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Environmental Measures

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Measures for Addressing Climate Change

Endorsement of TCFD Recommendations

In recent years, climate change, including global warming, is posing great risks to the environment, society, and corporate activities. As a company that considers ESG factors in the management of its real estate investments, SHR recognizes climate change and other environmental challenges as relevant to our aim of providing places for people to live, and for businesses to operate, sustainably. Recognizing these issues, SHAM has declared support for the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), and in November 2021 joined the Japan TCFD Consortium, a body of TCFD supporters in Japan. This means that we have committed to forecasting and evaluating climate-related risks and opportunities to our business, to setting and pursuing targets, and to disclosing information following the TCFD framework.

Climate-Related Governance

SHAM has a Sustainability Committee as the decision-making body for sustainability issues. It meets at least once every three months to define policies, targets, and various measures related to sustainability and to discuss climate change risks (transition risks and physical risks) and material issues in relation to mitigation of and adaptation to climate change. SHAM also appoints directors in charge of climate change to oversee initiatives related to climate risk mitigation and adaptation. The President and Representative Director directly oversees the Sustainability Committee and serves as the chief executive director of the Committee. The Sustainability Committee reports as needed to the board of directors of SHR on all ESG-related activities, including climate change.
Sustainability Promotion System

Strategy

SHAM conducted the analysis using a 4ºC scenario and a 1.5ºC scenario to identify climate-related risks and opportunities for SHR and evaluate potential financial impacts to its business.

Scope and Assumptions

[Assets] All held properties
[Scope] Entire business, from financing to management of investments in real estate
[Period] Short, medium, and long-term time horizons from 2021 to 2050
(short-term: 2021-2025, medium-term: 2026-2030, long-term: 2031-2050)

Scenarios Referenced from External Sources

Future climate projections published by international organizations and other third parties were used as the main source of information for the scenario analysis. The referenced scenarios are shown in the table below. Climate change risks were categorized into “transition risks” and “physical risks,” with physical risks further categorized into “acute” and “chronic” types.

1.[Transition risks]
: Policy and Legal risks, Technology risk, Market risk, Reputation risk
2.[Acute physical risks]
: Climate risks that are event-driven, such as typhoons and floods
3.[Chronic physical risks]
: Longer-term shifts in climate patterns, such as sustained high or low temperatures
References
Scenario Transition risks Physical risks
4℃ scenario IEA World Energy Outlook2020 SPS IPCC Fifth Assessment Report RCP8.5
1.5℃ scenario IEA World Energy Outlook2020 NZE2050 IPCC Fifth Assessment Report RCP2.6
  • IEA: International Energy Agency *IPCC: UN’s Intergovernmental Panel on Climate Change

Future State Anticipated in Each Scenario
4℃ Scenario

The 4ºC scenario is a future state that assumes no strict regulations or tax policies aimed at decarbonizing society will be enacted and that greenhouse gas (GHG) emissions will continue to rise. This scenario is characterized by relatively high physical risk and low transition risk.

Key Expectations

● Warming progresses further:

  • Rising temperatures (in Japan, lows will be around 4.6ºC higher and highs will 4.3ºC higher toward the end of the 21st century (2076-2095) than they were at the end of the 20th century (1980-1999))
  • More summer days, fewer winter days (in Japan, around 48.6 more days when the high exceeds 30ºC and 46.8 fewer days when the high drops below 0ºC during the above-mentioned period)
  • Increased frequency of heavy and torrential rains (each will roughly double during the above-mentioned period)
    (based on IPCC Fifth Assessment Report RCP8.5 and Japan Meteorological Agency Global Warming Projection Vol. 9)

● Current energy policies continue:

  • Carbon taxation not enacted in Japan (based on IEA SPS)

1.5℃ Scenario

The 1.5ºC scenario is a future state that assumes regulations and tax policies aimed at decarbonizing society will be enacted. This scenario is characterized by relatively low physical risk and high transition risk.

Key Expectations

● Maximum mitigation of global warming:

  • Magnitude of weather and climate changes, such as rising temperatures and increased frequency of heavy rains, is smaller than the 4ºC scenario (based on IPCC Fifth Assessment Report RCP2.6)

● Major shifts in the energy landscape:

  • Carbon taxation enacted
  • Dramatic reduction of CO₂ emissions (globally, around 40% reduction by 2030, net-zero by 2050)
  • Widespread development of solar and wind power (roughly quadrupling global capacity from 2020 to 2030) (based on IEA NZE2050)
  • Rise of carbon-neutral buildings (all newly developed buildings will be carbon-neutral by 2030, 85% of global building stock by 2050)
    (Based on NZE2050 Key milestones in the pathway to net-zero)

Financial Impacts Identified by Scenario Analysis

SHAM evaluated the financial implications to SHR’s business of risks and opportunities identified in each of the aforementioned scenarios, and organized them by short, medium, and long term time horizons. Medium and long term climate risks that could have a certain level of financial impact are shown below.

