Daiwa House REIT Investment Corporation

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Information Disclosure Based on TCFD Recommendations (Metrics and Targets)

GHG Emissions of Portfolio Properties (Scope 1, 2, and 3)

* Market-based

Unit: t-CO₂

Asset class Fiscal year ended
March 2020
Fiscal year ended
March 2021
Fiscal year ended
March 2022
Fiscal year ended
March 2023
Fiscal year ended
March 2024
Logistics 41,211 51,706 60,880 67,756 75,447
Residential 7,378 6,595 4,513 18,973 18,874
Retail 30,333 30,450 28,219 27,808 27,811
Hotel 2,095 1,823 2,155 2,532 3,139
Other 5,051 6,559 3,444 666 801
Total 86,068 97,133 99,210 117,736 126,072
  • This table shows GHG emissions of the properties for which data of emissions by tenants were obtained among the properties owned by DHR.
  • GHG emissions from tenants’ energy use are calculated as Scope 3 figures.
  • Increase in emissions data in fiscal year ended March 2021 to fiscal year ended March 2024 is mainly due to the increase in the number of properties for which emissions data were obtained.

GHG Emissions by Category (Scope 3)

Boundary: DHR, owned properties

Unit: t-CO₂

Category Fiscal year ended March 2020 Fiscal year ended March 2021 Fiscal year ended March 2022 Fiscal year ended March 2023 Fiscal year ended March 2024
Upstream 1. Purchased goods and services 202 160 45 8,609 9,651
2. Capital goods 14,906 18,310 29,694 8,443 13,115
3. Fuel- and energy-related activities not included in Scope 1 or Scope 2 990 1,067 1,124 1,095 1,137
4. Upstream Transportation and Distribution 3 3 2 2 2
5. Waste generated in operations 24 130 164 156 204
6. Business travel 0 0 0 0 0
7. Employee commuting 0 0 0 0 0
Downstream 13. Downstream leased assets 83,053 95,263 106,690 127,008 137,588
  • Calculated based on “Guidelines for Accounting of Greenhouse Gas Emissions of Organizations through the Supply Chain” by the Ministry of the Environment. Categories not listed above have no emission sources or are included in Scope 1 and Scope 2.
  • GHG emissions from tenants’ energy use and waste disposal are calculated.
  • Figures are verified by a third party based on “ISO 14064-3:2019 Greenhouse gases - Part 3: Specification with guidance for the verification and validation of greenhouse gas statements.”
    Greenhouse Gas Emissions Independent Verification Report (Limited Assurance)PDF

GHG Emissions and Energy-related Targets

DHR set targets of reducing total GHG emissions by 42% in the fiscal year ending March 2031 compared to the fiscal year ended March 2021 and achieving net zero emissions by the fiscal year ending March 2051, and became the first J-REIT to obtain SBTi certification for its SBT 1.5°C targets.

Item Coverage Base year Target year Target
GHG emissions
(Scope 1 and 2)
All properties 2020 2030 Reduce total emissions by 42%

SBTi

2050 Net zero

SBTi

GHG emissions
(Scope 3)
Properties with data available 2020 2030 Calculate and reduce total emissions

SBTi

2050 Net zero

SBTi

Energy consumption Properties with data available 2017 2027 Reduce consumption intensity by 10%
Water consumption Properties with data available 2017 2027 Reduce intensity to below
the level of base FY
Waste management Properties with data available 2017 2027 Improve recycling rate

Physical Risk (Risk of Flooding)

  • Responding to risks by implementing construction countermeasures and adding fire insurance coverage to avoid economic damage.
Flood depth Number of properties Acquisition price (millions of yen) Ratio (based on acquisition price) High
Over 20m 0 0 0.0% Risk of flooding
10m to 20m 0 0 0.0%
5m to 10m 5 82,260 8.9%
3m to 5m 28 105,442 11.4%
0.5m to 3m 104 383,528 41.3%
0.5m or less 13 54,356 5.9%
0 83 302,045 32.6%
Total 233 927,631 100.0% Low
  • Method: Based on the estimated flood prone areas (estimated maximum size) (source: Ministry of Land, Infrastructure, Transport and Tourism), compiled by the Asset Manager in April 2024.
  • For Royal Parks SEASIR (residential facility), we installed waterproof panels and waterproof doors at the entrance, electrical room, elevators, and management office to reduce the impact of water damage from torrential rains and large-scale typhoons.
Waterproofing panels
Waterproofing doors

Formulating Framework for Sustainable Finance

  • By raising funds through sustainable finance, DHR aims to further promote sustainability initiatives, expand the investor base interested in sustainability investment and lending, and ensure stable financing.
  • In October 2019, DHR formulated a Green Finance Framework for implementing green finance. In November 2021, DHR formulated a Sustainability Finance Framework for implementing sustainability finance.In this way, DHR is developing initiatives for sustainable finance and making steady progress in raising funds through sustainable finance.

