon neutrality initiatives through collaboration between the Board of Directors (role:resolution and monitoring) and the Council of Directors (role:theme setting/discussion). The Council of Directors shares and discusses the latest climate change issues surrounding the company among department/division heads, executive officers, and directors, while executive officers lead the implementation of initiatives at the worksites. These initiatives and KPI trends are monitored by the Board of Directors and consistently updated in consideration of immediate climate change issues, changes in risks and opportunities, and progress on carbon neutral investments.

Risk management

Under the governance structure above and the risk management structure centered around the Risk Management Committee, which comprises the president, the general managers, and the ERM Department, TOK will ensure the PDCA cycle of each activity countering climate change and will maintain continuous risk management with the president and chief executive officer as the chief risk management officer.

Strategies (scenario analysis)

TOK promoted a scenario analysis of the average temperature increases by the end of the 21st century by referring to the 1.5-degree scenario and the 4-degree scenario presented by the Intergovernmental Panel on Climate Change (IPCC). The company then identified the risks and opportunities for the overall group business, including the quantitative analysis of opportunities. Both in the 1.5-degree scenario and in the 4-degree scenario, the TOK Group reaffirmed that it would be reasonably possible to enhance corporate value on a medium to long-term basis through the process above by taking advantage of the abundant business opportunities in the miniaturization and multilayer stacking of semiconductors and in the demand for power semiconductors, as well as by adequately responding to the anticipated physical risks and by strengthening resilience.

Indicators and targets

In the medium-term KPI targets, TOK aims to reduce the absolute CO2 emissions of the entire group in 2030 by 30% compared to 2019, while the factory production volume is expected to increase significantly because of the growth strategy. The intention of this aggressive target is to reduce more than 30% of the 2030 emissions, which are expected to increase significantly compared to 2019 if no reduction efforts are made. Additionally, TOK is calculating the financial impacts from internal carbon pricing and emissions trading toward 2030–2050 after achieving this target, and the company will consider disclosing this at the proper time while deepening the linkage to progress and the outlook for the growth strategies and performance targets.

Response to climate-related risks and opportunities (scenario analysis)

★ The short term is defined as until 2025, the medium term as until 2030, and the long term as until 2050.

Risk type	Category	Risks on TOK business	Expected apparent time range*	Key initiatives (countermeasures against risks)
Transition risks Mainly assuming the 1.5-degree scenario	Policy and regulatory risks	● Increase in costs due to carbon pricing (introduction of the carbon tax and expansion of emission rights trading)	Medium term to long term	● Curb cost increases by accelerating the reduction of CO2 emissions through shifts to more energy-efficient manufacturing equipment and the increased use of renewable energy ● TOK shifted 100% of its purchased electricity to renewable energy sources at all key sites in Japan in February 2023. If a carbon tax of 10,000 yen per ton were to be introduced in Japan in the next few years, the payment of the tax would be reduced through this shift by 10,000 yen x 20,000 tons, equaling 200 million yen ● TOK completed the estimation of the financial impact under the assumption of the future introduction of internal carbon pricing and the implementation of emission rights trading
Transition risks Mainly assuming the 1.5-degree scenario	Policy and regulatory risks	● Increase in costs in response to more stringent policies and regulations to reduce CO₂ emissions in Japan and other countries where TOK has manufacturing sites	Short term to long term	● Take the necessary action without delay through careful collection of information and negotiations with governmental agencies in each country, thereby coping with climate change as a member of the local communities
Physical risks Mainly assuming the 4-degree scenario	Acute risks	● Damage to facilities due to an increase in natural disasters	Short term to long term	● Continuing water risk management at the TOK Technology Innovation Center and Logistics Center, the R&D hub facilities ● Emphasize BCP and resilience to natural disasters in the capital investment plan under tok Medium-Term Plan 2027 toward tok Vision 2030
	Acute risks		Short term to long term
	Chronic risks	● Increase in costs for process temperature control and product temperature control due to global warming	Short term to long term	● Develop more efficient and more cost-effective means and methods for the control of process temperatures and product temperatures
	Chronic risks	● Increase in water stress due to global warming and the difficulty in acquiring water resources	Medium term to long term	● Implement continuous measures in Japan and overseas to minimize water consumption in production activities and to maintain and improve effluent quality

Opportunities	Expected apparent time range*	Key initiatives (how to grasp opportunities)
Further miniaturization of semiconductors Assuming both 1.5-degree scenario and 4-degree scenario	Short term to long term	● Stable supply, sales increase, development, and maintenance of the largest global market share for EUV photoresists for 7 to 2 nm processes ● Expected reduction in semiconductor power consumption by providing EUV photoresists for 7 to 2 nm processes (estimate for 2030) Contribution to reduction: ▲76 TWh (equivalent to 0.2% of estimated global power consumption by 2030)*
Expansion of the power semiconductor market Assuming both 1.5-degree scenario and 4-degree scenario	Short term to long term	● Maintain the largest global market shares for g-/i-Line photoresists ● Stably supply and increase sales of g-Line and i-Line photoresists for power semiconductors
Increasing development needs for next-generation power semiconductors that achieve even lower power consumption Assuming both 1.5-degree scenario and 4-degree scenario	Medium term to long term	● Strengthen the advantage in g-Line and i-Line photoresists for silicon carbide (SiC) power semiconductors as the market starts to grow and further strengthen development and marketing ● Reinforce the development and marketing of g-Line and i-Line photoresists for gallium nitride (GaN) gallium oxide (Ga2O3) power semiconductors ● Expected reduction in power in solar/wind power generation, EVs, and data centers, through the provision of g-Line and i-Line photoresists for SiC, GaN, and other next-generation power semiconductors (estimate for 2030) Contribution to reduction: ▲155 TWh (equivalent to 0.4% of estimated global power consumption by 2030)*
Emergence of the photo-semiconductor market due to advances in photoelectric fusion technology Assuming both 1.5-degree scenario and 4-degree scenario	Medium term to long term	● Strengthen the development and sales of materials for photo-semiconductors that realize overwhelmingly low power consumption compared to conventional semiconductors