Environmental Initiatives Measures for Addressing Climate Change
Disclosure Based on TCFD Recommendation
In recent years, the environment, society and corporate activities have been exposed to major risks due to climate change such as global warming. SHR recognizes that resolving environmental issues such as climate change is one of the key issues for us, which aims to provide "bases for sustainable living" and "sustainable bases of operation for business" through ESG-conscious investment management.

Based on the TCFD recommendations, SHA identified and disclosed the risks and the opportunities posed by climate change to the business in 2020, and further analyzed and conducted a scenario analysis in 2021, using future climate projections published by international organizations and other sources as the main source of information. Since 2022, in addition to analyzing the financial impact of the identified risks and opportunities, SHA conducted an analysis using CRREM (Carbon Risk Real Estate Monitor). We will continue to enhance our resilience by enhancing information disclosure and by appropriately identifying and responding to transition and physical risks related to climate change through our initiatives in accordance with the TCFD recommendations, while simultaneously working strategically to create business opportunities.
Governance
SHA has established 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.
In 2020, in addition to defining the basic approach and organizational structure for addressing climate change-related issues, the Chief Sustainability Operator was appointed as the Director in charge of climate change, with the President & Chief Executive Officer as the Chief Sustainability Officer, in order to strengthen the promotion of climate change initiatives and clarify its responsibilities. These activities aimed at mitigating and adapting to climate change are reported as appropriate to the President & Chief Executive Officer, the Board of Directors of SHA, and the Board of Directors of SHR.
In 2021, the Sustainability Committee expanded its membership to include the heads of all departments in an effort to raise awareness of sustainability and strengthen the organizational structure for promoting awareness. And in 2022, the “ESG Promotion Department” was established as a department dedicated to overseeing and managing ESG-related operations to strengthen the promotion system for addressing climate change.
Click here for Sustainability Promotion System.
Strategy
Based on the recognition that climate change is an important issue that will have a significant impact on business activities, SHA has set “Promoting Our Response to Climate Change” as a materiality of SHR, and views the various risks and opportunities associated with climate change as one of the key points in its business strategy.
Scenario Analysis
In order to assume various possible future events that could be caused by climate change and to understand the risks and opportunities for the business activities of SHR and assess the financial impact, SHA used scenarios from international organizations and industry groups such as the IPCC (Intergovernmental Panel on Climate Change) and the IEA (International Energy Agency) to conduct an analysis for a world in which temperatures have increased by 4℃ and 1.5℃, respectively. Scenario analysis is conducted using the following process.
The Process for Conducting a Scenario Analysis

Risks and Opportunities Related to Climate Change
Risks related to climate change include risks associated with the transition to a decarbonized society ("transition risk"), such as tightening of regulations such as carbon tax, falling demand for companies that cannot respond to decarbonization, and a decline in reputation, and risks associated with the physical damage ("physical risk") caused by an increase in natural disasters and extreme weather events due to climate change. At the same time, we can also make assumptions regarding opportunities created by climate change.
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Category | Changes in the World due to Climate Change | |
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Transition risks | Policy, and laws and Regulations |
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Technology |
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Market |
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Reputation |
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Physical risks | Acute |
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Chronic |
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Opportunities | Technology |
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Market |
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A Worldview with Stakeholders in Mind by Scenarios
4℃ Scenario
The 4℃ scenario is a future view that assumes no strict regulations or tax reform aimed at decarbonizing society will be enacted and that GHG emissions will continue to rise. This is a scenario in which the physical risk is relatively high and the transition risk is relatively low.

