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 2019 Fiscal year ended March 2020 Fiscal year ended March 2021 Fiscal year ended March 2022 Fiscal year ended March 2023
Logistics 6,540 41,266 51,727 61,636 70,271
Residential 5,466 6,295 6,490 8,428 8,280
Retail 20,811 30,344 30,415 29,323 28,609
Hotel 854 2,100 1,828 2,176 2,448
Other 4,778 4,803 6,176 4,235 1,464
Total 38,449 84,808 96,636 105,798 111,072
  • 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 2020 to fiscal year ended March 2023 compared to data for the fiscal year ended March 2019 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
Upstream 1. Purchased goods and services 202 160 50 54
2. Capital goods 14,906 18,310 29,694 15,967
3. Fuel- and energy-related activities not included in Scope 1 or Scope 2 990 1,067 1,194 1,179
4. Upstream Transportation and Distribution 3 3 4 4
5. Waste generated in operations 24 130 142 156
6. Business travel 0 0 0 0
7. Employee commuting 0 0 0 0
Downstream
13. Downstream leased assets 83,053 95,263 106,712 114,710
  • 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 4 78,750 8.8%
3m to 5m 13 81,497 9.1%
0.5m to 3m 91 253,850 28.4%
0.5m or less 14 56,510 6.3%
0 108 424,546 47.4%
Total 230 895,153 100.0% 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 from April to May 2022.
  • 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 ¥33.5 billion as of the fiscal period ended February 28, 2023 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 70% 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 68.8% (based on gross floor area).
    (As of March 31, 2023)

Please refer to "Obtainment of Green Building Certifications"

Concept and Definition of ZEB

Please refer to "ZEB Assessment" 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 2023 procured 22.5 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. 12,868 tons (t-CO2 equivalent), and all of the DHR’s electricity-derived GHG emissions (Scope 2) for the fiscal year ended March 2023 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

DHR had been operating with the internal carbon price set at ¥10,000/t-CO2, but revised the price to ¥20,000/t-CO2 to incentivize low-carbon investment in light of long-term climate change risks. We will continue to use the revised internal carbon price 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

We have set the internal carbon price at ¥20,000 / t-CO2 and use it as an incentive for low-carbon promotion works, guidelines for investment decision making and a reference index to identify risks of rising costs.

(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 now 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 the 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