Environmental Considerations

Ⅳ. Environmental Considerations

A. Environmentally Conscious Asset Management

Through the renewal of facilities in investment properties and collaboration with business companies that have business relationships with ADR, we are progressively implementing energy-saving, water-saving, and other environmentally friendly initiatives in all properties we own.

a. Extending the lifespan of properties through large-scale repairs and value-enhancement renovations

b. Installing LED lighting
As of January 2023, LED lighting is installed in 122 properties (44.0% of portfolio).

c. Installing water-saving toilets
As of January 2023, water-saving toilets are installed in 546 tenants (2.4% of portfolio).

d. Installing heat shielding paint roofing

e. Encouraging tenants to conserve energy usage through posters on common area billboards and periodical “RESIDIA News” and sending of sustainability guides

f. Including a criterion concerning initiatives taken on environment in selecting a property manager.

g.Working together with building managers towards shared goals on environmental concerns.

h.Introducing car sharing in parking lots of properties
As of January 2023, 3 properties (1% of portfolio) have parking lots for car sharing.

h.Other Initiatives
ADR takes other environmentally friendly measures such as placing green open spaces on its property sites to alleviate heat island effect, paving the property grounds with interlocking paving blocks to lessen inner-city flooding and land subsidence.

1. Extending the Economic Life of Building Structures through Large-scale Repairs and Value Enhancement Renovations

ADR aims to raise unitholders’ value while contributing to the environment (e.g. reducing life cycle CO2 emissions) by extending the economic life and maintaining the value of building structures through large-scale repairs and value enhancement renovations.

2. Environmental Targets and Results (energy consumption, CO2 emissions, water usage and waste volume)

Establishing Policies

IRM has established policies on “Environmental performance data management standards” to improve energy efficiency of ADR’s properties and making effort to reduce the properties’ energy consumption and greenhouse gas emission.

Environmental Targets

For the entire portfolio, we aim to reduce energy consumption by 20% (intensity) and greenhouse gas emissions by 51% (total amount) for SCOPE 1 and 2 by FY2030, and achieve net zero emissions in FY2050 (compared to FY2018).

In May 2022, we procured FIT (Fuel-in-Transit) Certificates and converted 100% of the electricity used in common areas of the property to renewable energy in fiscal year 2021. As a result, we have reduced approximately 99% of Scope 2 greenhouse gas (CO2) emissions.

≪What is a FIT (non-fossil fuel certificate)?≫
FIT: Feed-in Tariff for renewable energy
Non-fossil Certificate...Certificates are issued for electricity generated from "non-fossil power sources (methods of electricity production)" that do not use fossil fuels such as oil and coal.

And ADR has installed electric energy measurement systems in 52 properties (18.8% of the portfolio) as of the end of January 2023, in order to improve the actual coverage rate of electricity consumption in our properties. By installing this system, it will be possible to measure the electricity consumption of the exclusive part. ADR encourages tenants to conserve usage through various enlightenment measures.

For tenants, IRM are implementing various enlightenment measures related to energy conservation.

Items	Targets by FY2030 (vs. FY2018)	Targets by FY2050
Energy Consumption	20% reduction (intensity)	－
GHG Emission (CO2)	Scope 1 & 2: 51% reduction (total) Scope 3: Identification of corresponding categories 　　　　and scope determination and calculation	Net zero
Water Usage	Do not increase (common areas)	－
Waste Volume	Recycling rate 65% (emissions related to construction of exclusive use areas)	－

Energy Consumption

		FY2018	FY2019		FY2020		FY2021
		FY2018		% Change		% Change		Coverage	% Change	% Change （vs FY2018）
Total	Total Usage (MWh)	15,842	15,624	0.0%	15,445	-3.5%	15.376	100.0%	0.0%	-4.5%
Total	Intensity (MWh/㎡)	0.086	0.086	0.0%	0.083	-3.5%	0.083	100.0%	0.0%	-4.5%
Electricity	Total Usage (MWh)	14,300	13,951	-1.3%	13,887	-2.6%	15,887	100.0%	-2.7%	-5.9%
Electricity	Intensity (MWh/㎡)	0.078	0.077	-1.3%	0.075	-2.6%	0.075	100.0%	-2.7%	-5.9%
Fuel	Total Usage (MWh)	1,247	1,364	6.8%	1,263	-33.3%	1,192	100.0%	-20.8%	2.3%
Fuel	Intensity (MWh/㎡)	0.059	0.063	6.8%	0.042	-33.3%	0.077	100.0%	-20.8%	2.3%
Ditrict Heaing andCooling	Total Usage (MWh)	294	308	5.0%	294	-4.8%	390	100.0%	35.0%	32.6%
Ditrict Heaing andCooling	Intensity (MWh/㎡)	0.020	0.021	5.0%	0.020	-4.8%	0.020	100.0%	35.0%	32.6%

