Information Disclosure based on the TCFD Recommendations

The progress of IIJ Group's initiatives for the TCFD(*1)'s disclosure recommendations of "Governance," "Strategy," "Risk Management" and "Metrics and Targets" is as follows.

Governance

IIJ believes that issues concerning climate change are highly relevant to its future business from a long-term perspective, and that addressing these issues sincerely shall lead to IIJ Group's sustainable growth and enhancement of its corporate value over the long term. IIJ has established the Sustainability Committee chaired by the president under the direct control of management to promote these initiatives as company-wide efforts, and has been continuing related activities based on the "Policy for Environmental Initiatives". This committee consists of cross-functional members from corporate planning, technology, finance, public relations, and other divisions to identify, assess, and control climate change related risks and opportunities from a variety of perspectives. In addition, important policies, measures to be implemented, and their progress are submitted to and reported to the Board of Directors.

Activities of the Sustainability Committee

(As of the end of June 2022)

Committee meetings	Ten times（2021.08-2022.06） Main topics Policy for environmental initiatives, climate related risks and opportunities, TCFD disclosure (scenario analysis, greenhouse gas emissions, environmental targets etc.), policy for data center initiatives etc.
Report to the Board of Directors	Three times Subjects Policy for environmental initiatives Policy for greenhouse gas reduction initiatives at IIJ's own data centers Information disclosure based on the TCFD recommendations

Strategy

The TCFD recommends that analyses include the 2℃ or lower scenario, which is based on the Paris Agreement's targets. IIJ selected the 2℃ or lower scenario for the initial "Scenario Analysis" this year in line with this recommendation. The "Scenario Analysis" was conducted by setting the year 2030 as a point in time in consideration of the rapid progress of information technology and others. The table below shows the risks and opportunities related to climate change identified by IIJ that could have a significant impact on its business, measures to address them, and impacts on its business, strategy and others. As for physical risks such as increased occurrence of typhoons and floods, prolonged high temperatures, and sea level rise, IIJ recognizes that the impact on its business and strategies is low due to the selection of data center sites in consideration of hazard maps, and redundant designs of network circuits and equipment. Meanwhile, the use of electricity is essential for the provision of network related services, and IIJ believes that implementing measures such as the use of renewable energy and improvement of energy efficiency at data centers, which consume a large amount of electricity, is an important initiative to address transition risks and opportunities, including stricter laws and regulations toward a decarbonized society, increasing demand for low-carbon emission services, and increasing social demand for environmental responsibility.

	Events	Risks and Opportunities	Measures	Time Horizon(*)	Business Impacts of the 2℃ or Lower Scenarios
P h y s i c a l r i s k s / o p p o r t u n i t i e s	Increase in extreme weather events such as typhoons and floods, and climate changes such as prolonged high temperatures	Risk Risk of inability to provide services due to data center facility damage, Internet circuit disconnection or other events caused by natural disasters Risk of inability for engineers to work on-site at data centers or other sites due to natural disasters Opportunity Increasing demand for services that are highly resilient to natural disasters and climate changes	Selection of data center sites in consideration of hazard maps, and redundant designs of circuits and equipment Formulation of business continuity plans and establishment of a system that enables remote monitoring between data centers	Long-term	Low
T r a n s i t i o n r i s k s / o p p o r t u n i t i e s	Stricter laws and regulations on decarbonization and energy conservation	Risk Risk of an increase in service operating costs due to increased renewable energy prices Risk of an increase in service operating costs due to increased electricity prices as a result of the introduction of carbon taxes	Formulation of a policy for greenhouse gas reduction initiatives at IIJ's own data centers, and efforts to achieve targets for renewable energy usage and energy conservation Plans to diversify renewable energy procurement through measures such as the installation of photovoltaic power generation	Mid- to Long- term	High
	Increasing demand for low-carbon emission services	Risk Risk of inability to provide services to meet the demand due to unavailability of renewable energy procurement or failure to achieve energy conservation Opportunity Increasing demand for data center services that use renewable energy and energy-saving technologies, as well as low-carbon emission services that use them		Mid- to Long- term	Medium
		Opportunity Increasing demand for IT resource sharing services such as cloud services Increasing demand for services that make business activities more efficient through IT utilization such as IoT	Continued execution of current strategy	Short- to Long- term	Medium
	Increasing social demand for environmental responsibility	Risk Risk of a decline in reputation from customers and capital markets due to insufficient corporate initiatives and disclosure of such information Likewise, risk of not being able to secure human resources necessary for business operations due to a decline in reputation in the human resources market	Continuous execution of environment related initiatives, enhancement of information disclosure, and communication with shareholders, investors, ESG rating agencies, customers, and students etc.	Short- term	Low

