Response to Climate Change

As indicated in the Paris Agreement (2015) and elsewhere, climate change is a scientific fact and is recognized as a material issue that will cause dramatic changes in the natural environment and social structure and have a significant impact on the overall management and business of One REIT and the Asset Management Company.
Based on the recognition that climate change is a global issue, One REIT aims to realize a decarbonized society and build a strong, climate change-resilient business foundation by managing and reducing energy consumption, greenhouse gas emissions, water consumption and waste volume, and enhancing severe disaster resiliency.

Support for TCFD (Task Force on Climate-related Financial Disclosures) Recommendations

In April 2022, Mizuho Realty One Co., Ltd. (MONE), which is the Asset Management Company's parent company announced its support for the TCFD recommendations and joined the TCFD Consortium, an organization of Japanese companies that have endorsed them.

One REIT and the Asset Management Company also recognize the importance of disclosing information on climate-related risks and opportunities, and are committed to addressing this and promoting further disclosure.

The TCFD published its final report in June 2017, recommending that companies disclose the following items on climate change-related risks and opportunities.

Disclosure Items Recommended by TCFD

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Disclosure Item	Disclosure Details
Governance	Disclose the organization's governance around climate-related risks and opportunities.
Strategy	Disclose the actual and potential impacts that climate-related risks and opportunities will have on the organization’s businesses, strategy, and financial planning.
Risk management	Disclose the process which the organization uses to identify, assess, and manage climate-related risks.
Indicators and targets	Disclose the indicators and targets used to assess and manage relevant climate-related risks and opportunities.

Basic Policy and Commitments

The Asset Management Company supports the international goals set forth in the Paris Agreement and will continuously work to reduce greenhouse gas emissions in order to contribute to the mitigation of climate change. In addition, in accordance with MONE, which endorses the TCFD recommendations, we will disclose climate-related information to our stakeholders while following the disclosure framework.

Governance

We have the following structure in place to address climate-related risks and opportunities.

(1) Board of Directors

The Board of Directors makes decisions on the formulation of mid- to long-term or annual plans for sustainability in the Asset Management Company's corporate operations and on other important sustainability matters.

(2) Investment Committee

The Investment Committee makes decisions on important sustainability matters for One REIT.

(3) Sustainability Promotion Council

The Sustainability Promotion Council is an advisory body to the Chief Executive Officer and discusses matters related to the Asset Management Company's corporate operations and the setting and monitoring of targets for sustainability initiatives of the REITs designated by the Chief Executive Officer.

(4) Sustainability Promotion Officer

The Sustainability Promotion Officer is the Chief Executive Officer, who oversees the sustainability initiatives of the Asset Management Company and its REIT.

(5) MONE Sustainability Committee

An advisory body to MONE's Board of Directors, MONE's Sustainability Committee deliberates on the MONE Group's sustainability policy, presents targets for the MONE Group to the Asset Management Company's Sustainability Promotion Officer, and monitors them. However, MONE is not involved in the Asset Management Company's decision-making on investment management matters for REITs which entrust their asset management to the Asset Management Company (regardless of the contract name or asset type). In addition, the MONE Group's Chief Climate Officer (MONE's President and Representative Director) can ask the Asset Management Company's Sustainability Promotion Officer to report to MONE's Sustainability Committee on the status of climate-related issues. (With respect to information concerning the REITs for which the Asset Management Company manages the assets, this is limited to information that the Asset Management Company deems may be provided without any problems, such as public information in the case of One REIT.)

Strategy

One REIT has analyzed scenarios in line with the TCFD recommendations in order to understand the risks and opportunities that climate change poses to the REIT and examine their impact.

Scenario Analysis Assumptions

(1) Time horizon

For the scenario analysis, we divided the timing in which financial impacts of climate-related risks and opportunities become more apparent into the following three time periods.