Category Risk/Opportunity factors in real estate management Potential financial impacts Classification Financial implications under 4ºC scenario Financial implications under 1.5ºC scenario Countermeasures
Medium term Long term Medium term Long term
Transition risks and opportunities Policy and Legal Rising GHG emission prices following carbon tax legislation Tax burden on GHG emissions of properties Risk S S M L Set reduction targets for GHG emissions intensity and disclose progress against targets
Renovate properties for improved energy-saving performance
Procure renewable energy
Reallocate portfolio to increase investment ratio in properties with outstanding environmental performance
Acquire ZEH and ZEB properties
Stricter energy standards Increased cost of renovating properties (fines in some cases) Risk S S M M
Improved competitiveness of properties from complying with laws and regulations Increased rent income from attracting residents/tenants Opportunity S S M L
Technology Innovation and penetration of renewable and energy efficiency technologies Increased cost of adopting new technologies Risk S S M M Collect information on new technologies and services and add to portfolio
Convert owned properties to ZEHs/ZEBs
Improved environmental performance reduces utility expenses Opportunity S S S M
Market Decline in asset value of properties caused by decline in relative environmental performance NAV declines Risk S M M M Collect information on real estate appraisal trends and respond as appropriate
Same as “Policy and Legal”
Deterioration of financing terms due to perceived inadequacy of responses to climate change Rising financing costs
Rising capital costs
Risk S S S S Improve investor valuations by strengthening information disclosure using frameworks such as TCFD
Utilize green financing
Changes in the demand of residents/tenants (increased awareness of carbon-neutrality Occupancy and rents increase at properties with outstanding environmental performance Opportunity S S M L Identify needs through tenant satisfaction surveys, etc., and conduct energy-saving renovations
Acquire ZEH and ZEB properties
Acquire green certifications
Reputation Decline in brand value Deterioration of stakeholder relations due to inadequate progress in managing climate risk Risk S S S M Maintain brand image by managing climate risk responsibly
Strengthen collaboration within the Sekisui House Group
Physical risks and opportunities Acute Damage to properties by typhoons Increased repair and insurance costs Risk S M S M Identify risks using hazard maps, etc.
Implement BCP measures such as securing emergency power sources and stocking emergency supplies
Keep tenants informed about disaster preparedness
Manage cash flow to prepare for rising fire insurance premiums
Identify high-risk properties by quantitively identifying physical risks and dispose of such properties as needed, such as through sale Incorporate quantitative physical-risk information into pre-acquisition property evaluations
Flooding caused by torrential rain and breaching of riverbanks Decreased rent income from decline in occupancy Risk S M S M
Chronic Flooding of low-lying properties due to sea level rise Increased cost of mitigating storm surge damage Risk S M S S Exclude high-risk properties from investment
Increased use of cooling/heating due to increased frequency of extremely hot/cold days Increased cost of HVAC operation, maintenance, and repair Risk S S S S Monitor changes in usage associated with weather and temperature change
Optimize HVAC operation through high-efficiency air-conditioning equipment and building automation systems (BAS), etc.
Diligently inspect facilities for degradation caused by increased use

Results of Scenario Analysis

The 4ºC scenario is a future pathway in which no strict regulations and tax policies aimed at decarbonizing society are enacted, GHG emissions continue to rise, and the cost of repairs and various types of insurance premiums for owned properties increase as weather-related disasters grow in intensity. The emergence of weather-related disaster risks due to climate change will influence tenants’ property choices; properties that underperform against more-competitive properties when it comes to environmental comfort and resilience against such disasters are likely to see a drop in tenant demand.
In a 1.5ºC scenario, regulatory and tax policies aimed at curtailing GHG emissions and decarbonizing society will be enacted, increasing the cost of renovations associated with avoiding carbon taxes on the GHG emissions of held properties and with complying with more stringent energy standards and other environmental requirements. This regulatory tightening will influence tenants’ property choices, with tenant demand for green buildings rising as it falls for properties that are doing less to reduce environmental impact; such properties also face the risk of declining asset value.
Considering that weather-related disasters will intensify in the 4ºC scenario, SHR is focusing its investments on properties that deliver high environmental performance and can withstand floods and other risks by virtue of both their location and specifications. Moreover, to manage transition risk and maintain our competitive advantage during the transition to a low-carbon society as projected by the 1.5ºC scenario, we are reducing the CO₂ emissions of our portfolio and focusing our investments on properties with green certifications.
SHR is working proactively to address each risk to limit its impacts on our business. We believe these efforts will, at the same time, open doors to new business opportunities in value creation. And we will continue to take a strategic approach to climate change to both minimize risk and maximize opportunities.