Implementation of Sustainable Finance

  • DHR has implemented sustainable finance of ¥36.5 billion as of the fiscal period ended February 28, 2024 through green bonds, green loans, sustainability bonds, and sustainability-linked bonds.
  • The ratio of sustainable finance to interest-bearing debt has also increased by continuously implementing sustainable finance.

Outstanding Balance and Ratio of Sustainable Finance

Climate-related Opportunities

Targets for Obtaining Environmental Certifications of Portfolio Properties

  • We are promoting the acquisition of third-party external certifications and evaluations to increase the objectivity and reliability of our sustainability initiatives at portfolio properties and improve the asset value over the medium to long term.
  • Our policy is to increase the percentage of properties with environmental certification (based on gross floor area) to 75% or more by the fiscal year ending March 2031.

Status of Environmental Certification of Portfolio Properties

  • The ratio of properties with environmental certification has improved to 73.7% (based on gross floor area).
    (As of March 31, 2024)

Please refer to "Obtainment of Green Building Certifications"

Concept and Definition of ZEB

Please refer to "ZEB Certification" in Obtainment of Green Building Certifications

Capital Deployment (Purchase of Non-fossil Certificates and Investment in Solar Power Generation Equipment)

  • We will reduce GHG emissions (Scope 2) by procuring FIT non-fossil certificates, etc. by participating in auctions in the renewable energy trading market.
  • We will reduce GHG emissions by investing in solar power generation equipment and switching existing equipment to own use.

Purchase of Non-fossil Certificates

DHR participated in the renewable energy value trading market, which allows consumers and intermediaries to purchase FIT non-fossil certificates, and in the fiscal year ended March 2024 procured 25.0 million kWh FIT non-fossil certificates through an intermediary (Whole Energy, Inc.) (hereinafter referred to as the “Procurement”).
Expected reduction effect of CO2 emissions by the Procurement was approx. 12,988 tons (t-CO2 equivalent), and all of the DHR’s electricity-derived GHG emissions (Scope 2) for the fiscal year ended March 2024 were offset alongside the introduction of 100% net zero renewable energy at the properties owned by DHR.

Mechanism for procuring FIT non-fossil certificates by auction in the renewable energy value trading market

Internal Carbon Pricing

  • We have not set a target for the internal carbon price. We will review the price as appropriate to reflect potential changes in government policy.

Revising the Internal Carbon Price

Internal carbon price is set at ¥20,000 / t-CO2 and used as an incentive for low-carbon promotion works, guidelines for investment decision making and a reference index to identify risks of rising costs.

Utilizing the Internal Carbon Price

(1) Incentives for low-carbon promotion works

If GHG emissions are expected to be reduced by LED lighting and air conditioning renewal, we apply the internal carbon price and use the data as a reference to decide whether to perform construction work.

(2) Guidelines for investment decision making

After calculating the profit and loss by applying the internal carbon price to the GHG emissions of the target property, we use the data as a reference for investment decisions (when emissions can be calculated).

(3) Identifying risks of rising costs in the future

By selecting suppliers with low emissions, we aim to reduce the risk of increased procurement costs when a carbon tax is introduced in the future.

Example

The investment decision on installation of solar power generation equipment at DPL Nagareyama III borne by DHR was made by balancing the cost and the revenue from power generation with the reduced GHG emissions multiplied by the internal carbon price.

Remuneration for Executive Director of DHR and Directors of the Asset Manager

In November 2021, DHR introduced a provision to fluctuate the amount of asset management fees to the Asset Manager in conjunction with the sustainability indices as the first initiative in J-REITs for the purpose of increasing unitholder value by encouraging the reduction of GHG emissions of DHR properties and enhancing the external evaluations of its sustainability initiatives.
This is to increase or decrease the amount of asset management fees based on the sum of indexed GHG emissions reduction ratio, GRESB Rating and CDP Score multiplied by the total assets of DHR, and is aimed at strengthening the commitment to solving ESG issues and improving governance.
Furthermore, remuneration for Executive Director of DHR and remuneration for directors of the Asset Manager are also linked to sustainability indices including GHG emissions reduction ratio, GRESB Rating and CDP Score.

Asset Management Fee Structure

Please refer to "Compensation of the Asset Manager" in Corporate Governance

Remuneration

  • We have not set a target for the amount of remuneration for Executive Officer of DHR and directors of the Asset Manager that is linked to climate-change indicators, but will review the remuneration structure as appropriate.

Physical Risk

  • We will take risk reduction measures and reduce the percentage of properties owned that are exposed to acute and chronic physical risks.

Greening and Countermeasures Against Heat Island Effect

Out of consideration for climate change, we carry out efforts such as those below at our properties.

Large-scale green area
Rooftop greening
Exterior greening/
water-permeable paving