SANKEI REAL ESTATE intends to conduct management that takes into consideration environment, social and governance (ESG) together with the Asset Management Company for the purpose of social sustainability and enhancement of unitholder value over the medium to long term.

Sustainability Policy

The Asset Management Company, in the course of asset management business of SANKEI REAL ESTATE, has established the Sustainability Policy in its Asset Management Guidelines for the purpose of enhancing sustainability initiatives with the belief that sustainability of ESG (environmental, social and governance) considerations will be essential for improvement of the medium- to long-term competitiveness of SANKEI REAL ESTATE and the sustained growth of unitholder value.

Sustainability Policy

• Preserving the Earth environment and reducing the environmental load of assets under management
  We will aim for the preservation of the Earth environment by promoting resource conservation, energy saving, water saving, effective use of water resources, waste reduction, recycling and other efforts at our assets under management for contribution towards a sustainable society and coexistence with nature. Moreover, specific initiatives will be stipulated for achieving environmental targets in greenhouse gas emissions, water consumption, waste output and such at our assets under management in an effort to reduce the environmental load.
• Serving the local community
  We will endeavor to serve the local community and establish good relations in the surrounding area through our assets under management.
• Cooperating with external stakeholders
  We will aim to establish good relations with the tenants, property management companies and master lease companies of our assets under management as well as other outside stakeholders and aim to put the sustainability policy into practice through collaboration and cooperation.
• Working with executives and employees
  We will implement continuous education and awareness-raising activities concerning ESG to deepen the understanding of executives and employees with regard to ESG considerations and increase their abilities. Moreover, we will establish an environment where each executive and employee can exert their ability to the fullest by creating a healthy, safe and comfortable work environment, nurturing human resources and initiating work-life balance.
• Observing compliance and establishing/maintaining an internal control system
  We will observe ESG-related laws and regulations as well as compliance and endeavor to further strengthen the internal control system to ensure fair transactions, appropriate management of information and prevention of conflicts of interest in an aim to meet the expectations of all stakeholders.
• Disclosing ESG information and securing transparency
  We will endeavor to disclose information regarding ESG in a timely and appropriate manner and secure transparency by utilizing outside evaluations such as with the acquisition of environmental certifications and utilization of international standards.

Climate Change Initiatives

Governance

• The Asset Management Company has established the “Sustainability Promotion System Rules” and has put in place an internal system to promote sustainability. Emphasizing collaboration with internal and external stakeholders, we work to understand the results and status of sustainability initiatives for assets under management and make an effort to disclose information to stakeholders as well as communicate appropriately with unitholders and other stakeholders.
• The Executive Deputy President is appointed as the chief executive officer for sustainability, including climate-related issues of the Asset Management Company, and the Sustainability Promotion Committee is comprised of key members involved in the execution of the Asset Management Company, including the President and Chief Executive Officer.
• The Sustainability Promotion Committee deliberates and resolves on the development of systems necessary for the promotion of sustainability, including climate-related issues, and the formulation of various policies, targets, and measures, and oversees the implementation of these policies and measures.

Strategy

Referenced external scenarios

For the assets owned by SANKEI REAL ESTATE, a scenario analysis was performed with reference to the following scenarios developed by the International Energy Agency (IEA) and Intergovernmental Panel on Climate Change (IPCC).

	Transition risks	Physical risks
1.5°C scenario	IEA NZE2050	IPCC RCP2.6
4°C scenario	IEA STEPS	IPCC RCP8.5

Identification of risks and opportunities

Based on the scenario analysis, SANKEI REAL ESTATE has identified risks and opportunities and evaluated their impact on the business as follows.

Category	Type	Risk and opportunity factors in management	Financial risks	Financial impact		Time when risks maximize
				4°C scenario	1.5°C scenario
Transition risks	Policy and Legal	Strengthened taxation on GHG emissions due to the introduction of an environmental tax (carbon tax)	Increased tax burden on GHG emissions from properties	Low	Medium	Medium term
		More stringent energy-saving standards and mandating energy conservation for existing real estate	Increased burden of renovation costs to comply with standards, and penalties might arise in some cases	Medium	Medium	Medium term
		Full-scale introduction and tightening of emissions trading schemes	Increased costs to respond to GHG quotas	Low	High	Medium term
	Markets	Raised awareness of tenants of the need to become environment-oriented	Increased occurrence of vacancies and longer vacancy periods due to difficulty in acquiring new tenants and lower tenant retention	Medium	High	Short term
Physical risks	Acute	Inundation due to internal flooding and river overflows caused by torrential rains	Higher repair expenses and insurance premiums, decrease in occupancy rate, etc.	Low	Low	Short term
	Chronic	Excessive operation of air conditioners due to higher average temperatures and more extreme phenomena such as extremely hot or extremely cold days	Increased load on existing HVAC equipment for air conditioning, long hours of operation, and rise in maintenance and repair expenses Upgrading of equipment may be required in certain cases	Low	Low	Medium term
Opportunities	Energy Sources	Evolution of energy-saving technology	Reduction of utility expenses for power procured from external sources Enhanced competitiveness resulting from lower operating costs Increase in real estate value with improved cash flow	Medium	High	Medium term
	Resilience	Advancement of resilience of real estate	Reduced losses caused by disasters and less damage to tenants in the event of a disaster	Low	Low	Long term

Specific initiatives to address risks and opportunities

SANKEI REAL ESTATE will promote the following initiatives in response to the above risks and opportunities.

