Disclosure in Accordance with the TCFD Recommendations

The Kubota Group expressed its support for the TCFD^*recommendations in January 2020.

The Task Force on Climate-related Financial Disclosures established by the Financial Stability Board (FSB).

TCFD Recommendations
Governance
Strategy
Risk Management
Metrics and Targets
Scenario Analysis

TCFD Recommendations

The various risks and opportunities arising from climate change could have a significant impact on companies’ financial statuses. The TCFD recommendations released in 2017 present a framework for corporations to disclose climate-related information to the financial markets. They recommend disclosure of information about the status of the company’s response to climate change, which could have a damaging effect on stabilization of financial systems, and about the impact on business and so forth. The recommendations call for companies to autonomously ascertain and disclose information related to Governance, Strategy, Risk Management, and Metrics and Targets, such as the financial impact of risks and opportunities engendered by climate change and the status of the company’s response. Also, the TCFD recommendations were partially revised in October 2021 to the effect that companies committed to reducing greenhouse gas emissions are now required to explain their plans for transitioning to a low-carbon economy. The Kubota Group will continue to examine how we can tackle climate change and make every effort to expand the information it discloses.
The status of the Group’s disclosures related to the TCFD recommendations is as follows.

Governance
Disclosure Items in the TCFD Recommendations	Relevant Section (excluding TCFD disclosures)	Kubota Group ESG Report 2024 Page
a. Describe the board’s oversight of climate-related risks and opportunities.	Environmental Management Promotion System,	P30
	Corporate Governance System	P156
b. Describe management’s role in assessing and managing risks and opportunities.	Environmental Management Promotion System,	P30
	Remuneration plan overview	P161
Strategy
a. Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term.	Environmental Management Approach —Materiality in Environmental Management, Environmental Management Approach —Risks and Opportunities	P19 P20
b. Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning.	Environmental Management Approach —Risks and Opportunities, Environmental Management Approach —Key Measures	P20 P21
c. Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.	Environmental Vision, Mitigating and Adapting to Climate Change, Expanding Environment-conscious Products and Services	P22 P32 P73
Risk Management
a. Describe the organization’s processes for identifying and assessing climate-related risks.	Environmental Management Approach —Materiality in Environmental Management	P19
b. Describe the organization’s processes for managing climate-related risks.	Environmental Management Approach —Materiality in Environmental Management,	P19
	Environmental Management Promotion System,	P30
	Expanding Environment-conscious Products and Services,	P73
	Internal Control System,	P171
	Internal Control System—Internal Control System Operation Activities (Risk Management Activities)	P172

c. Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk management.	Environmental Management Promotion System,	P30
	Corporate Governance System,	P156
	Internal Control System	P171
Metrics and Targets
a. Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process.	Medium- and Long-Term Environmental Conservation Targets and Results, Mitigating and Adapting to Climate Change —Measures to Reduce CO₂ Emissions, Remuneration plan overview	P26 P32 P161
b. Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks.	Mitigating and Adapting to Climate Change —CO₂ Emissions throughout the Value Chain, Environmental Data	P35 P86
c. Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets.	Medium- and Long-Term Environmental Conservation Targets and Results	P26

Governance

Environmental Management Promotion System

In 2014 the Kubota Group established the Environmental Management Strategy Committee to deliberate on medium- and long-term targets and key measures relating to environmental conservation, as well as an environmental vision, in light of climate change and other global environmental problems and the Group’s business environment. In 2021, with the objective of realizing our own ESG management, that committee was reorganized as the ESG Management Strategy Meeting to engage in discussion of ESG-related issues on a Group-wide basis. In addition, Environmental Manager Conferences are held in each of five regions—Japan, China, Asia, North America, and Europe—to promote environmental management of the entire Group globally.

Environmental Management Promotion System

ESG Management Strategy Meeting

Sites engaged in the business of operation or maintenance of environmental plants

The ESG Management Strategy Meeting is chaired by the president & representative director and attended by all inside directors, directors in charge of business divisions, the director in charge of finance, the director in charge of human resources, the director in charge of R&D, the director in charge of manufacturing, the director in charge of environmental management, and the general manager of the Corporate Planning & Control Department. The meeting participants discuss the medium- and long-term direction of environmental management in light of global environmental issues such as climate change and the business environment. They also decide on plans for key initiatives aimed at reducing environmental impacts and risks, and enhancing the lineup of environment-conscious products. The results of the meetings are reported to the Board of Directors and the Executive Officers’ Meeting, and are distributed throughout the Group. It also promotes management based on the plan-do-check-action (PDCA) cycle by assessing and analyzing the progress of the entire Group’s environmental conservation activities and reflecting the results when formulating new plans and policies. The ESG Management Strategy Meeting was convened four times in FY2023 to discuss environmental issues.

