Material Issues and Key Sustainability Goals

Material Issues

1. Material issues and focus areas to reduce climate-change related risks.
   1. Set GHG emissions reduction goals.
   2. Continue to lead in renewable energy investment and production.
   3. Quantify and reduce our climate change-related risks and continue to implement TCFD recommendations.
   4. Continue to promote a circular economy and reduce and appropriately manage waste.
   5. Formulate an exit strategy for existing exposure to high environmental risk business areas and create bright-line exclusion criteria in any new investing or lending.
   6. Work with our stakeholders to promote a healthier environment through goods and services that help mitigate adverse environmental impacts.
2. Material issues and focus areas to reduce social risks, including human rights risk.
   1. Continue to strengthen our Sustainable Investing and Lending Policy, Code of Conduct, and risk management system to adequately cover new and emerging social risk areas.
   2. Share a common and agreed respect for fundamental human rights with all of our stakeholders such as support for the UN Universal Declaration of Human Rights, worker health and safety, diversity, equity and inclusion and non-discrimination.
   3. Continue to improve employee satisfaction by respecting the diversity of our employees and creating an inclusive and equitable working environment that promotes flexible working styles and provides career development support, fair performance review and compensation schemes, and employee health support systems.
3. Material issues and focus areas to strengthen governance based on transparency, compliance, and integrity.
   1. Continue to strengthen the independence of the Board of Directors so that the Board may provide appropriate and effective oversight over the management’s business execution from an independent and objective perspective.
   2. The Group CEO will be responsible for all execution matters including responding to these material issues under the oversight of the Board of Directors.
   3. Emphasis on client satisfaction and developing and offering sustainable products and services.
   4. Endeavour to gain and keep the trust of our clients in all of our business areas.
   5. Promote a strong culture of compliance with all applicable laws and regulations, including paying our fair share of taxes.

ORIX is committed to continuously re-assessing and refining our analysis. This means that our list of material issues may change as our business grows and expands into new areas.

Key Sustainability Goals and Material Issues for Specific Business Areas

Key Sustainability Goals

1. Outside directors to account for over half of the composition of the ORIX Group Board of Directors by the General Meeting of Shareholders set to be held in June 2023.
2. Female directors to account for over 30% of the composition of the ORIX Group Board of Directors by the end of the fiscal year ending March 31, 2030.
3. Female employees to account for over 30% of management positions at ORIX Group by the end of the fiscal year ending March 31, 2030.
4. Reduce ORIX Group GHG (CO₂) emissions by 50% compared to the fiscal year ended March 31, 2020 by the end of the fiscal year ending March 31, 2030.
5. ORIX Group to achieve net zero GHG (CO₂) emissions by the end of the fiscal year ending March 31, 2050.
6. Reduce ORIX Group’s investment and credit balance in GHG (CO₂) emitting industries^* by 50% compared to the fiscal year ended March 31, 2020 by the end of the fiscal year ending March 31, 2030.
7. ORIX Group to achieve a zero investment and credit balance in GHG (CO₂) emitting industries^* by the end of the fiscal year ending March 31, 2040.
   
   • Refers to fossil fuel mining, palm oil plantations, and forestry financed by ORIX Group overseas subsidiaries.

Material Issues for Specific Business Areas

ORIX’s diverse businesses affect and are affected by society with regard to sustainability matters, which involve a wide array of environmental, social, and governance themes; therefore, in each of our businesses, we identify sustainability issues that have a material impact on long-term risks and opportunities. Our businesses also incorporate consideration of social themes in decision-making, leading to initiatives that have a greater social impact.

For information about key material issues for each of our business areas, please click on the links below.

Corporate Financial Services
As a core platform for Group sales, we will create new ESG-related services that meet customer needs. We will also fully deploy our network in Japan in initiatives to resolve social issues.

• We support business succession among small and medium-sized enterprises (SMEs) and help local economies develop and maintain and create employment. We also continue to strengthen our framework for being a single source for services including M&A intermediation, real estate brokerage, share transfer, and inheritance tax minimization.
• We help customers decarbonize by providing environmentally responsible power supply services represented by the PPA model.
• Our preventive healthcare business helps to extend healthy life expectancy, reduce medical expenses, and protect the ongoing integrity of Japan’s medical insurance system. We support health management at SMEs with a focus on preventive healthcare services provided at newly established medical examination centers.
• We invest in digital transformation (DX) and ESG-related startups with the goal of creating new services by supporting growth and collaboration.

Auto
We will continue to provide services that help reduce both environmental impact and traffic accidents. We will also promote and accelerate decarbonization in our own facilities and businesses.

• We will create an environment that facilitates the transition to electric vehicles (EVs) for customers, which will support expansion in vehicles under management.
• We will monitor the migration rate to next-generation hybrid vehicles, electric vehicles, and fuel cell vehicles in the leasing, rental car, and car sharing businesses, with the goal of increasing this rate by proactively proposing relevant vehicles.
• We will gradually transition ORIX-owned vehicles to EVs and increase the ratio of next-generation vehicles to directly managed rental cars and car-sharing vehicles.
• We will develop vehicle management reports using vehicle operation data and provide them as information services relevant to environment responsibility and safe driving.
• Initiatives to reduce CO₂ emissions will include using more green electricity at rental car outlets.

