レノバ（9519） – (Delayed)Corporate Governance Report

コーポレートガバナンス CORPORATE GOVERNANCE December 15, 2021 RENOVA, Inc. Yosuke Kiminami, Founding CEO & Representative Director Contact: Governance & Compliance Department +81-3-3516-6260 http://www.renovainc.com/ The corporate governance of RENOVA, Inc. (“the Company”) is described below. I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile, and Other Basic Information 1. Basic Views The Company conducts business in line with its mission “To create green and sustainable energy systems for a better world” and its vision “To become Asia’s renewable energy leader.” The Company believes that to achieve these goals it is important to gain the trust of local communities, our customers, shareholders, employees, and all other stakeholders. To this end, we are strengthening and improving our corporate governance by building a legal compliance system, quick decision-making and operation system, and appropriate supervision and monitoring system. [Reasons for Non-compliance with Principles of the Corporate Governance Code] Information is based on the Code after revision in June 2021. a．Supplementary principle 2.4.1 Ensuring diversity in the promotion to core human resources – The Company believes that all of its employees are core employees for realizing its corporate mission: “To create green and sustainable energy systems for a better world.” – Based on this assumption, the source of the Company’s competitiveness is “each human resources (“individual”) and “teams.” The renewable energy business takes advantage of natural conditions and climates that differ from region to region. To harness such diverse natural conditions and climates for business purposes, the Company must incorporate diversity and have a high level of collective intelligence created by diversity. To this end, the Company has always promoted equality in its recruitment, evaluation and promotion of diverse employees, to harness the diversity of capable individuals with differing experiences, approaches and views, regardless of race, gender, age, nationality and other individual differences. – As a result, as of December 1, 2021, the percentage of mid-career hires among employees on a Group basis (the Company and its consolidated subsidiaries) was 90.3%, the percentage of female employees was 31.7%, and the 1 コーポレートガバナンス CORPORATE GOVERNANCE percentage of foreign nationals was 10.8%. – Going forward, the Company will continue working on personnel and organization strategies to harness the strength of capable “individuals” in line with the Company’s business strategies of expanding the offshore wind energy business and business in Asia rather than setting numerical targets for different attributes and pursuing these. – The Company will tirelessly pursue inclusion and diversity by developing workplace environments aimed at “being barrier free and creating no barriers” so that all “individuals” play an active part through putting the right people into the right jobs and by implementing initiatives aimed at fostering employee understanding to eliminate any misunderstanding, ignorance and lack of awareness about diversity. – Key initiatives in FY2021: The Company implemented an initiative to reword its description of the culture it should aim to create in the future as part of organizational and personnel strategies. In the course of such initiative, the CEO himself held dialogue meetings with all employees (11 meetings in total) to reconfirm through dialogue with employees the “importance of diversity.” b．Principle 3.1 i) Principle of information disclosure, Supplementary principle 4.1.2 Mid-term business plan, Principle 5.2 Establishing and Disclosing Business Strategies and Business Plans The Company’s policy is to continue aggressively developing new power plants in the future. However, project development periods are long and it is not uncommon to be slightly ahead of or behind the schedule for the start of operation. In addition, each project involves development on a very large scale and it is therefore not necessarily the case that publicly announcing numerical targets in the form of a mid-term management plan is helpful for appropriate information disclosure. The Company discloses information on the status of its project development to investors on a regular basis. It also considers its policy for properly communicating its growth and strategic business policies to investors and will continue implementing disclosure methods that will help investors make investment decisions. [Disclosure Based on Principles of the Corporate Governance Code] Actions taken by the Company in relation to the disclosures specified in each principle of the Corporate Governance Code are as follows. Again, information is based on the Code after revision in June 2021. a. Principle 1.4 Cross-Shareholdings The Company currently holds no listed shares for the purpose of cross-shareholding. The Company has no intention of holding shares for the purpose of cross-shareholding in the future but, if it did, it would exercise voting rights from the viewpoint of the sustainable growth of the investee and the enhancement of its share value over the medium and long term. b. Principle 1.7 Related Party Transactions 2 コーポレートガバナンス CORPORATE GOVERNANCE – The Company’s Commitment to Compliance demands compliance for the prevention of conflicts of interest and the Rules for the Board of Directors and Rules for Approval Authority stipulate to the effect that transactions between Directors and the Company require the prior approval of the Board of Directors. – The Company checks and monitors transactions between officers themselves or their families, within the second degree of relationship (includes companies they own or subsidiaries thereof), and the Company or subsidiaries of the Company and discloses material transactions in its Annual Securities Report. c. Principle 2.6: Roles of Corporate Pension Funds as Asset Owners The Company does not have a corporate pension fund plan. It has introduced a corporate defined contribution pension plan for the steady build-up of employees’ assets. d. Principle 3.1 i) Company objectives (e.g. business principles), business strategies and business plans; 1. Company objectives (e.g. business principles) The Company conducts business in line with its mission “To create green and sustainable energy systems for a better world” and its vision “To become Asia’s renewable energy leader.” To realize its mission and vision, the Company defines the following as “Our Commitments.” – The Earth: To contribute towards a sustainable society and planet – Communities: To create value in partnership with local communities, and respect their heritage and cultures – Customers: To generate clean and efficient energy for our customers – Shareholders: To generate sustained growth in shareholder value – Employees: To gather the best people, and provide exciting career and growth opportunities for our employees 2. Business strategies The Group intends to develop multiple renewable energy sources and has set itself a medium-term target for the total capacity of power plants in operation and under construction of over 3.0GW. The Group is currently implementing the following business strategies to achieve this target. – Continue to make upfront investments for the foreseeable future. The Company will invest in expansion of its workforce for business