At the Environmental Manager Conferences, every year, in all regions, the Kubota Group policy and promotion items are communicated and the status of progress on medium-term environmental conservation targets is shared, along with case studies of energy-conservation measures, environmental risk countermeasures, and so forth. The conferences discuss matters such as how to solve issues related to environmental conservation activities in each region.
Moreover, the Group has set out environmental conservation targets taking medium-term (five-year activity period) and long-term (15-year activity period) perspectives, based on social trends and regulations in each country related to the environmental issues. The medium-term environmental conservation targets are revised every five years, or whenever necessary depending on the progress in achieving them. Medium-term environmental conservation plans are made individually by each site for global production sites. The Environmental Protection Department checks the status of progress on targets twice a year. In the same way, medium- to long-term targets for the sales ratio of products certified as Eco-Products are set and the department checks the status of progress once a year. The details and progress of the plans are also reported to the Executive Officers’ Meeting.

Board Oversight and Reflecting the Performance of Climate Change Measures into Executive Compensation

The outcomes of measures and medium- and long-term environmental conservation targets discussed and reported at the ESG Management Strategy Meeting are reported to the Board of Directors and Executive Officers’ Meeting, when required. From 2022, the Kubota Group revised the executive compensation system to encourage the achievement of performance targets related to business scale and profitability, as well as to accelerate efforts in ESG management. Twenty percent (20%) of the annual bonus awarded to executives is evaluated with ESG indicators, with climate change measures incorporated into a part of those indicators. Progress is evaluated based on the indicators alongside other metrics.

External Climate-related Activities

Based on the Kubota Group’s environmental charter, we aim to help bring about a society capable of sustainable development on a global scale. We have also declared our commitment to contributing to the conservation of the global and local environment through environment- conscious products, technologies, services, and corporate activities. As such, when we consider participating in external activities, we make sure that the environmental conservation activities, including measures promoted by the Kubota Group to tackle climate change, are consistent with our environmental charter. The decision to participate in the activities of other organizations is made after confirming that nothing contradicts with past internal decisions, our environmental charter and action guidelines, and policies and the like formulated by the ESG Management Strategy Meeting. If there are conflicts with an organization’s ideas or policies, we may decide to withdraw our participation. Also, the environmental conservation activities carried out independently by each global site are reviewed once a year to make sure that they align with the Kubota Group’s business policies and environmental conservation activity policies.

Timeline of Climate Change Action

Since announcing our support of the TCFD recommendations, we have discussed the items in the diagram below related to tackling climate change within the framework of our corporate governance structure. We will continue to ramp up our climate change initiatives as we push ahead with environmental management on a global scale.

Strategy

In 2021, the Group formulated the Environmental Vision, which presents the direction for its business activities from an environmental perspective towards 2050, having made an analysis of future society based on the scenarios for 1.5°C/2°C and 4°C temperature rises by the Intergovernmental Panel on Climate Change (IPCC), the International Energy Agency (IEA), and others. The Environmental Vision not only lays down the challenge of achieving zero environmental impacts through efforts aimed at reducing CO₂ emissions at our production sites, but also represents our commitment to help solve various social issues in the fields of food, water, and the environment through the provision of environment-conscious products and solutions and to help bring about a carbon-neutral and resilient society. In order to achieve the Environmental Vision, we need to consider how our business activities are impacted by regulatory developments, technological advancements, and changes in the market. We also need to focus on the physical changes brought on by the acceleration of climate change. That is why we analyzed and evaluated the impacts of climate change on our business domains in light of the anticipated future changes in the market and business environment with the use of 1.5°C/2°C and 4°C scenarios.
Going forward, we will continue to analyze climate change risks and opportunities under each scenario, examine methods for evaluating the foreseeable impacts on business activities as well as the financial impacts of climate change, and strive to provide even greater information disclosure to the public.

Scenario Analysis Process

Step 1: Selecting target business fields and climate scenario

Scenario Analysis Time Horizon

For the Environmental Vision we formulated in 2021, we projected what society might look like in 2050 and set goals for contributing to the realization of carbon neutrality within that timeframe. Moreover, in order to construct an image of the environmental businesses thought to be necessary in the future, we conducted an analysis of anticipated business lines in the year 2030. The Kubota Group operates businesses in the areas of food, water, and the environment. Of thouse three fields, in 2021 we analyzed our business operations in food (agricultural machinery) and water, the two fields we expect will be impacted significantly by climate change from both a financial and non- financial point of view. In 2022 we expanded our analyses to include all of our business fields.

To assess the impacts on our businesses in the year 2030, we selected the 1.5°C/2°C and 4°C scenarios in light of the available scientific evidence.

