Environmental Targets and Performance

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The Investment Corporation is striving to improve environmental performance by establishing environmental targets for the reduction of energy consumption, CO2 emissions, and water consumption across the entire portfolio and monitoring its performance with respect to achieving them.

Our Approach to Climate Change

The world has been accelerating the transition to a carbon-neutral society. This trend is found in the global long-term goal set in the Paris Agreement, an international framework since 2020 to address global warming. The goal in the agreement is to hold the increase in the global average temperature to well below 2°C above pre-industrial levels and pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels, and Japan has declared its intention to achieve carbon neutrality by 2050.

The Investment Corporation and the Asset Manager view climate change as an important issue that changes the natural environment and social structures dramatically and has a significant impact on real estate management. Contribution to the achievement of a carbon-neutral society is considered as a social mission.

In accordance with the TCFD recommendations, we will identify and analyze risks and opportunities related to climate change and proceed with step-by-step disclosure of information related to climate change. We will continuously work to reduce the environmental impact of business activities as we understand social needs and expectations for us through active dialogue with external stakeholders.

Support for TCFD Recommendations

The Task Force on Climate-related Financial Disclosures (TCFD) is an international initiative established by the Financial Stability Board (FSB), at the request of the G20. The purpose of the TCFD is to discuss disclosure of climate-related financial information and the responses by financial institutions. The TCFD Consortium is a group of companies, financial institutions, and other organizations that support the TCFD recommendations. The consortium was established with a view to further discussing effective corporate disclosure of climate-related information and initiatives to link disclosed information to appropriate investment decisions on the part of financial institutions and other organizations.

To clarify the policy and system for addressing climate-related issues and expand the disclosure of information about relevant initiatives, the Asset Manager established the Climate Change and Resilience Policy and announced its support for the TCFD recommendations in December 2021. In January 2022, the Asset Manager joined the TCFD Consortium, a group of domestic companies that support the TCFD recommendations.

Click here for TCFD.
Click here for TCFD Consortium.

TCFDTCFD

Governance Related to Climate Change

The Asset Manager has established the Climate Change and Resilience Policy, the policy for responding to risks and opportunities related to climate change and working to make business and strategy resilient to climate-related issues.

In accordance with the policy, Chief Climate-Related Issues Officers (general managers of departments engaged in sustainability promotion) make regular reports to the Chief Executive Officer for Climate-Related Issues (President and Representative Director) at Sustainability Promotion Committee meetings. The reports cover matters related to responses to climate change, including identification and evaluation of impacts of climate change, management of risks and opportunities, progress of initiatives for adaptation and mitigation, and indicator and target setting. The Sustainability Promotion Committee deliberates and discusses issues related to climate change, after which the Chief Executive Officer for Climate-Related Issues makes final decisions. Under this system, climate-related issues are supervised by the President and Representative Director.

Click here for Sustainability Promotion System.

Strategy

To factor climate-related risks and opportunities into the Investment Corporation’s real estate management business, the Asset Manager conducted a scenario analysis of the Investment Corporation’s portfolio. The Asset Manager referred to climate outlooks published by international organizations and other entities, in order to identify risks and opportunities of climate change brought to the Investment Corporation and assess financial impacts on the Investment Corporation's business. Using a 1.5°C/2°C scenario and a 4°C scenario, a qualitative analysis was conducted as described below.

Target of Analysis and Prerequisites

Target: All properties owned by the Investment Corporation
Scope: Overall real estate investment and management business
Target period: From 2022 to 2050, with short-term, medium-term, and long-term timeframes
(Short term: 2022–2025, Medium term: 2026–2030, Long term: 2031–2050)

Analysis Procedure

  1. In accordance with the TCFD framework, the Asset Manager discussed climate-related risks and opportunities and identified factors that may have a significant impact on the Investment Corporation’s business domain.
  2. Concerning the risks and opportunities identified in (1), the Asset Manager summarized and grasped what the world would look like under the 1.5°C/2°C and 4°C scenarios, based on the parameters (forecasts) of the adopted scenarios.
  3. Based on the forecasts in (2), the Asset Manager conducted a qualitative analysis for the Investment Corporation, calculated financial impacts in the scenario analysis, and worked out countermeasures.

Key Scenarios Adopted in the Analysis

1.5°C/2°C scenario 4°C scenario
Transition Risks IEA World Energy
Outlook2020 NZE2050
IEA World Energy
Outlook2020 STEPS
Physical Risks IEA World Energy Outlook2020 STEPS IPCC Fifth Assessment Report RCP8.5

Expected Future in Each Scenario

4°C Scenario

The 4°C scenario forecasts a future where greenhouse gas emissions are on an increasing trend due to insufficient climate change mitigation, without new regulations, taxation, or other measures to achieve a carbon-neutral society. The scenario involves high relative physical risks from climate disasters and low transition risks.

Government Tenants Investors Financial Institutions Climate/Weather
Stricter legal regulations related to resilience Increased needs for measures against storm and flood damage, heatstroke, etc. Higher importance of physical risk assessment in making investment decisions Increased needs for physical risk assessment in making lending decisions Severer storm and flood damage and increased natural disasters due to rising temperatures, etc.