development and make proactive investments in excellent projects. generation projects – Achieve growth in the medium and long term through the development of large-scale offshore wind power Among renewable energy sources, power generation from offshore wind has progressed furthest in Japan. The Company has built up expertise in this area through many years’ involvement in a wind farm off the coast of Yurihonjo City, Akita Prefecture, which has been under development since 2015. The area off the shore of Yurihonjo City, Akita Prefecture has been designated as a “promotion area” under the Renewable Energy Sea Area Utilization Law and the process of selecting an operator by public tender is currently underway. The Company’s policy is to leverage the knowhow built up in the Akita Yurihonjo offshore wind farm project and the 3 コーポレートガバナンス CORPORATE GOVERNANCE knowledge of human resources with experience of offshore wind farm projects in Europe and other parts of the world to develop new offshore wind farm projects in Japan. The Company will invest management resources in segments of the renewable energy market with particularly strong growth potential to realize growth over the medium and long term and further enhancement of its share value. – Achieve further growth through overseas business Leveraging the knowhow built up in Japan in its overseas business, focused on Asia, the Company will develop renewable energy sources suited to each country and region. It will use entry to the Vietnamese market as an opportunity to accelerate project development in Asia, where electricity markets are growing at a dizzying pace, and to achieve long-term growth and further enhancement of its share value. – Steadily achieve large-scale biomass power generation through continuous development The Company will leverage expertise built up through the operation of biomass power plants at United Renewable Energy Co., Ltd. and Kanda Biomass Energy K.K., development expertise from four 75MW large-scale biomass pipeline projects, and its superior network to accelerate the development of new large-scale biomass projects. It will steadily accomplish the four projects under construction, improving and enhancing its construction management system. – Achieve sustainable, stable operation by bringing the operation function in-house A certain degree of operational knowhow is required to operate biomass power plants and wind farms in a sustainable and stable manner. The biomass power plants the Group is currently constructing are going to start operation in succession from 2023 and the Company is also putting efforts into the development of large-scale offshore wind farm projects. By bringing operation functions in-house and accumulating the expertise to realize sustainable and stable power generation, the Group will fulfil its responsibility as a provider of social infrastructure and maximize profit at the same time. 3. Business plans As stated in [Reasons for Non-compliance with Principles of the Corporate Governance Code] above, the Company does not disclose business plan information such as numerical targets. For details of the Company’s mission, vision and commitment, please refer to the following link. https://www.renovainc.com/corporate/philosophy/ e. Principle 3-1 (ii) Basic views and guidelines on corporate governance For the Company’s basic views and guidelines on corporate governance, please refer to 1. Basic Views of Part I f. Principle 3.1 ⅲ) Board policies and procedures in determining the remuneration of the senior management and To achieve its missions and vision outlined above, the Company’s policies for Directors’ compensation are as of this report. directors 1. Policies 4 コーポレートガバナンス CORPORATE GOVERNANCE follows. each area. i) Developing an environment that facilitates the promotion of human resources with professional skills in ii) Establishing a compensation plan that easily enables the Company to attract and retain excellent human resources suitable for an executive position. iii) Making a commitment to realizing the medium- to long-term growth of the Company by focusing on it. iv) Achieving a compensation level worthy of the performance scale at the time when the medium- to long-term business performance of the Company is achieved v) Ensuring the flexible and speedy operation to enable the Company to recruit appropriate human resources for appropriate positions and respond to their retention needs. vi) Ensuring the objectivity and transparency of the compensation decision process to build the foundation for external accountability. 2. Procedures The Company has established the Nomination and Compensation Committee (discretionary organization) as an advisory body for the Board of Directors to ensure the objectivity and transparency of compensation for the Directors and Executive Officers. The Nomination and Compensation Committee is chaired by an Independent External Director, and the majority of the members are External Directors. The amount of compensation for Directors and Executive Officers is determined by the Board of Directors based in the recommendations of the Nomination and Compensation Committee. The total amount of compensation for Directors is set within a compensation limit approved at a general meeting of shareholders. g. Principle 3.1 iv) Board policies and procedures in the appointment/dismissal of the senior management and the nomination of director candidates and Audit & Supervisory Board Member candidates The Company appoints as Director candidates individuals who have outstanding personality and insight and high ethical standards and who satisfy the following requirements and will be capable of fulfilling their duties, taking diversity and the overall balance of knowledge experience and skills within the composition of the Board of Directors as a whole into consideration. Internal Directors – Must have excellent management sense and be familiar with management issues – Must accurately understand changes in the operating environment and market and be capable of formulating and implementing management strategies for achieving improvement in corporate value in the medium and 1. Policies (a) Directors Appointment criteria long term External Directors 5 コーポレートガバナンス CORPORATE GOVERNANCE environment and energy – Must have a high level of expertise in corporate management, financial investment, finance and accounting, or – Must have a good understanding of the characteristics of the Company’s business and be capable of fulfilling a supervisory function based on appropriate risk management within the Board of Directors – In the case of an Independent External Director – must satisfy the Company’s independence criteria Dismissal (proposal) criteria A proposal for dismissal will be made if a Director: – is deemed to be engaged in a socially condemnable relationship with Anti Social Forces; – has violated laws or regulations or the Articles of Incorporation or other rules of the Company, causing the Company heavy losses or disrupting its business; – has serious difficulty to perform duties; or – is not deemed to have the qualities defined in the appointment criteria. (b) Audit & Supervisory Board Members Appointment criteria The Company appoints as Audit & Supervisory Board Member candidates individuals who have outstanding personality and insight and high ethical standards and who satisfy the following requirements and