Item	Assumptions
Target businesses	All businesses (Farm & Industrial machinery and Water & Environment)
Time horizon	Analyzing impacts on business in 2030 considering the anticipated changes in around 2050 as a result of climate change

Setting scenario		Reference scenario
Transition aspect	1.5°C/2°C scenario	The IEA’s Net Zero Emissions by 2050 Scenario (NZE 2050)^1, Sustainable Development Scenario (SDS)^{1, 2}, and the FAO’s Towards Sustainability Scenario (TSS)^*3
Transition aspect	4°C scenario	The IEA’s Stated Policies Scenario (STEPS)^{1, 2} The FAO’s Business-as-usual Scenario (BAU)^3
Physical aspect	1.5°C/2°C and 4°C scenarios	IPCC’s Shared Socio-economic Pathway (SSP) scenario^*4

*1.Source: IEA “World Energy Outlook 2023”
*2.Source: IEA “Energy Technology Perspective 2020”
*3.Source: FAO “The future of food and agriculture – Alternative pathways to 2050”
*4.Source: IPCC “Sixth Assessment Report”

Step 2: Identifying risks and opportunities

By making best use of publicly available documents and data, we picked out the risks and opportunities expected to have an impact on our businesses and conducted an analysis of what the world might look like in 2030 in relation to our Farm & Industrial Machinery and Water & Environment businesses. These climate-related scenarios are updated from time to time as we accumulate more data and knowledge. We continue to expand and update our assumed scenarios while referencing the latest literature because it serves as the basis for our scenario analysis.

Step 3: Identification of changes that bear watching

We identified changes in the market and operating environment that bear watching in order to undertake business activities in the future, considering the market size and environmental changes brought about by climate change, the importance of businesses and regions impacted, and implications in the value chain.
Step 4: Scenario analysis

For each change that bears watching, we assessed the impacts (risks and opportunities) on business from the perspectives of agricultural machinery and water-related businesses and then formulated strategies to deal with those impacts.

Risk Management

Risk management in environmental conservation activities

The measures for tackling the significant physical and transition risks of climate change identified in our scenario analyses, as outlined in the governance section, are managed under the oversight of the Board of Directors by way of the ESG management promotion system. In FY2014 the Kubota Group set up the Environmental Management Strategy Committee to deliberate on medium- and long-term targets and key measures relating to environmental conservation, as well as the longer-term direction of environmental management, in light of climate change and other global environmental problems and the Group’s operating environment. From FY2021, discussions of environmental issues were transferred to the ESG Management Strategy Meeting, which is chaired by the president. The objective of this meeting is to formulate policies for generating medium- to long-term corporate value from an ESG perspective and examine and evaluate key measures. Also, the outcomes of its discussions are reported to the Board of Directors and Executive Officers’ Meeting, when required.

❶ Process for identifying risks and opportunities

So that we can identify transition and physical risks and opportunities pertaining to climate change across the entire value chain (including direct operations and upstream and downstream processes), we identify materiality relating to environmental conservation activities, including how we are tackling climate change. We identify risks and opportunities from a near-term, medium-term, and long-term point of view and review them every year. Our materiality identification process is as follows.

Step 1: Collection and analysis of information, including international policies, third-party assessment indicators, and global trends in the Group’s fields of business
Step 2: ESG Management Strategy Meeting review and discussions with related departments and identification of issues through dialogue with stakeholders, including ESG investment institutions
Step 3: Examination of importance to stakeholders and the Kubota Group and mapping of key issues with a matrix chart
Step 4: Formulation and steady promotion of key policies after identifying the impacts (risks and opportunities) on important issues

❷ Process for addressing and evaluating risks and opportunities

As for our process for addressing and evaluating risks and opportunities, we have set medium- and long-term environmental conservation targets and we continuously manage our progress towards achieving them. When establishing these targets, the ESG Management Strategy Meeting discusses the draft measures on environmental conservation as well as the medium-term (3–5 years) and long-term (5–15 years) targets. Each business site draws up a plan and then the Environmental Protection Department monitors the progress of those plans annually. The ESG Management Strategy Meeting discusses the direction of key policies and medium- and long-term initiatives based on how close the Group is to achieving its targets. Also, to tackle climate change in a way that best reflects the circumstances of each region, the Group organizes Environmental Manager Conferences in the five regions where Kubota has a business presence so that region-specific issues can be assessed and response measures studied.

Metrics and Targets

The Kubota Group has set, and is working towards achieving, medium- and long-term environmental conservation targets with the aim of reducing climate change risks and expanding opportunities. We also calculate CO₂ emissions (Scope 1 and 2) at the Group’s global sites (production and non-production sites) and CO₂ emissions from upstream and downstream processes (Scope 3) and disclose this data every year. We have obtained third-party assurance for our key disclosure data and we are making every effort to improve its accuracy.

Our Long-Term Environmental Conservation Targets 2030 call for a 50% reduction (vs. FY2014) in Scope 1 and 2 emissions at global business sites. We also aim to achieve carbon neutrality by the year 2050, as outlined in our Environmental Vision. In order to realize that goal, we will continue to find ways to lower our energy consumption at business sites, transition away from fossil fuels primarily by replacing our cupola furnaces with electric furnaces, and ramp up our use of renewable energy.

Looking ahead, we will promote initiatives that lead to solutions for the issues of climate change by promoting environmental conservation activities and expanding our environment-conscious products and services globally.

