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.

Note: All key sustainability goals are subject to compliance with local law. For example, where diversity goals may be unlawful, the targets do not apply.

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.

• Through initiatives such as power purchase agreements (PPAs) and the provision of solar panels for on-site consumption, we will contribute to the wider adoption of renewable energy. We will also support customers’ decarbonization efforts by assisting with the installation of energy-saving equipment utilizing government subsidies.
• We support business succession among SMEs and help local economies develop, maintain, and create employment. We also continue to strengthen our framework for being a single source for services including M&A advisory, real estate brokerage, share transfer, and inheritance tax minimization.
• 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 medical examination centers.
• We invest in DX and ESG-related startups with the goal of creating new services by supporting growth and collaboration.

Auto
We will promote services that help to reduce environmental impact and ensure compliance with laws and regulations. We will also continue to promote decarbonization in our own facilities and businesses.

• By increasing the number of EV models on offer as well as proposing the installation of charging facilities, we will provide an environment where customers can easily introduce EVs on lease.
• We have launched a new service that offsets CO₂ emissions associated with corporate vehicle use, based on the amount of fuel purchased by customers.
• We will increase the use of rebuilt and used parts, components and vehicle bodies for vehicle maintenance to promote the circular economy and reduce environmental impact.
• We are working with manufacturers to test the practical reuse of used tires.
• We will continue to transition our rental car and car-sharing vehicle fleets to next-generation vehicles.
• Through ESG initiatives that involve not only our company but also our suppliers, we will work to maintain and improve the quality of our services while also aiming to enhance our evaluations by rating agencies.

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 are promoting the realization of procurement practices that incorporate ESG perspectives throughout the supply chain.
• We are enhancing sustainability-related disclosures, including publishing the “CSR Procurement Guidelines” on our corporate website.
• We are expanding the scope of surveys conducted with suppliers and contractors and examining improvement measures to be requested of suppliers.
• We will begin switching to renewable energy to reduce Scope 2 emissions.

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 upgrading to energy-saving equipment and increasing our use of renewable energy as part of our plan to reduce CO₂ emissions from portfolio properties.
• In the facility operation business, we aim to remain a company trusted by all stakeholders. To that end, we have established five priority themes: (1) caring for the environment, (2) ensuring a pleasant stay, (3) coexisting with the local community, (4) creating a fulfilling workplace, and (5) fair business practices. We actively obtain and disclose third-party certifications for each initiative to ensure our accommodations can be chosen with even greater confidence.
• We have formulated the “Real Estate segment Supplier Code of Conduct,” which outlines expectations for understanding and implementation by our suppliers. Through dialogue and engagement with suppliers, we will promote understanding and work to build a sustainable supply chain.

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.
• We have formulated the “Real Estate Segment Supplier Code of Conduct,” which outlines expectations for understanding and implementation by our suppliers. Through dialogue and engagement with suppliers, we will promote understanding and work to build a sustainable supply chain.

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 advancing relevant initiatives such as replacing equipment and switching to renewable energy. We will formulate emissions reduction plans for portfolio companies to support ORIX Group’s decarbonization goals.
• We will start conducting risk analysis of each investee to address supply chain management and medium- and long-term ESG issues set by the investees.
• Enhancing compliance and governance among investees is a priority. We emphasize optimized labor management and thorough 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

• At Kansai Airports, we are advancing initiatives toward our long-term vision and 2030 targets under our environmental plan, “Environmental Vision 2050 and Environmental Goals 2030.[1.27MB]” Our efforts focus on “decarbonization,” the “circular economy,” and “environmental symbiosis” addressing not only greenhouse gas emissions reductions but also resource circulation, environmental monitoring, and biodiversity.
• In the water supply and sewage business, we conduct rigorous pollution control under voluntary standards stricter than legal requirements, while actively working to reduce environmental impact. Specific measures include preserving water quality, preventing air pollution and odors, improving energy efficiency, and reducing and recycling sludge. Through these efforts, we aim to contribute to a circular economy and the realization of a sustainable local community.

