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Environment

Issue of Green Bonds

Issue of Green Bonds

EnvironmentIssue of Green Bonds

In July 2019, we issued green bonds through public offering for the purpose of funding mass-production equipment for Motors and Inverters for Electric Vehicles.
In June 2018, Meidensha pledged to reduce greenhouse gas emissions by 30% by fiscal 2030 (compared to fiscal 2017 levels) and as part of the First Meiden Environmental Vision and we are promoting reduction of environmental impact. Furthermore, we understand that contributing to the achievement of sustainable development goals (SDGs) is a major management issue facing the Company and we are promoting the environmental contribution business by rolling out environmentally conscious products and services.
By issuing green bonds, we plan to expand our capital procurement resources and deepen the understanding of a wide range of stakeholders regarding our active environmental initiatives.

Meidensha Green Bonds

Outline

Name of bonds "Meidensha Corporation 2nd Series Unsecured Straight Bonds (with pari passu agreement limited to corporate bonds) (Green Bonds)"
Also known as Meidensha Corporation Green Bonds
Maturity 5 years
Total amount of issue 6.0 billion yen
Coupon rate 0.260%
Issue price 100 yen for each 100 of corporate bonds
Date of issue/date of maturity July 23, 2019 to July 23, 2024
Redemption method Bullet payment at maturity
Subscription method Open invitation
Security/guarantee Unsecured and non-guaranteed
Rating BBB+ (Japan Credit Rating Agency, Ltd./Rating and Investment Information, Inc.)
Use of proceeds To provide partial funding of enhancement of mass-production facilities for electric vehicle components
Lead managing underwriter SMBC Nikko Securities Inc.
Green Bond
Structuring Agent
SMBC Nikko Securities Inc.
Principles with which to confirm compliance Climate bond standard version 2.1
Low Carbon Transport (Land) Standard Version 1.0 (CBI)
Green Bond Principles 2018 (ICMA)
Green Bond Guidelines 2017 Edition (MOE)

List of investors that have declared their investment in corporate bonds

(As of July 17, 2019 in alphabetical order)

  • Aichi Shinkin Bank
  • Daitokyo Shinyokumiai
  • Fukoku Mutual Life Insurance Company
  • Hanno-Shinkin Bank
  • JA Bank Fukuoka
  • JA Bank Ibaraki
  • JA Bank Iwate
  • Kameari Shinkin Bank
  • Kesennuma Shinkin Bank
  • Kiryu Shinkin Bank
  • Kitami Shinkin Bank
  • Meiji Yasuda Asset Management Company Ltd.
  • Sugamo Shinkin Bank
  • Sumitomo Mitsui DS Asset Management Company, Limited
  • Sumitomo Mitsui Trust Asset Management Co., Ltd.
  • Taiyo Life Insurance Company
  • THE BANK OF NAGOYA, LTD.
  • THE DAIDO FIRE AND MARINE INSURANCE COMPANY LIMITED
  • THE KAGAWA BANK, Ltd.
  • THE TOWA BANK, LTD.
  • Tokio Marine & Nichido Fire Insurance Co., Ltd.
  • Tokio Marine Asset Management Co., Ltd.

External Evaluation of Compliance

Green bond framework

Meidensha Green Bonds are issued and managed according to the Green Bond Framework developed in accordance with the Green Bond Principles 2018*1 drafted by the International Capital Market Association, the Green Bond Guidelines 2017*2 Edition drafted by the Ministry of the Environment, and the Climate Bond Standard Version 2.1*3 drafted by the Climate Bonds Initiative (CBI).

Second-party opinion and ratings

Compliance with these green bonds is assessed by the Japan Credit Rating Agency (hereinafter JCR) according to the JCR Green Bond Evaluation, and the bonds received a rating of Green 1, which is the highest rating, as they fulfilled the Green Bond Principles 2018 and the Green Bond Guidelines 2017.

Verification

DNV GL Business Assurance Japan K.K. (DNV GL), one of the world's leading organizations to evaluate and accredit the ESG performance, has verified that Meidensha Green Bonds cleared the requirements in the Climate Bonds Standard Version 2.1 as well as related technological standards.

Certification

Meidensha has received certification from Climate Bonds Initiative (CBI), an international nongovernmental organization dedicated to promoting large-scale investments to realize a low-carbon society that sets stringent standards for the issuance of such bonds. Meidensha is the first Japanese private enterprise to receive the CBI certification.
Additionally, JCR and DNV GL has received the notification of Green Finance Organization JAPAN’s decision to grant as subsidy as part of the Financial Support Programme for Green Bond Issuance of MOEJ’s FY 2018*4.