**Climate Change-related Targets and FY2023 Results**
Action item	Management indicator	Base FY	FY2025 target^*3	FY2030 target^*3	Result^*3
Reduce CO₂ emissions (Scope 1 and 2)	CO₂ emissions^*1	2014	—	▲50%	▲28.0%
	CO₂ emissions per unit of production^*2	2014	▲45%	▲60%	▲46.6%
	Ratio of renewable energy usage^*1	—	20% or more	60% or more	15.9%
Save energy	Energy consumption per unit of production^*2	2014	▲35%	▲40%	▲37.8%
Expand Eco-Products	Sales ratio of Eco-Products	—	70% or more	80% or more	70.1%

*1.Global business sites
*2.Global production sites
*3.▲ indicates a negative figure.

Scenario Analysis

❶ Scenario analysis assumptions

The scenario analysis in the TCFD recommendations will be used to examine the financial impact on business due to highly uncertain climate change problems and the impact on future business strategy. In our scenario analysis of the impacts of climate change, we conducted an assessment of the anticipated impacts on business in the year 2030 with the use of the publicly available 1.5°C/2°C and 4°C scenarios of mainly the IPCC and the IEA based on population increase and economic development projections through 2050

❷ Results of climate change scenario analysis in each business field

Expected impacts of climate change on the Farm & Industrial Machinery business (2030)

Much like the decarbonization of the automotive industry, we expect more stringent regulations to be adopted in the Farm & Industrial Machinery business in the future and we therefore anticipate that the push for greater diversification of power sources will gain increasing momentum in industrial machinery fields. Given the listing (taxonomy) of sustainable economic activity in Europe and the adoption of restrictions on vehicles with internal combustion engines driving into urban areas, demand for electrification in industrial machinery is expected to increase going forward. This will likely include construction machinery used in works projects and lawnmowers used to maintain public parks. The WEO forecasts that demand for oil in the transportation sector will decline under the 1.5°C scenario, but will continue to be used as a raw material in the industrial sector. Similarly, we expect industrial machinery to be used in regions where there is no easy access to charging infrastructure; for example, construction work and farming, where long working hours are a must. From a long-term perspective, we do expect to see the increased use of battery power and low- and zero-carbon fuels, but narrowing them down to just one favored power source for applications in the agricultural and construction machinery fields is proving to be a challenge. Accordingly, even though the use of electrified machinery and low- and zero-carbon fuels will have spread to some regions by 2030, we think demand for products that use fossil fuels will still persist. For this reason, we believe we must develop products that meet the need for various power sources.

Changes in weather conditions, such as temperature increases, changes in precipitation patterns, and higher levels of CO₂ in the atmosphere, may affect yields depending on the crop and the region. For example, warmer weather usually accelerates crop growth, but extreme changes in temperature or rainfall could lead to reduced yields. The FAO forecasts that particularly in temperate regions, climate change will have a negative impact on crop yields. It also anticipates that the development of crops that can cope with temperature changes, advancements in agricultural technology, the development of sustainable next-generation farming methods, and the evolution of agricultural machinery will mitigate the adverse effects of climate change on crop yields. Accordingly, we believe that changing weather conditions could bring about changes in the environment in which crops are grown, thus driving the evolution of agriculture.

The World around 2030 with Respect to the Farm & Industrial Machinery Business

**<Changes considered in Farm & Industrial Machinery business>**
Changes considered	Value chain impacts			Scenario
Changes considered	Procurement	Direct operations	Products	1.5°C/2°C	4°C
Changes in product design and conditions of use owing mainly to tougher climate change-related regulations		○	○	○
Changes in market needs seeking decarbonized products and services		○	○	○
Changes in mode of agriculture owing to promotion of decarbonization in the industry		○	○	○
Changes in suitable farming land (changes in demand for agricultural machinery and farming methods)			○		○

