Environment
Climate Change
Mid- and Long-term Goals
Mid- and Long-term Goals
JMF has set targets for greenhouse gas emissions reduction toward realization of 2050 net-zero. Based on validation by a third party specialized institution, a target has been set for reduction of absolute GHG emissions by 42% compared to FY2020 levels by 2030. The target has been certified as a science-based target by the Science Based Targets initiative (SBTi).
Targets for GHG Emissions Reduction
Reduce absolute Scope 1+2 emissions by 42% by 2030 (compared with 2020)
Aim for net-zero absolute GHG emissions throughout the entire value chain by 2050
SBTi Certified Target
Please refer to Award from External Party for further details.
KJR Management, an asset manager for JMF, is highly aware of the importance of sustainability and is proactively making efforts to incorporate material sustainability considerations based on its Sustainability Strategy of “Practicing Responsible Property Investment and Contributing to Solve Global Issues” in order to realize its mission: “Always Create New Value for People, the Community, and the World.”
The asset manager has in place a Sustainability Promotion Structure to oversee and monitor its sustainability activities, including for environmental issues related to climate change and natural capital.
Developments Related to Climate Change
The Paris Agreement is an international framework on climate change adopted in 2015. Its long-term goal is stated as holding the increase in the global average temperature to well below 2ºC above pre-industrial levels and sharing efforts to limit the temperature increase to 1.5ºC, and to achieve effectively zero greenhouse gas emissions.
Actions related to climate change accelerated in 2021. For example, the U.S.-hosted Leaders Summit on Climate was held, and climate change was discussed as the most important issue in the G7 Summit. In addition, in the 6th Evaluation Report, Working Group 1 Report published on August 2021, it was affirmed that “it is unequivocal that human influence has warmed the atmosphere.” Thus, it was revealed that significant reductions in greenhouse gas emissions are urgently needed to achieve the Paris Agreement goals. Under such circumstances, the 26th Climate Change Conference of the Parties (COP26) was held. The final agreement clearly states that the conference “reaffirms the goal to pursue efforts to limit the temperature increase to 1.5ºC,” indicating that not only governments but also industries will need to consider measures for the 1.5ºC target going forward.
Policy on Initiatives for Sustainability
Based on the Responsible Property Investment Policy (established in June 2013, renamed to "Sustainability Policy“ in September 2023), the asset manager for JMF implements RPI (Responsible Property Investment) that integrates environmental, social, and governance elements into property investment. This concept of RPI is incorporated into and carried out throughout the entire period of funds’ investment and management processes. Owning and managing properties in an environmentally-friendly and socially responsible manner adds value to an investment by limiting the risks of regulatory non-compliance and losing its competitive position in the market, by making a property more appealing to tenants and purchasers, and by reducing expenses and improving returns. Therefore, we believe that this is an important strategy for us. We also believe that the strategy will bring about a more desirable result for our environment and society.
In addition, the asset manager established the Environmental Charter in June 2013, which sets out our environmental principles and action plans.
Please refer to the Environmental Charter for details.
Response toward Climate Change
The asset manager is highly aware of the importance of sustainability and proactively makes efforts to achieve it based on the idea of practicing Responsible Property Investment and helping to solve global issues to realize its mission: “Always Create New Value for People, the Community, and the World.” Global warming is becoming more severe with increasing economic activities, and various researches have made clear that this leads to abnormal weather such as torrential rains, floods, and droughts.
The asset manager’s mission is “creating, through real estate investment management, new demand in our society and new value that exceeds people’s expectations.” To achieve that mission, it is necessary to create a sustainable society, and it recognizes that the shift to a low-carbon society is a social responsibility required from long-term management.
The asset manager expressed support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)* in August 2019 and has been advancing initiatives based on the recommendations.
- In its final report, the TCFD recommends that climate-related risks and opportunities be disclosed with respect to four areas: governance, strategy, risk management, and metrics and targets.
- From 2024, the International Sustainability Standards Board (ISSB) of the IFRS Foundation took over the monitoring of the progress of companies’ climate-related disclosures from the TCFD.
Information Disclosure Based on TCFD and TNFD Recommendations
Information Disclosure Based on TCFD and TNFD Recommendations
Governance
System of Supervision by the Board of Directors of the asset manager / the investment corporations
The matters resolved by and reported to the Sustainability Committee chaired by the Chief Sustainability Officer (CSO) are overseen and supervised by being reported as needed to the Board of Directors, which meets at least once every three months and is chaired by the President of the asset manager, as well as the Board of Directors of the investment corporation, which meets at least twice a month in principle.
