Sustainability

Heiwa Real Estate Asset Management Co., Ltd., which manages the assets of HEIWA REAL ESTATE REIT, Inc., has selected materiality as a priority issue to be addressed through the following process in order to promote initiatives related to sustainability.

Materiality identification process

STEP
1

Identify issues
Identify a broad range of issues based on awareness of SDGs and other social issues, various guidelines (GRI, etc.), and ESG evaluation items in the real estate sector (GRESB, etc.)

STEP
2

Narrow down the proposed issues and prioritize
Narrow down and prioritize issues by taking into account their importance to HEIWA REAL ESTATE REIT, Inc. and stakeholders, their impact on the economy, society, and the environment, and their economic practicality.

STEP
3

Discuss, validate, and approve at the Sustainability Promotion Committee
After discussing and verifying the appropriateness of the materiality identified in Step 2, a decision is made by the Sustainability Promotion Committee, chaired by the President and CEO of Heiwa Real Estate Asset Management Co., Ltd., which has the final authority in decision making.

Materiality

	Materiality	Basic Policy	Goals	Risk	Opportunities
Environment	■Environmentally friendly business operations	■Environmentally friendly business operations ■Climate change mitigation (improvement of building performance and equipment capacity for energy conservation) ■Adapting to climate change (flood control measures) ■Confirming the results of sustainability activities by obtaining external certification	■Shifting the power used in all properties to renewable energy-derived. Applies to jointly and partially owned properties whose power is managed by a management association as well as all other properties excluding those with special contracts. For residences, it applies all areas except for exclusively-owned spaces. Period: By end of November 2021 ■Approve the proposal for Task Force on Climate-Related Financial Disclosures (TCFD). Period: By end of December 2021 ■Adopt FSC paper and bring in vegetable oil-based ink. Applies to all documents sent to investors Period: By end of November 2021	■Lowered evaluation by tenants and investors who use sustainability as the basis of assessment ■Decreased tenant sales and increased property damage due to physical effects of climate change ■Delay in response to tighter environmental regulations and increase in energy-related costs ■Decreased tenant satisfaction	■Reduce operating costs by improving the environmental performance of owned properties, improve evaluation by environmentally conscious tenants and investors ■Reduce energy-related expenditure ■Increase tenant satisfaction and increase demand for rentals
Social	■Providing tenants with security and peace of mind ■Contributing to local communities ■Creating a rewarding work environment	■Tenants: Improving tenant satisfaction and increasing the value of properties under ownership by providing safety and security through barrier-free and disaster preparedness measures ■Local community: Managing properties that help solve problems faced by local communities and that create livable urban developments, by attracting childcare, healthcare, and government facilities ■J-REIT industry: Fostering the future investor base and contributing to the development of the J-REIT industry through J-REIT industry educational activities ■PM, BM: Promoting sustainability in cooperation with PM companies and operators that manage working assets ■Executives: Creating strong business results through employees’ healthy minds and bodies and enhanced expertise, by managing health, improving the workplace environment, enhancing work-life balance, and providing support to undergo training and obtain qualifications	■Conduct environmental training for PM Companies. Applies to all PM companies dealing in properties. Period: Simultaneously once a year ■Practice health management Includes improving working environment, introducing stress checks, conduct employee satisfaction surveys, achieve a paid leave acquisition rate at 70% or higher. Period: By end of March 2022	■Move-outs due to decline in tenant satisfaction, decrease in rental revenue ■Greater damage and increased recovery cost in the event of a disaster ■Decreased creditworthiness due to deteriorating relations with the community ■Reduced transparency of HEIWA REAL ESTATE REIT, Inc. from the viewpoint of unitholders and delay in disseminating information fosters distrust ■Decline in operational capacity due to outflow of human resource talent and lower quality of employees ■Decline in status of J-REITs as an investment product	■Increase in rental revenue due to fewer tenant move-outs ■Minimize human and material damage and lower recovery cost in the event of a disaster ■Strengthen relationships with local community to increase creditworthiness and improve the value of the area to enhance competitiveness of properties ■Improve transparency and foster a sense of trust in HEIWA REAL ESTATE REIT, Inc. from the perspective of unitholders and customers ■Secure talented human resources to ensure business growth and stability and enhance employees' skills to improve operational capacity ■Improve the status of J-REITs as an investment product, increase the presence of HEIWA REAL ESTATE REIT, Inc.
Governance	■Strengthening corporate governance	■Promoting initiatives to ensure corporate ethics across the board ■Establishing a governance system that ensures the impartiality and diversity of investment corporation directors ■Promoting investment management with an emphasis on unitholder returns ■Ensuring transparency	■Conduct corporate ethics training. Applies to all executives and employees at asset management companies. Period: Once every quarter ■Create BCP system including pandemic response. Period: By end of 2021 ■Write and publish ESG report. Write ESG report and publish on the website. Period: By end of May 2022	■Decline in creditworthiness and investors' evaluation ■Decline in evaluation by sustainability-focused investors ■Reduced motivation for portfolio management	■Improve investors' evaluation of our sound operational systems and enhance our credibility ■Improve investors' evaluation through recognition of broad-ranging initiatives and improvement in external assessment ■Improve motivation for portfolio management

