Green Finance

Green Finance Framework

The Heiwa Real Estate Group (the “Group”), to which HEIWA REAL ESTATE Asset Management CO., LTD. (the “Asset Management Company”) belongs, is aware of the weight of its social responsibilities and strictly complies with any and all laws, regulations and rules as a company pursuing the realization of an affluent urban environment by providing comfortable offices and living spaces. Moreover, the Group aims to be a company that perpetually earns the trust of society by observing the highest ethical standards. HEIWA REAL ESTATE REIT, Inc. (the “Investment Corporation”) strives to contribute to the development of a sustainable society and accomplish the medium- to long-term improvement of unitholder value through corporate management that takes into consideration the environment, society, and governance (ESG) in accordance with the basic policy established in the Group’s Code of Conduct.
The Investment Corporation and the Asset Management Company have decided to create a green finance framework in order to further pursue sustainability initiatives such as procuring funds through green finance and aim to strengthen its funding base by expanding the range of investors and lenders who are interested in ESG investment and financing.
For details, please see the website of Japan Credit Rating Agency, Ltd. (JCR).

Eligibility criteria for the targets of investment in green finance

Funds raised via green bonds or green loans (“green finance”) will be appropriated to acquire green buildings that meet the following eligibility criteria, conduct repairs, introduce or acquire renewable energy facilities or refinance these funds.

Eligibility criteria

（１）Green buildings

Properties that have acquired or renewed in the past or have plans to acquire or renew in the future certification of any of the third-party certification bodies described in (i) - (iv) below

① DBJ Green Building Certification: Three or more stars

② CASBEE for Real Estate Certification: B+ rank or higher

③ BELS Evaluation (FY2016 standard): Three or more stars

*The following levels in the BELS Evaluation (FY2024 standard) for logistics facilities except those with the BEI that exceeds 0.75.

Non-residential buildings: Level 4 or higher

Residential buildings not equipped with renewable energy facilities: Level 3 or higher

Residential buildings equipped with renewable energy facilities: Level 3 or higher

④ LEED Certification: Silver or higher (If LEED BD+C is applied, it should be ver.4 or newer)

（２）Repairs of facilities, etc. that satisfy any of the following

(i) Repairs of facilities, etc. of real estate managed for the beneficial improvement of the environment (repairs which will likely result in an improvement effect of no less than 30% compared to before the repairs) in terms of energy efficiency, reduction of greenhouse gas (GHG) emissions, water consumption performance, waste reduction, etc.

(ii) Repairs that achieve the improvement of one or more level in any of the certifications described in (1) in Eligibility criteria above and the renewal or acquisition of environmental certification

（３）Renewable energy

Introduction or acquisition of facilities for renewable energy

Financing method and target of investment

（１）Financing method

Investment corporation bonds, borrowings

（２）Target of investment

Funds for acquisitions or repairs that meet the eligibility criteria, or funds to refinance these funds

Process for project selection

（１）People involved in project selection

Responsible people in the Planning & Finance Department of the Asset Management Company evaluate and select projects which will use the procured funds, and the responsible people examine whether the projects satisfy the eligibility criteria.

（２）Process for project selection

Responsible people in the Planning & Finance Department create a proposal for raising funds through green finance for a target project. This proposal is submitted for deliberation and approval by the Investment Committee, Compliance Committee and the Board of Directors, followed by final approval by the board of officers of the Investment Corporation. In addition, a report on the project selection process is submitted to the Sustainability Promotion Committee upon final approval.