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

• We aim to contribute to climate change mitigation by promoting the global adoption of renewable energy through the sustainable expansion of our business.
• We will expand businesses that recycle and properly dispose of waste to 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.
• We will continue efforts to decarbonize electricity used in our own operations, with the goal of completing this transition ahead of 2030.

Life Insurance
ORIX Life Insurance has formulated a Sustainability Policy(in Japanese) and identifies five material issues (materialities) to be given priority. By addressing these material 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
ORIX Bank aims to contribute to the realization of a sustainable society by engaging in dialogue with a wide range of stakeholders—including customers, business partners, employees, shareholders, society, and government—to accurately understand societal expectations and address social issues through its business activities.
We will provide financing to industries that support the foundation of a sustainable society and offer products and services that help solve challenges faced by both our customers and society. ORIX Bank also strives to become a sustainable company by promoting workstyle reforms and digital transformation, aiming for continued growth.
We place the highest priority on sustainability in our business decision-making processes.

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 emissions reduction targets of airline companies as an operating lease provider. We therefore aim to increase the ratio of new fuel-efficient models in our aircraft portfolio. At Avolon, we aim to achieve 75% new models by 2025.

Ship Business

• We will base our owned fleet on environmentally friendly specifications and promote the sale of aging vessels with poor fuel efficiency.
• We have begun introducing next-generation fuel vessels—dual fuel vessels that can operate not only on heavy fuel oil but also on more environmentally friendly fuels such as LNG and methanol—and aim to increase their share within our fleet.
• We will explore and promote initiatives to reduce GHG emissions by utilizing our owned vessels.
• We are also considering investments in AI and digital transformation (DX) businesses related to maritime operations.

ORIX USA
ORIX USA (OCU) believes that investment decisions incorporating sustainability considerations are essential to contributing to society, generating sustainable growth, managing risk, and maintaining the trust and respect of our stakeholders. As we continue to evolve, we aim to:

• Continue to evaluate and monitor investment targets’ sustainability scores and conduct annual reviews;
• Monitor the impact from climate legislation and sustainability-related regulations. Perform updates as needed per evolving landscape;
• Provide PRI training programs for all investment professionals and the Sustainability Champions^*
• Formally track and benchmark OCU Group GHG Emissions in anticipation for future disclosure requirements.
• The Sustainability Champions are employees within the investment teams and corporate functions who hold a higher awareness of sustainability matters and facilitate discussions and research within the respective teams in which they operate. They also act as a direct and less formal liaison between the Sustainability Team and their respective teams.

ORIX Europe
Robeco
Will continue region-specific marketing for sustainable investing (SI) and aims to establish strategic partnerships that can monetize its intellectual property related to SI.

ORIX Corporation UK
Contribute to sustainability in two of its four priority investment areas: (1) decarbonization and renewable energy business (focus on batteries, smart meters, hydrogen, and grid infrastructure) and (2) waste processing business (particularly next-generation technologies such as anaerobic digestion and waste-to-energy solutions)

Asia and Australia

• In Malaysia, Indonesia, and Australia, conduct monitoring to reduce balance of credit exposure to industries with a high environmental burden. Our policy is to reduce such balance of credit by 50% compared to 2020 levels by 2030, and to eliminate it entirely by the fiscal year ending March 2040.
• Based on the laws and regulations of each country, we will take stock of issues and organize the situation at each local subsidiary with regard to human rights risks, supplier management.
• Among local subsidiaries, we will share measures expected to have a positive impact and discuss their feasibility. Measures include electric vehicle conversion, provision of sustainable loans, and provision of products to unbankable customers.
• In Greater China, we collect and organize information on ESG-related laws and regulations for each country and region where we invest. For investees that have already published ESG reports, we work to enhance the content. For those who have not, we will encourage them to begin publishing such reports.

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.