4-8. EU Taxonomy and New Trends in EHS-Related Investment

The EU Taxonomy is a framework developed by the European Union to classify sustainable economic activities. It serves as a crucial foundation for increasing transparency in environmental, social, and governance (ESG) investments. This system aims to provide investors with a clear guide on which economic activities are environmentally sustainable. For companies, this directly impacts fundraising and business strategy, as Environment, Health, and Safety (EHS) initiatives are becoming a major factor in investment decisions based on the taxonomy.

1. Overview and Role of the EU Taxonomy

The EU Taxonomy is designed around six environmental objectives: climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems. Companies are required to disclose the extent to which their activities align with these criteria, and investors use this information to evaluate potential investments. Therefore, strengthening EHS initiatives is an essential condition for a company to be considered a target for sustainable investment.

2. Connection to EHS-Related Investment

EHS activities were traditionally seen as a way to ensure legal compliance and reduce risk. However, with the introduction of the EU Taxonomy, they have evolved into a "value-creation factor" that investors actively evaluate. For example, improvements in occupational health and safety are now seen as strengthening human capital, and efforts to reduce environmental impact are viewed as contributions to a circular economy and carbon neutrality, which can positively influence fundraising.

3. Impact and Response for Japanese Companies

Japanese companies that operate in the European market or seek to raise capital from European investors are required to disclose information in compliance with the EU Taxonomy. Specific measures include:

• Enhancing EHS data management and visibility: Disclose data on a global basis, such as lost-time injury rates, CO2 emissions, and water usage efficiency.

• Integrating EHS into business strategy: Incorporate environmental goals into business plans and present them in a way that investors can easily understand.

• Ensuring consistency with international standards: Secure credibility by aligning reporting with standards such as the GRI and ISSB.

4. Shifts in Investment Trends

As ESG investment becomes mainstream, "sustainable finance" using the EU Taxonomy is expanding rapidly. Investors are not only seeking to reduce environmental risk but are also shifting capital toward companies that can achieve long-term growth. Investing in EHS has thus become a strategic tool for boosting a company's standing in the capital markets.

Summary

The EU Taxonomy represents a new international standard for judging sustainable economic activities and is fundamentally changing the direction of EHS-related investment. To maintain and strengthen their competitiveness, it's essential for companies to integrate environment and occupational health and safety into their business strategies and provide transparent information to investors. The era has begun where strengthening EHS is no longer seen as a "cost" but as a "value" that drives sustainable growth and fundraising.