Risk Management

SHAM’s Sustainability Committee identifies and evaluates climate-related risks and opportunities to SHR’s business and updates its analysis when judged necessary by the President and Representative Director, who also directly oversees the Sustainability Committee. SHAM has a clearly defined approach to managing climate change risks and opportunities and is advancing efforts to manage such risks and opportunities and foster climate resilience as part of a comprehensive risk management process.
Risk Management

Metrics and Targets

SHR recognizes the solution of environmental challenges such as climate change as one of the key issues for the sustainable growth of our business. We have identified “Reduction of CO₂ Emissions” and “Investing in Real Estate with Excellent Environmental Performance” as materialities and have established the following metrics and targets for use in identifying, evaluating, and managing climate change risks and opportunities.

■ CO₂ Emission Reduction Target
Reduce 50% CO₂ emission intensity of portfolio by fiscal year 2030 compared to fiscal year 2018

■ Energy Consumption Reduction Target
Reduce 5% energy consumption intensity of portfolio by fiscal year 2023 compared to fiscal year 2018

  • In principal, energy consumption reduction target is set every five years after fiscal year 2023.

■ Target of Percentage of green certification
Achieve 70% or more of the portfolio with green certification by fiscal year 2022

Environmental Performance Data

SHR accumulates accurate and transparent data in owned properties by tallying environmental performance data through an outsourcer.

■CO₂ Emissions

(t-CO₂)
(t-CO₂/㎡)
Unit FY 2018
(Base year)
FY 2019 FY 2020
Total CO₂ emission t-CO₂ 15,253 18,318 15,892
 Scope1 2,411 2,930 2,473
 Scope2 12,842 15,389 13,420
CO₂ emission intensity t-CO₂/㎡ 0.064 0.063 0.052

■Energy Consumption

(Thousand kWh)
(kWh/㎡)
Unit FY 2018
(Base year)
FY 2019 FY 2020
Total energy consumption Thousand kWh 41,581 52,494 48,998
 Electricity 28,152 36,174 35,227
 Fuel 13,249 16,319 13,772
Energy consumption intensity kWh/㎡ 174.0 179.1 160.9

■Water Use

(㎥)
(㎥/㎡)
Unit FY 2018
(Base year)
FY 2019 FY 2020
Total water use 780,360 876,419 845,551
Water use intensity ㎥/㎡ 1.7 1.7 1.6

■Waste

(t)
(kg/㎡)
Unit FY 2018
(Base year)
FY 2019 FY 2020
Total waste emission t 1,055 1,045 714
 Landfill 357 357 200
 Incineration 197 207 162
 Recycled 501 481 352
Waste emission intensity kg/㎡ 7.5 5.4 3.7
  • Data aggregation period is from April to next March of each year. For detailed data by asset type, please refer to "ESG Data" in ESG Report 2021.
  • The properties held as of the end of March every year are subject to surveys. However, properties that were disposed of during the period and areas where it is difficult to comprehend data are excluded.
  • CO₂ emission is calculated using basic emission factors for fiscal year 2019 and earlier, and adjusted emission factors for fiscal year 2020, based on a method established by Ministry of the Environment "Greenhouse gas emission calculation / reporting / publication system."
  • The environmental performance data of fiscal year 2020 are subject to third party verification by SGS Japan Inc. and the scope of such verification includes properties disposed of during the period.

■Renewable Energy Power Generation

Unit FY 2018
(Base year)
FY 2019 FY 2020
Renewable energy power generation Thousand kWh 11.44 1.15 8.96
  • Target of aggregation in Renewable enagy power generation is 1 office building and data aggregation period is from April to next March of each year.

Measures for Addressing Energy-Saving

In order to realize a carbon-free society, SHR actively promotes the efficient use of energy by making capital investments in owned properties and implementing measures to conserve energy.

Introduction of Environmentally Friendly Facilities

SHR has actively introduced environmentally friendly facilities such as LED lighting and energy-saving air conditioner in its residences.