**<Results of analysis of Farm & Industrial Machinery business >**
Legend: Examples of anticipated risks and opportunities
Scenario	Summary of scenario analysis results (changes in market and operating environment)		Evaluation results (2030)	Financial impacts^* (2030)
1.5°C/ 2°C	Risks [Technologies]	Changes in product design and conditions of use owing mainly to tougher climate change-related regulations Controls on fuel-efficiency improvements in internal combustion engines will be further tightened up ahead. Japan, the US, and European countries have announced carbon-neutrality roadmaps for around 2050 and the transition to electrification and BEVs in the passenger car market in particular is gaining momentum. New regulations and similar will be applied to products that use internal combustion engines, like agricultural and construction machinery and utility vehicles, and the need to reduce CO₂ emissions will grow stronger and demand for electrification, fuel cells, low- and zero-carbon fuels (hydrogen engines and synthetic fuel engines), and other power sources will grow increasingly diversified. For large machinery not suited to electrification because of the requirement for long operating hours and higher power, products with internal combustion engines will be used. The use of low- and zero-carbon fuels in internal combustion engines will also increase.	We will need to secure business opportunities in the future by aggressively pursuing R&D of products that offer improved fuel efficiency and can run on various power sources	Medium
	Opportunities [Products]		The impact on revenue of decarbonized products will be limited even though restrictions will have been adopted in some developed regions by 2030	Low to medium
	Opportunities [Markets]	Changes in market needs seeking decarbonized products and services Market demand will increase for new value nonexistent in construction machinery, lawnmower, and utility vehicle products with internal combustion engines. For example, reduced noise, no refueling hassles, and indoor use. Depending on the fuel supply infrastructure in the region, demand will grow stronger for products equipped with a gas/hydrogen engine or a hybrid engine that runs on low- or zero-carbon fuels.	The impact on revenue by 2030 will be limited even though in some lead markets and existing markets there will be customers wanting electrified construction machinery, lawnmowers, and utility vehicles, and the like	Low to medium
	Opportunities [Markets]	Changes in mode of agriculture owing to promotion of decarbonization in the industry Crop yields will increase as farming technology advances and the effective use of farmland is further encouraged as a measure to adapt to climate change. Decarbonization in agriculture will continue to gather momentum in developed economies and the adoption of sustainable farming methods will become more widespread. Decarbonization and modernization of agriculture in emerging economies will progress concurrently and give rise to smart farming and farming solutions, which in turn will spur demand for energy-efficient agricultural machinery. Demand will grow stronger for carbon-free farming methods, such as non-tilled cropping, that lead to increased carbon storage in the soil.	Prospects for higher r evenue fr om mainly agricultural machinery and smart farming solutions that contribute to low- and zero- carbon agriculture	Medium to high
4°C	Opportunities [Resilience]	Changes in suitable farmland (changes in demand for agricultural machinery and farming methods) Climate change will affect the relocation of suitable farmland and crop production. Demand will increase for farming solutions and support on transitioning to new agricultural machinery and farming methods, including smart machinery and precision agriculture. Changes in demand for farming solutions are emerging in wet climate regions, especially North America, Asia, and some parts of Europe.	Prospects for higher revenue from agricultural machinery and farming solutions that can be adapted to changing weather conditions.	Medium to high
Countermeasure strategies
We intend to contribute to the reduction of CO₂ emissions at the product use stage through innovation. Continue to bolster hybridization efforts and other R&D activities aimed at improving fuel efficiency of engines most likely subject to tighter restrictions up ahead (Initiative #1) Expand our lineup of products that can help bring about carbon neutrality, in keeping with the needs of the market (Initiative #2) Accelerate R&D towards the practical application of various power sources, such as electrification, fuel cells, low- and zero-carbon fuels (hydrogen engines and synthetic fuel engines) according to the energy supply situation in each region We will look to help lower greenhouse gas emissions from farming and support sustainable food production activity. Propel R&D in products and services that can be adapted to low- or zero-carbon farming practices; for example, recycling of local biomass resources and carbon storage and give tangible shape to farming solutions. Expand and popularize agricultural machinery and services that make smart farming (automated machinery, precision agriculture, etc.) possible so as to contribute to more efficient farming that requires less manpower Contribute to the establishment of sustainable agriculture through next-generation crop production to help solve issues in the food value chain with the use of vegetable factories and the like Give tangible shape to farming solutions in regions affected by changing weather conditions Expand applications for the following systems that integrate cutting-edge technology with ICT to contribute to greater farming efficiency: Kubota Smart Agri System (KSAS), a system that supports farm operations; Kubota Smart Infrastructure System (KSIS), an IoT solutions system; and WATARAS, Kubota’s farm water management system (Initiative #3)

Impact on earnings shown as low (less than or equal to ¥2.5 bn), medium (greater than ¥2.5 bn but less than or equal to ¥25.0 bn), or high (greater than ¥25.0 bn).

Contributing to greater efficiency and labor saving in agriculture with the Agri Robo tractor
Contributing to lower CO₂ emissions from the operation of battery-powered construction machinery and tractors
Compact and electronically controlled fuel-efficient diesel engine
Contributing to more efficient farming with the Kubota Smart Agri System (KSAS)

Expected Impacts of Climate Change on the Water & Environment Business (2030)

As for the future pertaining to our Water & Environment business, we expect impacts to materialize in procurement, manufacturing, and other parts of the value chain owing to the decarbonization of production methods and a higher carbon tax for iron, a key raw material in many products. We also forecast the greater use of mainly mineral resources owing to population increase and economic development. As awareness of decarbonization and a circular economy grows stronger in society as a whole, we think the recycling movement will gather pace in order to avoid the mining of new resources. We anticipate increased demand for water resources, but there are concerns that water quality will deteriorate mainly because of the chlorination of groundwater caused by rising sea levels and increased turbidity of rivers stemming from torrential rain. All of this likely means that water resources will have to be managed even more rigorously. In addition, we expect impacts on water for agriculture and domestic use to materialize because water stress in Japan, China (northeast), North America (west), Europe (south), the Middle East, and South Asia is expected to increase under the 4°C temperature increase scenario (shown in the diagram below). According to the IPCC Sixth Assessment Report, a 4°C temperature increase is expected to result in less river flooding in high-latitude regions of North America and Europe, while an increase in frequency is anticipated in mid-latitude and tropical humid regions, as well as monsoon regions. We therefore believe it is imperative that we build social infrastructure that supports people’s livelihoods, such as engaging in urban development that makes effective use of resources and creates communities resilient to weather disasters.

