TCFD-based Climate Change-related Information Disclosure

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Initiatives for the TCFD recommendations

Based on the belief that sustainable growth requires assessment of the impact of climate change on business and financial conditions, Advantest announced its support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) in April 2020, and has committed to analysis/deliberation and disclosure in accordance with these recommendations.
For the first fiscal year of this initiative, FY2020, Advantest started by analyzing multiple RCP and IEA scenarios of IPCC and deliberating the physical and transition risks facing our business management. We will actively utilize the TCFD recommendation in FY2021 as well in our efforts toward sustainable growth, enhancing corporate value, and the realization of a sustainable society.

Governance

Advantest newly established the Sustainable Management Promotion Working Group (WG) in FY2020. This WG is a promotional secretariat that identifies issues and makes assessments on climate change-related issues for the entire group and each Business Unit, Functional Unit, and Regional Unit. This information will be summarized in an ESG Action Plan to support and promote activities. The WG also shares information on implementation statuses with related company-wide committees such as the Disclosure Committee, Internal Control Committee, and Compliance Committee in a timely and appropriate manner, and will manage the progress of the entire group and perform risk management. The implementation status of the ESG Action Plan is reported to the Executive Management Committee and the Board of Directors twice a year for discussion and assessment. In FY2020, it was decided to support the TCFD recommendations and to participate in RE100.

Strategies

Regarding scenario analysis and deliberation, Advantest referred to scenarios such as RCP8.5, RCP6.0, and RCP2.6 of the Intergovernmental Panel on Climate Change (IPCC) and SDS of the International Energy Agency (IEA) to begin deliberation of the physical and transition risks facing our business management. We assume that climate change will not have a level of physical impact that affects our business in the less than 2℃ scenario if stringent measures to address climate change (e.g., carbon pricing) are implemented. Meanwhile, it can be anticipated that needs for semiconductors will increase in a decarbonized society, leading to a boost in business opportunities. In the 4℃ scenario, if no measures are taken to address climate change, we assume physical impacts from climate change, such as further increases in extreme weather events.

Climate change risks and opportunities

In order to respond to the effects of climate change, climate change risks and opportunities were deliberated under the TCFD categories. These risks and opportunities were assessed according to their "priority" and "impact", and were categorized into time spans of "short-term (now until 2025)", "mid-term (now until 2030)", and "long-term (now until 2050)".

Risks related to climate change

Two scenarios described in the TCFD categories were deliberated regarding business risks related to climate change—(1) "Risks related to the transition to a decarbonized society", which occurs mainly during the less than 2℃ scenario, and (2) "Risks related to the physical effects of climate change", which occurs in the 4℃ scenario in which global CO2 emissions reduction goals are not achieved.

Less than 2℃ scenario: Risks transitioning to a decarbonized society
Category Major risks Response/strategy Time axis
Policies and regulations Skyrocketing prices of products and components due to the introduction of a carbon tax Promotion of CO2 reduction management across the supply chain Short-term
Technology
  • Increased demand for further energy-saving performance (e.g., low power and compact sizes) alongside improvements in testing performance
  • Decline in sales due to a failure to meet customer needs
R&D on energy-saving technologies and development of the next generation of human resources Mid-term
Market Spread of new semiconductors Development of new testing methods and testing devices Long-term
Reputation Decrease in reputation among stakeholders due to delays in GHG emissions reduction plans Steady and sure implementation of energy conservation and energy-saving plans according to the roadmap Short- to mid-term
4℃ scenario: Physical risks of climate change
Category Major risks Response/strategy Time axis
Acute/chronic events Disruption of the supply chain due to large-scale typhoons and torrential rainfall Response based on the business continuity plan Long-term

Climate change opportunities

Semiconductors will contribute to the decarbonized society, where stringent climate change countermeasures will be imposed. We can assume that the quantity of manufactured semiconductors will continue to grow 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 hand with the sophistication and technological evolution of semiconductors. It is thought that demand for semiconductor testing will increase because such demand will be multiplied by the two factors of "enhanced testing content per chip" and the "increase in the physical quantity of semiconductors", and so Advantest recognizes the decarbonized society to be an opportunity presented by climate change.
Advantest will make investments to achieve these technological advancements, such as in research and development and in developing the next generation of human resources, as part of our efforts to contribute to the future decarbonized society through semiconductor testing and product development of new semiconductor technologies.

Climate change-related opportunities
Category Major opportunities Response/strategy Time axis
Products & services/ market Expansion of testing markets and further increase in semiconductor demand with the digital revolution R&D on energy-saving technologies Mid-term
Products & services/ market Spread of new semiconductors Development of new testing methods and test devices Mid-term
Reputation Earning of society’s trust as a resilient company Steady and sure implementation of energy conservation and energy-saving plans according to the roadmap Mid-term

Risk management

Advantest recognizes obstacles that hinder business management as risks, and has established a company-wide risk management system. Business risks from climate change are managed within this system. Risks that require priority response as well as potential future risks are analyzed and assessed with the support of the Sustainable Management Promotion Working Group. The company-wide risk management system is employed to determine measures to avoid or alleviate such risks through business continuity planning.

Indicators and goals

The Advantest Group established mid-to-long-term goals for climate change measures (CO2 emissions reductions) in April 2020, with our sights on "mitigation of climate change and the realization of a decarbonized society" and RE100, towards the promotion of ESG management, which is the foundation of the ADVANTEST Way, and the realization of a sustainable society. Regarding the incorporation of renewable energy, almost all European and American business bases had introduced renewable energy as of 2020. In Japan, our Gunma Factory plans to become RE100 compliant in 2021. Furthermore, Advantest has established long-term goals for GHG emissions, aiming to reduce not only Scope 1 and 2 emissions but also emissions generated when Advantest products are operated at customer sites (Scope 3).