will be capable of fulfilling their duties, taking diversity and the overall balance of knowledge experience and skills within the composition of the Audit & Supervisory Board as a whole into consideration. – Must have the knowledge of finance, accounting and legal affairs required for audits and at least one must have sufficient knowledge of finance and accounting. – Must have a good understanding of the characteristics of the Company’s business and be capable of fulfilling a supervisory function based on appropriate risk management within the Board of Directors – In the case of an Independent External Audit & Supervisory Board Member – must satisfy the Company’s independence criteria Dismissal (proposal) criteria A proposal for dismissal will be made if an Audit & Supervisory Board Member: – is deemed to be engaged in a socially condemnable relationship with Anti Social Forces; – has violated laws or regulations or the Articles of Incorporation or other rules of the Company, causing the Company heavy losses or disrupting its business; – has serious difficulty to perform duties; or – is not deemed to have the qualities defined in the appointment criteria. (c) Executive Officers Appointment criteria duties. The Company appoints as Executive Officer candidates individuals who have outstanding personality and insight and high ethical standards and who satisfy the following requirements and will be capable of fulfilling their 6 コーポレートガバナンス CORPORATE GOVERNANCE expected to build a track record. – Must have adequate qualities and knowledge for performance of duties and have a strong track record or be – Must have an in-depth understanding of the Company’s corporate philosophy (Our Mission, Our Vision and Our Commitments) and be capable of demonstrating the competencies defined by the Company at high enough level to set an example to other employees. Dismissal (proposal) criteria A proposal for dismissal will be made if an Executive Officer: – fails to fulfil the role expected of him/her or accomplish the results expected of him/her at the time he/she became Executive Officer – is deemed to be engaged in a socially condemnable relationship with Anti Social Forces; – has violated laws or regulations or the Articles of Incorporation or other rules of the Company, causing the Company heavy losses or disrupting its business; – has serious difficulty to perform duties; or – is not deemed to have the qualities defined in the appointment criteria. 2. Procedures (a) Directors Appointment Meeting of Shareholders. Dismissal In light of the policy for the appointment of Directors outlined above, the President and Representative Director prepares a proposal for the appointment of Director candidates, which, following deliberation by the Nomination and Compensation Committee and a resolution by the Board of Directors, is then submitted to the General In light of the policy for the dismissal of Directors outlined above, the Nomination and Compensation Committee prepares and deliberates a proposal for dismissal, which, if approved by the Board of Directors, is then submitted to the General Meeting of Shareholders (ordinary resolution). (b) Audit & Supervisory Board Members Appointment In light of the policy for the appointment of Audit & Supervisory Board Members outlined above, the President and Representative Director prepares a proposal for the appointment of Audit & Supervisory Board Member candidates in consultation with the Audit & Supervisory Board Member who chairs the Audit & Supervisory Board and obtains the consent of the Audit & Supervisory Board. The proposal is then the subject of a resolution by the Board of Directors before being submitted to the General Meeting of Shareholders. Dismissal In light of the policy for the dismissal of Audit & Supervisory Board Members outlined above, the President and Representative Director proposes dismissal to the Board of Directors and, if approved by the Board of Directors, the proposal is then submitted to the General Meeting of Shareholders (extraordinary resolution). 7 コーポレートガバナンス CORPORATE GOVERNANCE (c) Executive Officers Appointment In light of the policy for the appointment of Executive Officers outlined above, the President and Representative Director prepares an appointment proposal and appointment is resolved by the Board of Directors following deliberation by the Nomination and Compensation Committee. Dismissal In light of the policy for the dismissal of Executive Officers outlined above, the President and Representative Director prepares a dismissal proposal and dismissal is resolved by the Board of Directors following deliberation by the Nomination and Compensation Committee. h. Principle 3.1 v) Explanations with respect to the individual appointments/dismissals and nominations based on the Board policies and procedures in the appointment/dismissal of the senior management and the nomination of directors and Audit & Supervisory Board Member candidates; and Explanations given on the appointment and dismissal of individual Directors and Audit & Supervisory Board Members, including a skills matrix showing the expertise required of the Company’s Directors, are disclosed in the notice of convocation of annual general meeting of shareholders (reference documents for the general meeting of shareholders) published on the Company’s website, which can be viewed using the following link. Notice of Convocation of Annual General Meeting of Shareholders: https://www.renovainc.com/ir/meeting/ i． Supplementary principle 3.1.3, Supplementary principle 2.3.1 and Supplementary principle 4.2.2 Basic policy for the Company’s sustainability initiatives and status of initiatives 1. Views and basic policy on sustainability The Company’s Board of Directors has formulated the following views and basic policy on sustainability. （Relationship between the corporate mission and sustainability） – The Company’s corporate mission is “To create green and sustainable energy systems for a better world.” Based on this mission, the Company develops and operates multiple energy sources (solar, biomass, wind, geothermal and hydroelectric power) across Asia as a company specializing in renewable energy to realize a sustainable society. – In addition, the Company has a vision “To become Asia’s renewable energy leader.” To achieve this vision, it is important not only to promote the adoption of green energy but also to increase sustainability of the business as whole from various perspectives including creating new value through coexistence with local communities and business in the process of business development and building new supply chains. We believe that through these activities, we will be able to become such a leading company. – The Company is committed to working with stakeholders to create a future in 100 years from now that is free of energy concerns. (Basic policy on sustainability) 8 コーポレートガバナンス CORPORATE GOVERNANCE – The Company will contribute to improving the sustainability of society through implementation of its mission. – The Company will pursue every single corporate activity in a sustainable way. Especially for the Company, which aims to operate business with an emphasis on “safety and security” and “mutual prosperity” in the long term, collaboration with a wide range of stakeholders is essential for the establishment and development of business. – The Company has set out commitments for each of its key stakeholders: “Earth,” “Communities,” “Customers,” Communities: To create value in partnership with local communities, and respect their heritage and cultures “Shareholders,” and “Employees.” The Earth: To contribute towards a sustainable society and planet Customers: To generate clean and efficient energy for our customers Shareholders: To generate sustained growth in shareholder value Employees: To gather the best people, and provide exciting career and growth opportunities for our employees – In the renewable energy business, the Company attaches most importance to the “Earth” and “Communities” among the above stakeholders based on the idea of “getting communities to use the natural energy with which they are blessed.” For the earth and communities, the Company will develop power generation business which will be even more sustainable in the long term and will also place importance on the Company’s own sustainability. 