The World around 2030 with Respect to the Water & Environment Business

**<Changes considered in Water & Environment business>**
Changes considered	Value chain impacts			Scenario
Changes considered	Procurement	Direct operations	Products	1.5°C/2°C	4°C
Changes in social trends regarding the securing and conserving of water and resources			○	○
Changes in awareness of weather disasters			○		○

**<Results of analysis of Water & Environment business>**
Legend: Examples of anticipated risks and opportunities
Scenario	Summary of scenario analysis results (changes in market and operating environment)		Evaluation results (2030)	Financial impacts^* (2030)
1.5°C/ 2°C	Opportunities [Markets]	Changes in social trends regarding the securing and conserving of water and resources Ongoing population increase and economic development will further drive up demand for water. Restrictions will be enforced on the intake and discharge of water for household and industrial use in developed countries and Asia as a preventive measure against stretched water resources and deteriorating water quality owing to the impacts of climate change. Demand will increase for solutions that resolve water shortages and poor water quality.	Prospects for higher revenue from products and solutions in connection with the development of water and sewage infrastructure	Medium to high
1.5°C/ 2°C	Opportunities [Resource Efficiency]	Changes in social trends regarding the securing and conserving of water and resources Demand will rise for solutions that facilitate the effective utilization of energy and resources, such as the use and exploitation of rubbish and agricultural waste, as well as the recovery of energy from previously unused small-scale hydropower. Decarbonization combined with a circular economy will gather momentum, the mining of new resources will be avoided, and the recycling of resources will further increase. Demand will grow stronger for solutions that can make the construction of water infrastructure more efficient, primarily as a result of increased urbanization construction work and fewer workers.	Prospects for higher revenue from solutions related to the reclamation/recovery and more efficient use of resources and energy.	Medium to high
4°C	Opportunities [Resilience]	Changes in awareness of weather disasters Climate change is expected to negatively affect people’s living environment chiefly because of the more frequent occurrence of typhoons, torrential rain, and other natural disasters, alongside drought and deterioration in water quality. Demand will increase for stronger resilience of existing water infrastructure, upgrades to aging facilities, and improvements in water quality in order to combat increasingly intense natural disasters. Demand will grow in Japan for water-related products aimed at bolstering national resilience in response to increasingly intense natural disasters as a consequence of climate change.	Prospects for higher revenue from ongoing demand for products and solutions in connection with the development of more resilient water infrastructure, disaster response measures, and water quality improvements	Low to medium
Countermeasure strategies
We intend to contribute to the effective use of various resources (water, energy, minerals, etc.). Contribute to the development of water and sewage infrastructure to meet increased water demand Expand offerings of purification and sewage treatment products and solutions to help improve water quality Manufacture and promote the use of biofuels derived from mainly agricultural waste, household waste, and sewage sludge so as to contribute to the development of resource recycling schemes in communities Promote the development of “deep recycling technology” that utilizes waste plastic as an energy source to recover valuable metals from discarded home appliances and other so-called “urban mines,” reduce the volume of waste destined for landfill Promote the effective utilization of resources by expanding the use of sewage sludge melting systems to recover heavy metals and phosphorus from sewage sludge Expand the use of smart waterworks systems that contribute to energy savings during water pipeline construction and management We intend to contribute to the building of water infrastructure that is resilient to weather disasters. Expand provision of disaster prevention and disaster response products; for example, ductile iron pipes that can withstand disasters, drainage pump trucks that can meaningfully contribute to disaster recovery efforts, and river level simulation/operational control systems for pump stations that help prevent disasters Expand applications for the Kubota Smart Infrastructure System (KSIS) to support water treatment plant operations and the remote monitoring, diagnosis, and control of equipment (Initiative #4)

Impact on earnings shown as low (less than or equal to ¥2.5 bn), medium (greater than ¥2.5 bn but less than or equal to ¥25.0 bn), or high (greater than ¥25.0 bn).

Ductile iron pipes make water supply possible even during times of disaster
Submerged membranes can also be used to recycle wastewater
The Kubota Smart Infrastructure System (KSIS) makes facility management and operation more efficient and less reliant on manual labor

Expected Universal Impacts of Climate Change on Both Businesses (2030)

In both the Farm & Industrial Machinery and Water & Environment businesses, we expect to see tighter restrictions on GHG emissions associated with business activities and impacts on business operations as a result of abnormal weather events. Climate change is a global issue that needs to be addressed by society as a whole, and in order to continue undertaking sustainable business activities, tackling the problem of climate change is absolutely essential. Countries worldwide are announcing carbon-neutral declarations as they work towards achieving the objectives of the Paris Agreement. In response, tighter restrictions on GHG emissions and energy use are being rolled out, including the introduction of carbon taxation and carbon border adjustment schemes. We also think investors and the markets will increasingly demand companies to take action on decarbonization. The carbon price in the EU ETS reached $109 in 2023 (World Bank, 2023) and the burden on companies is expected to grow heavier up ahead as GHG emission regulations are further tightened. It is therefore imperative that we push ahead with measures to address climate-related regulations and the risk of higher costs associated with our business activities if we are to maintain our competitiveness.