Rentec
We contribute to customer sustainability by providing technical knowledge and rental capabilities.

• We will continue to develop products and services that promote a circular economy, climate change mitigation, and technological innovation. We will also consider linking our cloud service for visualizing CO₂ emissions with reduction solutions inside and outside ORIX Group. In addition, we will consider promoting the introduction of rental equipment used in new technology research and development projects for GX^*.
• We will formulate procurement policies that effectively incorporate ESG perspectives.

• Green Transformation (GX): Innovations for using clean energy while minimizing the use of fossil fuels, and measures to carry them out.

Real Estate (RE Investment and Facilities Operation)
We do business with a policy that prioritizes safety, security, and comfort as we decarbonize in consideration of the environment and coexist with communities. We provide products and services with sustainability in mind to help achieve a sustainable society.

• We place importance on obtaining explicit third-party certification of the environmental performance, safety, and security of newly developed properties. We are also upgrading to energy-saving equipment and increasing our use of renewable energy as part of our plan to reduce CO₂ emissions from portfolio properties.
• Our facility operation business provides environmentally friendly furnishings and is committed to reducing food waste and loss. We use locally sourced food and ingredients, hire local people, and collaborate with tourism-related organizations and local companies in initiatives to promote the appeal of the areas we serve. Our inns and hotels prioritize the safety and security of guests and meticulously ensure consistently excellent hygiene.

Real Estate (DAIKYO)
We do business with a policy that prioritizes safety, security, and comfort as we decarbonize in consideration of the environment and coexist with communities. We provide products and services with sustainability in mind to help achieve a sustainable society.

• We will use ZEH-M Oriented^* specifications in developing condominiums as the basis for reducing the energy consumption of properties.

• Net zero energy house. Refers to housing that aims to keep the balance of annual energy consumption to zero or less by conserving energy with outstanding thermal insulation performance and the use of highly efficient facilities, and by creating energy with solar power generation. ZEH-M Oriented refers to condominiums that reduce primary energy consumption by 20% or more from the baseline value.

PE Investment
We are committed to management for sustainability among investees as a means to improve corporate value.

• We recognize the importance of reducing CO₂ emissions among investees, and engage in collaboration by jointly devising relevant initiatives such as replacing equipment and switching to renewable energy.
• Enhancing compliance and governance among investees is a priority. We emphasize optimized labor management and thoroughgoing fraud prevention and safety management.
• We focus investment on industries that contribute to resolving social issues. Our goal is to contribute to the SDGs through the businesses in which we invest.

Concession

• In April 2023, Kansai Airports launched a new environmental plan, Environmental Vision 2050 and Environmental Goals 2030[1.27MB]. The new plan encompasses greenhouse gas emission reduction, resource recycling, environmental monitoring, and biodiversity. We have set specific goals for 2030 as milestones for achieving our long-term vision and goals, centered on decarbonization, circular economy, and environmental symbiosis.
• At water supply and sewage concessions in Hamamatsu City and Miyagi Prefecture, ORIX is proactively involved in building a circular economy and sustainable local communities. We are committed to preserving water quality, preventing air pollution, controlling odors, conserving energy, reducing and recycling sludge, and contributing to a society that reuses and recycles with management that includes voluntary standards that are more rigorous than relevant laws and regulations.

Environment and Energy
We are working toward a sustainable society through businesses that contribute to a decarbonized society that reuses and recycles.

• We will expand the renewable energy business globally because it contributes to a decarbonized society. Outside Japan, we will grow our business using Elawan Energy as a strategic platform. In Japan, we will promote the nationwide use of the PPA model for third-party ownership of solar power generation systems.
• We will expand businesses that recycle and properly dispose of waste because they contribute to a society that reuses and recycles.
• We will study and implement measures to reduce CO₂ emissions at our two coal-biomass co-fired power plants by changing the equipment and fuels they use, and will consider shutting down the plants if we determine that these cannot reduce emissions by March 2030.

Insurance
Based on the ORIX Life Corporate Philosophy (in Japanese), ORIX Life Insurance has formulated a Sustainability Policy (in Japanese) that clearly states its basic approach to contributing to solving social issues through its life insurance business, and identifies five material issues (materialities). By working to resolve these important issues based on this policy, we will contribute to the realization of a sustainable global environment and society for future generations.
ORIX Life Insurance’s Material Issues (Materialities)

• To provide security through the insurance business to people of all generations who will live in the age of 100-year lifespans.
• To realize a sustainable society through the promotion of responsible investment as an institutional investor.
• To build mutually beneficial relationships with business partners.
• To create an environment in which each and every employee can maximize his or her potential in various situations.
• To strengthen corporate governance for sustainable growth.

See here (in Japanese) for details on initiatives for each material issue.