2．Status of initiatives for sustainability – The Company’s Board of Directors discusses sustainability issues and cross-functional teams led by the CEO consider sustainability policies, targets and measures as and when necessary. – The Company plans to disseminate information on its website in the future regarding material issues (materiality) identified by the Company from a sustainability perspective and related measures. – The Company presents details of its initiatives to date from the perspective of the SDGs. https://www.renovainc.com/corporate/sdgs/ 3．Investment in human capital and intellectual property – The Company makes investments to develop workplace environments aimed at “being barrier free and creating no barriers” so that all “individuals” play an active part through putting the right people into the right jobs. – Given the characteristics of the Company’s business (development and operation of renewable energy power plants), the Company has currently made no particular investments in intellectual property but will consider timely and appropriate investment where necessary. j．Supplementary Principle 4.1.1 Roles and Responsibilities of the Board of Directors 1. By ensuring that External Directors make up a majority of the Board of Directors, the Company further increases the separation between management oversight and execution and strengthens the monitoring function of the Board of Directors, enabling it to fulfil its function of being responsible for steering the general course of the company, in other words, for management strategies and oversight of senior management. 9 コーポレートガバナンス CORPORATE GOVERNANCE 2. The President, CEO and Representative Director and Executive Officers undertake decisions on material matters besides those defined in laws and regulation and the Articles of Incorporation as matters for resolution by the Board of Directors and business execution in accordance with the Rules for Approval Authority. The Company has also established a Management Committee, as an advisory body to support decision-making and business execution by the President, CEO and Representative Director, to increase the transparency and objectivity of management decision-making. k. Supplementary principle 4.1.3 Establishment and implementation of a succession plan for the CEO and other top executives, and oversight thereof The Company adopts a policy and system whereby the Nomination and Compensation Committee establishes and implements a successor plan, and the Board of Directors also verifies said plan and its implementation status – Establishment of requirements the CEO must satisfy (CEO requirements) identified based on ideal image of each year and gives advice where necessary. Based on this, the Company is currently implementing the following. – Formulation of successor plan roadmap CEO – Consideration of plan for the selection and development of eligible successors – Expansion of scope of successor plan from CEO to Executive Officers – Evaluation of selected candidates l. Principle 4.9 Independence Criteria and Qualifications for Independent External Directors The Company has established criteria for the independence of External Directors and External Audit & Supervisory Board Members (hereinafter collectively referred to as “External Officers”) as follows, to ensure appropriate transparency and objectivity in the governance of the Company. External Officers and candidates for External Officers are deemed to be independent if, following investigation by the Company as far as is reasonably practicable, they are deemed not to fall under any of the following 1. A person from the Company or a consolidated subsidiary of the Company (hereinafter referred to as the “ Company or its subsidiaries”)(see Note 1) 2. A major shareholder of the Company (see Note 2) 3. An executive of an entity which falls under any of the following categories (a) A major business partner of the Company or its subsidiaries (see Note 3) (b) A major lender to the Company or its subsidiaries (see Note 4) categories voting rights (c) An entity of which the Company or its subsidiaries hold voting rights equivalent to 10% or more of the total 4. A person who belongs to an audit corporation which is an accounting auditor for the Company or its 10 コーポレートガバナンス CORPORATE GOVERNANCE subsidiaries 5. A person who receives significant amounts of monetary compensation or other property (other than their remuneration as an officer) from the Company or its subsidiaries as a specialist such as a consultant, accountant, tax accountant, lawyer, judicial scrivener, patent attorney 6. A person who receives significant donations from the Company or its subsidiaries (see Note 6) 7. Business executives of a company, between which and the Company External Officers are mutually appointed (see note 7) 8. A person whose close relative (see Note 8) falls under any of 1. to 7. above (only a key person (see Note 9) with the exceptions of items 4 and 5) 9. A person who fell under any of 2. to 8. above in the five years prior to appointment 10. Notwithstanding provisions of each of the foregoing, a person in relation to whom other special grounds which might give rise to a conflict of interests with the Company exist Note 1: Refers to an Executive Director, Executive Officer or the equivalent (collectively referred to in these criteria as a “Business Executive”) who currently belongs to the Company or its subsidiaries or belonged to the Company or its subsidiaries in the ten years prior to appointment. Note 2: The term “major shareholder” means a shareholder who holds 10% or more of the voting rights of the Company under its own name or another person’s name at the end of the most recent fiscal year of the Company. In the case where the major shareholder is an organization such as a corporation or an association, the term refers to a Business Executive belonging to such organization. Note 3: The term ‘major business partner’ refers to a supplier or a customer of the Company or its subsidiaries whereby the annual transactions between such supplier or customer and the Company or its subsidiaries amount to more than 2% of the consolidated net sales of the Company or the consolidated net sales of the such supplier or customer. services rendered. Note 4: The term “major lender” refers to a financial institution from which the Company or its subsidiaries has borrowed funds whereby the balance of such borrowing at the end of the Company’s fiscal year exceeds 