GHG Emission(CO₂)

		FY2018	FY2019		FY2020		FY2021
		FY2018		% Change		% Change		Coverage	% Change	% Change （vs FY2018）
Total (scope1+2)	Total Usage (t)	7,781	8,143	4.7%	7,071	-13.2%	310	100.0%	-95.6%	-96.0%
Total (scope1+2)	Intensity (t/㎡)	0.042	0.045	4.7%	0.038	-13.2%	0.001	100.0%	-95.6%	-96.0%
Direct Emission Scope1	Total Usage (t)	218	239	9.6%	221	-7.5%	230	100.0%	10.0%	5.5%
Direct Emission Scope1	Intensity (t/㎡)	0.010	0.011	9.6%	0.007	-7.5%	0.010	100.0%	10.0%	5.5%
In-direct Emission Scope2	Total Usage (t)	7,563	7,904	4.5%	6,850	-13.3%	80	100.0%	-98.8%	-98.9%
In-direct Emission Scope2	Intensity (t/㎡)	0.041	0.043	4.5%	0.037	-13.3%	0.000	100.0%	-98.8%	-98.9%

Water Usage

	FY2018	FY2019		FY2020		FY2021
	FY2018		% Change		% Change		Coverage	% Change	% Change （vs FY2018）
Total Usage (㎥)	11,076	10,852	-2.0%	11,326	4.4%	9,956	100.0%	-12.1%	-10.1%
Intensity （㎥/㎡）	0.069	0.068	-2.0%	0.070	4.4%	0.061	100.0%	-12.1%	-10.1%

All water is taken from the water supply.

		FY2018	FY2019	FY2020	FY2021
Water itake	Total Usage (㎥)	FY2018	11,076	10,852	11,326	9,956
Water itake	Intensity （㎥/㎡）	0.069	0.068	0.070	0.061

All drainage goes to the sewer.

		FY2018	FY2019	FY2020	FY2021
Displacement	Total Usage (㎥)	FY2018	11,076	10,852	11,326	9,956
Displacement	Intensity （㎥/㎡）	0.069	0.068	0.070	0.061

Waste Volume

	FY2018	FY2019		FY2020		FY2021
	FY2018		% Change		% Change		Coverage	% Change	% Change （vs FY2018）
Total Volume(㎡)	288	399	38.2%	482	21.0%	336	100.0%	-30.3%	16.6%
Recycling Volume (㎡)	264	328	24.3%	422	28.5%	336		-20.3%	27.2%
Recycling Rate (%)	91.6％	82.4%	-10.1%	87.5%	6.2%	78.0%		-10.9%	-14.9%

Notes:

Review period
The fiscal year starts on April and end on March of the following year.
Calculation method
1. “Intensity” is calculated as follows.
  Total Usage or Emission (MWh) ÷ Total Property Floor Space (m2)
2. “Coverage” is calculated as follows.
  Total Floor Space of Data Collected (m2) ÷ Total Property Floor Space (m2)
3. The calculation of the waste recycling rate is as follows
  Recycling rate (%) = (1) Total amount recycled ÷ (2) Total amount x 100
     (1) Total amount of waste recycled The amount of waste recycled out of the total amount of waste generated by the restoration work ordered by ITOCHU Urban Community, a group company of the asset management company (㎥).
     (2) Total amount of waste generated from the same work (㎥).
Target of aggregation
1. IRM compare the properties owned for the full year in each fiscal year.

3. Independent assurance statement (limited assurance)

The independent assurance statement (limited assurance)has been obtained from Sustainability Accounting Co., Ltd. for the actual data on energy consumption, greenhouse gas (CO2) Scope 1 and 2 and water consumption in FY2021.
The figures in the assurance report include data on properties acquired and sold during the period, and therefore the figures differ from the above actual values.

4. Setting Green-lease Contract Clauses

74.2% of tenants are under leasing contract with clauses concerning energy and water conservation (green-lease contract) as of January 2023.