The Sustainability Committee
The Sustainability Committee, which held once a quarter in principle, identifies material risks and opportunities related to sustainability including climate change and natural capital, and plays a central role in sustainability activities by resolving policies, strategies, systems, and sustainability goals and monitoring performance.
For details, please refer to the asset manager’s “Sustainability Promotion Structure”.
Risk Management
Risk Management
Organizational Process of Identifying and Evaluating Environment-related Risks
Dependencies and impacts as well as risks and opportunities on climate change and natural capital are sorted out in consideration of the asset manager’s business activities and then reviewed for the investment corporation, led by the sustainability staff of each division. Dependencies and impacts as well as identified risks and opportunities, along with their degree of impact, are reported to, and discussed and confirmed by the Sustainability Committee.
Process of Managing Natural Capital-related Risks and Organizational Initiatives
The asset manager led by the person in charge of sustainability issues, holds meetings (hereinafter referred to as "subcommittees") as necessary to discuss and examine in detail sustainability-related issues and promotion methods at the working level, either within the division or in cooperation with other divisions. Through the subcommittees, individual issues are discussed, and information is shared to raise awareness and understanding of the issues among those in charge, and to integrate sustainability considerations into the daily investment and management process.
Matters discussed and considered by the subcommittees are reported to the Sustainability Committee by each division, and the Sustainability Committee monitors that progress.
Moreover, the investment corporation collects and monitors monthly environmental data for properties. To work on initiatives for environmental matters, including metrics and targets and efforts to address climate change, and collect environmental data, we have established an environmental management system and strive to continually strengthen and improve our initiatives by implementing a PDCA cycle.
Integration into Overall Risk Management
The asset manager operates the Risk Management Committee, in which senior management personnel serve as members. The Committee grasps and investigates matters related to major risks and formulates countermeasures and management policies. It checks the risks and opportunities affecting business operations, including climate change, at each division once every three months using a Risk Control Matrix (RCM), and reports to the committee for evaluation and management.
Strategy
Information Disclosure Based on TCFD Recommendations
Strategy
Scenario analysis based on climate-related scenarios
In examining the medium- to long-term financial impact of climate change, we assume world views surrounding J-REIT Industry (including “JMF”) based on both 4°C and 1.5°C scenarios related to climate.
[Scenarios envisioned by JMF and their impact on JMF]
| 4°C scenario | Scenario assuming that initiatives for decarbonization are not to be further enhanced and disasters associated with climate change will become more serious. | |
|---|---|---|
| Transition risk | As a result of the lack of measures beyond the current mitigation measures, no new regulations are introduced or strengthened compared to the 1.5°C scenario. It is assumed that stakeholders do not have a high level of interest in environmentally friendly measures. | |
| Physical Risk | As a result of a significant rise in temperatures and more intense rainfall, higher utility costs and flood damage to properties are expected, and measures focusing on disaster response are likely to be required. | |
| 1.5°C scenario | Scenario assuming that transition to a decarbonized society is to be socially reinforced and companies are expected to be more environmentally conscious. | |
|---|---|---|
| Transition Risk | Various policies and regulations, including the introduction of a carbon tax, will be strengthened, and environmental consideration and reporting will be required by stakeholders as well as evaluation based on the progress of initiatives. In the real estate sector, renewal to high-efficiency technology with low emissions and adoption of renewable energy, etc. will be required. |
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| Physical Risk | Physical risk is expected to be less severe and more limited than in the 4°C scenario. | |
Referenced climate change-related scenarios
| Risk | Sources | 4°C scenario | 1.5°C scenario | |
|---|---|---|---|---|
| Transition Risk | Risks associated with changes in policies and regulations, technology, market, and reputation, arising from the transition to a decarbonized society | IEA (International Energy Agency) World Energy Outlook 2023 |
IEA STEPS | IEA NZE2050 |
| Physical Risk | Risks resulting from the consequences of changes in the climate itself | IPCC (Intergovernmental Panel on Climate Change) Sixth Report |
IPCC SSP5-8.5 | IPCC SSP1-1.9 |
Scenario and Analysis
World view assumed under 4°C scenario
World view assumed under 1.5°C scenario
Financial impact study and response measures
JMF assesses the financial impact on the entire portfolio based on climate change-related scenarios, with 2030 as the medium term and 2050 as the long term. Based on the assessment results, JMF's efforts and measures to respond to potential risks and opportunities are as described below.