Basic Policy

Goals

Risk

Opportunities

Applicable SDGs

Environment

■Environmentally friendly business operations

■Climate change mitigation (improvement of building performance and equipment capacity for energy conservation)

■Adapting to climate change (flood control measures)

■Confirming the results of sustainability activities by obtaining external certification

■Shifting the power used in all properties to renewable energy-derived.
Applies to jointly and partially owned properties whose power is managed by a management association as well as all other properties excluding those with special contracts. For residences, it applies all areas except for exclusively-owned spaces.

Period: By end of November 2021

■Approve the proposal for Task Force on Climate-Related Financial Disclosures (TCFD).

Period: By end of December 2021

■Adopt FSC paper and bring in vegetable oil-based ink.
Applies to all documents sent to investors

Period: By end of November 2021

■Lowered evaluation by tenants and investors who use sustainability as the basis of assessment

■Decreased tenant sales and increased property damage due to physical effects of climate change

■Delay in response to tighter environmental regulations and increase in energy-related costs

■Decreased tenant satisfaction

■Reduce operating costs by improving the environmental performance of owned properties, improve evaluation by environmentally conscious tenants and investors

■Reduce energy-related expenditure

■Increase tenant satisfaction and increase demand for rentals

Social

■Providing tenants with security and peace of mind

■Contributing to local communities

■Creating a rewarding work environment

■Tenants: Improving tenant satisfaction and increasing the value of properties under ownership by providing safety and security through barrier-free and disaster preparedness measures

■Local community: Managing properties that help solve problems faced by local communities and that create livable urban developments, by attracting childcare, healthcare, and government facilities

■J-REIT industry: Fostering the future investor base and contributing to the development of the J-REIT industry through J-REIT industry educational activities

■PM, BM: Promoting sustainability in cooperation with PM companies and operators that manage working assets

■Executives: Creating strong business results through employees’ healthy minds and bodies and enhanced expertise, by managing health, improving the workplace environment, enhancing work-life balance, and providing support to undergo training and obtain qualifications

■Conduct environmental training for PM Companies.
Applies to all PM companies dealing in properties.

Period: Simultaneously once a year

■Practice health management
Includes improving working environment, introducing stress checks, conduct employee satisfaction surveys, achieve a paid leave acquisition rate at 70% or higher.

Period: By end of March 2022

■Move-outs due to decline in tenant satisfaction, decrease in rental revenue

■Greater damage and increased recovery cost in the event of a disaster

■Decreased creditworthiness due to deteriorating relations with the community

■Reduced transparency of HEIWA REAL ESTATE REIT, Inc. from the viewpoint of unitholders and delay in disseminating information fosters distrust

■Decline in operational capacity due to outflow of human resource talent and lower quality of employees

■Decline in status of J-REITs as an investment product

■Increase in rental revenue due to fewer tenant move-outs

■Minimize human and material damage and lower recovery cost in the event of a disaster

■Strengthen relationships with local community to increase creditworthiness and improve the value of the area to enhance competitiveness of properties

■Improve transparency and foster a sense of trust in HEIWA REAL ESTATE REIT, Inc. from the perspective of unitholders and customers

■Secure talented human resources to ensure business growth and stability and enhance employees' skills to improve operational capacity

■Improve the status of J-REITs as an investment product, increase the presence of HEIWA REAL ESTATE REIT, Inc.

Governance

■Strengthening corporate governance

■Promoting initiatives to ensure corporate ethics across the board

■Establishing a governance system that ensures the impartiality and diversity of investment corporation directors

■Promoting investment management with an emphasis on unitholder returns

■Ensuring transparency

■Conduct corporate ethics training.
Applies to all executives and employees at asset management companies.

Period: Once every quarter

■Create BCP system including pandemic response.

Period: By end of 2021

■Write and publish ESG report.
Write ESG report and publish on the website.

Period: By end of May 2022

■Decline in creditworthiness and investors' evaluation

■Decline in evaluation by sustainability-focused investors

■Reduced motivation for portfolio management

■Improve investors' evaluation of our sound operational systems and enhance our credibility

■Improve investors' evaluation through recognition of broad-ranging initiatives and improvement in external assessment

■Improve motivation for portfolio management