ESG of JPR

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Firstly I would like to offer my sympathy and condolences to all those affected by COVID-19. I would also like to express my respect and gratitude to healthcare professionals and to essential workers in critical infrastructure, such as energy and logistics, who are working to prevent further spread of COVID-19.

The COVID-19 pandemic is not over yet and continues to put the brakes on social and economic activity. In addition, severe natural disasters caused by climate changes are also occurring more frequently, and sustainability initiatives are becoming more and more important. Aware of the role we play in the social infrastructure, we are focusing all our energies on the health, safety and peace of mind of our tenants and workforce through management of the real estate we own and on actions to mitigate environmental impacts, including reducing GHG emissions and effectively utilizing water resources. Every year the responsibilities and roles we must fulfil keep on growing and we are also aware through our dialogue with various stakeholders of their rising expectations of us. Whilst such societal issues will severely impact our business activities, we see them as a potential business opportunity to create new value for sustainable growth and we position our commitment to sustainability as a top priority in our management strategies.

Last year (2020), JPR and TRIM identified five high priority material issues based on an assessment of their social impact in the future. Among these issues, action on climate change is a particularly important theme and TRIM declared its support for the TCFD recommendations in May 2021, committing to use scenario analysis in the development of business strategy. We will continue actively promoting action on climate change, including conserving energy, using renewable energy, and building resilience.

Meanwhile in social initiatives, as a member of the Tokyo Tatemono Group, TRIM supports the Universal Declaration of Human Rights in the International Bill of Human Rights, international labor standards such as the ILO Declaration on Fundamental Principles and Rights at Work, and the UN Guiding Principles on Business and Human Rights, and has established a Human Rights Policy based on the UN Guiding Principles on Business and Human Rights.

J-REITs, which invest in real estate, operate on the principle of co-existence and co-prosperity with society, and we believe that our sustainability initiatives are essential for our sustainable growth. Based on this awareness, TRIM intends to improve long-term returns of investors and contribute to the realization of a sustainable society and urban development by implementing initiatives that squarely address social issues. We look forward to your continued support and encouragement in the future.

Yoshihiro Jozaki, Executive Officer,
Japan Prime Realty Investment Corporation

Role in Society and Value Creation Process of JPR

Role of JPR in Society

JPR believes that, as a J-REIT, its role in society consists of the following.

  1. Role of returning real estate rental revenues and other earnings to investors
    (Creating an environment in which a wide range of investors can participate in real estate investment and enjoy stable distributions)
  2. Role of supplying funds for long-term stable investment to the real estate investment market
    (Supporting activation and stabilization of the real estate investment market through the integration of real estate and finance and transparent information disclosure)
  3. Role of forming, regenerating and utilizing real estate stock
    (Promoting improvements in real estate stock through buildings with improved earthquake resistance and lower environmental impact and the creation of comfortable, convenient spaces)

Value Creation Process of JPR

JPR will contribute to resolving the changing issues faced by society through the creation of five types of value.

Value Creation Process of JPR

Sustainability Policy

For JPR to grow stably over the medium to long term, it is essential to address such social requirements as considerations for the environment, society and corporate governance. TRIM has established the "Sustainability Policy" as part of its endeavors to enhance sustainability.

Sustainability Policy

Based on its corporate philosophy of working with integrity and commitment to its responsibilities, TRIM has resolved to contribute to the sustainable development of society and the investment management business through discussion and cooperation with its stakeholders (including investors and tenants), while aiming to maximize value for JPR's unitholders.

Initiatives on Behalf of Tenants

We will work with integrity and responsibility in responding to tenants, and endeavor to provide them with new and distinct values as well as enhancing their satisfaction.

Initiatives on Behalf of the Environment

Recognizing the importance of addressing environmental issues, we will aim to reduce he environmental load by managing the assets owned by JPR.

  • We will promote energy saving and the reduction of greenhouse gas emissions.
  • We will endeavor to make effective use of water resources and work on the "3Rs" (reuse, reduce and recycle).
  • We will strive to proactively disclose information on environmental issues.

Initiatives on Behalf of Local Communities

We will work to coordinate with local communities by managing the assets owned by JPR, in an effort to contribute to enhancing the brand value of the area in which such assets are located.

Initiatives on Behalf of Employees

We will respect each of our employees to achieve an employee-friendly workplace, helping them enhance their abilities in their specialties.

