Scenario Analysis
We evaluate impact on business under several scenarios and conduct scenario analysis according to the following steps to assess strategic resilience to climate-related risks and opportunities.
Step 1 Identify material climate-related risks and opportunities and set parameters
We have identified the risks and opportunities for DHR in the future due to unusual weather caused by climate change and increasing social demands for climate change measures.
| Risks/Opportunities | Category | Major risks and opportunities | |
|---|---|---|---|
| Risks | Transition risk |
Policy and regulation |
Repair and renovation costs increase from the soaring costs of construction materials while indirect costs related to GHG emissions from business activities increase due to the introduction of a carbon tax |
| Technology | Energy-saving renovation costs increase for ZEB and ZEH specifications | ||
| Market | Asset values decrease due to delays in ensuring resilience such as measures to address the risk of flooding due to climate change | ||
| Reputation | Decrease in occupancy rate and rent income due to delays in climate change initiatives (disaster prevention measures, etc.) | ||
| Physical risk |
Acute | Decrease in rent income due to flooding and water leakages in buildings | |
| Chronic | Increase in insurance premiums due to increase in natural disasters such as torrential rain, typhoons / floods, landslides and storm surges | ||
| Opportunities | Energy source | Reduction in utility charges by utilizing renewable energy and optimizing electricity use | |
| Market | Increase in occupancy rate and rent income through the management of buildings with high environmental performance | ||
| Resilience | Reduction in natural disaster restoration and repair costs on buildings through the management of buildings with high disaster prevention performance | ||
Step 2 Set climate-related scenarios
The scenarios on climate change referenced to formulate our own climate-related scenarios are outlined below.
| Category | Summary of scenario | Main reference scenarios |
|---|---|---|
| 1.5℃ Scenario |
The scenario that assumes policies and regulations to realize a carbon-free society are implemented and the global warming from preindustrial levels will stay below 1.5℃. While the transition risk is high, the physical risk is low compared to the 4℃ scenario.
|
|
| 4°C scenario |
The scenario that assumes announced goals such as national goals under the Paris Agreement will be achieved.No new policies or regulations will be introduced, and global energy-derived CO2 emissions will continue to increase.
|
|
| Timeline for scenario analysis | Assuming 2035 and 2050 | |
| Scope of assessment | Entire portfolio (excluding land properties) | |
Step 3Evaluate impact on business in each scenario
Step 4Evaluate strategic resilience to climate-related risks and opportunities, and consider additional measures
We revised the scenario analysis in 2026 and assumed the years 2035 and 2050 and analyzed the impact of climate-related risks and opportunities on the business of Daiwa House REIT Investment Corporation (hereinafter referred to as “DHR”).
We have formulated countermeasures in response to the scenario analysis and are increasing resilience.
| Risks/ Opportunities |
Category | Major risks and opportunities | Financial impact on the business (millions of yen)* |
DHR’s countermeasures | |||
|---|---|---|---|---|---|---|---|
| 2035 | 2050 | ||||||
| 1.5℃ | 4℃ | 1.5℃ | 4℃ | ||||
| Transition risk |
Policy and regulation |
Repair and renovation costs increase from the soaring costs of construction materials due to the introduction of a carbon tax | 885 | 10 | 1,353 | 11 |
|
| Indirect costs related to GHG emissions from business activities increase due to the introduction of a carbon tax | 213 | 2 | 326 | 3 |
|
||
| Technology | Energy-saving renovation costs increase for ZEB and ZEH specifications | 223 | 223 | 223 | 223 |
|
|
| Market | Asset values decrease due to delays in ensuring resilience such as measures to address the risk of flooding due to climate change | 1,859～ 10,517 |
3,719～ 21,035 |
1,859～ 10,517 |
3,719～ 21,035 |
|
|
| Reputation | Decrease in occupancy rate and rent income due to delays in climate change initiatives (disaster prevention measures, etc.) | 1,741 | 3,482 | 1,741 | 3,482 | ||
| Physical risk |
Acute | Decrease in rent income due to flooding and water leakages in buildings | 24 | 47 | 24 | 47 | |
| Chronic | Increase in insurance premiums due to increase in natural disasters such as torrential rain, typhoons / floods, landslides and storm surges | 39 | 78 | 92 | 185 | ||
| Opportunities | Energy source | Reduction in utility charges by utilizing renewable energy and optimizing electricity use | 167 | 167 | 265 | 265 |
|
| Market | Increase in occupancy rate and rent income through the management of buildings with high environmental performance | 371 | 371 | 629 | 629 |
|
|
| Resilience | Reduction in natural disaster restoration and repair costs on buildings through the management of buildings with high disaster prevention performance | 223 | 446 | 223 | 446 |
|
|
- The figures shown are the annual amount of impact estimated by the Asset Manager based on the past results and other factors with reference to the parameters general disclosed; therefore, accuracy of the figures are not guaranteed.
Roadmap for Reduction of Emissions and Achievement of Targets Certified by SBTi
DHR has set long-term targets of reducing total GHG emissions by 42% in the fiscal year ending March 2031 compared to the fiscal year ended March 2021 and net zero in the fiscal year ending March 2051 and formulated a roadmap that includes reduction rates by measure to achieve the goals.
- Scope 1: Reduction through controlling fluorocarbon emissions from air conditioning equipment, etc. and switching from gas air conditioning to electric air conditioning
Scope 2: Reduction through switching to renewable energy power plans and utilizing non-fossil certificates, etc. - Consideration of reduction measures related to residual emissions in the future