Climate Change Initiatives｜ESG｜MIRARTH Real Estate Investment Corporation

Approach to Climate Change/Policies

MIRR recognizes climate change as a key transformation in the external environment that could impact the continued existence of many different businesses. Given that climate change is a severe risk that broadly threatens all life, essential infrastructure, and economic systems at the global level, it must be urgently addressed by the international community.

In Japan, the government has declared its aim of achieving a decarbonized, carbon-neutral society by 2050, and the public and private sectors are working together to accelerate climate change countermeasures.
With the aim of ensuring the seamless continuation of its business activities, MIRR is proactively implementing “mitigation” measures that help to suppress climate change. These include the proactive introduction of energy-saving and high-efficiency equipment, promotion of energy saving, water saving, and the 3Rs (reduce, reuse, and recycle) in cooperation with tenants and other stakeholders, and introduction of renewable energy as part of the roadmap to net zero by 2050. In addition, as measures to enhance resilience that contribute to minimizing damage and loss caused by climate change, we will optimize capital expenditure with an awareness of disaster prevention and disaster mitigation and promote the formulation of Business Continuity Planning (BCP) for the entire portfolio and individual properties.

For the purpose of sharing these activities with stakeholders and promoting dialogue about them, in addition to endorsing the TCFD's recommendations, MIRR will provide timely, appropriate disclosure regarding the status of its response to climate change-related risks and opportunities, in alignment with the TCFD framework.

Endorsement of TCFD (Task Force on Climate-related Financial Disclosures)

The Asset Manager endorsed the TCFD's recommendations in February 2022.

Recommended Disclosures by the TCFD

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Disclosure Item	Disclosure Details
Governance	The organization's governance around climate-related risks and opportunities
Strategy	The actual and potential impacts of climate-related risks and opportunities on the organization's businesses, strategy, and financial planning
Risk management	Processes for identifying, assessing, and managing climate-related risks
Metrics and targets	Metrics and targets for assessing and managing climate-related risks and opportunities

Governance

The Asset Manager has established a Sustainability Promotion Committee to consider specific targets and measures and to monitor the status of progress. The committee is comprised of the CEO, directors, the general manager of the Investment Management Department, the general manager of the Finance and Planning Department, and the Compliance Officer. It holds meetings at least once per fiscal period.

ESG-related activities in general, including the details of Sustainability Promotion Committee meetings, are reported to the Asset Manager's Board of Directors once every six months, and risks and opportunities are shared as management issues.

Strategy

In preparing this section, we referred to climate scenarios developed by international organizations such as the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC). The worldviews assumed under the 4℃ and 1.5℃ scenarios are as follows.

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	1.5℃ scenario	4℃ scenario
Society	A scenario aligned with the Paris Agreement's goal of achieving a decarbonised society. It is characterised by rapid regulatory tightening, technological innovation and increased investment in renewable energy. Under accelerated decarbonization, the following conditions are assumed: ･Renewable energy becoming the primary power source, with 70% coming from solar and wind ･Widespread adoption of electric vehicles (EVs) and electrification ･Strengthened carbon taxes and emissions regulations.	A scenario in which insufficient climate action leads to a significant increase in physical risks, such as natural disasters and extreme weather events. Under current policies, the following conditions are assumed: ･Continued reliance on fossil fuels ･Limited deployment of renewable energy ･Failure to reduce greenhouse gas emissions
Assumption	･A sharp increase in carbon prices (e.g. over $100 per tCO₂) ･A rapid expansion of renewable energy ･A decline in fossil fuel demand ･Strengthened regulations (e.g. emissions trading schemes and mandatory reporting)	･Persistently low carbon prices ･Continued reliance on fossil fuels ･Increasing physical risks (e.g. floods, heatwaves and typhoons) ･Rising insurance premiums and repair costs
Bussiness opportunity	･Expansion of renewable energy, electric vehicle (EV) and hydrogen markets ･Rental premiums for energy-efficient properties ･Utilization of green finance	･Growing demand for disaster response services ･Expansion of insurance and business continuity (BCP)-related markets
Bussiness risk	･Higher carbon costs ･Increased capital expenditure due to the need for equipment upgrades ･Reputational risks arising from delayed action	･Damage caused by physical risks ･Supply chain disruptions ･Rising insurance premiums
Physical risk	･More frequent heatwaves and heavy rainfall, though impacts remain relatively limited ･Gradual sea‑level rise	･More frequent and severe heatwaves and heavy rainfall ･Sea‑level rise of 0.45–0.82m ･Significantly higher disaster risk
Transition risk	･Higher costs due to carbon taxes and strengthened regulations ･Loss of competitiveness due to delayed technological transitions	･Low transition risks due to lenient regulations