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

Assessment of Financial Impact
Under the following assumptions, we set parameters to evaluate the financial impact of risks and opportunities that SHR is expected to face, and calculate the impact by taking into account differences in parameters under each scenario. Furthermore, climate change risks are highly uncertain with respect to the timing and the scale of the risks that materialize, and it is extremely difficult to predict their financial impact. The analysis places certain assumptions on the subject of the analysis, socioeconomic changes, and anticipated natural disasters, and does not take into account the probability that the identified risks/opportunities will be realized. Therefore, analysis methods will continue to be reviewed in the future in light of changes in the external environment.
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Subject of Analysis | General business in real estate investment management and funding | |||||||||||||||
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Anticipated Periods |
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Category | Transition risks | Physical risks | ||||||||||||||
Referenced Scenarios |
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4℃ Scenario
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Classification | Risk and opportunity factors, and financial impact |
Period anticipated | Amount of financial implications(Note) | Countermeasures | ||
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Physical risks | Acute |
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Medium and long term | (0.4) billion yen |
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Medium and long term | (0.4) billion yen | ||||
Chronic |
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Medium and long term | (0.01) billion yen |
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Opportunities | Technology |
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Medium and long term | 0.1 billion yen |
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1.5℃ Scenario
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Classification | Risk and opportunity factors, and financial impact |
Period anticipated | Amount of financial implications(Note) | Countermeasures | ||
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Transition Risks | Policies, laws and regulations |
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Medium and long term | (0.1) billion yen |
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Medium and long term | (0.7) billion yen | ||||
Technology |
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Medium and long term | (0.05) billion yen |
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Market |
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Medium and long term | (0.05) billion yen |
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Reputation |
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Medium to long term | (1.2 to 1.4) billion yen |
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Physical risks | Acute |
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Medium and long term | (0.2) billion yen |
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Medium and long term | (0.2) billion yen | ||||
Chronic |
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Medium and long term | (0.01) billion yen |
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Opportunities | Technology |
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Medium to long term | 0.15 to 0.2 billion yen |
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Market |
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Medium to long term | 1.2 to 1.4 billion yen |
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(Note)The amount of financial implications is the annual implications estimated by SHA based on the actual performance of SHR and other factors, and with reference to various parameters based on scenarios presented by international organizations, etc. The accuracy of the figures is not guaranteed.
Analysis Results
Under the 4℃ scenario, no strict regulations or tax reform aimed at shifting to a decarbonized society are enacted, causing GHG emissions to continue rising. Physical risks due to changes in weather patterns such as intensifying weather disasters and chronic temperature increases are unavoidable. As a result, rent for owned properties are expected to decrease, while repair costs and electricity charges increase. SHA is aware of the risk that flooding damage to its properties due to typhoons and heavy torrential rain, etc., could affect earnings. SHR owns 124 properties in Japan (as of March 2024), of which 58 properties are recognized as being at risk of flooding damage due to river flooding, etc., based on hazard maps and other survey data. Properties that are expected to suffer large amounts of damage are covered by insurance for more than the estimated amount. In such cases, there is also a risk that continuation of business operations will become impossible due to flooding damage, and rent income will decline. We are therefore seeking to reduce risks by taking out insurance to compensate for lost profits (indirect damage), the financial impact of which is calculated to be around 400 million yen. While these damages are calculated based on the assumption that similar damage occurs simultaneously in all areas where owned properties are located, we believe that the risk of such damage occurring simultaneously is low due to the dispersed location of properties owned by SHR.
Under the 1.5°C scenario, we expect to be affected by transition risks, such as tightening of regulations aimed at curbing GHG emissions toward the realization of a decarbonized society, and changes in property selection preferences due to increased environmental awareness among tenants. To respond to these risks, SHR calculates the impact of the introduction of a carbon tax on operating costs, and the impact is 100 million yen. SHR is also working to reduce GHG emissions in its portfolio and obtain green certification for its properties. We have calculated the impact of the response to these restrictions at around 700 million yen, in anticipation of further tightening of environmental regulations such as energy-saving standards. With regard to the impact of changes in preference of properties by tenants, we have calculated that the impact on rent income if the acquisition of these properties does not proceed will be a decrease of up to 1.4 billion yen, while the effect on rent income if the acquisition proceeds will be an increase of up to 1.4 billion yen, assuming that the demand for properties with high environmental performance - such as ZEH - will increase.
In anticipation of the intensification of weather disasters indicated by the 4°C scenario, SHR invests mainly in properties that are resistant to risks such as flooding in terms of location and specifications, and with high environmental performance. Additionally, in order to respond to transition risks and maintain a competitive advantage in anticipation of the transition to a low-carbon society indicated by the 1.5°C scenario, we will work to address individual risks, by working to further reduce GHG emissions in our portfolio, acquire green certification, and actively investing in ZEH properties developed by Sekisui House. In this way, SHR is engaged in active efforts to respond to individual risks. As a result of these efforts, we believe that the impact of these risks on our business will be limited, and that these initiatives will lead to business opportunities for value creation.
As part of our further responses, since 2022, we have also been conducting transition risk assessment analysis using CRREM (Carbon Risk Real Estate Monitor). Going forward, SHR will continue to strategically address climate change, and work to reduce climate change risks and maximize opportunities.
Analysis According to CRREM
Overview of CRREM
CRREM (Carbon Risk Real Estate Monitor) calculates and publishes GHG emissions pathways (carbon reduction pathways) up to 2050 consistent with the 2℃ and 1.5℃ targets of the Paris Agreement for each use of real estate in a total of 44 countries (as of November 2024) in Europe, North America and the Asia-Pacific region including Japan. This tool is expected to be utilized for operational improvement by comparing the property data analyzed and pathways to calculate the timing of assets becoming stranded (Note) and carbon costs for each property, and to grasp the scale of renovation required to address these issues.
(Note)Stranded assets are assets that turn out to be worth less than expected as a result of changes (such as demands and market prices) associated with the transition to a low-carbon economy.