Initiatives on Behalf of Society

We will abide by laws and regulations as well as the rules of society, and conduct business operations with a focus on transparency and objectivity while maintaining our high moral standards.

Sustainability Management

In 2018, TRIM established the Sustainability Committee to continuously promote sustainability initiatives systematically.
Chaired by the President and CEO, the overall Sustainability Committee consists of the Sustainability Committee, which comprises managerial personnel of TRIM, and the Secretariat, a subordinate organization of the Committee. The Sustainability Committee meets at least four times a year, in principle. In addition, the Sustainability Committee conducts activities such as setting sustainability targets, monitoring and assessing sustainability activities, and raising awareness among officers and employees, and the details of major activities of the Committee are reported to the Board of Directors of JPR and TRIM.
TRIM established an organization dedicated to sustainability (Sustainability Group), which focuses on running the Sustainability Committee and tackling each material issue.

Sustainability Management

International Initiatives

Signing of the Principles for Responsible Investment (PRI)

The Principles for Responsible Investment (PRI) refers to the six principles (see below for specific descriptions) as well as the international network of investors established to realize those principles. PRI is promoted by the United Nations Environment Programme ("UNEP") and the United Nations Global Compact ("UNGC").
PRI encourages companies to incorporate environmental, social and corporate governance ("ESG") issues into decisions on investments. By incorporating these perspectives into the investment decision-making processes, PRI aims for companies to enhance the long-term performance of their beneficiaries and further fulfill their fiduciary duties.
TRIM became a signatory to PRI in May 2019, in agreement with its fundamental thinking.

  1. We will incorporate ESG issues into investment analysis and decision-making processes.
  2. We will be active owners and incorporate ESG issues into our ownership policies and practices.
  3. We will seek appropriate disclosure on ESG issues by the entities in which we invest.
  4. We will promote acceptance and implementation of the Principles within the investment industry.
  5. We will work together to enhance our effectiveness in implementing the Principles.
  6. We will each report on our activities and progress towards implementing the Principles.

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Acquisition of ranking in GRESB Real Estate Assessment

GRESB is an annual benchmarking assessment to measure ESG (Environmental, Social and Governance) awareness of real estate companies and funds, as well as the name of organization which runs the assessment system. It was founded in 2009 primarily by major European pension fund groups. Of the survey subjects, GRESB Real Estate Assessment covers real estate companies and funds that are mainly engaged in managing existing properties.
In the 2021 GRESB Real Estate Assessment, JPR received a "5 Stars" in GRESB Rating for the third consecutive year, which is based on GRESB Overall Score and its quintile position relative to global participants. With regard to JPR's initiatives on sustainability, its superiority both in the "Management Component" and "Performance Component" dimensions, and designated JPR as "Green Star" for the eighth consecutive year. In addition, JPR received an "A," the highest rating, in GRESB Public Disclosure (Evaluation of ESG Disclosure Level).
The following initiatives taken by JPR were acknowledged in the assessment of the survey:

  • Enhanced management and strategy for sustainability, including establishment of objectives and reinforcement of the implementation system
  • Concrete actions for appropriately understanding ESG risks and improving on ESG issues
  • Strengthened efforts in establishing relationships with tenants and other stakeholders



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Inclusion in MSCI Japan ESG Select Leaders Index

The index is designed to target companies with relatively high Environmental, Social and Governance ("ESG") performance from among the MSCI Japan Investable Market Index (IMI) Top 700 Index. The index has been selected as one of the ESG indices for passive investment by Japan's Government pension Investment Fund (GPIF). The index is reviewed periodically for reconstitution based on MSCI ESG Ratings, market capitalization and other criteria. In a review conducted in May 2021, JPR was newly included in the index in the real estate sector.

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  • The inclusion of JPR in any MSCI index, and the use of MSCI logos, trademarks, service marks or index names in notifications about this matter do not constitute a sponsorship, endorsement or promotion of JPR by MSCI or any of its affiliates. The MSCI indexes are the exclusive property of MSCI. MSCI and the MSCI index names and logos are trademarks or service marks of MSCI or its affiliates.

Materialities and SDGs

JPR and TRIM recognize that the realization of a sustainable society is essential for stable growth in the medium and long runs. TRIM approaches sustainability from the two perspectives of stakeholders' societal demands and business domains and determined materiality (material issues) for enhancing the social value provided through business activities as follows.

