Selection of Model Example for 2021 Climate Transition Finance Model Projects of Ministry of Economy, Trade and Industry

Tokyo, March 18, 2022 - Mitsubishi Heavy Industries, Ltd. (hereinafter, "MHI") applied for the “2021 Climate Transition Finance Model Projects”(Note) of Ministry of Economy, Trade and Industry (hereinafter, "METI") and was selected as a model example. One of the unique features of this model example is that MHI not only plans to achieve emission reduction from the economic activities of itself but also attempts to enable the realization of transition strategies of other parties through its products and services.

DNV Business Assurance K.K. (hereinafter, "DNV") opined that MHI's "Roadmap to Achieve Carbon Neutrality" is consistent with the sector-specific roadmaps (electric power, gas, iron and steel, chemical) formulated by METI and the sector-specific roadmap (international shipping) formulated by the Ministry of Land, Infrastructure, Transport and Tourism from the perspective of MHI's efforts to promptly provide systems, facilities and services which are necessary for the execution of these roadmaps. DNV also opined that MHI's roadmap indeed aims at contributing to CO₂ reduction in a wide range of value chains, including various key industries.

MHI is planning to issue Transition Bond via public offering in the domestic market based on this model example in fiscal year 2022.

1. Outline of this Model Example

In accordance with the three statements that are at the heart of our Principles, MHI Group serves as a manufacturing corporation that contributes to societal progress through its business endeavors of delivering products and technologies in support of social and industrial infrastructure worldwide, and resolving global issues. MHI has defined two growth areas to focus on in its 2021 Medium-term Business Plan, announced in October 2020: "Energy Transition," which aims to decarbonize the energy supply side, and “New Mobility and Logistics”, which aims to realize the decarbonization, and promote the energy efficiency, manpower saving in the energy demand side. MHI Group is committed to promoting businesses of these two areas, and to advancing the decarbonization, electrification, and intelligence of the existing businesses, in order to achieve Net Zero by 2040. MHI Group made the declaration of achieving Carbon Neutrality by 2040 with the following newly set targets.

CO₂ Emission Reduction Target

Scope 1&2: The calculation standard is based on the GHG Protocol
Scope 3: The calculation standard is based on the GHG Protocol. However, we also account for reductions achieved by CCUS as an MHI original index
CCUS: Carbon dioxide Capture, Utilization and Storage

Roadmap to Achieve Carbon Neutrality

　

These targets support the entire value chain related to our business to achieve carbon neutrality.

MHI's strategies are aligned with the 2050 Carbon Neutral Declaration of the Japanese government. We consider the issuance of transition bond as necessary funding for our activities towards achieving Carbon Neutrality by 2040.

【Summary of the scheduled Transition Bond】

• Use of Proceeds is determined based on the above projects. It may as well include R&D funds, business development and operation funds, and working capital of the eligible businesses and/or projects, which have been confirmed consistent with sectoral roadmaps for electricity, gas, iron & steel, chemicals (Ministry of Economy, Trade and Industry) and shipping (Ministry of Land, Infrastructure, Transport and Tourism), outlined in "Mitsubishi Heavy Industries, Ltd. Green/Transition Finance Framework" stated below.

2. Green/Transition Finance Framework

MHI has developed "Mitsubishi Heavy Industries, Ltd. Green/Transition Finance Framework" and has obtained a second party opinion from DNV, an independent external reviewer, that this framework is aligned with the following principles and guidelines.

• ICMA Green Bond Principles 2021
• Ministry of the Environment Japan Green Bond Guidelines 2020
• LMA, APLMA, LSTA Green Loan Principles
• Ministry of the Environment Japan Green Loan and Sustainability Linked Loan Guidelines 2020
• ICMA Climate Transition Finance Handbook 2020
• Financial Services Agency, Japan; Ministry of Economy, Trade and Industry, Japan; and Ministry of the Environment Japan Basic Guidelines on Climate Transition Finance (May 2021)

• A project of METI which provides information on and reduces the assessment costs for examples that are deemed to have model qualities in order to promoting the spread of transition finance. Examples that conform to the "Basic Guidelines on Climate Transition Finance", formulated by the Ministry of the Environment (MOE) and the Financial Services Agency (FSA), and have model qualities will be selected as model examples.

This press release has been prepared for the sole purpose of publicly announcing the Company’s transition finance, and not for the purpose of soliciting investment or engaging in any other similar activities within or outside Japan.