Governance Related to Climate Change

The Asset Manager has established the Climate Change and Resilience Policy, the policy for responding to risks and opportunities related to climate change and working to make business and strategy resilient to climate-related issues.
In accordance with the policy, Chief Climate-Related Issues Officers (general managers of departments engaged in sustainability promotion) make regular reports to the Chief Executive Officer for Climate-Related Issues (President and Representative Director) at Sustainability Promotion Committee meetings. The reports cover matters related to responses to climate change, including identification and evaluation of impacts of climate change, management of risks and opportunities, progress of initiatives for adaptation and mitigation, and indicator and target setting. The Sustainability Promotion Committee deliberates and discusses issues related to climate change, after which the Chief Executive Officer for Climate-Related Issues makes final decisions. Under this system, climate-related issues are supervised by the President and Representative Director.

Policy Regarding Sustainability and Sustainability Promotion System

Strategy Target of Analysis and prerequisites

To factor climate-related risks and opportunities into the Investment Corporation’s real estate management business, the Asset Manager conducted a scenario analysis of the Investment Corporation’s portfolio. The Asset Manager referred to climate outlooks published by international organizations and other entities, in order to identify risks and opportunities of climate change brought to the Investment Corporation and assess financial impacts on the Investment Corporation's business. Using a 1.5°C/2°C scenario and a 4°C scenario, a qualitative analysis was conducted as described below.

Target of Analysis and Prerequisites

Target: All properties owned by the Investment Corporation
Scope: Overall real estate investment and management business
Target period: from 2025 to 2050, with medium-term and long-term timeframes
(Medium term: 2025-2030, Long term:2031-2050)

Analysis Procedure

① In accordance with the TCFD framework, the Asset Manager discussed climate-related risks and opportunities and identified factors that may have a significant impact on the Investment Corporation’s business domain.

② Concerning the risks and opportunities identified in (1), the Asset Manager summarized and grasped what the world would look like under the 1.5°C/2°C and 4°C scenarios, based on the parameters (forecasts) of the adopted scenarios.

③ Based on the forecasts in (2), the Asset Manager conducted a qualitative analysis for the Investment Corporation, calculated financial impacts in the scenario analysis, and worked out countermeasures.

Key Scenarios Adopted in the Analysis

	1.5/2℃ scenario	4℃ scenario
Transition Risks	IEA World Energy Outlook2024 NZE	IEA World Energy Outlook2024 STEPS
Physical Risks	IPCC Fifth Assessment Report RCP4.5	IPCC Fifth Assessment Report RCP8.5

Expected Future in Each Scenario

4°C Scenario
The 4°C scenario forecasts a future where greenhouse gas emissions are on an increasing trend due to insufficient climate change mitigation, without new regulations, taxation, or other measures to achieve a carbon-neutral society. The scenario involves high relative physical risks from climate disasters and low transition risks.

Government	Tenants	Investors	Financial Institutions	Climate/Weather
Stricter legal regulations related to resilience	Increased needs for measures against storm and flood damage, heatstroke, etc.	Higher importance of physical risk assessment in making investment decisions	Increased needs for physical risk assessment in making lending decisions	Severer storm and flood damage and increased natural disasters due to rising temperatures, etc.

1.5℃/2℃ Scenario
The 1.5°C/2°C scenario forecasts a future where greenhouse gas emissions are on a decreasing trend, with the advancement of social policy, emission regulations, technology investment, and other measures to achieve a carbon-neutral society. The scenario involves low relative physical risks from climate disasters and high transition risks.

Government	Tenants	Investors	Financial Institutions	Climate/Weather
Stricter regulations against GHG emissions due to an introduction of carbon tax	Increased needs for environmental performance	Increased needs for the assessment of compliance with environmental regulations and environmental certifications in making investment decisions	Increased needs for the assessment of compliance with environmental regulations and environmental certifications in making lending decisions	A certain degree of advancement of chronic climate change, such as increased storm and flood damage

Financial Impacts in the Scenario Analysis

For each scenario, the Asset Manager classified the financial impacts of identified risks and opportunities into short-term, medium-term and long-term impacts and examined relative scales of impacts on the Investment Corporation. Shown below are medium-term and long-term risks from climate change that have a certain degree of financial impacts.

