Disclosures based on TNFD recommendations

Response to TNFD Recommendations

The Group recognizes that the environmental impact associated with its business activities affects biodiversity, in view of which we have endorsed the TNFD recommendations and joined the TNFD Forum^*1. The Group is furthermore committed to reducing various environmental impacts—including by undertaking initiatives related to resource conservation and climate change countermeasures—in order to preserve and protect biodiversity. In addition, through the development of our veterinary pharmaceutical and feed additive businesses, we contribute to building a society where humans and animals can coexist. As our initial response to the TNFD recommendations, we took the steps outlined at right.

Raising awareness and sharing direction within the Company
In April 2025, we distributed an original training video on biodiversity to all employees, aiming to raise awareness and share direction.
Evaluation and management of nature-related issues
Using the LEAP Approach^*2, an evaluation methodology developed by the TNFD, we analyzed nature-related opportunities and risks, and are in the process of gauging the effect on our finances.
Relationship with our business
Through our veterinary pharmaceuticals and animal feed additives, in particular, we are contributing to building a society in which humans and animals can co-exist. We are keenly aware of the relationship between our business and nature.

Governance

As part of our stakeholder engagement, the Group regards the promotion of environmental management, as well as biodiversity conservation that underpins such efforts, as issues that should be addressed on an ongoing basis. We have established a “Human Rights Policy” that commits us to promoting respect for human rights throughout our business activities across the entire value chain—including research and development, procurement, manufacturing, inventory management, distribution, sales, prescription by medical institutions, and use by patients. In line with this policy, we conduct training programs to deepen understanding of the importance of respecting human rights and compliance, and we are working to create a workplace in which each employee can fully demonstrate their capabilities while safeguarding individual dignity. In addition, to maintain and promote sound and constructive labor-management relations, we provide numerous opportunities for labor-management dialogue on a wide range of issues, including labor conditions, the working environment, and work-style initiatives to support the next generation. Through these efforts, we ensure employees’ rights and foster healthy and positive labor-management relations.
Furthermore, in parallel with our initiatives based on the TCFD^*3, we will continue to advance our efforts toward the TNFD under our ESG promotion framework. Please refer to the following section for information disclosure based on the TCFD recommendations.

* “Information Disclosure Based on the TCFD Recommendations”
https://www.aska-pharma-hd.co.jp/english/csr/sustainability/tcfd.html

Strategy

The Group assesses the potential impacts of nature-related dependencies, impacts, risks, and opportunities on its business strategy and financial planning, and integrates these considerations into its management strategy.

Overview of Identified Nature-Related Risks and Opportunities

Based on the LEAP approach, the Group has identified the following key nature-related risks and opportunities across its entire value chain. In identifying these issues, we applied ENCORE^*4, based on dependencies and impacts (double materiality), to assess material nature-related issues throughout the Group’s value chain and subsequently developed a heat map.

A. Assessment of Dependencies and Impacts Across the Value Chain

Dependency
Upstream - Procurement	VH	---
	H	---
	M	Flood control, Soil, Severe storms, Water flow regulation, Water supply, Water purification
	L	Vegetation, Ecosystem
	VL	Air filtration, Microorganisms, Noise
Direct Operations - R&D, Manufacturing, Sales	VH	Water purification
	H	Water flow regulation, Water supply
	M	Flood control, Soil, Severe storms
	L	---
	VL	---
Downstream - Distribution, Prescription, Administration	VH	---
	H	---
	M	Water purification, Soil, Severe storms, Water flow regulation, Water supply
	L	Ecosystem
	VL	Air filtration, Antibacterial, Climate change mitigation, Rainfall

Impact
Upstream - Procurement	VH	Noise, Soil pollution
	H	---
	M	GHG emissions, Air pollutants, Ecosystem, Water use, Waste
	L	Land use area
	VL	---
Direct Operations - R&D, Manufacturing, Sales	VH	---
	H	---
	M	Noise, GHG emissions, Air pollutants, Waste
	L	Vegetation, Ecosystem, Microorganisms
	VL	Air filtration, Ecosystem
Downstream - Distribution, Prescription, Administration	VH	---
	H	---
	M	GHG emissions, Air pollutants, Water use
	L	Land use area
	VL	Noise, Soil pollution, Waste

B. Identification of Materiality Across the Value Chain

C. LEAP Approach

Locate
Business sites			At the Iwaki Factory and Shonan Recerch Center, we are tracking water resource usage and characteristics of the surrounding ecosystems. We conduct water risk assessments at both sites as they are located in areas deemed to have relatively high water stress.
Supply chain			When procuring pharmaceutical active ingredients, we identify whether they come from areas rich in biodiversity or areas at risk from deforestation and water pollution. This also applies to procuring raw materials for feed additives in our veterinary pharmaceuticals business.

Evaluate
Dependence			We have determined that our business activities depend on clean water resources and stable ecosystem services (e.g., soil health and biological resources).
Impacts			We assessed changes in land use and impacts on ecosystems associated with water use, wastewater discharge during the production process, waste disposal, and raw material procurement.

Assess
Risks	Physical risks	Risk of halt to operations due to increased water stress, risk of instability in supply of raw materials due to ecosystem degradation
	Transition risk	Increase in costs accompanying stricter nature- related regulations (e.g., higher water quality standards, expansion of biosphere reserves) and change in product preferences as consumers become more environmentally aware
	Reputation risk	Damage to corporate image due to negative impact on biodiversity
Opportunities	Development of new products and services	Development of ecosystem-friendly pharmaceuticals and adoption of production processes with smaller environmental footprint
	Efficiency improvement	Lowering costs by reducing water usage and recycling waste
	Enhancing brand value	Enhancing corporate value by contributing to protection of the natural environment

Impact on Business Strategy

The identified nature-related risks and opportunities may have the following impacts on our business model and financial planning.