Materiality determination process

TRIM determined five material issues as social issues to be solved through business activities. JPR and TRIM will implement sustainability measures to solve these issues and also focus on the enhancement of ESG management.

Steps when considering materiality

Step 1 Consider and identify social issues

TRIM listed up social issues linked to business activities by categories of environment, society and governance, with reference to the SDGs and other international targets, reporting standards such as the GRI Sustainability Reporting Standards and Sustainability Accounting Standards Board (SASB) standards, to broaden its understanding.

Step 2 Assess and prioritize the identified issues

TRIM assessed 16 social issues and measured their importance. In its assessment, TRIM used the two assessment criteria of societal significance (stakeholders' needs) and business relevance (domains which are relevant to current business or have future business potential), and scored issues based on the following six perspectives.

Societal needsBusiness relevance
Comparison with other companies in the same industry Analysis of existing initiatives
Industry analysis Interviews with senior management
Expert reports Workforce interviews

Step 3 Validate

TRIM validated the proposed material issues in light of the material issues of other companies in the same industry, the assessment criteria of ESG rating agencies, and exchanges of views with outside consultants.

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Step 4 Determine materiality

Following approval of the proposed and validated material deliberates by TRIM's Sustainability Committee, TRIM determined the ESG-related material issues which are important for JPR and TRIM and reported these to TRIM's Board of Directors and JPR's Board of Directors.

SDGs is an abbreviation for Sustainable Development Goals and represents the global goals to be achieved by 2030 adopted at the Millennium Summit of the United Nations. The SDGs have set 17 goals in a wide range of areas in light of a variety of social issues in developing and developed countries, and investment corporations and companies are expected to contribute to their achievement.

Sharing the philosophy of the SDGs, JPR and TRIM will contribute to the achievement of the goals through their business activities.

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Materiality and Strategy target of JPR and TRIM (2030)

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Stakeholder Engagement

Major stakeholders of JPR and TRIM are tenants, local communities, employees, unitholders, investors and business partners. TRIM emphasizes stakeholder engagement by which TRIM uses dialogues with stakeholders for its asset management and business management through a variety of day-to-day mechanisms.

StakeholdersThinking of dialogueMethods of dialogue
Tenants Work to improve services and the level of satisfaction by reflecting voices of tenants. ・ Tenant satisfaction survey
・ Collaboration on energy saving and disaster prevention
Local communities Contribute to local communities by working to enhance their value through community activities. ・ Participation of volunteers in cleaning activities
・ Participation in local events and festivals
Employees Make efforts to cultivate professional human resources by working to realize a rewarding workplace where employees can sense their growth. ・ Variety of education and training
・ Award programs
・ Periodic personnel interviews
・ Customer satisfaction surveys
Unitholders and investors Aim to build a long-term relationship of trust with unitholders and investors and acquire appropriate recognition through sincere and fair information disclosure and active communication. ・ General meeting of unitholders
・ Results briefings
・ IR meetings (Japan and overseas)
・ Seminars for individual investors
Business partners such as property managers (PMs) Aim to establish a relationship of trust and achieve mutual development through fair and equitable transactions with business partners. ・ Sharing of Sustainable Procurement
Periodic information sharing
・ Implementation of workshops

Sustainability Finance and Green Finance

JPR established a sustainability finance framework (the “Framework”) based on the Sustainability Bond Guidelines 2021, the Green Bond Principles 2021, the Social Bond Principles 2021, the Green Loan Principles 2021, the Green Bond Guidelines 2020, and the Green Loan and Sustainability Linked Loan Guidelines 2020 in order to implement sustainability finance and green finance (sustainability finance and green finance are collectively the “Sustainability Finance, etc.”).

Use of Procured Proceeds

Use of proceeds

Proceeds from Sustainability Finance, etc. (the “Proceeds”) will be used to fund acquisition of specified assets (Eligible Green Assets (as defined below) for green finance; and Eligible Sustainability Assets (as defined below) for sustainability finance), to fund renovation work (as defined below) of Eligible Green Assets, and to fund refinancing of loans and investment corporation bonds necessary for the acquisition of target specified assets.