Also ADR will insert green lease clause in the management consignment contract with property manager at the time of future consignments and contract renewals.

And based on the contract, ADR has received proposals concerning LED installation once a year from the building managers.

5. Supply Chain Management

IRM has established a Green Procurement Policy to put the sustainability policy’s specific component into practice with the cooperation from its suppliers.

Since FY2016, to strengthen the engagement with suppliers, major suppliers including all property management companies that IRM uses as a vendor have been evaluated by conducting surveys at the start of the contract and annually in accordance to the policy, on how they are addressing sustainability issues.

Since IRM believe it is important to have our major suppliers’ understanding and cooperation, on FY2017 IRM have re-notified our Green Procurement Guideline to our major venders, property management companies and building management companies.

B. Urban Area Investments

By investing in various kinds of urban properties, ADR promotes the reduction of environmental burden and contribute to the revitalization of cities and communities.

1. Investments in Flexible / Mixed Use Properties

ADR invests in flexible/mixed use properties (as of January 2023, 84properties, 30% of the portfolio), thereby contributing in reducing environmental impact, revitalizing the area and providing convenient facilities to tenants and local residents. In addition, those flexible /mixed use properties have stores and squares open to public which contributes to the revitalization of the cities and the communities, by providing places for people gather.

The flexible / mixed use properties that ADR invests in are;

Properties close to train stations which promote the use of public transportations thereby reducing CO2 emissions
94% (on acquisition price) of properties are located within 10 minute walk from the nearest train station.
In addition, ADR has established criteria (access quality and number of minutes on foot) for the distance from the nearest station regarding property acquisition, within 10 minutes on foot for single and compact types, and within 15 minutes for family and large types.
Properties with convenient facilities such as a supermarkets or convenient stores attached.
Properties with open space which are publicly accessible. (As of January 2023, 7 properties (2.5% of portfolio))
Universal design properties that are accessible to senior citizens.
In principle, ADR’s properties have wheelchair-accessible leads (slopes, handrails, private parking lots) installed in the relevant properties based on the Building Standards Act.
In addition, although it is not legally required, a handrail was installed at BRANCHEILE Kohoku 2 based on requests from tenants.

2. Investments Towards Urban Revitalization

By investing in properties developed through urban revitalization project, we contribute to the revitalization of towns and communities and the improvement of convenience for residents in the surrounding areas

01. Pianetta Shiodome

We invest in properties located in the district developed by Urban Revitalization Projects in support of the creation of a community for new production activities and lifestyles based on the initiative of local residents.

The aim of the district is not only creating an attractive landscape while achieving harmony and balance between Italian culture and traditional Japanese culture, but also creating a safe and secure community and enhancing and strengthening partnerships with the government for sustainable regional development. Furthermore,　the district is characterized by its adoption of Italian urban revitalization concepts, not only in the superficial adoption of Italian cityscapes, but also in the urban renewal process itself.

02. Other urban redevelopment properties acquired by ADR.

RESIDIA Minami-Senjyu

RESIDIA TOWER Kami-Ikebukuro

Pacific Royal Court Minato Mirai Ocean Tower

RESIDIA Tsutsujigaoka

3. Investments Towards Existing Urban Brownfield Redevelopment

By investing in existing urban brownfield redevelopment properties ADR contributes in the usage of existing infrastructures such as existing water supply systems, electricity grid, public school facilities. It will also prevent urban sprawl which will save energy involved in commuting and prevent development of green lands.

C. Cooperation between the Sponsor Group Companies

ADR works together with IRM’s sponsor group companies in various fields to lessen its environmental burden and contribute to local communities.

Acquisition of sponsor group developed properties
IRM advises on the residential market to help sponsor group companies to succeed in developing flexible / mixed use properties that will satisfy ADR’s acquisition criteria.Acquisition of Green Building Certification.
Property management
The sponsor group property manager who manages the largest share of ADR’s properties cooperates with ADR not only in such measures as promoting energy savings but also in measures such as placing AED equipments in publicly accessible area, whereby contributing to local communities.

D. Policy on Climate Change

IRM recognizes that climate change is an important issue affecting the future sustainable growth of IRM and ADR.
Please see the link below for information on how to deal with this issue.