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Period	Definition
Short term	By 2025
Medium term	By 2030
Long term	By 2050

(2) Information Sources Referenced

One REIT analyzed scenarios using future climate projections published by various international organizations, etc. as its main sources of information (shown below).
Note that climate-related risks can be broadly classified as "transition risks" or "physical risks," and may bring not only risks but also new business opportunities.

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	Climate-related risks	Main information sources referenced
Transition risks	Business impacts resulting from social/economic transition to low/zero carbon	IEA Stated Policies Scenario World Energy Outlook 2020（STEPS） IEA Net Zero Emissions by 2050 Scenario（NEZ2050）
Physical risks	Business impacts resulting from ongoing climate change from previous patterns and phenomena	IPCC 5th Assessment Report: Representative Concentration Pathways (RCP8.5) IPCC 5th Assessment Report: Representative Concentration Pathways (RCP2.6)

(3) Scenarios based on the main information sources

Based on the Paris Agreement, our base cases for analysis were the 4°C scenario and the 1.5°C scenario, as summarized below.

4°C Scenario (sources referenced: STEPS, RCP8.5)
A future in which climate change mitigation measures are insufficient and GHG emissions continue to rise, resulting in a large temperature increase. This scenario has high physical risk and low transition risk.

1.5°C Scenario (sources referenced: NEZ2050, RCP2.6)
A future in which zero-carbon social policies, emission controls and technology investment proceed more than in the present situation toward achieving the Paris Agreement targets, limiting temperature increase. This scenario has low physical risk and high transition risk.

Summary of Scenario Analysis

Based on the abovementioned assumptions, One REIT has examined climate-related risk and opportunity factors as well as financial implications and risk management/response measures that can be expected, as summarized below.

