Materiality Identification Process

DHR and the Asset Manager use the following process for materiality identification in order to identify and assess the dependency on external stakeholders related to business activities, products and services, and their supply chains as well as the impact of the dependency.

Quantitative indicators related to key issues are used to assess the dependency and impact of DHR and the Asset Manager on stakeholders.
We have a system in place to review the materiality analysis annually and report to the Sustainability Committee, Compliance Committee, and Board of Directors of the Asset Manager, as well as to the Board of Directors of DHR.
We set KPIs, targets, or indicators (management items) related to materiality, and we monitor and disclose their progress every year. Our commitment is reinforced by linking the remuneration of the Executive Officer of DHR and the Board of Directors of the Asset Manager to the relevant targets or assessment indicators.

Priority issues		Management items (KPIs)	Subjects	Targets	Reasons for selecting management items (KPIs)	FY2024 progress	FY2024 results	Strategies to achieve targets	Related SDGs
Environment	Response to climate change	GHG emissions	DHR	i) Reduce total GHG emissions (Scope 1+2) by 42% (compared to FY2020) by FY2030 * SBT (February 2022)	Selected this item with the intention of reducing GHG emissions, which have been a major factor behind climate change, thought to be the cause of the increase in climate disasters in recent years occurring around the world and across Japan.	Achieved	i) Reduction by 97.0%	Promotion of conversion to LED lighting Update to power-saving air conditioning equipment and review of air conditioning capacity Installation of motion sensors Promotion of ZEB Installation of solar power generation equipment Utilization of internal carbon pricing Introduction of options for energy derived from renewable energy Purchase of non-fossil certificates Implementation of energy-saving diagnostics
				ii) Achieve net zero total GHG emissions (value chain) by FY2050 * SBT (August 2022)		-	ii) –
	Response to biodiversity	Biodiversity-related certifications	DHR	5 or more properties to have obtained biodiversity-related certification by FY2030	Selected in consideration of the impact on business from rising biodiversity needs of customers.	Not achieved	2 properties	Do not use any species from the lists of Designated Invasive Alien Species, Unevaluated Alien Species, or Invasive Alien Species for the Prevention of Ecosystem Damage Use native species Implement environmentally friendly maintenance (do not perform heavy pruning, use chemical agents only within the minimum necessary range)
	Promotion of Environmental Certifications	Green building certifications	DHR	An environmental certification acquisition ratio (based on a gross floor area) of 75% or higher by FY2030	Selected to increase the objectivity and reliability of the initiatives in reducing the environmental burden of portfolio properties and improve the asset value over the medium to long term.	Not achieved	74.6%	Promoting energy-saving through initiatives such as the conversion to LED lighting and the adoption of powersaving air conditioning equipment, water conservation equipment and solar power generation equipment
	Efficient use of water resources	Water consumption	DHR	Reduce consumption rate to the consumption intensity of FY2017 (base year) (0.8205㎥/㎡) or less (10-year period from 2018 to 2027)	Selected because the water supply is expected to become unstable as a result of climate change, and it is becoming more important to conserve aquatic environments around the world.	Achieved	0.5953㎥/㎡	Adoption of Water Conservation Equipment Effective Use of Rainwater, Groundwater, and Greywater
	Reducing waste and increasing recycling rates at portfolio properties	Waste recycling rate	DHR	Improve recycling rate to the rate of FY2017 (base year) (54.2%) or higher (10-year period from 2018 to 2027)	Selected because the increasing world population and other factors are triggering a substantial rise in consumption of global natural resources, and resource depletion and the negative impacts of waste on the environment are becoming more severe.	Achieved	73.7%	Displaying posters to promote recycling Promoting recycling through sorting