2% of the consolidated total assets of the Company or the consolidated total assets of such financial institution. Note 5: The term “significant amounts” is defined as followed according to such specialist’s involvement in the (1) In the case where such specialist renders services to the Company or its subsidiaries as an individual, the term “significant amounts” denotes when compensation (excluding officers’ remuneration) received from the Company and its subsidiaries exceeds ¥10 million a year on average over the past three fiscal years. (2) In the case where a corporation, association or other organization to which such specialist belongs renders services to the Company or its subsidiaries, the term “significant amounts” denotes when the average compensation such organization has received from the Company or its subsidiaries over the past three fiscal years exceeds 2% of the such organization’s total annual revenue in the previous fiscal year. 11 コーポレートガバナンス CORPORATE GOVERNANCE three fiscal years. Note 6: Refers to a person who has received donations exceeding ¥10 million a year on average over the past In the case where the recipient of the donations is a corporation, association or other organization, the term “person” refers to a person belonging to such organization who is directly involved in research, education or other activities relating to such donations. Note 7: The case “External Officers are mutually appointed” refers to a situationwhere a Business Executive of the Company or its subsidiaries serves as an External Director or External Audit & Supervisory Board Member of another company and an Business Executive of such other company serves as an External Director or External Audit & Supervisory Board Member of the Company. Note 8: The term “close relative” means a spouse or a relative within the second degree of relationship. Note 9: The term “key person” refers to a Director or Executive Officer. m. Supplementary Principle 4.11.1: Views on the Overall Balance of Knowledge, Experience, and Skills of the Board of Directors, and on Diversity and Appropriate Board Size 1. The Articles of Incorporation stipulate that the number of Directors shall be not more than nine, from the viewpoint of quick decision making and extensive deliberation. 2. The Board of Directors is made up of individuals with excellent management skills and individuals with expertise and knowledge useful for project development. The majority of its members are External Directors to 3. Internal Directors are individuals with extensive corporate management experience and good project ensure management transparency and objectivity. implementation skills and management skills. 4. External Directors consist of five experts in the fields of corporate management, financial investment, finance & accounting, environment & energy respectively. A skills matrix showing such expertise is disclosed in the notice of convocation of the annual general meeting of shareholders (reference documents for the general meeting of shareholders) published on the Company’s website, which can be viewed using the following link. Notice of Convocation of the Annual General Meeting of Shareholders https://www.renovainc.com/ir/meeting/ n. Supplementary Principle 4.11.2 Status of Concurrent Serving of Directors and Audit & Supervisory Board Members at Other Listed Companies The Company judges that the concurrent positions of each Director and each Audit & Supervisory Board Member at other listed companies will not prevent them from performing their duties as a Director or Audit & Supervisory Board Member of the Company. Significant concurrent positions of each Director and each Audit & Supervisory Board Member are disclosed in the Notice of Convocation of the Annual General Meeting of Shareholders and the Annual Securities Report published on the Company’s website, which can be accessed via the links below. 12 コーポレートガバナンス CORPORATE GOVERNANCE Notice of Convocation of the Annual General Meeting of Shareholders: https://www.renovainc.com/ir/meeting/ Annual Securities Report: https://www.renovainc.com/ir/securities/ o. Supplementary Principle 4.11.3 Effectiveness of the Board of Directors as a Whole To ensure the objectivity of Board of Directors and to seek further improvement of governance, the Company hired a third-party evaluation agency to conduct an evaluation of the effectiveness of the Board of Directors. An outline of the evaluation implemented and evaluation results are as follows. 1. Date of implementation The Company implemented an evaluation of the effectiveness of the Board of Directors by all Directors and Audit & Supervisory Board Members over the period from February to early May 2021. – A questionnaire survey was implemented in February 2021 surveying all Directors and all Audit & Supervisory 2. Implementation process Board Members – Based on the answers given in the questionnaire survey, all Directors and Audit & Supervisory Board Members were interviewed by a third party in March 2021 – The results of analysis and evaluation by a third party based on the answers given in the questionnaire survey and the interviews were reported to the Board of Directors and discussion and an exchange of views were held. (a) Action taken to address issues identified in the evaluation of the effectiveness of the Board of Directors (b) Composition, operation and deliberations of the Board of Directors (c) Support structure for Directors and Audit & Supervisory Board Members 3. Main survey items conducted the previous fiscal year (d) Successor plan (e) Internal control (f) Dialogue with investors, etc. 4. Overview of evaluation results – Overall evaluation identified. During discussions by the Board of Directors based on the third-party evaluation, it was found that the effectiveness of the Board of Directors of the Company was sufficiently ensured and no major issues were Some degree of improvement was confirmed on all matters recognized as issues in the evaluation conducted the previous fiscal year and various opinions and recommendations were given on the following matters. – Further strengthening of the monitoring function of the Board of Directors – Increased deliberation of agenda items which need to be discussed as a priority – Monitoring of the formulated successor plan Issues and priority matters which need to be addressed to improve the effectiveness of the Board of Directors will 13 コーポレートガバナンス CORPORATE GOVERNANCE and actioned. continue to be discussed by the Board of Directors, incorporated into the Board of Directors’ annual action plan, p. Supplementary principle 4.14.2 Training policy for Directors and Audit & Supervisory Board Members The Company provides training for Directors and Audit & Supervisory Board Members through discussions with outside speakers and other means, where necessary. Training themes range from the basics (duties and responsibilities of officers/compliance, etc.) to corporate governance-related topics in light of recent trends (Stewardship Code/Corporate Governance Code), and training on such themes is provided as needed. q. Principle 5-1 Policy for Constructive Dialogue with Shareholders 1. The Company deals with requests for dialogue (interviews) from shareholders in an appropriate manner, verifying the purpose of requests and then accommodating them within reason to the extent that they can be judged to contribute to sustainable growth and the increase of corporate value over the mid- to long-term, while giving due consideration to insider information. with shareholders is as follows. 