Marubeni: Marubeni : 03 Initiatives for More Sustainable Value Creation

S 3 E C T I O N Initiatives for More Sustainable Value Creation In the context of medium- to long-term improvement in corporate value, we discuss our efforts to reduce the cost of equity, along with non-financial initiatives to enhance sustainability. We also explain our approach to corporate governance and risk management. Improvement of Corporate Value Sustain and Sustain and Reduce Cost of Equity Improve Cash Improve ROE Generation Message from the CAO Risk Management 62 Sustainability for the Marubeni Group 70 Corporate Governance 80 Corporate Management MARUBENI CORPORATION INTEGRATED REPORT 2024 57 Values of the Marubeni Group Message from the President & CEO SECTION 1: Value Creation at Marubeni SECTION 2: Realizing Value Creation SECTION 3: Initiatives for More Sustainable Value Creation Message from the CAO Risk Management Sustainability for the Marubeni Group Corporate Governance Corporate Management SECTION 4: Business Portfolio SECTION 5: Corporate Data Message from the CAO Jun Horie Senior Managing Executive Officer; Chief Administrative Officer (CAO); Senior Operating Officer, Audit Dept.; Senior Operating Officer, Executive Secretariat; Vice Chairman of Investment and Credit Committee; Chairman of Disclosure Committee; Chief Compliance Officer (CCO); Chairman of Internal Control Committee; Chief Information Officer (CIO) Supporting the Business in Uncertain Times The world at present is facing rapid change and unprecedented challenges. There are numerous risks that companies must prepare against as they engage in business, including the materialization of geopolitical risks, recession concerns, social instabilities, and increasingly frequent natural disasters stemming from climate change. To address such risks, we are putting in place a wide range of management practices, ranging from integrated risk management and other forms of macro-level risk management to individual transaction and contract management and other forms of micro-level risk management. Meanwhile, the development and spread of digital technologies have accelerated around the world in recent years. Information sharing and communication have become easier and the speed of business has improved drastically, while the emergence of AI, blockchain, cloud computing, and other new technologies are bringing about major changes in the way companies conduct business and in the structure of society. Our company, too, is being called on to capitalize fully on the benefits of technological innovation, including in streamlining operations, boosting productivity, and enhancing the value we provide to customers. At the same time, such innovation also gives rise to the need to focus on risk management and ensure appropriate governance, including data security risks and the protection of privacy. Strategic Risk Management For the Marubeni Group to continue to create value in an increasingly complex business environment, management actions that support the business groups are essential. Our business activities are facing numerous challenges. Enhancing our credibility as a company through rigorous compliance with laws and regulations and ethical behavior. Ensuring the stability and transparency of our corporate activities by implementing contracts and transactions lawfully. Supporting management decisions that take into account the balance of risk and return by means of risk assessments. Boosting efficiency across the organization by tightening internal controls and reviewing our business processes. Bolstering data security and improving our data utilization capabilities. Marubeni Group regards all of these as critical issues for the group's sustainable growth. Risk management means not simply avoiding risks but rather viewing them as sources of earnings. By understanding the nature of these risks and managing them appropriately, it is possible to increase expectations of earnings by way of entering new businesses, setting the Company apart from our competitors, and addressing the changing business environment. Striving to Realize "Fairness, Innovation, and Harmony" As a general trading company, it is critical for us to instill strategic risk management in our organizational culture and to tackle change flexibly and boldly. By working with various stakeholders inside and outside the Company and by continuing to think outside the box about turning risks into opportunities, we will be able to enhance corporate value and achieve sustainable growth. Precisely because we live in an age of rapid change, we need to be guided by the unchanging values of "Fairness, Innovation, and Harmony" expressed in our Company creed as we seek to address issues facing society and our customers, leading to growth for the corporate group. The Marubeni Group will continue to evolve by reinforcing and enhancing our management foundation, aiming to become a corporate group that creates new value-a Global crossvalue platform. MARUBENI