CBI

Green bond framework

1. Use of Proceeds

Eligible green project: Equipment for mass production of electric vehicle components

Outline of facility expansions(Total investment: Approx. 7 billion yen)
Nagoya Works: Renovation of existing buildings and introduction of new facilities
Location 496 Ittangosewari, Nishibiwajimacho, Kiyosu City, Aichi Prefecture
Parts to be produced Inverter-Integrated Motor Units for EVs
Start of operations Scheduled for November 2019
Total floor space 4,620m2
Production capacity Maximum annual production of 170,000 units
Kofu Meidensha Electric Mfg. Co., Ltd.: Construction of new building and introduction of new facilities
Location 825 Nakadate, Chuo City, Yamanashi Prefecture
Parts to be produced Motors for EVs
Start of operations Scheduled for November 2019
Total floor space 2,660m2
Production capacity Maximum annual production of 170,000 units
Numazu Works: Expansion of facilities
Location 515 Kaminakamizo, Higashimakado, Numazu City, Shizuoka Prefecture
Parts to be produced Inverters for EVs
Start of operations Scheduled for April 2019
Total floor space 240m2
Production capacity Maximum annual production of 120,000 units

2. Process for Projects Evaluation

Nominated green bond projects were selected and evaluated by Meidensha Accounting & Financing Group Financing Division, after the consideration of conformity to qualified criteria, based on the Group's management philosophy, environmental vision, and CSR critical issues. Final approval of the project selection is implemented by the director of treasury executives of the company decision making committee. Furthermore, we also conduct verification of negative environmental impact of eligible projects.

3. Management of Proceeds

The proceeds from the Green Bonds will be fully allocated to eligible projects and assets and tracked. Fund allocation will be implemented in one year after bond issuance. The proceeds will be managed by the Meidensha Accounting & Financing Group Financing Division. The proceeds outstanding balance will be managed by internal Meidensha forms (earmarked by numbering) and its budget and actual expense tracked with Meidensha internal protocol (accounting management scheme) quarterly. These will be requested to receive approval from the Meidensha General Manager of Financing Division to avoid deviation (financial outflow). Meidensha also manages the preservation of documents related to cash management by using the accounting document retention term list and through the accounting regulations of Meidensha concerning the scope and preservation of accounting documents.
Until the allocation of procurement funds is decided, we will manage cash or cash equivalents equal to funds.

4. Reporting

Funding status reporting

We will report the status of funding once a year until the full amount of funds to be procured is applied to projects that meet qualified criteria. Disbursement status disclosed is as follows: (1) Amount of funds appropriated, (2) Approximate amount or ratio in case of unappropriated funds, operation schedule of allocated time, and unappropriated period, (3) Estimated amount or percentage when the refund is applied.
We will disclose in a timely manner if there is a major change in the procurement funding plan or when there is a significant change in the fund status after the procurement funds have started to be appropriated.

Impact reporting

Until Green Bonds are redeemed, the following indicators showing the progress status of qualified projects funded and the environmental improvement effect are scheduled to be disclosed once a year on our website.
KPI in Impact Reporting: Annual CO2 emission reduction from eligible projects*5

*1 The guideline regarding green bond Issuance is written by Green Bond Principles Executive Committee which is facilitated by ICMA (International Capital Market Association.)

*2 MOEJ (Ministry of the Environment of Japan) has established “the Green Bond Guidelines, 2017” in March 2017 with the purpose of spurring issuances of Green Bonds and investments in them in Japan. The Guidelines, with due consideration to the consistency with the GBP, which is widely accepted in the Green Bond markets in the world, provide issuers, investors and other market participants with illustrative examples of specific approaches and interpretations tailored to the characteristics of the Japan's bond market which will aid these market participants to make decisions on working-level matters related to Green Bonds.

*3 Climate Bonds Standards (CBS) is a standard developed by Climate Bonds Initiative (CBI), the UK’s international nongovernmental organization, which includes certification process, pre issuance and post-issuance requirements and sectoral eligibility and guidance. And is aimed with the objective of “Ensuring credibility and transparency of Green Bond’s contribution to the environment. CBS imposes a sectoral standard, and it is necessary to meet the applicable sectoral standard in judging the eligibility of projects and assets covered by the green bond.

*4 A program where subsidies will be provided for the expenses that are required by those who support companies, municipalities and other bodies who seek to issue Green Bonds, in the form of granting external reviews, consultation on establishing a Green Bond framework, etc.

(1) A Green Project that meets one of the following criteria:

  1. Contributes mainly to domestic decarbonization (renewable energy, energy efficiency, etc.)
    • Projects for which equal to or more than half of the procured amount, or equal to or more than half of the number of projects is domestic decarbonization-related project.
  2. Has high decarbonization and effects on vitalization of local economy
    • Decarbonization effects Those whose subsidy amount per ton of domestic CO2 reduction is less than the specified amount.
    • Effects on vitalization of local economy Projects that are expected to contribute to effects on vitalization of local economy as part of the ordinance and plan, etc. decided by the municipality, projects for which investment by municipalities can be anticipated, etc.

(2) Compliance with the Green Bond Guidelines to be confirmed by an external review organization before issuance.

(3) It cannot be “Green wash” bonds.

*5 The formula for calculation differs from Meidensha’s calculation of environmental contribution and CO2 emissions reduction, which are stated under Meidensha’s environmental targets, as they are calculated according to the ICMA Green Bond Principles 2018, the MOE Green Bond Guidelines 2017, the CBI Climate Bond Standard Version 2.1, and the Low Carbon Land Transport and the Climate Bonds Standard (v1.0).

This content is provided for the sole purpose of publicly announcing the Company’s issuance of the Bonds, and not for the purpose of soliciting investment or engaging in any other similar activities within or outside of Japan.

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