2. The Company’s policy on the development of a structure and initiatives for promoting constructive dialogue – The CFO is in charge of overseeing dialogue and interviews are conducted by the IR Office, in principle. – The means of communication is primarily individual interviews and the Company also holds and streams financial results briefings twice a year, holds earnings calls (briefings for institutional investors and analysts via teleconference after the financial results announcement) and publishes financial results supplementary materials every quarter. – Feedback from interviews with shareholders is reported as appropriate to senior management, including the President, CEO and Representative Director, and a quarterly report on IR activities is given four times a year at meetings of the Board of Directors. – For the management of insider information about financial results, the Company positions the period from the quarter end to the announcement of quarterly results as a quiet period and limits contact with shareholders – By means of consolidation of all external communication channels into the IR Office, considerable attention is during this period, in principle. paid to the communication of information. 2. Capital Structure [Status of Major Shareholders] Foreign Shareholding Ratio From 20% to less than 30% 14 コーポレートガバナンス CORPORATE GOVERNANCE Yosuke Kiminami Sumitomo Forestry Co., Ltd. Sachio Semmoto Daisuke Tsujimoto The Master Trust Bank of Japan, Ltd. (Trust account) Mitsuuroko Group Holdings Co., Ltd. Daisaku Honda Custody Bank of Japan, Ltd. (Trust account) The Dai-ichi Life Insurance Company, Limited ISB S/A DUB NON RESIDENT RBC UCITS-CLIENTS ACCOUNT / TREATY RATE Controlling Shareholder ‒ ‒ Parent Company Stock Exchange on which Parent Company is Listed ‒ Name / Company Name Number of Shares Owned (Shares) Percentage (%) 14,880,000 7,360,000 5,431,600 5,000,000 4,035,400 3,878,400 3,123,000 2,232,500 1,786,300 1,767,300 18.94% 9.36% 6.91% 6.36% 5.13% 4.93% 3.97% 2.84% 2.27% 2.24% Supplementary Explanation 3. Corporate Attributes Fiscal Year-End Type of Business Number of Employees (consolidated) as of the End of the Previous Fiscal Year Sales (consolidated) as of the End of the Previous Fiscal Year Number of Consolidated Subsidiaries as of the End of the Previous Fiscal Year Supplementary Explanation Listed Stock Exchange and Market Section Tokyo Stock Exchange, First Section March Electricity and gas sector From 100 to less than 500 From ¥10 billion to less than ¥100 billion From 10 subsidiaries to less than 50 subsidiaries 4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling Shareholder 5. Other Special Circumstances which may have Material Impact on Corporate Governance ‒ ‒ 15 II. Business Management Organization and Other Corporate Governance Systems regarding Decision Making, Organization Form Company with an Audit & Supervisory Board コーポレートガバナンス CORPORATE GOVERNANCE Execution of Business, and Oversight in Management 1. Organizational Composition and Operation [Directors] Maximum Number of Directors Stipulated in Articles of Incorporation 9 Term of Office Stipulated in Articles of Incorporation 1 year Appointment of External Directors Appointed Chairperson of the Board Number of Directors Number of External Directors Number of Independent Directors Relationship with the Company (1) President 9 5 4 Name Attribute Relationship with the Company (*1) Hideki Minamikawa From another company Koichi Kawana Miyuki Zeniya Naoki Shimada From another company From another company From another company Mayuka Yamazaki From another company *1 Categories for “Relationship with the Company” a b c d e f g h i j k a. Business executive (a person who executes business; hereinafter the same) of the Company or its subsidiaries b. Business executive or non-executive director of a parent company of the Company c. Business executive of a fellow subsidiary of the Company d. A party whose major business partner is the Company or a business executive thereof e. Major business partner of the Company or a business executive thereof f. Consultant, accountant or legal professional who receives significant amounts of monetary compensation or other property from the Company other than remuneration as an officer g. Major shareholder of the Company (or a business executive of said major shareholder if the shareholder is a corporation) h. Business executive of a business partner of the Company (which does not correspond to any of d., e., or f.) (the director i. Business executive of a company, between which and the Company External Officers are mutually appointed (the director j. Business executive of a recipient of donations from the Company (the director himself/herself only) himself/herself only) himself/herself only) k. Others Relationship with the Company (2) 16 コーポレートガバナンス CORPORATE GOVERNANCE Name Independent Officer Supplementary Explanation of the Relationship Reasons for Appointment Hideki Minamikawa ○ ‒ The Company appointed Mr. Hideki Minamikawa judging that he can give specialist high-level advice on a wide range of matters relating to the Company’s Renewable Energy Business because he is familiar with environmental policies in Japan and overseas, having served as Vice Minister for Global Environmental Affairs at Japan’s Environment Ministry and been involved in efforts to get the United Nations Framework Convention on Climate Change signed. Mr. Minamikawa is chair of the Nomination and Compensation Committee and plays an important role within the Committee from an independent objective perspective. The Company appointed Mr. Koichi Kawana judging that he will oversee management in general and give the Company useful advice on overseas business expansion and the construction and operation of power plant facilities because he has extensive experience as the senior executive of a listed company, is also familiar with overseas business, having headed up an an overseas office, and has specialist knowledge of plant engineering. Mr. Kawana was previously receiving compensation as Vice Chairman from JGC Holdings Corporation. JGC Corporation, which is a subsidiary of JGC Holdings Corporation, falls into the category of a major business partner of Ishinomaki Hibarino Biomass Energy G.K., which is an affiliate of the Company. However, Mr. Kawana resigned from all posts at JGC Holdings Corporation in June 2020and will not receive any more compensation from JGC Holdings Corporation in the future. Mr. Kawana is a member of the Nomination and Compensation Committee and plays an important role within the Committee from an objective perspective. The Company appointed Ms. Miyuki Zeniya judging that she will oversee business execution and give the Company advice on its management from an investor perspective given that she has extensive knowledge and experience from a finance and investment perspective gained from working at an investment consultancy and as Deputy President of a regional bank and through her role as Head of Sustainable Finance at The Dai-ichi Life Insurance Company, Limited. The Company appointed Mr. Naoki Shimada judging that he will oversee business execution and give the Company advice from a broad management Koichi Kawana ‒ Miyuki Zeniya ○ ‒ Naoki Shimada ○ ‒ 17 コーポレートガバナンス CORPORATE GOVERNANCE Mayuka Yamazaki ○ ‒ perspective because he has extensive consulting experience and many years’ experience as a senior manager, having worked for an overseas consulting firm, been involved in corporate management as a representative director, started up new businesses, supported entry to overseas markets and implemented M&A growth strategies. Mr. Shimada is a member of the Nomination and Compensation Committee and plays an important role within the Committee from an independent objective perspective. The Company appointed Ms. Mayuka Yamazaki judging that she will oversee business execution and give the Company appropriate advice from a global multifaceted perspective because she has specialist knowledge of corporate management gained through her experience working for a foreign management consultancy and a business school in the United States and her experience serving as an External Director for a fast-growing startup. Discretionary Committees Discretionary Establishment of Committee(s) Corresponding to Nomination Committee or Compensation Committee Established Status of Establishment of discretionary Committees, Composition and Attributes of Chairperson Committee Corresponding to Nomination Committee Committee’s Name Nomination and Compensation Committee All Committee Members Full-time Members Internal Directors External Directors External Experts Other Chairperson 5 0 2 3 0 0 External Directors Committee Corresponding to Compensation Committee Committee’s Name Nomination and Compensation Committee All Committee Members Full-time Members Internal Directors External Directors External Experts Other Chairperson 5 0 2 3 0 0 External Directors Supplementary Explanation The Company established the Nomination and Compensation Committee, a discretionary body which acts as an advisory body to the Board of Directors, to increase management transparency and objectivity and to ensure the appropriateness of compensation for Directors and Executive Officers. The Nomination and Compensation Committee is chaired by independent External Director Mr. Hideki Minamikawa. It has 5 members in total: Mr. 18 コーポレートガバナンス CORPORATE GOVERNANCE Sachio Semmoto, Chairman and Director, Mr. Yosuke Kiminami, President and Representative Director, Mr. Hideki Minamikawa, External Director, Mr. Koichi Kawana, External Director and Mr. Naoki Shimada, External Director. A majority of the members are External Directors. The status of activities of the Nomination and Compensation Committee in the fiscal year ended March 31, 2021 (from April 1, 2020 to March 31, 2021) is as follows. a. Number of meetings 12 b. Status of attendance All members attended the committee meetings which were held c. Main matters considered 1. Appointments and changes of Directors, Executive Officers or key employees 2. Compensation for Directors and Executive Officers 3. Significant organizational changes 4. Successor plan for CEO and other senior management 5. Compensation plan for officers Audit & Supervisory Board Members Establishment of Audit & Supervisory Board Established Maximum number of Audit & Supervisory Board members stipulated in Articles of Incorporation Not more than 5 Number of Audit & Supervisory Board Members 4 Cooperation among Audit & Supervisory Board Members, Accounting Auditor and Internal Audit Office Audit & Supervisory Board Members receive reports from both the Accounting Auditor and the Internal Audit Office mainly on audit plans at the start of each fiscal year and on audit implementation status and audit results every quarter thereafter, and engages in an exchange of opinions with them. In addition, Audit & Supervisory Board Members, the Accounting Auditor and the Internal Audit Office hold a three-way audit liaison meeting every quarter in an effort to further strengthen cooperation between them. Appointment of External Audit & Supervisory Board Members Appointed Number of External Audit & Supervisory Board Members Number of Independent Audit & Supervisory Board Members 3 3 Relationship with the Company (1) Name Attribute Noriyasu Kaneko Attorney-at-law Relationship with the Company (*1) a b c d e f g h i j k l m 19 コーポレートガバナンス CORPORATE GOVERNANCE Toshiki Sada From another company Hiroyuki Wakamatsu CPA *1 Categories for “Relationship with the Company” a. Business executive (a person who executes business; hereinafter the same) of the Company or its subsidiaries b. Non-executive director or accounting advisor of the Company or its subsidiaries c. Non-executive director or business executive of a parent company of the Company d. Audit & Supervisory Board Member of a parent company of the Company e. Business executive of a fellow subsidiary of the Company f. A party whose major client or supplier is the Company or a business executive thereof g. Major business partner of the Company or a business executive thereof h. Consultant, accountant or legal professional who receives significant amounts of monetary consideration or other property from the Company other than remuneration as an officer i. Major shareholder of the Company (or if such shareholder is a corporation, business executive of such corporation) j. Business executive of a business partner of the Company (which does not correspond to any of f, g, or h) (the Audit & k. Business executive of between which and the Company External Officers are mutually appointed (the Audit & Supervisory Supervisory Board Member himself/herself only) Board Member himself/herself only) l. Business executive of a recipient of donations from the Company (the Audit & Supervisory Board Member himself/herself only) m. Others Relationship with the Company (2) Name Independent officer Supplementary Explanation of the Relationship Reasons for Appointment Noriyasu Kaneko ○ ‒ Toshiki Sada ○ ‒ Hiroyuki Wakamatsu ○ ‒ The Company appointed Mr. Noriyasu Kaneko judging that he will fulfil his role of auditing and overseeing the Company’s management in general and compliance in particular because of his extensive experience and wide-ranging knowledge as an attorney-at-law. The Company appointed Mr. Toshiki Sada judging that he will fulfil his role of auditing and overseeing the Company’s management in general because of his specialist and wide-ranging knowledge and experience of corporate audits gained through experience working for a major securities firm and experience serving as an External Audit & Supervisory Board Member for a major investment firm and a non-financial company. The Company appointed Mr. Hiroyuki Wakamatsu judging that he will fulfil his role of auditing and overseeing the Company’s management in general because of his specialist knowledge of accounting as well as 20 コーポレートガバナンス CORPORATE GOVERNANCE Independent Officers Number of Independent Officers 7 his specialist and wide-ranging knowledge and experience of corporate audits gained through experience working as a certified public accountant for major audit corporation and experience serving as an External Audit & Supervisory Board Member for a listed company. 