■Introduction of LED Lighting(common areas)

Unit FP ended Oct. 2020(12th FP) FP ended Apr. 2021(13th FP) FP ended Oct. 2021(14th FP)
Cumulative total of No. of implemented properties Properties 61 61 62
 Prospected reduction of power consumption per annum kWh approx. 1,443,755 approx. 1,443,755 approx. 1,455,930
 Prospected reduction of CO₂ emission per annum t-CO₂ approx. 703 approx. 703 approx. 708

■Introduction of Energy-Saving Air Conditioner(exclusive area)

Unit FP ended Oct. 2020(12th FP) FP ended Apr. 2021(13th FP) FP ended Oct. 2021(14th FP)
Cumulative total No. of implemented Units 2,180 2,585 3,154
 Prospected reduction of power consumption per annum kWh approx. 486,140 approx. 542,850 approx. 662,340
 Prospected reduction of CO₂ emission per annum t-CO₂ approx. 214 approx. 239 approx. 287
  • The figures for each expected reduction above are estimated by SHAM based on materials provided by the replacement work operator or materials published by the Agency for Natural Resources and Energy of the Ministry of Economy, Trade and Industry; there is no guarantee that the expected reductions will be realized.

In addition, we strive to reduce environmental load through introducing solar power generation panels, Low-e double glazed windows with thermal shielding, and thermal insulation capabilities and installing flow control valves that prevent overflow of water, showerhead with water-saving features, and chargers for electric vehicles.

Examples of Environmental Consideration Facilities Installation

Switching to Renewable Energy-Derived Electricity

SHR switched to electricity derived from renewable energy in the power supply of two properties, HK Yodoyabashi Garden Avenue and Hommachi Minami Garden City.
We use FIT electricity, which is generated from renewable energy and purchased by electric utilities under the Feed-in Tariff Scheme for Renewable Energy(FIT), and non-fossil fuel energy certificates with tracking information to verify the environmental value of electricity produced from non-fossil power sources. By repurchasing the environmental value of FIT electricity and reducing the CO₂ emission factor to zero through the use of substantial renewable energy, we have achieved virtually carbon-free properties when using electricity.
In residences as well, we plan to gradually switch electricity to renewable energy in common areas, and we will work on a medium to long term basis to reduce CO₂ emissions.

Flow of Supply of Electricity Derived from Renewable Energy

Biodiversity Conservation

Based on the Gohon no ki (“5 trees”) Project, which is promoted by Sekisui House, the sponsor, SHR conducts maintenance and management of planting and other greenery measures, basically by selecting tree species in consideration of ecosystems.

The Gohon no ki (“5 trees”) Project

The Gohon no ki (“5 trees”) Project is a landscaping and greening project that takes the ecosystem into consideration launched by the sponsor, Sekisui House since 2001, based on the approach that “three trees are for birds, two trees are for butterflies, and all are local native tree species”.
By planting 288 local tree species that are in harmony with the climate of each region of Japan and are beneficial to birds, butterflies, and other creatures can be used as garden trees, we aim to create a garden that coexists with the nature around us and deepens our attachment over time.
In fiscal year 2020, Sekisui House planted 0.98 million trees and the cumulative number of planted trees since the start of the project has reached 17.09 million.
The creation of greenery spaces in cities, even on a small scale, creates a corridor for the habitat and movement of insects, wild birds, and other creatures, which creates food chains and forms ecosystem networks among live. This ecosystem network will enrich the biodiversity of local communities and Japan. These spaces not only make them easy to use for creatures, but also make them a place where tenants can enjoy the richness of nature at the same time.
SHR will continue to maintain and manage tree planting and other activities based on ecosystem-friendly tree species in accordance with Gohon no ki Project.

Gohon no ki

Examples of Introduction

Garden City Shinagawa Gotenyama and Hommachi Garden City have rooftop gardens. The greening of rooftops improves insulation performance and contributes to the creation of natural environments in urban areas. The entrance of Prime Maison Yokohama Nihon-odori has an entire wall covered with plants to prevent heat penetration into the building and also to provide a space for residents to relax.

Examples of Introduction

Prevention of Pollution Risks

In acquiring the assets to be invested, SHAM has established survey items such as the use history, use status and storage status of asbestos, PCBs, and other hazardous substances, geological status, land use history, and soil contamination status in the due diligence standards, and has sufficiently conducted surveys to examine the appropriateness of the investment targets. Even after the acquisition of assets, we maintain legal compliance by investigating whether there are any violations of environmental laws and regulations in owned properties through continuous acquisition of engineering reports and other means.