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Risks and opportunities	Sort	Financial effects	Measures to address risks and initiatives to seize opportunities	Financial effects
				4℃ scenario		1.5℃ scenario
				Mid- term 2030- 2040	Long- term 2050	Mid- term 2030- 2040	Long- term 2050
Transition risk	Policy Law regulation	4°C： Relatively limited regulatory requirements	･Setting and disclosing GHG reduction targets ･Collaboration with external specialist firms ･Promoting the adoption of green lease clauses aimed at reducing environmental impact ･Increasing the number of environmentally certified properties	Low	Low
	Policy Law regulation	1.5°C：･Tightening regulations on GHG emissions ･Higher administrative costs due to expanded disclosure requirements ･Increasing costs from environmental and carbon taxes				Medium	High
	Technique	4°C： Relatively limited need for replacing existing equipment	･Energy‑saving measures for owned properties ･Renovation planning to improve property energy performance ･Promoting the adoption of green lease clauses to reduce environmental impact ･Introducing renewable energy and non‑fossil certificates	Low	Low
	Technique	1.5°C： Increasing costs due to the more frequent replacement of existing equipment or the mandatory adoption of new technologies				Medium	High
	Market	4°C： Increasing operational expenses due to inflation in energy, water, and waste management costs	･Improving the level and number of environmental certifications ･Enhancing ESG‑related disclosures ･Active utilization of green finance	Low	Low
	Market	1.5°C： Increasing operational expenses driven by renewable energy procurement				Low	Medium
	Reputation	4°C： No significant change in stakeholders’ awareness of the transition to a low‑carbon society	･Building strong relationships with investors and financial institutions ･Appropriate disclosure of ESG‑related information ･Achieving high ESG ratings	Low	Low
	Reputation	1.5°C：･Eroding investor value caused by negative screening by stakeholders ･Increasing vacancies and declining revenue resulting from tenants' shifting preferences away from properties with insufficient environmental performance				Medium	Medium
Physical risk	Acute	Increasing cost risks driven by more severe and frequent weather-related disasters, leading to property damage, human impacts, business interruption, higher recovery costs, and safety and health risks for employees and tenants	･Enhancing energy efficiency through equipment upgrades ･Implementing both structural and non-structural disaster resilience measures ･Regular review of fire insurance coverage	Low	Medium	Low	Low
Physical risk	Chronic	･Increasing risks of more frequent equipment deterioration driven by changes in weather patterns and shifts in people’s living patterns and behaviors ･Increasing BCP and contingency cost risks, including rising insurance premiums and enhanced flood‑protection measures		Low	Medium	Low	Low
Opportunity	Strength of a diversified REIT	The ability of the Investment Corporation, as a diversified REIT, to incorporate a wide range of asset types and build a resilient portfolio that accounts for medium‑ to long‑term risks	･Energy‑saving measures for owned properties ･Building a portfolio with high energy-efficiency performance	Low	Low	Low	Low
	Strength of a developer serving as the main sponsor	The expectation that part of the Investment Corporation’s pipeline will comprise environmentally certified properties, in line with the KPI set by its main sponsor, MIRARTH Holdings, Inc. to ensure that a proportion of its developments qualify as environmentally conscious real estate	Acquiring environmentally certified properties from the sponsor	Low	Low	Low	Low
	Strength in renewable energy procurement	The expectation that the Investment Corporation can develop effective renewable‑energy procurement measures through potential collaboration with clean‑energy‑related group companies and by leveraging consulting support from in‑house specialists within its main sponsor, MIRARTH Holdings, Inc.	･Procuring renewable energy from group companies ･Collaborating with external specialist firms	Low	Low	Low	Low

Risk Management

The Asset Manager has created a Risk Management Manual and implements its contents. Moreover, with respect to the overall risks in MIRR's business activities, including climate change, it revises the Annual Plan for Risk-Related Management Policy each year. This plan is approved by a resolution of the Compliance Committee, which is comprised of both internal and external members, and the Board of Directors. The Asset Manager regularly checks for issues in risk management conditions by means of voluntary inspections and internal audits, and the verified details are reported to the Compliance Committee and Board of Directors as needed.

With regard to the Asset Manager's organizational structure concerning risk management, refer to “G. Governance”

(1) Board of DirectorsAfter identifying the types and characteristics of risks faced by the company, the Board of Directors determines key matters concerning risk management, such as establishing the organizational structure and regulations with respect to risk management.

(2) Compliance CommitteeThe Compliance Committee serves a role as a cross-organizational consultative body. It discusses and considers the formulation, revision, and abolition of the organizational structure and regulations relating to risk management, monitors risks, etc. and passes resolutions on key matters concerning risk management, as well as collaborating with the Board of Directors, auditors, and Compliance Officer as needed.

(3) Risk Management SupervisorThe role of the Compliance Officer includes supervising risk management for the company.

(4) Risk ManagersThe heads of each department manage risks that fall under their department's jurisdiction and report to the risk management supervisor regarding the status of management.

Metrics and Targets

Refer to the “Environmental Targets” and “Environment-Related Data” sections in “E. Environment”.