IRM clearly understands that climate change issues have significant impacts on the environment, economic activities, and our business activities. We are also fully aware that since our business activities impact and depend on natural capital (water, land, biodiversity, etc.), its health is essential for the sustainability of our corporate value and society. We believe that combating climate change and conserving natural capital are closely interrelated, requiring comprehensive approaches to both challenges. Going forward, we will continue contributing to sustainability by identifying, analyzing, and disclosing key climate-related and nature-related issues.

To identify key climate-related and nature-related issues, IRM first endorsed the recommendations of the TCFD (Task Force on Climate-related Financial Disclosures) in March 2020 and has been assessing and disclosing climate-related risks and opportunities. Furthermore, in 2025, to deepen our analysis of nature-related issues, we expressed support for the TNFD (Taskforce on Nature-related Financial Disclosures) policies, and have been collecting information as a TNFD Forum member. Based on these initiatives, this report will disclose climate-related and nature-related issues based on the four pillars of the TCFD and TNFD disclosure frameworks: Governance, Strategy, Risk management, and Metrics and Targets.

Management’s roles and oversight by the Boards of Directors of IRM and each investment corporation

Risk identification and evaluation and integration with company-wide risk management

To identify climate- and nature-related issues, we first assessed how changes in climate and the natural environment could affect ADR’s business environment. To assess our resilience, we have adopted two extreme scenarios for ADR: one with maximum transition risks and the other with maximum physical risks. Specifically, in one of the scenarios, social changes associated with achieving Nature Positive impact our business, and in the other, climate change and natural disasters caused by nature destruction impact our business.

Please follow this link for details of the scenarios recommended by the TNFD.
For specific climate change scenarios, please see "Scenario Analysis"

We classify various change factors in the external environment resulting from climate change into transition risks and physical risks and identify and evaluate them as risks and opportunities. We select any factors that have a material impact on our business and run scenario analysis. We mainly analyze and calculate transition risks related to “policies/regulations, markets, reputation,” and physical risks in the categories of “acute/chronical,” and opportunities related to “markets, energy sources, resource efficiency, products and services.” We aim to reduce our environmental impact while achieving a medium- and long-term growth by addressing climate change-related risks and enhancing our efforts to capture opportunities.

Scenario Analysis

The following chart shows the images of the world surrounding our investment corporations in the climate change scenarios with a 4-degree Celsius temperature rise and 1.5-degree Celsius temperature rise as the background for risk and opportunity identification and evaluation.

	over ￥300M	over ¥100M and under ¥300M	under ¥100M
Financial Impact	High	Medium	Low

General requirements	Measures implemented
Application of materiality	Based on objective information from external tools regarding the business activities listed below, we identified the dependency and impact factors, risks, and opportunities for ADR as described in “The TNFD Analysis Process.” Considering both the impact of nature on ADR's business and the impact of ADR's business on nature from a double materiality perspective, we identified material nature-related issues based on their significance, frequency of occurrence, and likelihood of occurrence.
Scope of disclosure (Business activities subject to analysis)	Direct operations : real estate investment, building completion Upstream value chain : building construction Proceed to STEP 1 for details
Location of nature-related issues	Since this analysis was conducted for all properties, we did not specify priority regions or properties. Proceed to STEP 3 for details
Integration with other sustainability-related　disclosures	For shared elements with the TCFD analysis and disclosure framework, we have integrated our disclosure.
Timeline	The analysis is conducted under 2030 scenarios assuming changes in nature.
Engaging stakeholders	ADR understands how our business activities impact the environment and society and commits to a sustainable society by fulfilling our corporate responsibilities. To that end, we have implemented initiatives to serve tenants and local communities as set forth in our Sustainability Policy. We also clarify our human rights guidelines by disseminating our Sustainability Procurement Policy and Sustainability Procurement Guideline, including prohibition of forced labor and child labor. We also conduct regular surveys to monitor compliance, promoting relevant initiatives throughout the supply chain

For TNFD analysis, we used the LEAP approach. It is a systematic procedure involving identifying the value chain, touch points with nature, and priority regions (Locate); evaluating the dependencies and impacts on nature in those points (Evaluate); identifying and assessing resulting risks and opportunities (Assess); and managing them and disclosing related findings (Prepare).

*1  We classified our business activities using the International Standard Industrial Classification of All Economic Activities (ISIC). Under the ISIC, real estate investment is defined as “Real estate activities with own or leased property” and building completion is defined as “Building completion and finishing.”
*2  This refers to tenant space restoration work, which is included in waste data aggregation for ADR’s environmental performance management.

To identify natural capital risks and opportunities, we first analyzed the degree to which the target business activities shortlisted in STEP 1 impact and depend on natural capital. For this analysis, we used ENCORE. The results are shown in the heatmap below.

Real estate investment and building completion : Even if ecosystem services deteriorate, the direct impact on these operations will be limited. Meanwhile, the analysis showed that these activities are closely related to various types of natural capital, including water, soil, and air.
We have identified some relationship with risks of natural disasters, including storms and floods (Impact level: L and M)

Building construction : The analysis showed that building construction has significant impacts on nature, including water pollution, soil pollution and construction noise.