Eligible assets

Eligible Green Assets are assets that meet the green eligibility criteria described below. Eligible Sustainability Assets are assets that meet both of “A. Green buildings” of the green eligibility criteria and social eligibility criteria described below (Eligible Green Assets and Eligible Sustainability Assets are collectively the “Eligible Assets.”).

Green eligibility criteria

Green buildings

Assets which have received or will receive certification under either of the following standards.

  1. DBJ Green Building Certification (Note 1): 3 Stars, 4 Stars or 5 Stars
  2. Certification for CASBEE for Real Estate (Note 2): B+ Rank, A Rank or S Rank
  3. BELS Certification (Note 3): 3 Stars, 4 Stars or 5 Stars
  4. LEED Certification (Note 4): Silver, Gold or Platinum

(Note 1) "DBJ Green Building Certification” is a five-star scale evaluation system launched by Development Bank of Japan Inc. (“DBJ”), giving certifications to properties with proper care for the environment and society (Green Building), based on the comprehensive scoring model developed by DBJ.
(Note 2) CASBEE (Comprehensive Assessment System for Built Environment Efficiency) is a system for comprehensively assessing and ranking buildings based on their environmental performance with regard to aspects such as the enhancement of environmental quality and performance including indoor comfort and consideration for the landscape, on top of the aspect of environmental consideration such as energy saving and the use of materials and equipment with a lower environmental burden.
(Note 3) BELS (Building-Housing Energy-efficiency Labeling System) is a public evaluation system of which evaluation criteria have been set by the Ministry of Land, Infrastructure, Transport and Tourism. It evaluates and ranks energy-saving performance of buildings based on their primary energy consumption on a five-star scale.
(Note 4) LEED (Leadership in Energy and Environmental Design) is a certification system developed and operated by U.S. Green Building Council (USGBC) to evaluate environmental performance of buildings and cities. Based on the number of points achieved, a project earns one of four LEED rating levels: Certified, Silver, Gold or Platinum.

Renovation work

Renovation work which meets either of the following standards and was completed within three years prior to the execution date of Sustainability Finance, etc. or to be completed in the future.

  1. Reduction of CO2 emissions or energy consumption by over 30%
  2. Reduction of water consumption by over 30%
  3. New acquisition of either of the certifications specified in “A. Green buildings” above or improvement by one grade or more of acquired such certification

Social eligibility criteria

Among the functions that contribute to solving either of the following social issues, assets with functions that satisfy a certain level or higher in two or more issues.

  1. Community disaster prevention
  2. Medical services
  3. Child care support
  4. Facilities to support startups
  5. Barrier-free facilities

Management of the Proceeds

Management of balance of Sustainability Finance, etc.

The amount of liabilities calculated by multiplying the total acquisition price of Eligible Sustainability Assets by the ratio of interest-bearing liabilities to total assets (as of the end of December each year) (the “Eligible Sustainability Liabilities”) will be set as the maximum amount of Sustainability Finance.
The amount of liabilities calculated by multiplying the total acquisition price of green buildings among the Eligible Green Assets by the ratio of interest-bearing liabilities to total assets (as of the end of December each year) (the “Eligible Green Liabilities”) will be set as the maximum amount of Green Finance. The acquisition prices of Eligible Green Assets that are also Eligible Sustainability Assets will be deducted from the total acquisition price of green buildings and be excluded from the calculation of Eligible Green Liabilities.

Reporting

Reporting on the status of appropriation of funds

JPR will, as long as the Proceeds are outstanding, disclose on its website the status of appropriation of the Proceeds and that the balance of the Proceeds does not exceed Eligible Sustainability Liabilities and Eligible Green Liabilities, as of the end of December each year.

Reporting on positive environmental impacts

JPR will, as long as the Proceeds are outstanding, disclose on its website the following items as of the end of December each year.

  1. Number of properties classed as Eligible Assets
  2. The levels of third-party certifications acquired by each Eligible Green Asset
  3. The total amount of floor area of Eligible Assets
  4. Energy consumption*
  5. CO2 emissions*
  6. Water consumption*
  7. Positive impact of renovation work

*As to indicators 4 to 6, JPR will announce annual aggregate figures for the Eligible Green Assets. In the case of certain properties, JPR will disclose information to the extent that JPR has energy control authority.

Reporting on social benefits

JPR will, as long as the Proceeds are outstanding, disclose on its website the following items as of the end of December each year.