1.5°C/2°C Scenario

The 1.5°C/2°C scenario forecasts a future where greenhouse gas emissions are on a decreasing trend, with the advancement of social policy, emission regulations, technology investment, and other measures to achieve a carbon-neutral society. The scenario involves low relative physical risks from climate disasters and high transition risks.

Government Tenants Investors Financial Institutions Climate/Weather
Stricter regulations against GHG emissions due to an introduction of carbon tax Increased needs for environmental performance Increased needs for the assessment of compliance with environmental regulations and environmental certifications in making investment decisions Increased needs for the assessment of compliance with environmental regulations and environmental certifications in making lending decisions A certain degree of advancement of chronic climate change, such as increased storm and flood damage

Financial Impacts in the Scenario Analysis

For each scenario, the Asset Manager classified the financial impacts of identified risks and opportunities into short-term, medium-term and long-term impacts and examined relative scales of impacts on the Investment Corporation. Shown below are medium-term and long-term risks from climate change that have a certain degree of financial impacts.

  • Transition risks: Policy and legal risks, technology risk, market risk, and reputation risk
  • Acute physical risks: Event-driven climate risks, including typhoons and floods
  • Chronic physical risks: Climate risks caused by long-term shifts in climate patterns, including sustained higher temperatures and sea level rise
Classification Risk and Opportunity Factors in Real Estate Management Potential Financial Impacts Category Financial Impacts Countermeasures
4℃ 1.5℃/2℃
Medium Term Long Term Medium Term Long Term
Transition Risks and Opportunities Policy and Legal Stricter regulations against GHG emissions due to an introduction of carbon tax

・Increased tax burden due to the introduction of carbon tax, depending on the volume of GHG emissions from properties

Risk Small Small Medium Large

・Introduction of energy management systems and renewable energy

・Planned reduction of energy consumption/GHG emissions at portfolio properties

・Improvement in GHG emissions through strategic replacement/renovation of properties

・Increase in environmental certification acquisition rates

Stricter energy-saving standards, obligation to report emissions

・Increased renovation costs due to raised energy-saving standards

・Increased business expenses related to emissions reporting

Risk Small Small Large Large
Enhanced competitiveness of properties that comply with legal regulations

・Increased rent income from portfolio properties with high environmental performance

・Decreased utility bills thanks to improved energy efficiency

Opportunity Small Small Medium Medium
Technology Advancement and spread of energy-saving and renewable energy technologies

・Increased renovation costs due to the introduction of new technologies

Risk Small Small Large Large

・Introduction of cutting-edge technologies

・Planned renovation works

・Promotion of transition to power from renewable energy

・Decreased utility bills thanks to better energy-saving performance

Opportunity Small Small Medium Medium
Market Fluctuations in properties’ asset value depending on environmental performance

・Fluctuations in portfolio properties’ asset value depending on environmental certification acquisition rates

・Fluctuations in rent income depending on the proportion of portfolio properties with high environmental performance

Risk Small Small Large Large

・Increase in environmental certification acquisition rates

・Promotion of transition to power from renewable energy

・Sufficient information disclosure about portfolio properties’ environmental performance

・Decreased utility bills thanks to better energy-saving performance Opportunity Small Small Medium Medium
Changes in the stances of investors/lenders/tenants on investing and lending

・Fluctuations in reputation from ESG-conscious investors and lenders

・Fluctuations in ESG-conscious tenants’ demand for moving in and out

・Better/Worse terms and conditions in financing from financial institutions, etc.

Risk Small Small Large Large

・Appropriate disclosure of ESG-related information, including that on climate change

・Higher ratings in ESG assessments by external institution

・Reduction of financing costs through the use of sustainability finance

Opportunity Small Small Medium Medium
Reputation Decline in reputation from investors and customers

・Decreased investment unit prices/Lower ESG ratings

・Decreased profitability of properties with low environmental performance/resilience

Risk Small Small Medium Large

・Appropriate disclosure of ESG-related information, including that on climate change

・Stronger stakeholder engagement in the ESG area

・Continuous improvement of environmental performance/ Continuous acquisition of environmental certifications

Physical Risks Acute Increased loss due to severer storm and flood damage

・Increased repair costs and insurance premiums

・Decreased rent income due to lower occupancy rates

・Loss of business opportunities/Increased business continuity risks

・Increased renovation costs to protect portfolio properties from water intrusion, damage, destruction, etc.

Risk Small Medium Small Small

・Risk comprehension using hazard maps, etc.

・Portfolio of highly resilient properties

・Upgrading of facilities to install high-efficiency air conditioning systems, introduction of energy management systems

・Collaborative energy saving initiatives with tenants, including green leases

・Enhancement of BCP measures

・Promotion of greening at portfolio properties

Chronic Increased damage from rise in average temperature/sea level Risk Small Small Small Small

Initiatives to Address Climate Change

To address the above climate change risks, the Investment Corporation takes various measures to improve energy efficiency and reduce GHG emissions.

