In assessing physical risks, we examined the risks from the objective perspective of Sompo Risk Management Inc., an external expert, referring to the IPCC RCP scenario. For the scenarios, we have adopted RCP8.5 (equivalent to a 4°C increase) as a stress case, and RCP4.5 (equivalent to STEPS in IEA WEO) and RCP2.6 (equivalent to APS) as cases that are close to our base-case scenario. As a result of simulating the amount of damage caused by flooding using WRI Aqueduct and other means for 31 of our facilities and assets in Japan, such as refineries and smelters, our current estimate of the average annual amount of damage in the stress case is over 100 million yen, and we expect the average annual amount of damage to be about 100 million to 200 million yen in 2040.
There is a tendency for damage to be greater in locations where storm surges are a concern due to large rivers in the vicinity or strong winds during the passage of typhoons. We are implementing measures to mitigate these risks to ensure that the overall impact is minimal.

Expected Annual Amount of Damage Due to Inland Flooding

Expected Annual Amount of Damage Due to Coastal Flooding

While it is certain that society will move toward carbon neutrality based on international trends and other factors, it remains unclear what the main source of carbon-neutral energy will be and when necessary technological breakthroughs will occur. Taking into account policy trends and other factors, we believe that the turning point will be around 2030. We have a high level of resilience that enables us to respond to any scenario, and we will continue working to establish our technological and strategic superiority toward the turning point, which will be around 2030.
We will make the necessary investments ahead of this turning point in 2030. We will focus on the development of intangible assets not booked on the balance sheet, such as technological development, collaboration with leading partners, utilization of support systems from the government, and human resources development.
Meanwhile, we will also streamline and improve the efficiency of our existing fossil-resource-derived energy businesses in line with the decline in demand in the domestic market. We will secure and develop human resources and other intangible assets during the third Medium-Term Management Plan to establish our advantage as a pioneer. We will also monitor the growth of the decarbonization market and expand capital investment in promising fields from 2030 onward. In terms of the scale of capital to be invested, we plan to increase the total amount by 1.3 times compared to fiscal 2025 by 2040.
Currently, fossil energy accounts for more than half of the Group’s earnings. Under the third Medium-Term Management Plan, we will implement various measures following the basic policies of “establish a solid earnings base,” “accelerate execution of measures for energy transition,” and “enhance the management base,” to maximize earnings in our current business portfolio.
At the same time, by 2030, in addition to upfront investment in decarbonization, we will build a business foundation for EV charging and the ENEOS Platform to meet the needs of local communities and individuals. By around 2040, the “permeation” phase of the energy transition, we expect our earnings portfolio to comprise 50% decarbonized energy and fossil energy offset by CCS and other measures, and 50% materials and the ENEOS Platform.

Scale of Investment Capital and Profits in the Long-Term Vision by Business Area

1. 1Fixed asset balance by business + working capital of inventory, etc.
2. 2Including incubation businesses. The target for FY2025 is 7% or higher excluding the incubation businesses.
3. 3Net income attributable to owners of the parent

We are advancing our shift to being a business that contributes to the reduction of carbon emissions by setting an internal carbon price of 50 dollars per ton^* as a reference and identifying the impacts of both the risks and opportunities associated with changes in our CO₂ emissions. We have set specific CO₂ reduction values with the aim of accelerating the construction of a business portfolio that will enable us to achieve carbon neutrality. We will use these values as factors to guide investments in energy efficiency that will lower our carbon emissions and to encourage exploration of new investments that will advance our conversion to decarbonized energy. The internal carbon price will be updated as the business environment evolves.

• *For ENEOS and JX Nippon Oil & Gas Exploration business areas

In building our business portfolio for a decarbonized society, we believe that reducing social and economic burdens is essential to the continuity of social and economic activity during the transition period. The most effective way we can contribute to a just transition is by fully leveraging our strengths, including our refineries, supply chain and other existing assets, our highly professional and motivated human capital, and our close relationships with local communities, including local economies.
For example, in building a hydrogen supply chain, which is currently in progress, we can use our refineries, logistics, and service station network to establish a competitive advantage, which will enable us to minimize any adverse impacts on our employees or related companies as well as on the employment and labor conditions and people’s livelihoods in local communities.
Our approach is aligned with the International Labour Organization’s “Guidelines for a just transition towards environmentally sustainable economies and societies for all.”
We also conduct human rights due diligence based on the United Nations Guiding Principles on Business and Human Rights every two years, and we will carry out regular reviews and implement appropriate measures as we pursue our initiatives during the transition.