Information Disclosure based on TCFD Recommendations

In October 2023, NSD announced to make its best effort to support the recommendations of the Task Force on Climate Change-Related Financial Disclosures (TCFD)^*, and disclosed the information on the four elements, "Governance", "Strategy", "Risk Management" and "Indicators and Targets" based on the TCFD recommendation framework.
NSD will continue to face the issues of climate change from a medium to long-term perspective, to deepen the understanding of the impact on NSD’s business operation, and to disclose matters such as Governance, Strategy, Risk Management, and financial impact regarding climate change in an accurate and timely manner to increase the management transparency.

*TCFD is an abbreviation for Task Force on Climate-related Financial Disclosures, the English name of the Task Force on Climate-related Financial Disclosures.
TCFD is a task force established by the Financial Stability Board (FSB) in December 2015. TCFD encourages companies and others to disclose information on “Governance”, “Strategy”, “Risk Management”, and “Metrics and Targets” related to climate change.

Governance

NSD established “Sustainability Management Committee (the Committee)”, chaired by the CEO, as a subordinate organization the Board of Directors, in July 2022 with the purpose of promoting the Group's sustainability activities, including responding to climate change.
The members of the Committee are the leaders at each department responsible for corporate governance, resource and energy management, supply chain, health management, external disclosure. The Committee’s main role is to deliberate on sustainability initiatives for the entire Group (the Group), monitor the status of initiatives, collect information, and educate employees.
The Committee is held once every quarter in principle and the matters discussed by the Committee are regularly reported to the Board of Directors, and the Board of Directors makes resolutions on important matters.

Strategy

Based on the framework of the TCFD recommendations, NSD organized the "Risks" and "Opportunities" related to climate change that are expected to affect the Group's business.
Please see the【Figure 2】below:

【Table 2】Climate-Related Risks / Opportunities and Financial Impacts

Type	Potential Financial Impacts
Transition Risks	Decrease in number of current / potential customers, due to industry reorganization or decline of business which may occur by climate change. Decrease in orders received, due to NSD’s inability to respond to requests from customers to address climate change. Increase in necessary expenses (e.g. carbon offset costs), necessary to NSD’s climate change related countermeasures. Increase in NSD’s R&D expenses and capital expenditures, due to requests from customers to develop innovative technologies and products related to climate change. Increase in NSD’s tax burden, due to introduction of new environmental taxes (e.g. carbon tax). Decline in NSD’s stock price, due to NSD's inability to respond to shareholders' requests for information disclosure regarding climate change.
Physical Risks	Decrease in productivities, due to the health damage of NSD’s employees caused by abnormal weather such as increase in average temperature. Instability in NSD’s business operations, due to frequent occurrence of extreme weather events such as cyclones, floods, etc.
Opportunities	Business expansion, caused by increasing needs for BCP related IT system development from current / potential customers in preparation for abnormal weather. Business expansion in medical / healthcare IT system field, caused by growing interest in health in worldwide. Increase in orders received and rise in NSD’s stock price due to improved reputation with stakeholders such as customers, shareholders, caused by proactive disclosure of information on climate change.

Risk Management

In the process of organizing the "Risks" and "Opportunities" related to climate change for the disclosure, NSD decided the Committee, which is comprised of experts on climate change, to manage the risks that climate change poses to the Group business.
The Committee will make a full effort to collect information regarding the risks that the Group is expected to face and will discuss appropriate monitoring methods by the nature of each.

Indicators and Targets

In order to deal with the problem of worldwide climate change, the Group has positioned "Climate Change" and "Energy Management" as one of the “Materialities” and is working to reduce CO₂ emissions. The Group’s CO₂ reduction targets are shown in【Figure 3】below:

【Table 3】Reduction targets for carbon dioxide (CO₂) emissions, which are greenhouse gases^*

Results(FY2020) Targets	Target Timing	Targets
2,403 t-CO₂ (reference)	FY2030	42% reduction from FY2020
2,403 t-CO₂ (reference)	FY2044	Achieve net-zero

* The scope is the Company and all its subsidiaries.