Priority issues		Management items (KPIs)	Subjects	Targets	Reasons for selecting management items (KPIs)	FY2024 progress	FY2024 results	Strategies to achieve targets	Related SDGs
Social	Enhancing employee engagement	eNPS score	Asset Manager	Improve the score to -8 or higher (FY2030)	Selected this item as a key indicator to gauge employee satisfaction, ease of working, and job satisfaction based on our belief that it is the Asset Manager’s “human resources” that supports the stable and continuous growth of DHR. Engaged in this initiative to build a better workplace environment by conducting a third-party eNPS survey targeting officers and employees (including fixed-term, temporary, and part-time employees) to explain the scores and provide feedback.	Not achieved	-25	Increase the salary levels of employees and establish a wellness leave system, childcare leave benefits, returnto-work benefits, and a program to provide allowance for replacing work of coworkers on long-term leave, with the aim of achieving a good balance between job satisfaction and ease of work In an attempt to strengthen our commitment to achieving our goals, we have established a remuneration structure whereby the remuneration of directors at the Asset Manager is linked to the “employee engagement with the company” score in the “Engagement Survey” conducted annually by the Daiwa House Group
		Turnover	Asset Manager	Improve the percentage to 0% (FY2030)		Not achieved	4.1%
		Average tenure of employees	Asset Manager	Improve the average tenure to 10 years or more (FY2030)		Not achieved	6.5 years
	Developing human resources	i) Per capita training hours for officers and employees	Asset Manager	No quantitative targets (confirmation item)	Selected this item because we believe it is important to develop human resources to support the growth of DHR and the Asset Manager.	-	i) 36.5 hours/ person/year	-
		ii) Per capita training cost for officers and employees					ii) ¥112,752/ person/year
	Promoting a healthy, comfortable working environment and worklife balance	Percentage of male employees taking childcare leave	Asset Manager	Improve the percentage to 100% (FY2030)	Selected this item because we believe that sharing the burdens of childcare and housework, which tend to fall disproportionately on the shoulders of the female partner, will help to address the issue of the declining birthrate by increasing women’s willingness to have children and continue working. It will also lead to workstyle reform at the Asset Manager.	Not achieved	75.0%	We are supporting male officers and employees who take childcare leave by providing childcare leave benefits (100,000–300,000 yen) corresponding to the number of days of childcare leave taken.
		Percentage of paid leave taken	Asset Manager	Improve the percentage to 85% (FY2030)	Selected this item out of our belief in the importance of accommodating diverse work styles and being considerate of employees’ health and lifestyles—such as by improving working hours, days off, and ensuring employees actually use their days of annual leave—if we are to achieve work-life balance.	Not achieved	66.1%	We are encouraging employees to take paid leave through the introduction of planned annual paid leave, paid leave by the hour, wellness leave, home holidays (planned quarterly paid leave), and other programs
		Monthly average overtime hours	Asset Manager	No quantitative targets (confirmation item)		-	16.7 hours	The introduction of a flextime system Monitoring and reporting to the Asset Manager’s Health Committee, Sustainability Committee, Compliance Committee, and Board of Directors, as well as the DHR Board of Directors, all of which meet on a monthly basis
	Promotion of diversity	Ratio of female officers	DHR	No quantitative targets (confirmation item)	Given the challenges presented by the diminishing workforce resulting from the declining birthrate and aging population, selected this item because we believe it is essential to expand opportunities for women to play an active role and increase the working population in order to raise corporate productivity.	-	33.3%	-
		Ratio of female managers	Asset Manager	i) Percentage of female managers (senior manager and above) to 39% or more (FY2030)		Not achieved	i) 25.9%	Provide corporate management training for female leaders Create an environment in which men and women can share the burdens of housework, childcare, etc., and strike a balance between life events and building a career Support female officers and employees who return to work after taking childcare leave by providing return-to-work benefits (300,000–1,000,000 yen) based on the time when they returned to work
				ii) Percentage of female line managers (group leader and above) to 20% or more (FY2030)		Not achieved	ii) 11.8%
	Respect for human rights	Number of reports about labor-related issues, discrimination, harassment, etc.	Asset Manager	No quantitative targets (confirmation item)	Selected the number of reports as a confirmation item because we believe it is an important indicator to measure employee satisfaction and comfort of working, and because we believe it contributes to the development of a society in which human rights are respected through business.	-	0	Implementation of human rights training and harassment training Notification of the reporting hotline
	Initiatives to cooperate with tenants to reduce environmental impact	Percentage of green lease agreements signed	DHR	Increase the percentage of green lease agreements (based on a gross floor area) to 100% by FY2030	Selected the percentage of green lease agreements signed (based on a gross floor area) with the aim of cooperating with tenants to improve the environmental performance of the portfolio properties.	Not achieved	99.7%	In addition to negotiations through the PM company representative with tenants, improve contract conclusion rates by conducting negotiations through the Asset Manager’s AM representative and the sponsor’s property representative Promote engagement by creating a dialogue platform involving the PM company representative, the Asset Manager’s AM representative, and the sponsor’s property development representative
	Improvement in the health, comfort, and convenience of tenants	Tenant satisfaction surveys	DHR	Conducted approximately once every 3 years No quantitative targets (confirmation item)	Selected in the belief that increasing tenant satisfaction leads to stable and improved property-operating performance.	-	Conducted a tenant satisfaction survey with an 11-point scale for tenants of 120 residential properties (8,715 units) (February 2025) Satisfaction with the property: 72.2% rated “7” or higher Would recommend to others: 62.7% rated “7” or higher	-

