February 14, 2007
Sekisui Chemical Co., Ltd.

Accelerating the efforts by the group with the aim to achieve 10% reduction in C02 emissions over 1990 levels.

Introduction of environment-related capital investment promotion system
Use of environment rated financing through the Development Bank of Japan

With the aim of reinforcing CSR management that promotes the three prominent concepts "Environment," "CS & Quality", and "Human Resources," Sekisui Chemical Co., Ltd. (President: Naotake Okubo) has altered its corporate headquarters organization (head office organization) effective from January 1 and has established a new CSR Department. As a part of this process, it has been decided to introduce an environment-related capital investment promotion system in the company that would promote CO2 reduction from FY2007. Additionally, Sekisui will receive environment rating financing through the Development Bank of Japan.

Outline of environment-related capital investment promotion system

(1) Calculate CO2 emissions reduction volume as a financial amount and Sekisui Headquarters will supplement the amount over a period of four years. (2) Financial conversion will be made by calculating at 6,000 yen/ton including the addition of a premium to the current emissions credit rate of the trading market (3000/ton).

To give a specific example, let us say we will reduce CO2 emissions by 600 tons by investment in the conversion from hydraulic to electric production lines. The total investment for this project is 45 million yen and corporate headquarters will supplement this by financial conversion of the CO2 emissions volume. While the current trading market of emissions credit rate is approximately 3,000 yen per ton, calculation based on a premium-added rate of 6,000 yen per ton multiplied by 600 tons produces an annual supplement of 3.6 million yen. This supplement is provided over a period of four years resulting in a burden on corporate headquarters of 14.4 million yen. Additionally, while the project for conversion of heavy oil used for drying to a waste fuel involves an initial cost of 80 million yen, the resulting annual reduction in CO2 emissions will total 500 tons producing an annual supplement of 3 million yen, or 12 million yen over a period of four years. Rather than corporate headquarters bearing the burden of costs for investment projects, it is believed that this approach features the unique concept of corporate headquarters bearing the burden of cost for CO2 reductions. This will accelerate the process of reduction in CO2 emissions by the provision of merits through investment in equipment with high emissions reduction yield.

Use of environment rated financing through the Development Bank of Japan

Sekisui Chemical has earned high acclaim from the Development Bank of Japan for its environmental undertakings and receives 3 billion yen in "environment-rating loans" the highest rank available with a preferential interest rate of a maximum of 0.6% compared to standard rates. Under this unique environment rating loan system, the Development Bank of Japan evaluates and rates the environmental business operations of corporations and, based on the results of such evaluation, sets an appropriate level of interest for loans and Sekisui will take advantage of this system to focus its endeavors on the environment.

Status of progress in reductions in CO2 emissions

Japan promised to the world at the COP3 held in Kyoto in 1998 that it would achieve reductions in CO2 emissions 6% lower compared to 1990. Sekisui Chemical produced an "Environment Top Runner Plan" in 2005 that raised the target of a 7% reduction in emissions set in 2003 to a level of 10%, firmly positioning the company as a business growing with the environment. While the outlook for CO2 emissions reductions forecast a 7% level for FY2006 reflecting steady progress up to FY2006, based on the forecast for expanded production volume envisaged in the next mid-term management plan, current emissions levels fall short of the target of a 10% reduction compared to 1990 levels by 14,000 tons. The aim of introduction of the "environment-related capital investment promotion system" is to achieve the target 10% reduction in CO2 emissions by FY2010.

Achievement of reductions by 14,000 tons through capital investment

The causes of the 14,000 ton shortfall in the reduction strategy are (1) the 3% increase in target levels of reduction as a result of the increase of the target figure from 7% to 10%, (2) although net sales for FY2010 were set at 930 billion yen in FY2003, the current plan foresees a figure of 1 trillion yen, causing a shortfall in emission reduction due to an increase in production volume, and (3) strained balance in the supply/demand for natural gas making new purchases prior to FY2010 impossible. As a measure to resolve the shortfall in reductions of 14,000 tons, there are approaches such as achievement of reductions by capital investment through our own efforts, emissions trading and the purchase of green certificates. As a company aiming to become top rank in terms of environmental corporate management, Sekisui believes that reductions should be achieved through its own efforts. Although steady returns on CO2 emissions reduction investment can be foreseen, in many cases in the past, the benefits of such returns were available only in the mid to long term and other investments were often prioritized. The current undertaking aims to facilitate capital investment for CO2 emissions reduction by each company by partial shouldering of the burden of costs by corporate headquarters.