*ENCORE: A digital tool co-developed by Global Canopy, the UNEP Finance Initiative: Innovating Financing for Sustainability (UNEP‐FI), and the UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC). This tool is used to assess and disclose the degree to which each type of economic activity as classified under the ISIC impacts and depends on natural capital on a five-level scale, with VL indicating the lowest degree and VH the highest. (Website: https://encorenature.org/en)

In STEP 2, we identified the dependencies and impacts that may concern our general business activities. In STEP 3, we analyzed the degree to which all the properties impact and depend on natural capital to identify the areas and properties that we should prioritize. For this analysis, we used the environmental performance data for each property and an external tool called “WWF Risk Filter” *1.

The analysis showed that the flood risk may increase by 2030, but such trends were not significant for any property or area. The findings were mostly consistent with Japan’s overall trends - there were no areas or properties where the risk of natural disasters was considerably high or our business activities had a critical impact on nature.

Therefore, in analyzing the risks and opportunities, we targeted all the properties because we were aware of potential risks and opportunities, including higher water risks due to climate change, future legal amendments, and supply chain impacts on biodiversity.

Assessment items : environmental performance data (energy, water, waste, GHG Scopes 1 and 2, and category 13 of Scope 3), environmental certification status, greenery area, and ecosystem conditions (assessed using the WWF Risk Filter)

*1 The WWF Risk Filter is a tool provided by the World Wide Fund for Nature (WWF) used by companies and financial institutions to assess environmental risks (particularly, biodiversity risks) and water risks and analyze various scenarios. The risk rating scale varies by target periods when the level of dependency and impact are measured. In screening for current risks, a five-level scale ranging from 1 to 5 applies, with 4.2 or higher ratings representing extremely high risks. Meanwhile, future risk screening for 2030 uses a six-level scale ranging from 1 to 6.
*2 The comprehensive environmental impact assessment covers the following four items for each property: water consumption, waste output, total emissions from Scopes 1 and 2, and emissions from category 13 of Scope 3. Each is rated on a scale of 3 points, with a maximum total score of 12. The items were rated as follows based on the performance. All the properties were assessed on the applicable items (consumption or emissions), with the top 20% rated as 3 points and the bottom 20% as 1 point. The remaining middle of 60% was rated as 2 points.

To clarify things to consider in identifying risks and opportunities, we explored dependencies and impacts that may concern our general business activities. Specifically, we assessed each stage of our direct operations - real estate investment and building completion - and the upstream building construction sector.

Examples:

・Visual amenity services : In the heatmap created in STEP 2, this item was rated as “VH” (very high) because the appeal of properties depends on surrounding landscapes. However, we excluded this item from our risk/opportunity analysis. This is because many of our residential properties are conveniently located in city centers and near facilities like stations, and our target tenant demographics are unlikely to emphasize landscapes in selecting properties.

・Control of hazardous substances : We included this item in our risk/opportunity analysis. One reason is because although the item was rated as “L” (low) in the heatmap, we identified some relevance for our business activities. Restoration work is essential for our operations, and controlling the release of hazardous substances from construction materials and paint helps to prevent environmental pollution. In addition, delays in such initiatives may result in higher operational costs due to regulatory enhancement in the future.

Based on the dependencies and impacts identified as possibly relevant to business activities in STEP 4, we have thoroughly identified potential risks and opportunities for ADR. We considered the potential impacts on our direct operations, i.e., real estate investment and building completion, as well as construction in the upstream value chain.

• Identifying risks and opportunities

Risks and opportunities in direct operations (real estate investment and building completion) : We have identified how our daily investment activities affect natural capital, including water resource consumption, energy consumption, waste outputs, land use, and impacts on biodiversity. We have also itemized consequences such as increases in management costs and legal and regulatory risks. We also explored opportunities arising from measures to mitigate environmental impacts, including deploying energy conservation facilities, using renewable energies, and promoting greening initiatives.

Risks and opportunities in the upstream value chain (construction) : As indicated in STEP 2, construction work is believed to have significant impacts on natural capital, including those of material procurement, pollution from construction work, restrictions on land use, and effects on biodiversity. However, in identifying such risks and opportunities, we struggled to trace impacts on nature from construction work to ADR’s activities. Therefore, instead of exhaustively assessing risks and opportunities from the upstream construction process, we shortlisted risks that may emerge from our real estate investment activities.

We qualitatively assessed the financial impacts of individual risks and opportunities based on the two projection models from the “Climate-related and Nature-related issues : Scenario outline” section: Scenario A (gradual nature deterioration) and Scenario B (rapid degradation of nature).

In Scenario A, transition risks due to carbon tax and other regulatory enhancements for nature conservation became apparent. Meanwhile, Scenario B indicated that increasing physical risks - property damage and loss of rental income opportunities - from natural disasters, including heavy rainfalls, floods, and ground instability, would pose significant challenges. In addition, both scenarios revealed that stricter waste and water regulations would lead to risks and opportunities for our business activities. To address them, we will establish metrics and targets and continue monitoring progress and improving.

	over ￥300M	over ¥100M and under ¥300M	under ¥100M
Financial Impact	High	Medium	Low

To promote climate-related issues and nature conservation and mitigate environmental impacts, we have established the following metrics and targets (KPIs) and implemented specific measures, including energy conservation, GHG emission control, and reinforced waste recycling initiatives. To achieve these objectives, we track progress and sustain improvement through regular monitoring and the PDCA framework as described in the “Governance” and “Risk Management” sections.