TCFD Scenario Analysis (Qualitative Analysis)
This table can be scrolled left and right.
| Classification | Risk / Opportunity Items | Financial impact | JMF’s efforts and measures | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Change in cash flow (qualitative expression) | Risk / Opportunity | 4°C scenario | 1.5°C scenario | ||||||
| Medium term 2030 | Long term 2050 | Medium term 2030 | Long term 2050 | ||||||
| Transition Risks / Opportunities | Policy and Regulations | Increase in legal compliance costs | Increase in CO2 emissions costs due to introduction of CO2 emissions regulations and carbon tax | Risk | Small | Small | Middle | Large |
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| Increase in cost of acquiring environmental certifications/energy conservation ratings | Risk | Small | Small | Small | Middle |
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| Increase in building management outsourcing costs due to increase in PM and BM companies' work to comply with laws and regulations | Risk | Small | Small | Small | Small |
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| Improved competitiveness of properties by complying with laws and regulations | Opportunity | Small | Small | Middle | Large |
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| Technology | Diffusion of low-carbon / energy-saving technologies | Increase in various costs for ZEB conversion | Risk | Small | Small | Middle | Middle |
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| Increased costs associated with retrofitting low-carbon and energy-efficient facilities | Risk | Small | Small | Small | Middle |
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| Reduction of utility costs through ZEB and energy-saving construction | Opportunity | Small | Small | Middle | Large |
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| Market | Increased social importance regarding the environmental performance of buildings | Decreased rental income due to decreased needs and occupancy rates for properties with low environmental performance (e.g., not certified, not energy efficient, etc.) | Risk | Small | Small | Middle | Middle |
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| Increase in appraised value and average rent for properties with high environmental performance | Opportunity | Small | Small | Middle | Middle | ||||
| Lower financing costs through green finance | Opportunity | Small | Small | Middle | Middle |
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| Increasing number of companies going carbon neutral | Increase in renewable energy installation and response costs | Risk | Small | Small | Middle | Middle |
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| Reputation | Increased importance of transition risk | Increased cost of financing from investors and financial institutions due to the assessment of high transition risk | Risk | Small | Small | Small | Middle |
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| Improved reputation for transition risk response will improve the brand value of owned properties in response to climate change and increase rental income through improved use by tenants and facility users | Opportunity | Small | Small | Small | Middle |
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| Physical Risks / Opportunities | Acute | Increase in typhoons, torrential rain, flooding and inundation | Increase in repair costs, proactive measures and property insurance premiums due to flooding of owned properties | Risk | Small | Large | Small | Small |
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| Decrease in property values of properties at high risk of flooding | Risk | Small | Middle | Small | Small | ||||
| Decrease in rent from tenants and percentage rent from commercial facilities due to loss of business opportunities due to flooding of owned properties | Risk | Small | Middle | Small | Small |
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| Increased work by PM and BM companies related to BCP, such as evacuation drills and disaster prevention stockpiling, and also increased building management outsourcing costs | Risk | Small | Small | Small | Small | ||||
| Gaining market competitiveness by increasing the number of tenants who appreciate BCPs for climate change and the comfort and safety of real estate | Opportunity | Small | Middle | Small | Small | ||||
| Chronic | Progression of average temperature increase | Increased air conditioning operation, maintenance and repair costs due to increased demand for cooling | Risk | Small | Middle | Small | Small |
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| Increase in utilities costs due to higher energy use | Risk | Small | Middle | Small | Small | ||||
| Progressive sea level rise | Decrease in property values of properties at high risk of flooding | Risk | Small | Middle | Small | Small |
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| Repair costs and loss of business opportunities due to flooding of owned properties | Risk | Small | Middle | Small | Small | ||||
Scenario Analysis (Quantitative Analysis)
This table can be scrolled left and right.