The negative impact of green projects on the environment and methods for addressing this impact

（１）Assumed risks

Green buildings
Defects in properties (use of environmental/soil contaminants), trouble with neighborhood residents, etc.
Repairs
Matters that are harmful to neighborhood residents such as noise, vibrations, etc. caused by construction

（２）Risk mitigation measures

Performance of due diligence at the time of acquisition, implementation of on-site examinations of properties, etc. (The Real Estate Investment Department and the Compliance & Risk Management Office of the Asset Management Company perform due diligence using the compliance check sheet that lists the items to be confirmed and the operational guidelines check sheet. The compliance check sheet and the operational guidelines check sheet are circulated as an attachment to approval documents at the time of the acquisition of properties. After the status of due diligence is confirmed, the matter is submitted for deliberation and approval by the Investment Committee and the Compliance Committee, followed by the final approval of the Board of Directors (the board of officers of the Investment Corporation in the case of an interested party transaction))
If the risk of a negative impact is found during due diligence, it is our policy to avoid or mitigate the risk by implementing corrective measures such as repairs. If the impact of risks to the environment is larger than the improvement effect of the corrective measures such as repairs, we will work to avoid and mitigate risks by suspending the implementation of the green finance project, changing the content of the repairs or implementing other measures. Repairs are performed to appropriately address anticipated risks in accordance with relevant laws and regulations.

Selection criteria for eligible green projects and method for disclosing the selection process

We plan to disclose our selection criteria for eligible green projects and selection process either on the Investment Corporation's website, via a press release from the Investment Corporation, in supplemental shelf registration documents or in JCR Green Finance Evaluation Reports.

Plans for use of procured funds

All procured funds are promptly appropriated for the intended uses defined in the purpose of use of the funds.

Method of the tracking management of the procured funds

Procured funds are deposited in relevant accounts. The Asset management Company issues instructions to the asset custodian when the need to transfer funds arises, such as the acquisition of eligible green assets, the implementation of repairs, the introduction of renewable energy facilities, the refinancing of borrowings used to acquire eligible green assets or investment corporation bonds. The asset custodian settles these transactions by transferring funds based on the instructions. The approval of the General Manager of the Business Planning Division is required to transfer funds. A management ledger is prepared by persons in charge at the Planning & Finance Department to record amounts of procured funds and status of use for each transaction, and is retained upon approval of the General Manager of the Planning & Finance Department.

Internal and external audits regarding tracking management

The Asset Management Company regularly performs internal audits and undergoes external audits. The Investment Corporation undergoes external audits conducted by the accounting auditor on all aspects of accounting including matters regarding financing.

Method for managing unappropriated funds

If there are unappropriated funds, the Asset Management Company manages the status of use of the funds procured for green finance per portfolio unit, as described below. The upper limit of green finance will be the amount of debt (hereinafter, “amount of eligible green debt”), which is calculated by multiplying total sum of the total acquisition price of the eligible green assets held by the Investment Corporation and the total amount expended under (2) and (3) in Eligibility criteria above by fiscal-end LTV (Loan-to-Value), calculable at the time of verification, and we manage the outstanding balance of green finance to ensure that it will not exceed the amount of eligible green debt.

Status of disclosure of appropriation of funds

The Investment Corporation plans to disclose the following content on its website annually.

・Status of the appropriation of the procured funds, for the period until the time when all the procured funds are appropriated to projects that satisfy the eligibility criteria.

・That the outstanding balance of green finance does not exceed the upper limit of eligible green debt as long as the balance exists.

*If the status of the appropriation of procured funds changes significantly from the initial status and there are unappropriated funds ex post facto, the matter will be disclosed on the website of the Investment Corporation after obtaining the approval of the Asset Management Company.

Method and frequency of disclosing impact reporting

The Investment Corporation plans to disclose impact reporting within the limits of practicability on its website annually.

KPIs (Key Performance Indicators) in impact reporting

（１）Reporting on green buildings

(i) Number of properties

(ii) Total floor area

(iii) By type of certification

(iv) Certification rank

(v) Energy consumption, GHG (CO2) emission, water consumption, and waste disposal for the properties held as a whole

（２）Reporting on repairs, etc.

Value of one of the following indicators before and after repairs or reduction rate

(i) Energy consumption

(ii) GHG emissions

(iii) Water consumption

（３）Reporting on renewable energy

Any of the following

(i) Volume of power generated

(ii) Amount of reduction of GHG emissions

Please click here for Acquisition of External Assessment and External Rating.
Please click here for impact reporting.

Summary of Investment Green Finance

Summary of Investment Corporation Bonds

As of Nov 30,2024

This table can be scrolled sideways.