The Kubota Group does business in over 120 countries and we have a global network of suppliers and production sites. In the 4°C scenario in particular, changes in weather conditions, such as temperature increases, changes in precipitation patterns, and higher levels of CO₂ in the atmosphere, may lead to more frequent storm and flood damage. This will not only affect our company, but also our suppliers and other partners involved in our business operations. We operate in the fields of food, water, and the environment, and we provide products and services that support people’s lives. Accordingly, we believe we must build a business structure that is resilient to climate change to ensure the continued supply of our products and services even in the event of weather disasters and the like.

**<Changes considered that apply to all businesses>**
Changes considered	Value chain impacts			Scenario
Changes considered	Procurement	Direct operations	Products	1.5°C/2°C	4°C
Changes in decarbonization approach of companies sought after by society	○	○		○
Impacts on the Group and suppliers as a result of more abnormal weather events	○	○		○	○

**<Analysis results shared by all businesses>**
Legend: Examples of anticipated risks and opportunities
Scenario	Summary of scenario analysis results (changes in market and operating environment)		Evaluation results (2030)	Financial impacts^*1(2030)
1.5°C/ 2°C	Risks [Regulations]	Changes in decarbonization approach of companies sought after by society Calls will grow stronger for decarbonization across a product’s lifecycle worldwide, including the introduction of carbon pricing schemes and carbon border adjustment mechanisms. Regulations and measures geared towards decarbonization will gather momentum and the rollout of a carbon tax and impetus for the use of renewable energy will accelerate, thus driving up energy prices. Taxes on fossil fuels and CO₂ emissions will increase owing to the introduction of a carbon tax. Energy costs and expenses associated with energy-saving measures are expected to rise when governments worldwide enforce stricter energy-saving restrictions.	Manufacturing costs will rise, driven by increases in Capex to meet decarbonization and energy-saving obligations, as well as higher energy and raw material prices An expected carbon tax burden will materialize when emission reduction targets are met as a result of measures taken to save energy and curb CO₂emissions	Medium Low (Approx. ¥2.5 bn^*2)
4°C	Risks [Physical]	Impacts on the Group and suppliers as a result of more abnormal weather events There will be increasingly intense and more frequent meteorological disasters like torrential downpours and floods. Negative effects on business activities are expected to be felt at the Group’s sites and at suppliers. Production and sales activities will be affected by delays in procuring raw materials.	Disaster-related losses may arise as a result of weather disasters	Medium (Approx. ¥3.0–6.0 bn^*3)
4°C	Risks [Physical]		Costs associated with BCP measures for avoiding the adverse impacts of weather disasters could increase	Medium
Countermeasure strategies
We intend to contribute to the reduction in CO₂ emissions generated by business activities. Promote initiatives aimed at conserving energy use, installing energy-efficient equipment, switching to electric furnaces and alternative fuels, installing LED lighting, and expanding the use of renewable energy at production sites We will aim to beef-up climate change risk countermeasures at the Group’s sites and at suppliers. Use hazard maps to identify sites that are at high risk of suffering damage from torrential rain, flooding, and strong winds and systematically push ahead with the reinforcement of buildings and measures to prevent electrical equipment from being inundated by water Decentralize the purchasing of parts and materials by diversifying procurement routes Construct a manufacturing system that is resilient to weather disasters based on a business continuity plan (BCP)

*1.Impact on earnings shown as low (less than or equal to ¥2.5 bn), medium (greater than ¥2.5 bn but less than or equal to ¥25.0 bn), or high (greater than ¥25.0 bn).
*2.Calculated by multiplying the projected carbon tax as of 2030.
*3.Calculated with reference to losses stemming from previous weather disasters.

❸ Transition Plan to a Low-Carbon Economy

By performing climate change scenario analyses, we identified the impacts on our businesses and studied what strategies we can take to deal with those impacts. In particular, we believe climate change will have significant impacts on food production and water resources vital to people’s livelihoods. Based on the Kubota Group’s Environmental Vision, we aim to contribute to the establishment of a carbon-neutral and resilient society. We have formulated a transition plan (roadmap) to demonstrate how we intend to solve these issues in society by achieving our vision.