Appropriate Waste Management

At Garden City Shinagawa Gotenyama, SHR is promoting the effective use of water resources by utilizing stored rainwater for wataring rooftop gardens. In-house, we have posted an awareness-raising poster for three Rs (Reduce, Reuse, Recycle) aimed at reducing waste emissions.
Furthermore, Hommachi Garden City was certified as an excellent building for waste reduction and HK Yodoyabashi Garden Avenue was awarded the “Excellent Marker for Waste Reduction” by the Osaka City Environment Bureau for these excellent performances in promoting the reduction and proper disposal of commercial waste. SHR continue our efforts to appropriately manage waste through management of owned properties.


HK Yodoyabashi Garden Avenue
Excellent Marker for Waste Reduction

Urban Revitalization / Urban Redevelopment

Sekisui House, the sponsor, focuses proactively on environmental creation development through using natural energy and adopting energy-saving technologies.
SHR, in cooperation with Sekisui House, aims to provide high-quality social capital and to create a sustainable city through the acquisition of environmentally conscious properties.

"Gotenyama Project", a Large-Scale Complex Developed by Sekisui House

“Prime Maison Gotenyama East”, “Prime Maison Gotenyama West”, “Garden City Shinagawa Gotenyama”, and “Gotenyama SH Building” held by SHR are properties planned and developed by Sekisui House’s large-scale complex development “Gotenyama Project”. It is not a mere large-scale development that advocates a sense of scale, but is based on the revitalization of the original landscape of "Gotenyama", which is rich in nature, the familiarity of human-scale with its rich expression, and the creation of a comfortable townscape. In addition, the project focuses on environmental considerations through the active use of natural energy and advanced energy-saving technologies.
In the “Gotenyama Project”, more than 40% of the total development area is greened by planting the exterior and greening the roof and walls. Based on Sekisui House’s proprietary Gohon no ki Project, which is ecosystem-conscious, based on the “Satoyama”, which can be said to be the original landscape of Japan, a green network that is integrated with the greenery in the surrounding area is created through preservation of existing trees and planting over 26.4 thousand trees, mainly indigenous species.

<Major Awards Granted to the Project>

  • February 2012Sponsored by Shinagawa Ward, Tokyo
    Greening Grand Prize at the Green Honoring System
  • September 2012Sponsored by Organization for Landscape and Urban Green Infrastructure
    Minister of Land, Infrastructure, Transport and Tourism Award in the Rooftop Greening Category at the “Rooftop / Wall / Special Greening Technology Contest”
  • October 2012Sponsored by Organization for Landscape and Urban Green Infrastructure
    Urban Greenery Organization Chairman’s Award in the Green Community Development Category at the Urban Green City Award

<Overview of Gotenyama Project>

Location :
6-7-29 Kitashinagawa, Shinagawa-ku, Tokyo
Site area :
Approx. 28,000㎡(Total of four sites)
Overview of the buildings :

Collaboration with Tenants and Property Management Companies

Initiatives for Selection and Evaluation of Property Management Companies

In order to secure stable earnings, maintain and improve the value of assets, SHR has established standards for selecting property management companies to whose management is entrusted. SHR evaluates the performance of property management companies' management operations once a year in principle to verify their appropriateness.
For evaluation, in addition to property management capabilities and operational systems, SHR also considers the organizational structure for promoting corporate sustainability and the energy conservation promotion system for managed properties.

Initiatives for Energy Reduction

SHR asks property management companies to propose ways for energy savings in managed properties. We also share the results of the CO₂ emissions reduction potential diagnoses conducted by SHR with property management companies to work together for the purpose of reducing environmental impact.
At Akasaka Garden City, tenant companies are regularly convened to hold a CO₂ reduction promotion meeting. At the meeting, energy consumption and CO₂ emissions are reported to each tenant, and explanations on energy conservation are provided in conjunction with these reports to raise environmental awareness.
At Garden City Shinagawa Gotenyama, the initial illuminance of the illuminance sensor is adjusted to ensure proper lighting brightness. In parallel, daylight is used during the daytime to reduce electricity consumption.

Promotion of Green Leasing

Green leasing refers to the establishment and implementation of environmental provisions in lease agreements with tenants at owned properties. SHR has entered into green lease agreements with certain tenants. From the perspective of energy saving and environmental consideration, we are accelerating our environmental efforts by sharing our thoughts on maintaining and improving the comfort and productivity of our properties with our tenants, and we have established a system for mutual cooperation. We will continue to strengthen cooperation with tenants and promote green leasing.

Major Properties with Green Lease Agreements

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