CORPORATION INTEGRATED REPORT 2024 58 Values of the Marubeni Group Message from the President & CEO SECTION 1: Value Creation at Marubeni SECTION 2: Realizing Value Creation SECTION 3: Initiatives for More Sustainable Value Creation Message from the CAO Risk Management Sustainability for the Marubeni Group Corporate Governance Corporate Management SECTION 4: Business Portfolio SECTION 5: Corporate Data Risk Management Marubeni's competitiveness ties in with our ability to identify and respond to opportunities and risks as they emerge. The Company has policies and internal rules in place for managing risks from each perspective, and continuously modifies its management structures and methods to maintain its capabilities for effective risk management. The business environment has become increasingly complex in recent years, including factors such as global inflation and the economic recessions it has caused, mounting geopolitical risks, and changes in the industrial structure stemming from advances in digital technology. We approach risk management with a sense of urgency, increasing our sensitivity and sharing up-to-date information within the Group. Main Risk Factors Changes in the Credit Risks Regarding 1. Global Economy and 2. 3. Investment Risk Business Partners Industrial Structure 4. Ability to Procure Funds 5. Market Risks 6. Risks Associated with and Funding Cost Long-term Assets 7. Laws and Regulations 8. Significant Lawsuits 9. Environmental and Social Risks Risks Related to 10. Natural Disasters 11. Country Risks 12. Information Systems and Information Security Consolidated Financial Statements with Independent Auditors' Report: Business Risks https://www.marubeni.com/en/ir/reports/security_reports/ Integrated Risk Management In addition to responding to individual risks, we practice integrated risk management that encompasses the entire Marubeni Group, to obtain a bird's-eye view of business risks across diverse operations and manage them with discipline. In conducting integrated risk management, the Marubeni Group calculates the maximum downside risk (risk assets) by multiplying the consolidated risk exposure by the assumed maximum loss ratio, which is defined according to the risk profile of each asset type. The Group's basic risk management policy is to keep risk assets within equity, which represents its risk-bearing capacity. As of March 31, 2024, risk assets were within the scope of shareholders' equity. The Marubeni Group screens and selects each investment project to maximize returns relative to risk for the entire Group. In addition, by monitoring RORA (return on risk assets), we work to strengthen earnings capacity against potential risks, sustain and improve ROE, and reduce the cost of equity. Risk Assets 3,459.7 Risk Assets Shareholders' Equity 2,877.7 2,830.8 (Billions of yen) 2,225.4 2,242.2 2,366.1 2022.3 2023.3 2024.3 MARUBENI CORPORATION INTEGRATED REPORT 2024 59 Values of the Marubeni Group Message from the President & CEO SECTION 1: Value Creation at Marubeni SECTION 2: Realizing Value Creation SECTION 3: Initiatives for More Sustainable Value Creation Message from the CAO Risk Management Sustainability for the Marubeni Group Corporate Governance Corporate Management SECTION 4: Business Portfolio SECTION 5: Corporate Data Risk Management Response to Individual Risks Country Risks Constraints on our business activities can arise due to political, economic, social, or other conditions in particular countries or regions, which may potentially damage the value of our assets. We conduct country risk management as shown below to prevent excessive risk taking. As of the end of March 2024, about half of our long-term exposure was to Japan and the U.S., which we regard to have low country risk. Given the Russia-Ukraine situation, we have lowered the asset valuations in Russia, which has limited our exposure to Russia to low level. In order to respond quickly to changes in the global situation, our Economic Research Institutes, which function as think tanks for the Company, constantly gather and analyze information, and share the results of their analysis on a daily basis within the Group via internal platforms and other means. At Marubeni, we utilize commodities futures and/or forward transactions to mitigate the risk of price fluctuations. We also conduct commodity position management centered on setting of limits on positions in each commodity and timely monitoring. Net profit for resource projects for the fiscal year ended March 31, 2024 is as shown below. To reduce earnings volatility and achieve stable profit growth, we give priority to growth investments in existing business areas where we are competitive, especially non-resource fields. Products Net profit Main operations (Billions of yen) Copper 10.1 Equity-method investment (Chile) Iron ore 42.4 Equity-method investment (Australia) MARUBENI CORPORATION INTEGRATED REPORT 2024 60 Values of the Marubeni Group Message from the President & CEO SECTION 1: Value Creation a