Banking
In accordance with ORIX Bank’s material issues (materialities), we will provide products and services that help resolve social issues, and implement initiatives to be a sustainable company.
ORIX Bank’s Material Issues (Materialities)

1. Creating a sustainable economy and society:
   • Responding to an aging society
   • Regional revitalization
   • Realizing a smart and resilient society
2. Building safe and secure homes and lifestyles:
   • Creating sustainable cities and communities
   • Resolving urban issues
3. Realizing a society in harmony with nature:
   • Responding to climate change
   • Creating a recycling-oriented society
4. Creating a work environment in which everyone can work comfortably:
   • Diversity and inclusion
   • Human resource development and self-realization

Aircraft and Ships
Aircraft Business

• Recognizing the strong social demand for reduced CO₂ emissions in the airline industry, we will provide supplementary support for meeting the emission reduction targets of airline companies as an operating lease provider. We therefore aim to increase the ratio of new models with good fuel efficiency in our aircraft portfolio.
• We will consider investments and loans related to sustainable aviation fuel (SAF).

Ship Business

• ORIX bases vessel ownership on specifications that improve fuel efficiency and reduce environmental impact. We have implemented a policy to exclusively procure new ships that comply with international environmental regulations, and we will not invest in ships built prior to the international environmental regulations* that went into effect in 2013.
• We will increase sustainability linked loans.

• Fuel efficiency regulations for new ships.

ORIX USA
We believe that ESG-based investment decisions are essential to contributing to society, generating sustainable growth, managing risk, and maintaining the trust and respect of our stakeholders.

• We will evaluate and monitor ESG scores and conduct annual reviews.
• We will improve the ESG scorecard* to better contribute to ESG due diligence and engagement.
• We will identify indicators and exposures related to information disclosure based on the TCFD recommendations, and monitor them as part of risk management.

• ORIX USA uses its own ESG scorecard to assign ESG scores to all assets on its balance sheet. The ESG scorecard incorporates the framework of the U.S. Sustainability Accounting Standards Board (SASB), and also adjusts risk weightings by industry sector.

ORIX Europe
Robeco

• Our investment strategies will integrate ESG factors: (1) strategies that employ ESG information in investment decisions; (2) strategies that focus on sustainability; and (3) impact investment strategies. In particular, we will focus on expanding the balance of assets under management related to (3) impact investment strategies.
• We will create an engagement policy and appoint experts to strengthen engagement with governments and government-owned enterprises.
• In line with our Net Zero Roadmap, we will reduce carbon emissions from our investment and business activities by 7% each year with the goal of achieving net zero by 2050.
• In line with our Biodiversity Roadmap, we will implement initiatives for TNFD* testing and the creation of biodiversity-related asset management industry standards.

• Taskforce on Nature-related Financial Disclosures: An initiative launched in June 2021, TNFD encourages organizations to assess and report risks and opportunities related to the natural environment and biodiversity in their own economic activities.

Boston Partners Global Investors
Boston Partners incorporates sustainability considerations into its investment scoring models, with an emphasis on climate change, corporate governance, and supply chain management. For companies with adverse sustainability metrics, Boston Partners’ Sustainability and Engagement Team provides an in-depth review of the company. This review forms the basis of engagement, which includes both dialogue with the company and use of proxy decisions.

Harbor Capital Advisors
Harbor Capital is committed to providing additional transparency of ESG metrics for its equity mutual funds to investors, which it believes will afford investors an additional layer of due diligence when making investment decisions.

Transtrend
Transtrend aims to contribute to well-functioning, well-organized and reliable markets. Transtrend established an ESG Committee in 2021 to coordinate and enhance its progress on beliefs, policies, and initiatives in the areas of responsible investing and corporate responsibility.

Gravis Capital Management
Gravis invests in long-term projects that offer a human dimension, including renewable, social, and economic infrastructure. Its approach to responsible investment includes exclusions, ESG due diligence, monitoring and engagement, and reporting, overseen by its Responsible Investment Committee. Gravis is working to reduce its carbon footprint, and as part of this initiative, it has offset carbon emissions by contributing to a portfolio which is run by a provider whose aim is to reduce one billion tons of CO₂ by 2030. In addition, Gravis makes efforts to quantify ESG indicators used in its investment portfolios.

Asia and Australia

• Subsidiaries in Malaysia, Indonesia, and Australia will reduce the balance of credit extended to industries with high environmental impact by 50% through 2030 compared to 2020.
• We will support ESG initiatives among existing private equity investees in Greater China.

Review of Material Issues

ORIX has a diverse portfolio of businesses. In order to make our sustainability initiatives and contributions to society more meaningful, it is important that we focus our efforts on business areas with more pronounced social impact. To that end, we identified material issues in three business areas in 2019 and have been addressing social themes and needs through our business activities.
Given the increasing importance of incorporating sustainability into all aspects of the business, as well as changes in our operating environment, we reviewed our material issues in 2021. In this evaluation, we identified Group-wide ESG-related material issues that need to be addressed in order for ORIX to continue to grow sustainably. We also set ESG-related key goals to link clearly defined actions to the material issues.
We will analyze and evaluate material issues on an ongoing basis. As a result, material issues may change. In addition, material issues may change as a result of business growth or entry into new business areas.

Process for Reviewing Our Material Issues

• An executive body for senior management and executive officers to discuss important matters related to ORIX’s management and strategy.