Sustainability Finance

Issuance of sustainability-linked bonds

Background of the Issuance

KITZ Group has issued Sustainability-Linked Bonds with the aim of promoting KITZ Group’s sustainability management from the perspective of finance in order to implement our corporate philosophy of KITZ’ Statement of Corporate Mission, that is, to strive to build a robust global environment and sustainable future by supporting societal infrastructure through our advancements in fluid control technologies and materials.

In the Long-term Management Vision, KITZ Group has placed sustainability management at the core of our management strategy and identified key themes for each ESG component. On the environmental front, KITZ Group aims to realize CO₂ Zero, Zero Environmental Impact and Zero Risk in 3 ZERO (Triple Zero) initiatives. The KPI of the Bonds is a measure of progress in CO₂ Zero, which is an especially important target in the Triple Zero initiatives that addresses climate change, an urgent social issue. It constitutes an indispensable element of the KITZ Group’s sustainability management.

Overview of Sustainability-Linked Bonds

Name of Bonds	KITZ Corporation Sixth Series of Unsecured Bonds (with limited inter-bond pari passu rider) (Sustainability-linked bonds)
Term	5 years
Amount issued	10 billion yen
Interest rate	0.450%
Issue price	100 yen per 100 yen of each bond
Redemption price	100 yen per 100 yen of each bond
Condition Determination Date	Wednesday, September 7, 2022
Issue Date	Wednesday, September 14, 2022
Redemption date	Tuesday, September 14, 2027
Lead managing securities company	Daiwa Securities Co. Ltd. and Mizuho Securities Co., Ltd.
Structuring Agent※	Daiwa Securities Co. Ltd.
KPI(Key Performance Indicator)	the domestic group’s Scope 1 and 2 CO₂ reduction rate
SPT(Sustainability Performance Target)	the domestic group’s Scope 1 and 2 CO₂ reduction rate by 81.7% in FY 2025 compared to the base year of FY2013
Bond characteristics	If SPT cannot be achieved, the characteristics of the Bonds will vary. Regarding the details of the change, the decision shall be made on or after the judgement date of the bond, whether to set as ① or ②. ①Before the bonds are redeemed, we will purchase emission credits equivalent to 0.1% of the bond issue amount (credits/certificates of CO₂ reduction value) ②Before the bonds are redeemed, we will donate the amount equivalent to 0.1% of the bond issue amount to public interest incorporated associations, public interest foundations, international organizations, local government-authorized NPOs, local governments and similar organizations engaged in activities for a transition to a decarbonized society.
Rating	A-(Rating and Investment Information, Inc.)

※Structuring Agent refers to those who support the issuance of ESG bonds through, for example, the development of frameworks and advising on obtaining third-party assessments.

Establishment of a Sustainability Link Bond Framework and Acquisition of Independent Evaluation

The Company has formulated a Sustainability Link Bond Framework that covers the five elements of the Bond Issue: selection of KPI, measurement of SPT, bond characterization, reporting, and verification. The Company has also obtained from Rating and Investment Information, Inc. (R&I) a second opinion that has confirmed its conformity with the Sustainability Link Bond Principles 2020 set forth by the International Capital Markets Association (ICMA) for this framework.

Status of KPI

Reports the status of KPI annually from issuance to redemption.

Regarding KPI performance, we have obtained the Independent Assurance Report by an independent third.

Investment assertion investor in the bond

Here are the investors who have pledged to invest in this Sustainability Link Bond.
(As of September 7, 2022, in the Japanese syllabary order, with 31 announced investment)

• ・The Aichi Bank, Ltd.
• ・Nagano Shinkin Bank
• ・Ueda Shinkin Bank
• ・The Nishio Shinkin Bank
• ・Kanonji Shinkin Bank
• ・Numazu Shinkin Bank
• ・The Kita Osaka Shinkin Bank
• ・Fukuoka Prefectural Credit Union
• ・Kofu Shinkin Bank
• ・The Fukuoka Chuo Bank, Ltd.
• ・The Saikyo Bank, Ltd.
• ・Fukusen Credit Union
• ・San Ju San Bank, LTD.
• ・The Fuji Shinkin Bank
• ・Shizuoka Prefectural Credit Federation of Agricultural Cooperatives
• ・Mie Prefectural Credit Federation of Agricultural Cooperatives
• ・Suwa Shinkin Bank
• ・The Mishima Shinkin Bank
• ・Saison Automobile & Fire Insurance Co., Ltd.
• ・Mitsui Sumitomo Insurance Co., Ltd.
• ・The Takinogawa Shinkin Bank
• ・The Yamaguchi Bank, Ltd.
• ・Tsuruga Shinkin Bank
• ・The Yamanashi Chuo Bank, Ltd.
• ・Tokio Marine & Nichido Fire Insurance Co., Ltd.
• ・Lifenet Insurance Company
• ・The Bank of Toyama, Ltd.
• ・Ryobi Credit Union
• ・Nakahyogo Shinkin Bank
• ・Wakayama Prefectural Credit Federation of Agricultural Cooperatives
• ・Nagano-ken Labour Bank