Environmental Considerations

Ⅲ. Environmental Considerations

A. Environmentally Conscious Asset Management

ADR’s properties will be managed with environmental consideration through the following measures.

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

b. Installing LED lighting
As of July 2022, LED lighting is installed in 115 properties (41.5% of portfolio).

c. Installing water-saving toilets
As of July 2022, water-saving toilets are installed in 492 tenants (2.3% 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 July 2022, 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 July 2022, 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
 

% Change

 

% Change

  Coverage

% Change

% Change
(vs FY2018)

Total

Total Usage
(MWh)

15,842

15,624

0.0%

15,376

-3.5%

15.376

100.0%

0.0%

-4.5%

Intensity
(MWh/㎡)

0.086

0.086

0.083

0.083

Electricity

Total Usage
(MWh)

14,300

13,951

-1.3%

13,887

-2.6%

15,887

100.0%

-2.7%

-5.9%

Intensity
(MWh/㎡)

0.078

0.077

0.075

0.075

Fuel

Total Usage
(MWh)

1,247

1,364

6.8%

1,192

22.2%

1,192

100.0%

-20.8%

2.3%

Intensity
(MWh/㎡)

0.059

0.063

0.077

0.077

Ditrict Heaing

andCooling

Total Usage
(MWh)

294

239

5.0%

209

-4.8%

209

100.0%

35.0%

32.6%

Intensity
(MWh/㎡)

0.020

0.021

0.020

0.020

GHG Emission(CO2)

 

 

FY2018

FY2019

FY2020 FY2021
  % Change   % Change

 

Coverage

% Change

% Change
(vs FY2018)

Total
(scope1+2)

Total Usage
(t)

7,781

8,143

4.7%

7,059

-13.3%

310

100.0%

-95.6%

-96.0%

Intensity
(t/㎡)

0.042

0.045

0.038

0.000

Direct Emission
Scope1

Total Usage
(t)

218

239

9.6%

209

-12.6%

230

100.0%

10.0%

5.5%

Intensity
(t/㎡)

0.010

0.011

0.013

0.010

In-direct  Emission
Scope2

Total Usage
(t)

7,563

7,904

4.5%

6,850

-13.3%

80

100.0%

-98.8%

-98.9%

Intensity
(t/㎡)

0.041

0.043

0.037

0.000

Water Usage
 

FY2018

FY2019

FY2020

FY2021

  % 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 0.070 0.061
All water is taken from the water supply.
    FY2018 FY2019 FY2020 FY2021
Water itake

Total Usage (㎥)

11,076 10,852 11,326 9,956

Intensity (㎥/㎡)

0.069 0.068 0.070 0.061
All drainage goes to the sewer.
    FY2018 FY2019 FY2020 FY2021
Displacement

Total Usage (㎥)

11,076 10,852 11,326 9,956

Intensity (㎥/㎡)

0.069 0.068 0.070 0.061
Waste Volume
  FY2018 FY2019 FY2020 FY2021
  % 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:

  1. Review period
    The fiscal year starts on April and end on March of the following year.
  2. 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 (㎥). 
  3. 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

63.0% of tenants are under leasing contract with clauses concerning energy and water conservation (green-lease contract) as of July 2022

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 July 2022, 83 properties, 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;

  1. 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.
  2. Properties with convenient facilities such as a supermarkets or convenient stores attached.
  3. Properties with open space which are publicly accessible. (As of July 2022, 7 properties (2.5% of portfolio))
  4. 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 Life & Senior House Kohoku Ⅱ based on requests from tenants.

2. Investments Towards Urban Revitalization and Redevelopment Properties

ADR contributes in promoting urban revitalization and redevelopment through investments in the revitalization and redeveloped properties.

In revitalization projects, block districts are re-zoned, lands are more highly utilized and properties within the redevelopment will draw in people to the community thereby revitalizatizing the area.

(There are legal restrictions to the amount of development that J-REITs are allowed to do.)

Urban redevelopment properties acquired by ADR.

  1. Pianetta Shiodome
  2. RESIDIA Minami-Senjyu
  3. RESIDIA TOWER Kami-Ikebukuro
  4. Pacific Royal Court Minato Mirai Ocean Tower
  5. 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.

  1. 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.
  2. 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.

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.

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 5 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.