TCFD-based Climate Change-related Information Disclosure

Guided by "The Advantest Way," Advantest implements climate change mitigation and adaptation measures from a long-term perspective, aiming to help solve important environmental issues through our business. In April 2020, Advantest announced its support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and is engaged in analyzing and disclosing information on business risks and opportunities attributed to climate change.

Advantest's environmental management system, which includes climate change-related matters, is led by the global lead of the SMWG. The SMWG is headed by the Group CEO, and consists of members representing all business units, functional units and regional units. Advantest's environmental goals are established through the formulation and review of the "Sustainability Action Plan," which is formulated through discussion and approval by the Executive Committee. The climate-related targets in the action plan are reviewed annually, taking into account the trends of environmental consortia in industry associations, as well as frameworks such as IFRS S1, S2 and TCFD. The SMWG reports on initiatives and progress towards the sustainability action plan, which sets out sustainability-related targets, including climate-related targets, at the Global Sustainability Meeting, and receives confirmation and approval from the management. In addition, the analysis of climate-related risks and opportunities based on the TCFD is reported to the CSO, who then approves the results of the analysis. The Board of Directors receives reports on climate-related risks and opportunities, holds discussions based on the content of the reports, and oversees whether appropriate responses are being made to related regulations.

Advantest is promoting climate change countermeasures as one of the key themes in its environmental activities. Since collaboration with external stakeholders such as customers and suppliers is essential in promoting climate change countermeasures, Advantest has set mid-term targets for each climate change issue, focusing on the reduction of greenhouse gas (GHG) emissions and the introduction of renewable energy. Advantest has established unified task forces (TFs) that work with internal and external to promote responsible efforts to address climate-related issues. TF1 focuses on CO₂ reduction in product development and TF3 targets CO₂ reduction through collaboration with customers. Both TF1 and TF3 aim to address Scope 3 Category 11 through collaboration with customers. TF2 focuses on reduction of CO₂ emissions through collaboration with business partners to address Scope 3 Category 1 through collaboration with suppliers, and TF4 aims for reduction of CO₂ emissions through business activities with the introduction of energy-saving equipment and renewable energy to address Scope 1+2, which is direct emissions from our own production processes. All four TFs are implementing activities related to their goals.

Advantest assesses and regularly reviews climate change risks and opportunities in accordance with the TCFD classification in order to understand the risks and opportunities brought about by climate change and work to improve its own resilience. These risks and opportunities were assessed according to their priority and impact and were classified into time frames for short (until 2027), medium (until 2030), and long term (until 2050). In the context of scenario analysis, the following time horizons are considered for both 1.5°C/2°C and 4°C scenarios.

In evaluating the risks and opportunities associated with climate change, we consider a range of scenarios, including the IEA NZE2050, IEA APS, RCP 1.9, RCP2.6, SSP1-1.9, SSP1-2.6, RCP8.5, and SSP5-8.5.

Two scenarios described in the TCFD categories were deliberated regarding business risks related to climate change.

Regarding physical risks, we have estimated the impact of flood damage at our own production sites in 2030 and 2050. As a result of the risk assessment, it has been determined that there is a risk of flooding at three of our production sites: the Gunma Factory, the Saitama R&D Center and Essai, Inc.(Chandler, Arizona, U.S.A.). At the Gunma Factory, the construction to raise the level of the extra-high voltage substation was carried out when it was renewed and flood prevention measures such as the installation of waterproof panels have been taken. Flood prevention measures are also being considered at the Saitama R&D Center. Essai, Inc.'s Chandler plant has installed a drainage system to cope with heavy rainfall during the monsoon season. Additionally, through all-hazards approaches in business continuity management initiatives, Advantest is taking measures to be able to respond to all kinds of disasters including those caused by climate change which will contribute to improving our resilience.

Semiconductors will contribute significantly to the achievement of Net Zero, which requires stringent climate change countermeasures to be imposed. It is to be assumed that semiconductor production volumes will continue to grow in the future due to factors such as the expansion in semiconductor demand accompanying the digital revolution. Meanwhile, the quality and quantity of semiconductor testing will increase in step with the increasing sophistication and technological evolution of semiconductors. Demand for semiconductor test is expected to increase as a result of the combination of two factors: greater test content per chip, and increased semiconductor production volumes. Hence, Advantest recognizes the Net Zero movement to be an opportunity created by climate change. We will make investments to achieve the necessary technological advancements, such R&D costs and human capital development for next-generation technologies, as a part of our efforts to contribute to Net Zero through our semiconductor test business and product development that meets the needs of new semiconductor technologies.

At Advantest, we consider the factors that may hinder business management to be risks and have established a company-wide risk management system. The company-wide risk management system is described in "3. Risk Factors (1) Risk Management Structure," and risks related to climate change are also managed within this system. Specifically, Advantest analyzes and evaluates urgent risks and anticipated risks posed by climate change and implements countermeasures to avoid and mitigate those risks within the company-wide risk management system.

Climate change related metrics and targets are listed in "(1) Sustainability in general 5) Metrics and Targets."

As a mid/long-term climate change countermeasures target, Advantest has set a goal to reach net-zero Scope 1+2 GHG emissions by FY2050. In addition, we have set targets to reduce Scope 1+2 GHG emissions by 60% by FY2030 compared to FY2018. For more details, please see our website. Furthermore, Advantest has established Scope 3 GHG emissions reduction targets for FY 2030. However, in light of changes in the business environment, we are currently reviewing our Scope 3 targets and considering specific measures to achieve these targets. The GHG emissions for FY2023, as outlined below, are estimates as of June 2024. As with other major performance figures, they will undergo third-party assurance by Ernst & Young ShinNihon LLC and be published on our group website (scheduled for release in October 2024).

Unit: 1,000 t-CO₂e

Unit: 1,000 t-CO₂e