Disclosure based on TCFD Recommendations

To realize our Management Philosophy that we contribute to the world by fighting disease and improving health with advanced technology, and create a fulfilling life for our employees, Nihon Kohden strives to earn the trust of our customers, shareholders, business partners, and society in all aspects of products, services, technology, financial position, and employee quality.
In recent years, activities aimed at achieving the UN Sustainable Development Goals have been promoted in order to respond to various cross-border social issues. The medical care we are involved in is becoming more and more complex due to various problems such as the aging society in developed countries, rising medical costs, lack of basic medical care in emerging countries, and widening medical disparities.
Under these circumstances, Nihon Kohden defined sustainability key issues (material issues) to be addressed through business and corporate activities. The Company also incorporated these non-financial targets into its Three-year Business Plan, BEACON 2030 Phase I, in order to contribute to addressing global social issues and SDGs. As addressing climate change is one of the most critical social issues facing global society and one of the most significant management issues for us, Nihon Kohden expressed its support for the recommendations by the Task Force on Climate-related Financial Disclosures (TCFD) in May 2022 and disclosed related information in July 2022. We will address climate change with integrity to realize a carbon-free society as stated in our material issues and disclose information in line with the TCFD recommendations.
We aim to realize a sustainable society and increase our corporate value by further strengthening the coordination between our business strategy and sustainability strategy, and creating both economic and social value.

To promote sustainability, Nikon Kohden has established the Sustainability Promotion Committee and Sustainability Promotion Meeting. In July 2021, Nihon Kohden has also established the Advisory Board consisting of external experts to incorporate outside perspectives on sustainability activities including measures to address climate change.
The Sustainability Promotion Committee holds a meeting twice a year and formulates the policies and directions including measures on climate change. The president, who is the chairman of the Sustainability Promotion Committee, has the authority to evaluate and manage measures to mitigate climate change, and regularly reports to the Board of Directors about the progress and evaluation of the annual plan. The Board of Directors supervise the Company’s measures on climate change. The Sustainability Promotion Meeting is held four times a year to establish and promote annual plans based on the policies and directions formulated by the Sustainability Promotion Committee and reports on the progress of those plans to the Sustainability Promotion Committee. Based on its Three-year Business Plan, Nihon Kohden’s management has set material issues and KPIs related to sustainability and assigned departments for each materiality. Members of the Sustainability Promotion Meeting, who represent the departments in charge of each materiality, report on the progress of sustainability activities and exchange opinions with other members at regular meetings. The Advisory Board Meeting is held twice a year to discuss and advise on overall sustainability promotion, including actions on climate change.

In the medical industry, demand for environmentally friendly products and digital health solutions will increase because of strengthening laws and regulations and increasing customer awareness of the need to realize a carbon-free society. Costs are expected to increase as a result of the need to meet this demand, but further business opportunities are expected if our response is handled properly.
In our analysis of the 1.5°C to 2°C scenario, we made assumptions about how the strengthening of carbon-free policies in each country and region in response to climate change would affect the industries we are involved with.
With the development of a carbon-free society, we can expect tighter regulations in each country and region, including carbon taxes and emissions trading. Since our medical equipment manufacturing is mainly assembly line production, we do not emit a large amount of greenhouse gases (GHG) on our own, but our suppliers do emit a certain amount of GHG in their parts manufacturing process. If carbon pricing and environmental labeling, including parts, become mandatory in the future, and the impact of such labeling expands, there is a risk that it will become difficult to provide medical equipment to customers at stable prices. In particular, the intensification of these initiatives in Europe may affect our ability to achieve the 45% overseas sales ratio targeted in our Long-term Vision, BEACON 2030.
In addition, as we work to reduce CO_{2} emissions, we plan to introduce equipment and technologies using renewable energy and energy conservation, as well as relocate to high-efficiency offices. We expect the corresponding costs to continue to increase. On the business front, we expect an increase in R&D and capital investment to realize digital health solutions with low environmental impact, as well as higher prices for raw materials such as resins used in product housings and restrictions on the use of certain substances. In addition, there is a risk of lost sales opportunities if the development of environmentally friendly products, for which demand is expected to grow in the future, is delayed, or if we are unable to meet the conditions for tender on medical equipment from an environmental perspective.
On the other hand, the increase in the cost of dealing with a carbon-free society is expected to be temporary, and therefore costs are expected to decrease in the long-term perspective. For example, cost reductions from reducing part counts, optimizing components, improving productivity and shortening lead times can all be expected. As one of material issues and KPIs for sustainability, we have set a target of the sales ratio of environmentally friendly products to be 20% or more (cumulative total for three years from FY2021), and are strengthening development of environmentally friendly products. We believe that by expanding our efforts to realize a carbon-free society, we can avoid worsening financing conditions and divestment by financial institutions and investors.

In a society where carbon-free policies are not progressing well and extreme natural disasters are intensifying, it is expected that the healthcare system will need to be strengthened, especially in the areas of disaster medicine and emergency medicine. On the other hand, the procurement of parts, the supply of products, and sales and service activities may be disrupted significantly.
In our analysis of the 4°C scenario, it is assumed that carbon-free policies will not be strengthened in each country and region in response to climate change, average temperatures will continue to rise, and physical risks will increase as natural disasters become more severe.
The Nihon Kohden Group operates its business activities throughout Japan and around the world. In the event of natural disasters and shortage of water or other resources associated with climate change, or the spread of infectious diseases in each region, the procurement of parts, the supply of products, and sales and service activities may be disrupted, which could have a profound impact on the operating results and financial condition of the Nihon Kohden Group.
On the other hand, in the medical field where we provide our products and services, the importance of disaster medicine and emergency medicine is likely to increase even further due to the increase in natural disasters and infectious diseases caused by climate change. Society demands that medical equipment, which is vital to human life, continue to be supplied smoothly and operate stably even in the event of a large-scale disaster. We have contributed to enhancing healthcare systems around the world by providing defibrillators that are robust and durable even in times of disaster, telemetry systems and ventilators that contribute to infection control. In recent years, by providing IT system solutions and promoting the Digital Health Solution vision, we have been working to improve productivity in clinical practice and reduce indirect CO_{2} emissions through the effective use of medical resources.

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