| Classification | Risk / Opportunity Items | Financial impact | JMF’s efforts and measures | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Change in cash flow (qualitative expression) | Risk / Opportunity | 4°C scenario | 1.5°C scenario | ||||||
| Medium term 2030 | Long term 2050 | Medium term 2030 | Long term 2050 | ||||||
| Transition Risks / Opportunities | Policy and Regulations | Increase in legal compliance costs | Increase in CO2 emissions costs due to introduction of CO2 emissions regulations and carbon tax | Risk | ▲12 | ▲19 | ▲411 | 0 |
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| Increase in cost of acquiring environmental certifications/energy conservation ratings | Risk | － | － | ▲9 | ▲16 |
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| Technology | Diffusion of low-carbon / energy-saving technologies | Increased costs associated with retrofitting low-carbon and energy-efficient facilities | Risk | － | － | ▲126 | ▲152 |
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| Reduction of utility costs through ZEB and energy-saving construction | Opportunity | － | － | 51 | 90 |
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| Market | Increased social importance regarding the environmental performance of buildings | Increase in appraised value and average rent for properties with high environmental performance | Opportunity | － | － | 3,071 | 5,419 |
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| Lower financing costs through green finance | Opportunity | － | － | 5 | 9 |
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| Physical Risks / Opportunities | Acute | Increase in typhoons, torrential rain, flooding and inundation | Increase in repair costs, proactive measures and property insurance premiums due to flooding of owned properties | Risk | ▲204 | ▲283 | ▲196 | ▲204 |
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| Decrease in rent from tenants and percentage rent from commercial facilities due to loss of business opportunities due to flooding of owned properties | Risk | ▲111 | ▲111 | ▲55 | ▲55 |
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| Compensation for losses by insurance | Opportunity | 75 | 104 | 72 | 75 |
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- The financial impact amounts of the calculated transition and physical risks/opportunities are estimated amounts based on internal carbon pricing and external reports published by international organizations and third parties. Therefore, we cannot guarantee the accuracy of the figures. Also, the response measures are based on assumptions, and decisions to implement them have not been made.
- In the quantitative analysis, the impact is calculated based on the assumption that targets are achieved or response measures are implemented.
Indexes and Goals
Indexes and Goals
JMF has set targets for greenhouse gas emissions reduction toward realization of 2050 net-zero target. Based on validation by a third party specialized institution, a target has been set for reduction of absolute GHG emissions by 42% compared to FY2020 levels by 2030. The target has been certified as a science-based target by the Science Based Targets initiative (SBTi).
GHG Emissions Reduction Targets
- Reduce absolute Scope 1+2 emissions by 42% by 2030 (compared to 2020) SBT certified
- Aim for net-zero absolute GHG emissions throughout the entire value chain by 2050 SBT certified
- SBTi certified target
For details of SBTi, please see.
| FY2020 | FY2021 | FY2022 | FY2023 | Target | ||
|---|---|---|---|---|---|---|
| Scope1 | 5,608 | 5,135 | 5,542 | 5,302 |  |
SBT certified 2030 Reduce absolute Scope 1+2 emissions Scope2 (Market Based) by 42%* |
| Scope2 (Market Based) | 29,884 | 24,633 | 22,061 | 17,558 | ||
| Scope1+2 | 35,492 | 29,768 | 27,602 | 22,860 | ||
| Scope3 | 232,446 | 214,579 | 206,297 | 236,769 | |
2030 Scope 3 total emissions calculate and reduce* |
| Category 1 Purchased goods and services | 16,998 | 17,110 | 16,975 | 17,207 | ||
| Category 2 Capital goods | 30,182 | 23,994 | 28,757 | 32,943 | ||
| Category 3 Fuel- and energy-related activities not included in Scope 1 or 2 | 6,716 | 6,467 | 6,334 | 6,215 | ||
| Category 5 Waste generated in operations | 13,017 | 14,478 | 14,374 | 16,074 | ||
| Category 6 Business travel | 1 | 0 | 0 | 0 | ||
| Category 7 Employee commuting | 3 | 1 | 1 | 1 | ||
| Category 12 End of life treatment of sold products | 0 | 0 | 0 | 0 | ||
| Category 13 Downstream leased assets | 165,531 | 152,527 | 139,855 | 164,329 | ||
| Category 15 Investments | 0 | 0 | 0 | 0 | ||
| Total | 267,938 | 244,347 | 233,899 | 259,629 | |
SBT certified 2050 Net-zero |
- Compared to FY2020
For results and progress since 2015, please refer to “Environmental Performance”. For other indexes and goals, please refer to “Materiality and KPIs” in Sustainability.