Output indicatorsOverview of subject properties and facilities
Outcome

①Community disaster prevention

  • Acceptable number of people unable to return home
  • Amount of emergency stockpile

②Medical services

  • Contents of available medical services

③Child care support

  • Contents of available services

④Facilities to support startups

  • Contents of available services

⑤Barrier-free facilities

  • Contents of available services
Impact Initiative on collaboration with local communities through assets JPR owns; and contribution to enhancing the brand value of the entire area

Reporting in the event of a change in the status

In the event that unappropriated funds arise due to a material ex-post change in the initial appropriation status of the Proceeds, JPR will disclose such on its website.

Status of Finance

Outstanding Balance of Green Bonds Issued

As of December 31, 2020 11,000 million yen

Twenty Forth Series of Unsecured Investment Corporation Bonds
Issue Amount (million yen) 5,000
Issue Date July 31, 2019
Maturity Date July 31, 2029
Coupon Rate 0.570%
Remarks Unsecured/Unguaranteed
Use of proceeds ・ The acquisition on May 31, 2010 JPR Sendagaya Bldg. (2 billion yen)
・ The acquisition on August 8, 2012 Yakuin Business Garden (3 billion yen)
Twenty Fifth Series of Unsecured Investment Corporation Bonds
Issue Amount (million yen) 6,000
Issue Date November 26, 2020
Maturity Date November 26, 2030
Coupon Rate 0.510%
Remarks Unsecured/Unguaranteed
Use of proceeds ・ The acquisition on May 31, 2010 JPR Sendagaya Bldg. (6 billion yen)

Eligible Assets (as of the end of December 2020)

PropertyAcquisition Price
(JPY million)
DBJ Green Building CertificationCASBEE
Olinas Tower 31,300 ★★★★★
Tokyo Square Garden 18,400 ★★★★★
Shinjuku Center Bldg. 21,000 ★★★★
JPR Sendagaya Bldg. 15,050 ★★★★
Oval Court Ohsaki Mark West 3,500 ★★★★
Omiya Prime East 6,090 ★★★
Rise Arena Bldg. 5,831 ★★★
Yume-ooka Office Tower 6,510 ★★★
Kanematsu Bldg. 16,276 ★★★
BYGS Shinjuku Bldg. 15,121 ★★★
Shinagawa Canal Bldg. 2,041 ★★★
Kawasaki Dice Bldg. 15,080 ★★★
JPR Kojimachi Bldg. 5,750

S

JPR Musashikosugi Bldg. 7,254 S
Musashiurawa Shopping Square 4,335 S
FUNDES Ueno 3,800 S
Sompo Japan Sendai Bldg. 3,150 S
JPR Umeda Loft Bldg. 13,000 S
Housing Design Center Kobe 7,220 S
JPR Nihonbashi-horidome Building 5,100 A
JPR Shibuya Tower Records Bldg. 12,000 A
JPR Chiba Bldg. 2,350 A
JPR Yokohama Nihon Odori Bldg. 2,927 A
Kawaguchi Center Bldg. 8,100 A
JPR Ueno East Bldg. 3,250 A
JPR Nagoya Fushimi Bldg. 4,137 A
Yakuin Business Garden 10,996 A
JPR Yokohama Bldg. 7,000 B
Total 256,568

Number of Eligible Green Assets (properties) 28
Total Acquisition Price of Eligible Green Assets (JPY million) 256,568
LTV (%) 40.6
Eligible Green Asset liabilities (JPY million) 88,172
Total amount of floor area of Eligible Assets (㎡) 453,472
  • The numbers of above are as of December 31, 2020.
Total Energy Consumption of Eligible Assets (2020, MWh) 73,417
Total CO2 Emissions of Eligible Assets (2020, t) 28,320
Total Water consumption of Eligible Assets (2020, ㎥) 283,517
  • Total energy consumption of eligible assets and total CO2 emissions of eligible assets, total water consumption of eligible assets are as of December 31, 2020.

Third-party assessment

JPR has obtained SU1(F) rating, the highest in the “JCR Sustainability Finance Framework Evaluation” from Japan Credit Rating Agency, Ltd. (JCR), as a third-party evaluation for the Framework.
Please click on the link below for further details. https://www.jcr.co.jp/en