Priority issues		Management items (KPIs)	Subjects	Targets	Reasons for selecting management items (KPIs)	FY2024 progress	FY2024 results	Strategies to achieve targets	Related SDGs
Governance	Construction of an internal control system and BCP response	Number of compliance training held	Asset Manager	No quantitative targets (confirmation item)	Selected this item as a confirmation item in the belief that all officers and employees (including fixed-term, temporary, and part-time employees) need to undergo compliance training on a continual basis to ensure a high level of awareness of the need for their actions to be undertaken in the best interests of investors.	-	4(Note 1)	-
		Number of risk assessments carried out	Asset Manager	No quantitative targets (confirmation item)	Conducted risk assessments and set the number of times as a confirmation item in order to accurately understand the various risks inherent in the operations of the Asset Manager and to properly manage the losses that may arise from the realization of these risks.	-	3	-
		Number of internal audits carried out	Asset Manager	No quantitative targets (confirmation item)	Conducted internal audits to examine and assess whether the operations of each of the Asset Manager’s departments are legitimate and in compliance with laws, regulations and the company’s internal regulations and policies, etc. In addition, based on the results of internal audits, we make recommendations for improvements and greater efficiency to the audited departments, thereby contributing to ensuring the appropriateness of the Asset Manager’s operations and the soundness of its management. Therefore, we have set the number of internal audits carried out as a confirmation item.	-	7(Note 2)	-
		Number of external inspections of internal management systems	Asset Manager	No quantitative targets (confirmation item)	Commissioned a third-party organization to investigate whether the Asset Manager’s internal control systems have been properly constructed and are functioning effectively and appropriately, and set the number of external inspections of internal control systems as a confirmation item.	-	1	-
		Number of times safety confirmation drills held	Asset Manager	No quantitative targets (confirmation item)	Adopted an online safety confirmation system and set the number of times that safety confirmation system drills have been conducted as a confirmation item to swiftly ascertain the post-disaster status and safety of officers and employees at the time of disaster as part of corporate crisis management.	-	1	-
		Number of targeted email attack drills for officers and employees	Asset Manager	No quantitative targets (confirmation item)	Selected the number of times such drills are conducted as a confirmation item by regularly conducting “targeted email attack drills” in which we send fake targeted attack emails to officers and employees to check whether they are able to correctly identify suspicious emails and evade the attacks, as well as to see whether there are any problems with the reporting and communication system for suspicious emails.	-	1	-
	Stakeholder engagement and timely and appropriate information disclosure	Number of completed IR activities (including telephone/web conferences)	Asset Manager	No quantitative targets (confirmation item)	Selected the number of IR activities as a confirmation item because we seek to meet society’s needs through active disclosure and dialogue with investors and unitholders.	-	201	-
	Reinforcement of governance	Sustainability assessment by external expert advisors	Asset Manager	No quantitative targets (confirmation item)	Selected the overall evaluation as a confirmation item because we receive an evaluation of each item (committee operation, governance, commitment from management, internal permeation and education, etc. to officers and employees, materiality, targets and performance related to energy, information disclosure, engagement, concrete initiatives, and participation in various initiatives) as well as an overall evaluation and general comments from outside expert advisors of the Sustainability Committee, which meets monthly at the Asset Manager.	-	4/5 points	-

• In addition, compliance training is conducted separately for new employees.
• Internal audits are conducted once a year for all departments.