21 コーポレートガバナンス CORPORATE GOVERNANCE Matters relating to Independent Officers Directors” in Part 1 above. [Incentives] Supplementary Explanation The Company has designated as Independent Officers all External Officers who satisfy the independence criteria set out by the Tokyo Stock Exchange in the “Guidelines concerning Listed Company Compliance, etc.” and the Company’s independence criteria for external officers (described in “Disclosure based on the principles of the Corporate Governance Code, l. Principle 4.9 Independence Criteria and Qualifications for Independent External Implementation Status of Measures to Provide Incentives to Directors Introduction of performance-based compensation plan In 2018 and 2021 respectively, the Company introduced a performance-based stock compensation plan using a trust, as an incentive plan for Directors (compensation is not based on performance for External Directors) aimed at further increasing motivation to contribute to improving the Company’s medium- and long-term business performance and stock value by clarifying the linkage between compensation for the Directors and the Company’s stock value. The key indicator used to evaluate performance was EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) (see Note) for the fiscal year ended March 31, 2023 in the case of the stock compensation plan introduced in 2018 and the cumulative total renewable power generation capacity (GW) of plants in operation and under development in the case of the stock compensation plan introduced in 2021. The calculation method for the amount of performance-based stock compensation is determined by the Board of Directors in accordance with factors such as degree of contribution, level of expectation and degree of achievement of performance targets and based on the deliberations and recommendations of the Nomination and Compensation Committee. (Note) Revenue – Fuel expenses – Outsourcing expenses – Payroll and related personnel expenses + Share of profit (loss) of investments accounted for using the equity method + Other income – Other expenses For details of the stock compensation plan for Directors, please refer to the disclosure in the Annual Securities Report. https://www.renovainc.com/ir/securities/ Compensation for Directors Disclosure of Individual Directors’ Compensation No individual disclosure Supplementary Explanation In the fiscal year ended March 31, 2021, amounts of compensation paid to Directors and Audit & Supervisory Board Members were as follows: The Company paid 215 million yen to 11 Directors (including 45 million yen to 22 コーポレートガバナンス CORPORATE GOVERNANCE 7 External Directors (see Note))and 35 million yen to 4 Audit & Supervisory Board Members (including 17 million yen to 3 External Audit & Supervisory Board Members)). (Note) The above numbers reflect the retirement from office of 2 Directors at the close of the 21st Annual General Meeting of Shareholders held on June 19, 2020 and the retirement from office of 2 Directors at the close of the 22nd Annual General Meeting of Shareholders held on June 18, 2021. Policies on Determining Compensation Amounts and Calculation Methods Established Disclosure of Policies on Determining Compensation Amounts and Calculation Methods The Company’s policies on determining officers’ remuneration amounts and calculation methods are determined by the Board of Directors based on the deliberations and recommendation of the Nomination and Compensation Committee. The details of remuneration for individual Directors are determined by the Board of Directors and the Company judges that the details of remuneration are in accordance with such policies. (1) Basic policy on officers’ compensation Our mission is “to create green and sustainable energy systems for a better world,” and our vision is “to become To realize its vision in accordance with its mission outlined above, the Company adopts the following basic Asia’s renewable energy leader.” policy on officers’ compensation: area. suitable for an executive position. 1. Developing an environment that facilitates the promotion of human resources with professional skills in each 2. Establishing a compensation plan that helps the Company to attract and retain excellent human resources 3. Making a commitment to realizing the medium- to long-term growth of the Company by focusing on it. 4. Achieving a compensation level worthy of the performance scale at the time when the medium- to long-term business performance of the Company is achieved. 5. Ensuring the flexible and speedy operation to enable the Company to recruit appropriate human resources for appropriate positions and respond to their retention needs. 6. Ensuring the objectivity and transparency of the compensation decision process to build the foundation for external accountability. (2) Approach to compensation levels Referring to an external compensation database to determine compensation for officers, the Company sets compensation taking the scale of its business when it reaches its medium-to-long term targets into consideration and also using the compensation levels of companies engaged in the renewable energy business in Japan and overseas as a reference so that the Company can secure a certain level of competitiveness in competitions for 23 コーポレートガバナンス CORPORATE GOVERNANCE obtaining human resource. (3) Structure of compensation Compensation for Directors (excluding External Directors) and Executive Officers is composed of (i) basic compensation (monetary compensation), (ii) performance-based stock compensation based on medium- and long-term business performance, performance targets as an entire company and performance targets as an individual, and (iii) non-performance-based stock compensation according to degree of contribution and degree of expectation, and the proportion of stock compensation to basic compensation ranges from 0% to 100%. As key indicators for evaluating performance, the Company uses EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) (see Note) and the cumulative total renewable power generation capacity (GW) of plants in operation and under development. To ensure a neutral and objective oversight function over management, compensation for External Directors is composed of basic compensation (monetary compensation) and non-performance-based stock compensation which has no connection whatsoever with performance, and the proportion of non-performance-based stock compensation to basic compensation is always 20%. (Note) Revenue – Fuel expenses – Outsourcing expenses – Payroll and related personnel expenses + Share of profit (loss) of investments accounted for using the equity method + Other income – Other expenses In addition, to secure and retain talent on a global scale, the level and composition of compensation for human resources hired from different labor markets where laws and regulations and employment practices are vastly different are sometimes determined by the Board of Directors based on deliberations and recommendations by the Nomination and Compensation Committee. (4) Malus/Clawback clause The rules of the stock compensation plan introduced by resolution of the 19th Annual General Meeting of Shareholders held on August 29, 2018 stipulate that, if the Company suffers damage or might suffer damage as a result of a serious breach of internal regulations, an illegal act, deliberate intent or gross negligence, then by resolution of the Board of Directors based on the deliberations and recommendations of the Nomination and Compensation Committee, the Company may withhold some or all of the points granted. The rules of the stock compensation plan introduced by resolution of the 22nd Annual General Meeting of Shareholders held on June 18, 2021 stipulate that, if the Company suffers da