CRREM Pathway Transition
SHA analyzes the potential stranded asset risk in the portfolio by comparing the 1.5℃ pathway (Global Pathways v2.01) for each use of real estate with the actual GHG emissions (2023) in SHR.

Roadmap to Achieve Net Zero
Toward the long term target of "Achieve net zero by 2050", SHR will reduce Scope 1 and Scope 2 emissions from SHR's portfolio by 42% and Scope 3 by 25% based on absolute emissions by 2030 with measures such as energy savings through capital investment and operational improvements etc.
Furthermore, toward 2050, we aim to reduce 90% or more of GHG emissions by strengthening engagement with suppliers and promoting measures to reduce GHG emissions through the use of new technologies, etc. We will also neutralize residual emissions to achieve net zero emissions.
Initiatives to Achieve Net Zero
Introduction of Environmentally Friendly Facilities
SHR promotes the changeover to LED lighting in common areas of residences. As of the end of October, changes have been made to 69 of owned properties, and it is expected that the annual electricity usage will be reduced by 61.8% and the annual CO₂ emissions will be reduced by 731 tons with the changes thus far.
Effect of the Change to LED Lighting(Note1)(Note2)

(Note 1)The figures are based on the owned properties as of the time of aggregation and the properties that have already been disposed are excluded.
(Note 2)The figures for expected reduction are estimated by SHA based on materials provided by the replacement contractor etc. There is no guarantee that the expected reductions will be realized.
In addition to reducing emissions from owned properties, such as by installing solar panels and Low-e double glazing with thermal shielding and thermal insulation capabilities, we also strive to reduce our environmental impact by installing electric vehicle chargers and “carbon dioxide-absorbing vending machines” etc.
Solar Power Generation Panels