• Promote energy conservation
  • Upgrade to energy-saving equipment; purchase energy conservation-oriented properties
  • Implement energy conservation activities in collaboration with tenants; adopt green lease contracts
  • Obtain environmental certifications
• Introduce renewable energy
  • Change the electricity service contract to adopt renewable energy
  • Install solar power generation, etc. (including purchase of property with equipment already installed)
• Other
  • Identify risks using hazard maps, etc.
  • Implement BCP measures such as disaster prevention stockpiling

Risk management

SANKEI REAL ESTATE and the Asset Management Company implement the following processes to manage climate change-related risks.

• Process for identifying risks and opportunities
  • Significant risks and opportunities related to climate change issues are discussed at the Sustainability Promotion Committee meetings.
• Process for managing risks
  • The Executive Deputy President is the chief executive officer for climate change-related issues, and designates the departments or persons in charge of responding to the risks identified by the Sustainability Promotion Committee and instructs the formulation of countermeasure proposals for the risks.
  • The proposed measures will be discussed and implemented by the Sustainability Promotion Committee, the Investment Committee, or other appropriate internal committees, depending on the nature of the proposed measures.
• Integration into the overall management program
  • Climate change-related risks are integrated into existing company-wide risk management programs.

Indicators and targets

SANKEI REAL ESTATE has established key performance indicators (KPIs) and targets to manage and monitor risks and opportunities. The indicators and targets set are as follows.

Indicator	Targets
Greenhouse gas (GHG) emissions	(i) Interim target: 30% reduction by 2030 (intensity basis) (2019 as the base year) (ii) Long-term target: Achieve net zero emissions by 2050

Performance Track Record

		Unit	FY 2019 (base year)	FY 2020	FY 2021	FY 2022	FY 2023	FY 2024	FY 2025	Rate of change (intensity)
Total floor area		㎡	69,296.91	86,469.81	124,916.21	132,596.45	142,825.68	124,139.27	122,489.37	-
Energy	Data coverage	%	100.0	100.0	100.0	100.0	100.0	100.0	100.0
	Consumption	MWh	16,722	17,338	22,455	24,313	21,546	15,822	12,142
	Consumption intensity	kWh/㎡	418.9	362.2	380.3	386.0	408.1	310.3	279.3	▲33.3%
GHG	Data coverage	%	100.0	100.0	100.0	100.0	100.0	100.0	100.0	-
	Scope1	tCO2eq	458.9	579.5	569.4	527.0	614.7	248.6	228.1
	Scope2	tCO2eq	2,178.7	2,192.5	2,537.1	2,587.2	1,657.3	1,090.4	429.9
	Scope3	tCO2eq	3,336.6	3,356.7	4,847.3	5,252.6	4,679.1	7,212.5	4,326.8
	Emission	tCO2eq	5,974.1	6,128.7	7,953.8	8,366.8	6,951.1	8,551.5	4,984.8
	Emission intensity	kgCO2eq/㎡	139.7	123.0	119.1	114.7	102.6	110.3	68.2	▲51.2%
Water	Data coverage	%	100.0	100.0	100.0	100.0	100.0	100.0	100.0	-
	Consumption	㎥	66,451	54,868	76,637	86,624	83,791	162,155	158,996
	Consumption intensity	㎥/㎡	1.0	0.8	0.7	0.7	0.7	1.4	1.5	+48.3%
Waste	Data coverage	%	100.0	100.0	100.0	100.0	100.0	100.0	100.0	-
	Emission	t	425	340	412	491	492	588	575
	Emission intensity	kg/㎡	6.5	4.7	3.6	4.1	4.1	5.2	5.4	▲16.2%

• The data coverage indicates the ratio of total floor area of ​​owned properties during the target period to the total floor area of ​​properties for which data is available.
• Energy consumption is the total value for “owner-managed areas (common areas)”, “owner-managed areas (private areas)”, and “tenant-managed areas”.
• GHG emissions are calculated by the asset management company using the emission coefficients by electric utility (adjusted emission coefficients) in the Ministry of the Environment’s “greenhouse gas emissions accounting, reporting, and disclosure system”. Scope 2 and scope 3 GHG emissions are calculated based on market standards.
• The figures may change due to changes in the calculation method, etc.
• No annual adjustments have been made for properties acquired or transferred during the fiscal year.

Environment

As part of our efforts to be considerate of the environment and to coexist with the environment, we have obtained and are operating environmental certifications for our properties.

DBJ Green Building Certification Program

BELS evaluation

Social

SANKEI REAL ESTATE puts forth efforts to contribute to local communities and build amicable relationships with the surrounding areas.

Contribution to local communities (Introduction of share service for electric micromobility)

SANKEI REAL ESTATE promotes introduction of share service for electric micromobility to contribute to the realization of a carbon-neutral society, while striving to improve convenience for tenants and increase property value.

Governance

Aim for enhancement of unitholder value over the medium to long term by creating a management structure that contributes to unitholder interest.

Asset management fee system

Decision-making flow for transactions with interested parties (property purchases and sales)

In the case of property transactions with an interested party, Sankei Building Asset Management makes it a rule to obtain approval from its compliance committee, which has an external member, and its investment committee, as well as approval from SANKEI REAL ESTATE’s board of directors (when necessary.)