Click here for details

E. Expressing Support for The Task Force on Climate-related Financial Disclosures Recommendations

Based on the recommendations of TCFD, IRM will continue to contribute to the realization of a sustainable society by assessing the impact of climate change on its businesses, taking measures to counteract risks and to take advantages of opportunities, and proactively disclosing related information.
IRM expresses its support for the recommendations issued by the "Climate- related Financial Disclosure Task Force* (TCFD)" on March 11, 2020. In addition to supporting TCFD, IRM are also a member of the TCFD Consortium (composed of Japanese companies and organizations that support TCFD).

IRM recognizes that climate change is an important issue affecting the future sustainable growth of IRM and ADR.

* TCFD was established in 2015 by the Financial Stability Board, which consists of central banks and financial regulators of world’s major countries. In June 2017, it issued recommendations urging companies to analyze climate-related business risks and opportunities in the medium- to long-term, and reflect the findings to its financial disclosures in order to mitigate risks that could destabilize financial markets.

Identified climate-related risks, opportunities and response（As of May, 2021）

Risk Category		Term	FinamcialImplicatuins	Strategy
Transition Scenario	Political and Legal	Medium -term	・Increased CO2 emission costs due to introduction of carbon tax and expansion of emissions trading system. ・Increased renovation costs for existing properties due to tightening energy conservation regulations.	・Upgrading　properties systematically. ・Introduced green power certificate and renewable energy. ・Acquiring properties that comply to energy saving standards.
	Technology change	Medium -term	・Increased costs for introducing new technologies to prevent portfolio obsolescence due to the evolution and spread of renewable energy and energy-saving technologies.	・Upgrading　properties systematically. ・Acquisition of new properties with new technology introduced.
	Market change	Medium -term	・Price increase of energy-saving property, possibility of price decrease of unsupported property. ・Rise in funding cost	・Promotion of acquisition of green building certification for existing properties and newly acquired properties. (expansion of qualified real estate in issuing green bonds)
	Reputations	Short -term	・Being discredited from investors. ・Decrease in occupancy rate due to changes in reputation from tenants.	・Development of disclosures that investors place importance on when investing in ESG, including TCFD. ・Providing tenants with services to heighten satisfaction（Disaster prevention / energy saving support）.
Physical Scenario	Acute	Short -term	・Increases in flooding from torrential rain, rising sea level and etc. ・Increase in insurance cost.	・Implementation of disaster risk assessment for each property. ・Disaster countermeasures for both hardware and software. ・Acquiring properties with disaster risks.
Physical Scenario	Chronic	Long -term	・Property in the area of zero meters above sea level may be flooded due to sea level rise. ・Decreased comfort due to rising average temperature and rising indoor temperature due to the increase in hot days.	・Implementation of disaster risk assessment for each property. ・Disaster countermeasures for both hardware and software. ・New acquisition of properties with high energy-saving efficiency and heat insulation.
Opportunity	Resilience	Short -term	・Demand for properties prepared for natural disasters will increase.	・As inundation measures, necessary measures are taken from both hardware and software according to the disaster risk evaluation results of each property. Installation of waterproof boards, implementation of disaster training, distribution of disaster prevention goods, etc.

※IRM will continue to disclose the disclosure content required by TCFD.

Flooding Risk

IRM understands the inundation risk expected at the planned scale for the portfolio.

Economic damage is covered by fire insurance.

Regarding the response to the electrical equipment specified in the guidelines*, IRM has implemented inundation measures as necessary for 6 properties with cubicles on the 1st floor and below.

* Exposures were assessed using publicly accessible information such as hazard maps published by Ministry of Land, Infrastructure, Transport and Tourism (MLIT) and other local municipalities.

In addition, as a measure to ensure the safety of tenants, IRM has installed inundation sensors, etc. to guide the degree of evacuation to the upper floors for 6 properties that are at risk of inundation of 2m or more and have dwelling units on the 1st floor.

F. Participation in the Japan Climate Initiative

Subscribing to the fundamental principles of the Japan Climate Initiative (JCI), IRM became a member in July 2019.
Following the adoption of the Paris Agreement for the prevention of global warming in 2015, JCI was established by a coalition led by Japanese corporations, municipalities, NGOs, and other bodies actively working to address climate change. It is intended to serve as a network for voluntary efforts toward society’s decarbonization. JCI is aiming for the achievement of a decarbonized society by creating a nation-wide movement, supporting the activities of its member organizations while urging the government to take action, and cooperating with the international community.
For more information, please visit the Japan Climate Initiative website.