• Transition risks: Policy and legal risks, technology risk, market risk, and reputation risk
• Acute physical risks: Event-driven climate risks, including typhoons and floods
• Chronic physical risks: Climate risks caused by long-term shifts in climate patterns, including sustained higher temperatures and sea level rise

Category		Risk and Opportunity Drivers in Real Estate Operations	Potential Financial Impacts	Type	Financial Impact				Response Measures
					4℃		1.5℃/2℃
					Medium term	Long term	Medium term	Long term
Transition Risks and Opportunities	Policy / Regulation	Stricter GHG Emissions Regulations through the Introduction of Carbon Taxation	Increased tax burden in proportion to GHG emissions from properties following the introduction of carbon taxation	Risk	Low	Low	Medium	High	Introduction of energy management systems and renewable energy solutions Planned reduction of energy consumption and GHG emissions across the portfolio Improvement of GHG emissions through strategic asset replacement and property renovations Installation of energy-saving and water-saving equipment
		Mandatory Compliance with Energy Efficiency Standards	Additional costs to comply with energy efficiency standards may increase property acquisition prices and renovation costs.	Risk	Low	Low	High	High
		Higher Occupancy Rates and Unit Rents for Properties with Strong Environmental Performance	Increased rental income from owning properties with strong environmental performance	Opportunity	Low	Low	Medium	Medium
		Reduction in Utility Costs through Improved Environmental Performance	Reduction of utility costs through improved energy efficiency	Opportunity	Low	Low	Low	Low
	Technology	Advancement and Wider Adoption of Energy-Saving and Renewable Energy Technologies	Increased renovation costs associated with the introduction of new technologies Increased costs associated with ZEB renovations	Risk	Low	Low	High	High	Introduction of advanced technologies Implementation of planned renovation works Implementation of ZEB renovations and energy-saving renovations
			Advancement and wider adoption of energy-saving and renewable energy technologies may reduce installation and maintenance costs for properties.	Opportunity	Low	Low	High	High
	Market / Reputation	Changes in the Investment and Lending Stance of Investors and Lenders	Lower evaluations by investors and financial institutions due to delays in environmental responses, including disclosure, mitigation and adaptation measures Increased financing costs due to lower investment unit prices, downgraded ESG ratings and divestment	Risk	Low	Low	Medium	Medium	Sufficient disclosure of the environmental performance of portfolio properties Appropriate disclosure of ESG-related information, including climate change Investigation and analysis of natural disaster risks, and implementation of countermeasures Proactive use of green finance
			Improved evaluations by investors and financial institutions through proactive disclosure and responses Reduced financing costs through the use of green finance	Opportunity	Low	Low	Low	Medium
		Changes in Tenant Needs for Environmental Performance	Decrease in rental income for properties with relatively low environmental performance or without environmental certifications Decline in brand value and investment unit prices due to delays in environmental responses	Risk	Low	Low	Medium	Medium	Improvement in the ratio of properties with environmental certifications Improvement in ESG evaluations by external organizations Implementation of energy-saving measures in collaboration with tenants through green leases and other initiatives Reduction of running costs through installation of energy-saving and water-saving equipment
			Increase in rental income from properties with strong environmental performance or environmental certifications Enhancement of brand value and increase in investment unit prices by taking the lead in environmental responses	Opportunity	Low	Low	Low	Low
Physical Risks	Acute	Increased Damage from More Severe Storm and Flood Events	Increase in repair costs and insurance premiums Decrease in rental income due to lower occupancy rates Increase in renovation costs to prevent flooding and prepare for property damage and destruction Increase in electricity consumption due to higher cooling demand caused by more frequent extreme heat days	Risk	Low	Medium	Low	Medium	Implementation of risk assessments using hazard maps and other resources Ownership of highly resilient properties and properties located in areas less susceptible to flood damage Enhancement of BCP preparedness Promotion of greening at portfolio properties
	Chronic	Increased Damage Due to Rising Average Temperatures and Sea Level Rise		Risk	Low	Low	Low	Low

• GHG refers to Green House Gas.

Risk Management

The Investment Corporation’s Climate Change and Resilience Policy sets out processes to identify, assess, and manage the impacts of climate change risks and opportunities on the corporation’s management activities, strategies, financial plans, etc.

• Chief Climate-Related Issues Officers summarize climate-related risks and opportunities and report the progress to the Sustainability Promotion Committee, in principle, once a year.
• The Sustainability Promotion Committee continuously identifies, assesses, and manages climate change risks and opportunities that are important to the business and financial plans and affect the asset management operations of the Investment Corporation. Based on the above reports, the committee prioritizes issues of strategic importance to the business.
• The Chief Executive Officer for Climate-Related Issues instructs to factor important climate-related risks with high priority, which have been deliberated by the Sustainability Promotion Committee, into the existing company-wide risk management program. The risk identification, assessment, and management processes are thus integrated.

Indicators and Targets

The Investment Corporation views the transition to a decarbonized society as an opportunity and has established the following as key monitoring indicators (KPI) in the process of managing climate change risks and opportunities.

