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 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 intermediation, 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 help customers decarbonize by supporting the introduction of subsidized energy-saving equipment and investment in solar power generation.
• 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 and accelerate 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 will continue to transition our rental car and car-sharing vehicle fleets to next-generation vehicles^*.
• We will transition to green sources of electricity used at truck rental outlets, U-Car outlets, and bidding venues.
• We will increase the use of rebuilt and used parts and components for vehicle maintenance to promote the circular economy and reduce environmental impact.
• We will develop services in response to mandatory pre-driving alcohol checks. This will help eliminate dangerous driving such as driving under the influence and will promote DX in corporate fleet management.

• Hybrid vehicles (HV), plug-in hybrid vehicles (PHV), electric vehicles (EV), and fuel cell vehicles (FCV).

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 rentals for equipment used in R&D projects for new GX^* technology.
• We will formulate and publish procurement policies that effectively incorporate ESG perspectives. We will conduct regular surveys of suppliers and contractors. We will also set up internal committees on several topics, such as health and safety and human rights, and implement a PDCA cycle to promote sustainability.

• Green transformation (GX): Innovations for using clean energy while minimizing the use of fossil fuels, and measures to put such innovations into practice.

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.
• We will start building a supply chain management system.

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 advancing relevant initiatives such as replacing equipment and switching to renewable energy.
• 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

• Kansai Airports will continue with its environmental plan, Environmental Vision 2050 and Environmental Goals 2030[1.27MB], launched in April 2023. The plan addresses greenhouse gas emissions 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.
• In water supply and sewage concessions in Hamamatsu City and Miyagi Prefecture, ORIX will be 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, and reducing and recycling sludge 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 to contribute to a society that reuses and recycles. ORIX Eco Services buys and resells pre-owned solar panels to promote reuse and reduce waste.
• 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
ORIX Life Insurance has formulated a Sustainability Policy(in Japanese) and identifies five material issues (materialities) to be given priority. By working to resolve 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
In accordance with ORIX Bank’s material issues (materialities)(in Japanese), we will provide products and services that help resolve social issues, and implement initiatives to be a sustainable company.

• We will continue with initiatives addressing material issues (materialities).
• We will strengthen support functions for sustainability management, including energy transitions at business partners, in environmental fields such as renewable energy and green buildings, centered on the promotion of sustainable finance.
• We will continue to promote DE&I, strategically develop IT personnel in the area of human capital, and enhance our sustainability promotion system and disclosure.

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.
• We will continue to 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. Along with the sale of older vessels with poor fuel efficiency, we will consider the introduction of next-generation fuel vessels such as LNG dual-fuel vessels and methanol- and ammonia-fueled vessels. We will also discuss and examine biofuel and energy-saving technologies for demonstration tests and trial voyages.
• We will increase sustainability linked loans.

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 sustainability scores and conduct annual reviews;
• Develop a new policy on stewardship and engagement;
• Provide training on climate change to all OCU Group employees; and
• Move forward with the launch of sustainable investment products.

ORIX Europe
Robeco
We will continue our activities in accordance with our Net Zero Roadmap and Biodiversity Roadmap. In particular, we plan to expand our Biodiversity Framework. We also aim to increase impact investment AUM, as exemplified by our introduction of a range of transition investment funds.

Transtrend
Our ambition is to further refine the measuring and reporting of our carbon footprint. We will also monitor the debate on the effectiveness of carbon offsetting initiatives to enhance our offsetting program where possible. Additionally, we will continue our role as a responsible investor, including our engagement activities on issues around market functioning.

Harbor Capital
We will continue to apply our proprietary framework to provide various sustainable investing options to our clients.

Boston Partners
We will continue to leverage our sustainability and engagement team’s expertise to make sustainability-informed investment decisions and advocate for change.

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, and to zero by the fiscal year ending March 2040. To achieve this target, we will continue monitoring the reduction of the balance of credit extended to industries with high environmental impact, closely examining credit recipients and credit amounts.
• 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, and compliance.
• 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 will continue to examine methods for measuring GHG emissions of major portfolio companies. In addition, we will encourage investees that have not yet issued ESG reports to do so.

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.