**<Disclosure of Transition Plan in line with TCFD recommendations>**
Elements considered for the transition plan		Kubota’s circumstances
Governance	Approval, oversight, accountability, reporting, review	Reports and reviews are handled by the ESG Management Strategy Meeting
	Transparency	Progress and new initiatives are reported in mainly integrated reports and ESG reports
	Incentives	Assessments of efforts to promote ESG are reflected in officer remuneration (see p.161)
	Assurance	Medium- and long-term environmental conservation targets, energy consumption, and CO₂ emissions are subject to third-party assurance
Strategy	Alignment	“Mitigating and adapting to climate change” identified as an item of materiality in Kubota’s ESG management policy
	Scenario analysis	Disclosing the results of analyses of 1.5°C/2°C and 4°C temperature increase scenarios and background to our environmental vision
	Assumptions	Megatrends in broader society include population increase, economic development, and urbanization
	Prioritized opportunities	Provision of products and solutions that help solve climate change issues in society pertaining to agriculture and water resources
	Action plans	Roadmap formulated from short-, medium-, and long-term perspectives
	Financial plans	Capex and R&D costs associated with climate change measures included in Mid-Term Business Plan 2025
Risk management	Description of risks	Identification of risks in the 1.5°C/2°C and 4°C temperature increase scenarios for the Farm & Industrial Machinery and Water & Environment businesses
Risk management	Challenges and uncertainties	Subject to major changes, depending on future technological development and market trends, because roadmap is based mainly on data currently available for analysis
Metrics and targets	Metrics, targets, dates	See p.26 to 28, 41
	Methodology	Establishment of SBT-certified CO₂ emission reduction targets for Scope 1 and 2
	GHG emissions reductions	Reductions of Scope 3 and GHG emissions in society are currently being examined

Transition plan

In the TCFD recommendations, a transition plan is defined as “an aspect of an organization’s overall business strategy that lays out a set of targets and actions supporting its transition toward a low-carbon economy, including actions such as reducing its GHG emissions.” Investors and other users of TCFD information are interested to know how organizations will reduce climate risks and increase business opportunities as they transition to a low-carbon economy. The TCFD revised its recommendations in October 2021 and also released a document that provides guidance on disclosing a transition plan.
Please visit the website below for more information about the TCFD.
www.fsb-tcfd.org/

The diagram below represents Kubota’s contributions, through its products and services, to carbon neutrality and the recycling of resources in the farming sector.

In our climate-related scenario analysis, by the year 2030 we assume that electrification and the use of low- and zero-carbon fuels will have gained traction in some regions. However, we also believe that demand will persist for our agricultural and construction machinery equipped with internal combustion engines. To achieve a low-carbon economy, it is vital that we demonstrate the technological potential of our products in an age that demands carbon neutrality, while also accommodating the growing needs of customers and developing social infrastructure.
We believe that in the carbon-neutral era beyond 2030, there will be plenty of power source options, so we will need to be ready on all fronts. The transition plan below shows how we intend to fight climate change.

The above roadmap is based on information that can be studied at present. It is subject to major changes, depending on future technological development and market trends.

*1.Compact electric tractors:www.kubota.com/news/2022/20220905.html
*2.Electric Mini Excavatorwww.kubota.com/news/2023/20231218.html
*3.Hydrogen engineswww.kubota.com/news/2022/20221003.html
*4.Micro hybrid engines: global.engine.kubota.co.jp/en/technology/microhybrid/
*5.Agricultural solutions: www.kubota.com/innovation/smartagri/
*6.Farm water management systems: agriculture.kubota.co.jp/product/kanren/wataras/ (only in Japanese)
*7.Systems for recycling local resources using agricultural biomass: www.kubota.co.jp/news/2022/management-20220405.html (only in Japanese)
*8.J-Credit Scheme certification for CO₂ reduction projects: https://agriculture.kubota.co.jp/service/j-credit/ (only in Japanese)
*9.Smart water pipe installation: www.kubota.co.jp/product/ironpipe/products/technology/innovation/ (only in Japanese)
*10.IoT solutions for water related plants and equipment: www.kubota.co.jp/product/ksis/ (only in Japanese)

Carbon-Neutral Initiatives at Our Business Sites

The Kubota Group has set an ambitious goal of achieving net-zero CO₂ emissions by 2050. To achieve this goal, we have set a target of reducing Scope 1 and 2 CO₂ emissions by 50% by 2030 compared to FY2014, by advancing systematic environmental load reduction. Efforts towards achieving this will lead to risk reduction in the anticipated carbon tax on fossil fuel use, the introduction and strengthening of a carbon border adjustment tax, the mandatory adoption of renewable energy, and energy price spikes. At our global sites, we are systematically advancing energy-saving measures, such as transitioning to energy-efficient equipment and reducing energy waste through proper operational management. We are also progressing with initiatives such as electrification of furnaces and expanding the use of renewable energy.
1. *1.CO₂ emissions of companies that have been acquired have been retroactively adjusted to before the acquisition. CO₂ emissions before the adjustments are 714, 613, and 585 kilotons CO₂e.
2. *2.The amount calculated as an increase in Capex mainly for energy- saving measures and the installation of electric furnaces when the transition plan was being reviewed may need to be recalculated.