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Risk category		Risk/opportunity factors		Type	Financial impacts	Risk Management/Response Measures	Severity/timeframe of maximum financial impacts
Risk category		Risk/opportunity factors		Type	Financial impacts	Risk Management/Response Measures	4℃	1.5℃
Transition Risks and Opportunities	Policy and law	Stricter energy laws/regulations
			Introduction of carbon tax	Risk	GHG emissions tax burden Higher material procurement costs, fuel costs, power costs, etc.	Introduction of low-carbon energy Promotion of energy-saving measures	Medium term
			Introduction of carbon tax	Risk			Low	Medium
			Stricter building energy-saving standards	Risk	Renovation costs to meet energy-saving standards Higher property acquisition costs due to higher construction/renovation costs to install energy-saving equipment	Consideration of ZEB conversion Energy-saving renovation Enhancement of energy data management Deepening of tenant understanding of ESG through awareness-raising activities to encourage conclusion of green lease agreements and other measures	Medium term
				Risk			Medium	High
				Opportunity	Lower property acquisition costs due to increased sale of properties not conforming to energy-saving standards or regulations (stranded assets), and higher property value and mid-/long-term profits through renovation, etc. of these properties	Green building conversion through energy-saving renovation and renewable energy introduction	Medium term
				Opportunity			Low	High
			Expanded/mandatory energy-saving ratings	Risk	Higher certification acquisition costs	Cost levelling through certification period management Promotion of certification acquisition	Medium term
				Risk	Higher certification acquisition costs		Low	Low
				Opportunity	Higher rent revenue due to increased competitiveness of properties complying with laws and regulations Increase added value due to improving environmental performance of properties conforming to laws and regulations		Medium term
				Opportunity			Low	Low
	Technology	Evolution/spread of renewable energy/energy-saving technology		Risk	Higher technology implementation costs	Installation cost reduction through new technology comparison/consideration Operating cost reduction through energy-saving technology installation Conclusion of green lease agreements and other measures	Short term
				Risk	Higher technology implementation costs		Low	Medium
				Opportunity	Greater occupancy/higher property value due to increased demand for renewable energy-based properties due to stronger GHG emissions regulations Lower energy costs	Consideration of renewable energy technology installation LED lighting conversion High-efficiency air-conditioning system installation	Medium term
				Opportunity			Low	Medium
	Market/reputation	Higher utility bills (including external procurement of renewable energy)		Risk	Higher rental business costs	Energy-saving renovation Awareness-raising activities for tenant on energy-saving initiatives	Medium term
				Risk	Higher rental business costs		Medium	Low
		Change in tenant demand/real estate transaction demand		Risk	Due to a slow response to climate change: Lower occupancy (tenant departure, extension of tenant leasing) Lower property prices	Property value increase through acquisition of environmental certification/energy-saving rating Appeal to tenants/market due to carbon neutrality	Medium term
		Change in tenant demand/real estate transaction demand		Risk			Low	Medium
		Green building appeal to tenants/users		Opportunity	Higher occupancy in green buildings/renewable energy-based properties due to office demand from companies seeking carbon neutrality	Consideration of ZEB conversion Promotion/advertisement of carbon neutrality through energy-saving renovation and renewable energy introduction	Medium term
		Green building appeal to tenants/users		Opportunity			Low	Medium
		Worse fundraising terms for market participants (bond issuers) not responding to climate change		Risk	Higher fundraising costs	Climate change measures by One REIT Addition of climate change response to supplier selection criteria Use of green finance Advertisement of ESG (including climate change) initiatives	Short term
				Risk	Higher fundraising costs		Low	Low
		Appeal to current investors/lenders, acquisition of new investors/lenders		Opportunity	Lower fundraising costs through green finance Higher fundraising from ESG-focused investors/lenders	Use of green finance Advertisement of initiatives to ESG-focused investors/lenders (including climate change)	Short term
				Opportunity			Low	Low
Physical Risks and Opportunities	Acute	More water damage/landslides due to severer storm and flood damage		Risk	Higher repair/prevention costs, damage costs, insurance fees Loss of business opportunities, asset value due to flooding of owned properties	Hazard map confirmation when acquiring properties, countermeasures during management Strengthening of disaster risk management Preparation of disaster manual for each portfolio property Posting of evacuation points/hazard maps at properties	Long term
				Risk			High	Medium
				Opportunity	Higher rent revenue due to resiliency of water damage/disaster countermeasures Higher portfolio competitiveness due to increased resiliency		Short term
				Opportunity			High	Medium
	Chronic	Flooding of low-elevation properties due to sea level rise		Risk	Flood countermeasure costs (flood barrier installation, etc.) Lower property value due to flooding	Hazard map confirmation when acquiring properties, countermeasures during management	Long term
	Chronic	Flooding of low-elevation properties due to sea level rise		Risk			Low	Low

(Note) The period of highest impact is until 2025 for short term, 2030 for medium term and 2050 for long term.

Risk Management

The Asset Management Company's Sustainability Promotion Officer manages identified and assessed climate-related risks and opportunities and promotes resilience initiatives to reduce business risks and realize value creation opportunities to ensure steady, sustainable earnings over the long term. The management process for climate-related risk and opportunity factors is as follows:

The Sustainability Promotion Officer directs the Sustainability Promotion Council to consider the development of countermeasures for climate-related risks and opportunities that are high-priority in business and financial plans.
The Sustainability Promotion Council's proposed measures are deliberated on and approved by the institutions specified in the Basic Policy on Sustainability Initiatives based on their content, and are then implemented.
The Sustainability Promotion Officer also instructs the Asset Management Company to consider climate-related risks that are important in business and financial plans for its regulations.

Indicators and Targets

The following indicators and targets are used in the process of managing climate-related risks and opportunities.

	Indicator	Target
1	Reduction of greenhouse gas emission (intensity)	(From FY2014) 40％ (FY2030) 100% (FY2050)
2	Reduction of water consumption (intensity)	(From FY2014) 10% (FY2030)
3	Percentage of portfolio that is green building-certified (by total floor area)	90% (FY2030)