Click here for Implementing Eco-Friendly Initiatives via Real Estate Investment.

Risk Management

The Investment Corporation’s Climate Change and Resilience Policy sets out processes to identify, assess, and manage the impacts of climate change risks and opportunities on the corporation’s management activities, strategies, financial plans, etc.

  • Chief Climate-Related Issues Officers summarize climate-related risks and opportunities and report the progress to the Sustainability Promotion Committee, in principle, once a year.
  • The Sustainability Promotion Committee continuously identifies, assesses, and manages climate change risks and opportunities that are important to the business and financial plans and affect the asset management operations of the Investment Corporation. Based on the above reports, the committee prioritizes issues of strategic importance to the business.
  • The Chief Executive Officer for Climate-Related Issues instructs to factor important climate-related risks with high priority, which have been deliberated by the Sustainability Promotion Committee, into the existing company-wide risk management program. The risk identification, assessment, and management processes are thus integrated.

Indicators and Targets

The Investment Corporation regards the transition to a carbon-neutral society as an opportunity. As a key monitoring indicator (KPI) in the management process of climate change risks and opportunities, it has set a medium- to long-term target in July 2022 for CO2 emissions reduction, which aims for a reduction of 46% in CO2 emissions on an intensity basis across the portfolio by FY2030 (compared with FY2013).

Improvement of Environmental Performance

Target (KPI))

FY2030 Targer (KPI) :
Reduction of 46% in CO2 emissions on an intensity basis across the portfolio by FY2030 (compared with FY2013)

FY2050 Targer (KPI) :
Achieved carbon neutrality in CO2 emissions on an intensity basis across the portfolio by FY 2050.

Environmental Targets

Energy Consumption

Reduction of 5% in energy consumption across the entire portfolio on an intensity basis by FY2024 (compared with FY2019)

CO2 Emissions

Reduction of 5% in CO2 emissions across the entire portfolio on an intensity basis by FY2024 (compared with FY2019)

Reduction of 46% in CO2 emissions on an intensity basis across the portfolio by FY2030 (compared with FY2013)

Achieved carbon neutrality in CO2 emissions on an intensity basis across the portfolio by FY 2050.

Water Consumption

Maintaining the same level of water usage across the entire portfolio by FY2024 (compared with FY2019)

  • The coverage rate within the portfolio when calculating the above data is 100%.

Performance

In conjunction with the medium- to long-term targets formulated for its ESG initiatives, the Investment Corporation is working to keep track of energy consumption, CO2 emissions, water consumption, and so forth at real estate that it owns.

Item Reduction target
(Medium- to long-term target)
Unit Actual reduction
FY2019
(base year)
FY2020 FY2021 Rate of
change
from FY2019
Energy Reduction of 5% on an intensity
basis compared with base year
Consumption (MWh) 104,219 91,237 87,245 -16.29%
Consumption intensity (MWh/㎡) 0.207 0.181 0.178 -14.06%
CO2 Reduction of 5% on an intensity
basis compared with base year
Emission (t-CO2) 44,771 38,250 37,063 -17.22%
Emission intensity (t-CO2/㎡) 0.089 0.076 0.076 -15.02%
Water Maintain the current level Consumption (㎥) 396,297 290,167 284,367 -28.24%
Consumption intensity (㎥/㎡) 0.787 0.575 0.580 -26.34%
Waste Consumption (t) 4,388 3,594 3,373
Amount of recycled waste (t) 2,502 2,092 1,862
Recycling (%) 57.03 58.20 55.21
  • Reduction target (Medium- to long-term target): The following targets are established for all properties
    [Energy and CO2] 5% reduction compared to base year over 5 years (from FY2019 (base year) to FY2024) on an intensity basis
    [Water] Maintain current level over 5 years (from FY2019 (base year) to FY2024)
  • Aggregation method: Intensity is calculated by dividing each consumption/emission for each fiscal year by intensity denominator (sum of the total floor areas (㎡) in accordance with the period of ownership of each building).
    The recycling rate is calculated by dividing consumption for each fiscal year by the amount of recycled waste.
  • CO2 emissions from Scope 1 (city gas) and Scope 2 (indirect emissions from the use of electricity, heat and steam provided by other companies). The figure includes CO2 emissions derived from energy consumption by tenant activities for the tenant space.
  • Figures for FY2020 and earlier have been revised retrospectively after careful examination of the data.
  • SOMPO Risk Management Co., Ltd. conducts a third-party review of the environmental performance data (energy, CO2, water, and waste) for FY2021 for all five portfolios.

Environmental Management System

In order to pursue energy-saving, CO2 emissions reduction, and efficient use of water resources, the Investment Corporation has established an environmental management system. Focusing on energy consumption, CO2 emissions, and water usage, it sets targets, tracks performance, manages budgets, and executes countermeasures (PDCA cycle), contributing to the realization of a sustainable society through the reduction of its environmental footprint.