Research and Development	We will prioritize investments in the discovery of new pharmaceutical candidates with lower impacts on ecosystems, as well as in research and development of sustainable manufacturing process technologies.
Production	At manufacturing sites located in water-stressed areas, we will strategically promote the introduction of water recycling systems and the enhancement of water-saving facilities to ensure stable operations.
Procurement	We will prioritize transactions with suppliers that take biodiversity conservation into consideration and strengthen our standards for sustainable raw material procurement. Through these efforts, we aim to enhance supply chain resilience and reduce the risk of future supply disruptions.
Financial Planning	We are considering incorporating the necessary funds for nature-related risk response measures (e.g., environmental technology investments and supply chain audits) into our budgets, while reflecting opportunities (e.g., increased sales from environmentally conscious products) in our financial targets.

Business Resilience

The impacts of nature-related risks and opportunities on our short-, medium-, and long-term resilience are as follows.

Short term (up to 3 years)	We will minimize the risk of temporary operational disruptions caused by water shortages or tighter local environmental regulations through water-saving measures and enhanced wastewater treatment.
Medium term (up to 10 years)	To address risks associated with the degradation of natural capital within the supply chain, we will maintain a stable supply of raw materials by introducing sustainable procurement policies and securing alternative sources.
Long term (over 10 years)	In response to broader societal changes resulting from the loss of ecosystem services, we will create environmentally friendly new technologies and products through research and development, and by leading social transformation, we will build a foundation for long-term business growth.

The priority location (Priority Location) identified under the TNFD LEAP approach for the Group is our major manufacturing site centered on the Iwaki Factory (Iwaki City, Fukushima Prefecture), which has been designated as the highest-priority area.

Among our directly operated sites, the location with the greatest interface with nature and therefore the highest-priority area to be addressed (Direct Operations):
ASKA Pharmaceutical Iwaki Factory (Iwaki City, Fukushima Prefecture)

This site was selected as our primary manufacturing facility, as it has the largest production volume as well as the highest levels of energy consumption and wastewater discharge.

Interface with nature (dependencies and impacts)
Water resources: A large volume of high-quality water is required for pharmaceutical manufacturing processes, including cleaning, cooling, and dissolution of raw materials.
Wastewater: Potential impacts of effluent from manufacturing processes on local water systems (including the Natsui River system and nearby rivers) as well as on the marine environment.
Key points of evaluation
Using “WRI Aqueduct (Water Risk Atlas by the World Resources Institute),” the assessment results for water stress (supply–demand pressure) and flood risk in the Iwaki City area of Fukushima Prefecture are as follows.

WRI Aqueduct Assessment Results

In accordance with the LEAP approach, our Group evaluates the interfaces between our business activities and nature. As a first step, we identified our Iwaki Factory—our core production site with a high dependence on water resources—as a priority location and conducted an evaluation (Evaluate) of water-related risks and impacts on surrounding ecosystems.
(In the future, we will also proceed with confirming overlaps between biodiversity-important areas and upstream supply chain locations, including raw material procurement sites.)

Using the TNFD-recommended tool “ENCORE,” we analyzed the pharmaceutical manufacturing industry’s dependence on natural capital. The results indicated that dependence on “water purification” in direct operations was assessed as “Very High.” This reconfirmed that water management is a critical issue for the Group.
Based on this analysis, we evaluated water stress and flood risk at the location of our main production site, the Iwaki Factory, using “WRI Aqueduct,” as outlined below.

Water stress
Assessed as “Low–Medium,” indicating that current water withdrawal risks are within a manageable range.
Flood risk
Climate change scenarios project an increase in future risk; therefore,ures within our Business Continuity Plan (BCP).

Furthermore, by integrating the results of these analyses, we recognize that while the pharmaceutical industry has a high dependence on water, our major sites are located in regions with relatively abundant water resources (according to Aqueduct results). However, with regard to water pollution resulting from wastewater discharge—identified as a potential impact by ENCORE—we strictly manage water quality based on voluntary standards that are significantly more stringent than regulatory requirements, thereby contributing to the conservation of local biodiversity.

Building on this water-focused narrative, we will continue to sequentially evaluate other issues identified by ENCORE (such as waste) as challenges for the coming fiscal years.

*1 TNFD Forum:
An international organization established in June 2021 to support discussions within the Taskforce on Nature-related Financial Disclosures (TNFD) as a stakeholder providing expert knowledge, with the aim of developing a framework for corporate risk management and disclosure related to nature.

*2 LEAP Approach:
An assessment methodology developed by the TNFD to evaluate and manage nature-related issues.
It consists of four steps—Locate, Evaluate, Assess, and Prepare—and analysis using this approach covers a substantial portion of the disclosures recommended by the TNFD.

*3 TCFD:
The Task Force on Climate-related Financial Disclosures (TCFD), established by the Financial Stability Board (FSB) at the request of the G20 and chaired by Michael Bloomberg, to consider climate-related disclosures and responses by financial institutions.

*4 ENCORE:
An online tool designed to help assess exposure to nature-related risks and to understand dependencies and impacts on nature.

*This section presents the results of our TNFD-related considerations as of October 2025. Going forward, we will continue to advance our review of risk and impact management, metrics and targets, and other related matters, and disclose updates as appropriate.

Biodiversity Initiatives

Please refer to the following page for details on the ASKA Pharmaceutical Group’s biodiversity initiatives.

Biodiversity