• (*)short-term : 2 years or less, medium-term : 3-5 years, long-term : 6-10 years

Risk Management

Information on climate change related risks is constantly collected at each division and business unit, and these risks are continuously recognized, assessed, and controlled by the Sustainability Committee held once a month in principle. Risks that could have a significant impact on businesses are integrated into company-wide risks, and the Sustainability Committee and front-line divisions work together to formulate corresponding policies, which are then reviewed and approved by the management meeting and submitted to and reported to the Board of Directors.

Metrics and Targets

Actual Greenhouse Gas Emissions

As of the end of June 2022, IIJ calculated greenhouse gas emissions and the scope of data collection is IIJ (non-consolidated base). In Scope 1 and 2, which calculate IIJ's own emissions, the Scope 2 emissions, which recognize the electricity consumption of its own data centers, account for 98% of the total emissions. In Scope 3, which calculates indirect emissions within the upstream and downstream of supply chain, a large proportion of indirect emissions are accounted for by Category 1 "Purchased goods and services" and Category 11 "Use of sold products," which are recognized through the purchase and sale of equipment and others when providing system integration, and Category 2 "Capital goods", which is recognized through the purchase of equipment and others used in service facilities. These account for 98% of indirect emissions. In comparison with the emissions of other companies in the same industry, the emissions are generally correlated with the size of the business, and the composition of the emissions is similar for each company.

IIJ (Non-consolidated basis) FY2020 Results (Unit: t-CO2)

• (*)Calculation is based on the Basic Guidelines on Accounting for Greenhouse Gas Emissions Throughout the Supply Chain（Ver2.3）(The Ministry of the Environment and Ministry of the Economy, Trade and Industry）

Policy for Greenhouse Gas Reduction Initiatives at IIJ's Own Data Centers

IIJ Group contributes to the reduction of greenhouse gas emissions in society as a whole by improving the efficiency of social activities through the provision of network related services and by sharing computer resources through the provision of cloud services. However, the use of electricity is essential for delivering these services.

IIJ recognizes the importance of reducing greenhouse gas emissions at its own data centers, which account for more than 70% of greenhouse gas emissions (Scope 1 and 2 (*2)), by "usage of renewable energy (*3)" and "improvement of energy conservation". IIJ has set targets for each of these initiatives.

Measures	Targets
Usage of renewable energy	The target is to increase the renewable energy usage rate of data centers (Scope 1 and 2) to 85% in FY2030.
Improvement of energy conservation	The target is to keep the PUE(*4) of the data center at or below the industry's highest level(*5) until FY2030 through continuous technological innovation.

• (*)Renewable energy usage rate as of March 2022：14.3％　
• (*)PUE performance in FY2021：1.22 for Matsue DC and 1.42 for Shiroi DC

• (*1)TCFD：Task Force on Climate-related Financial Disclosures
• (*2)Scope 1 and 2 (Greenhouse gas emissions by a company): Direct emissions from the use of fuels and industrial processes at the company and indirect emissions from the use of electricity and heat purchased by the company (as defined by the GHG Protocol)
• (*3)Renewable energy: Including substantial renewable energy through the use of non-fossil fuel certificates
• (*4)PUE（Power Usage Effectiveness）：Total data center facility energy usage divided by IT equipment energy usage
• (*5)Industry's Highest Level PUE : PUE 1.4 or lower (As of April 2022, the Agency for Natural Resources and Energy has set a benchmark index and target level of PUE as 1.4 or lower in the data center sector, and operators that achieve this are considered excellent energy conservation operators.)