Improvement of Environmental Performance

Target (KPI)
Reduction of CO2 emissions	Mid-term target (FY2030) : Reduction of 20% in CO2 emissions on an intensity basis across the portfolio by FY2030 (compared with FY2022)
	Long-term target (FY2050) : Achieved carbon neutrality in CO2 emissions on an intensity basis across the portfolio by FY 2050
Percentage of environmental certifications acquired	Mid-term target (FY2030) : Achieve an environmental certification ratio of at least 30% for the entire portfolio

Environmental Targets and Performance

The Investment Corporation is striving to improve environmental performance by establishing environmental targets for the reduction of energy consumption, CO2 emissions, and water consumption across the entire portfolio and monitoring its performance with respect to achieving them.

Environmental Targets

Item		target
Energy	Consumption intensity	8% reduction by FY2030 (compared to FY2022)
CO2		20% reduction by FY2030 (compared to FY2022)
Water		Maintenance of the status quo

• The above reduction target uses fiscal year 2022 as the base year and covers up to fiscal year 2030.

Performance

In conjunction with the medium- to long-term targets formulated for its ESG initiatives, the Investment Corporation is working to keep track of energy consumption, CO2 emissions, water consumption.
The reduction targets and actual results of energy consumption, CO2 emission and water consumption for the residence (common area and part of the exclusive area) are as follows.

Overall DLI

Item	Unit	Actual reduction
		FY2022 【base year】	FY2024	FY2025	Rate of change
Energy	Consumption (MWh)	57,467	56,862	48,425	-15.7%
		Consumption intensity (MWh/㎡)	0.198	0.185	0.178	-10.2%
CO2	Emission (t-CO2)	20,983	22,312	16,146	-23.1%
		Emission intensity (t-CO2/㎡)	0.071	0.071	0.059	-16.9%
Water	Output (㎥)	681,595	684,473	582,813	-14.5%
		Consumption intensity (㎥/㎡)	2.01	1.90	1.84	-8.7%

• With respect to energy consumption intensity (MWh/m²), errors were identified in the previously disclosed figures for FY2022 through FY2024; accordingly, the corrected figures are presented.

Rental housing

Item	Unit	Actual reduction
		FY2022 【base year】	FY2024	FY2025
Energy	Consumption (MWh)	8,687	8,666	8,482
	Consumption intensity (MWh/m²)	0.172	0.160	0.093
CO2	Emission (t-CO2)	3,611	3,670	3,443
	Emission intensity (t-CO2/m²)	0.045	0.043	0.038
Water	Consumption (m³)	194,337	170,658	148,723
	Consumption intensity (m³/m²)	1.57	1.27	1.12

• Actual values ​​for "rented housing" among the managed assets are listed (energy consumption and CO2 emissions are actual values ​​for common areas only, and water consumption includes 9.5% of the exclusive area (as of the end of March 2025) and actual values ​​for common areas).
• Properties that were bought and sold in each target fiscal year are excluded from the calculations for that year.
• CO2 emissions are calculated by the asset management company based on adjusted emission factors for each electric power supplier published by the Ministry of the Environment.
• Sompo Risk Management Inc. is conducting third-party verification of each environmental performance data (energy consumption, water consumption) for rental housing properties from fiscal 2023 onwards.

Healthcare

Item	Unit	Actual reduction
		FY2022 【base year】	FY2024	FY2025
Energy	Consumption (MWh)	48,780	48,196	39,943
	Consumption intensity (MWh/m²)	0.232	0.218	0.220
CO2	Emission (t-CO2)	17,372	18,642	12,702
	Emission intensity (t-CO2/m²)	0.081	0.082	0.070
Water	Consumption (m³)	487,258	513,815	434,090
	Consumption intensity (m³/m²)	2.26	2.27	2.35

• Actual values ​​for "Healthcare" are listed among the managed assets (51 properties are covered, where at least one of energy consumption/CO2 emissions/water is measurable).
• Properties that were bought and sold in each target fiscal year are excluded from the calculations for that year.
• CO2 emissions are calculated by the asset management company based on adjusted emission factors for each electric power supplier published by the Ministry of the Environment.
• Each environmental performance data for fiscal 2023 (energy consumption, water consumption) has undergone third-party verification by Sompo Risk Management Inc.

Construction of Environmental Management System

In order to pursue energy-saving, CO2 emissions reduction, and efficient use of water resources, the Investment Corporation has established an environmental management system. Focusing on energy consumption, CO2 emissions, and water usage, it sets targets, tracks performance,
manages budgets, and executes countermeasures (PDCA cycle), contributing to the realization of a sustainable society through the reduction of its environmental footprint.

Implementing Eco-Friendly Initiatives via Real Estate Investment

Eco-Friendly Initiatives with Stakeholders