Prime Maison EGOTANOMORI

Prime Maison Gotenyama East
Low-e Double Grazed Windows

Hommachi Minami Garden City
Electric Vehicle Chargers

Prime Maison EGOTANOMORI
Carbon Dioxide-absorbing Vending Machines

Esty Maison Kyobashi
Introduction of Renewable Energy-Derived Electricity
SHR promotes the introduction of renewable energy-derived electricity in owned properties by switching the contracts for power supply to electricity plans that eliminate CO₂ emissions to virtually zero. SHR has switched the contract for power supply to “Sekisui House Owner Denki (Note) " for "Hirokoji Garden Avenue", resulting in CO₂ emissions from electricity to be virtually zero. SHR introduced virtual renewable energy through the purchase of FIT non-fossil fuel energy certificates with tracking at the Non-fossil Fuel Energy Value Trading Market of the Japan Electric Power Exchange via a broker.
(As of December 31, 2023)
Entire Portfolio
88.3%
(Note 1)"Sekisui House Owner Denki" is a service in which the power supply company purchases surplus electricity from solar power generation from owners of houses built by Sekisui House. This surplus electricity is purchased at a stable price even after the expiration of the feed-in tariff (FIT) system and sold to Sekisui House and others.
(Note 2)This figure is the percentage of renewable energy-derived electricity consumption in the common areas of properties in SHR's portfolio over which SHR has energy management authority. The calculation includes the amount of electricity used that is virtually renewable energy-derived due to the purchase of FIT non-fossil fuel energy certificates with tracking.
Implementation of Rooftop Insulation
SHR has implemented rooftop insulation work using thermal barrier sheets and heat insulating paints, etc. during large-scale repair work to achieve heat shielding effects, etc.
Acquisition of ZEH Properties
To promote the decarbonization of the portfolio, SHR has set a KPI "Acquire and keep owning 10 ZEH properties or more by 2030" and is promoting the acquisition of ZEH properties.
For details, Please click here.
Introduction of Internal Carbon Pricing
SHR has introduced the internal carbon price with the aim of further promoting investment in decarbonization. The price is set at 10,000 yen/t-CO₂. When GHG emission reductions are expected through the implementation of energy-saving renovation work, the internal carbon price is applied to the investment amount, and this is used as one of the investment decision indicators.
Grasping Environmental Data of Exclusive Areas
The majority of GHG emissions from SHR's properties are from the exclusive areas (Scope 3). In general, each resident in a residential property has a direct contract with the electricity and gas companies to receive their own supply, making it difficult for the owner to grasp the data for the exclusive areas. However, with the recognition that it is essential to grasp the GHG emissions from the exclusive areas in order to achieve net zero, SHR is working to grasp the data by installing clamp meters that can measure the electricity usage in the tenants' exclusive areas and the data coverage for GHG has greatly improved.
Clamp Meters

Strengthening Relations with Property Management Companies
SHR is strengthening its relationship with property management companies and sharing ideas on energy-saving plans for owned properties. For office buildings, we also share the results of the CO₂ emissions reduction potential diagnoses conducted by SHR with property management companies and work together to reduce environmental impact through measures such as operational improvements based on discussions.
Promoting Green Finance
SHR procures funds through green finance in order to further promote investment management with considerations given to ESG and strengthen its financial base.
For details, Please click here.
Risk Management
SHA has established an integrated risk management system for the purpose of accurately identifying various risks inherent in the execution of our operations, managing such risks appropriately, preventing risks from materializing, and minimizing losses when risks occur. In order to properly carry out organizational risk management, the Chief Manager of the Internal Control Promotion Department takes care of risk management as the chief supervisor, the head of each department is its own department’s responsible for each risk management, and the Internal Control Promotion Department is in charge of promoting risk management. Every business year, the Internal Control Promotion Department formulates a risk management plan for the following fiscal year, consisting of annual policies, priority management risks, and receives approval from the Board of Directors. The Internal Control Promotion Department also holds risk management meetings every six months, monitors the progress of the risk management plan, including climate-related risks, and reports the details to the Board of Directors. Under such risk management system, with respect to climate change, the Sustainability Committee of SHA continuously identifies and assesses climate change risks and opportunities that may affect SHR’s operations, and updates its measures as deemed necessary by the President & Chief Executive Officer, who is also the Chief Executive Director of the Sustainability Committee. We clarify the methods for managing climate change risks and opportunities, and as part of our integrated risk management process, promote management of climate change risks/opportunities and initiatives related to resilience.

Click here for Risk Management System.
Indicators and Targets
SHR recognizes that solving environmental challenges, such as climate change, is one of the key issues for the sustainable growth of our business. We have identified “Promoting response to climate change” 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. In addition, we have obtained the SBTi validation for reduction targets for GHG.
For details of the targets that have obtained SBTi validation, please click here.
■ GHG Emissions Reduction Target
Reduce absolute emissions compared to 2023
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Medium term target: Reduce 42% of Scope 1 and Scope 2 emissions by 2030
Reduce 25% of Scope 3 emissions by 2030 -
Long term target: Achieve net zero by 2050
Reduce 90% or more of Scope 1, Scope 2, and Scope 3 and neutralize residual emissions
■ Energy Consumption Reduction Target
- Reduce 10% energy consumption intensity by 2028 compared to 2018
■ Portfolio Green Certification Target
- Maintain 70% or more of the portfolio with green certification