Second-Party Opinion

Comforia Residential REIT, Inc.
Green Bond Framework

Evaluation Summary
Sustainalytics is of the opinion that the Comforia Residential REIT, Inc. (“CRR” or the“Investment corporation”) Green Bond Framework (The “Framework”) aligns with thefour core components of the Green Bond Principles 2018 (GBP). This assessment isbased on the following:

Evaluation dateJuly 7, 2020

Issuer Location

Tokyo, Japan

Report Sections
The eligible category for the use of proceeds
Green Buildings, is aligned with those recognized by the GBP.
Sustainalytics considers that the eligible category will lead to positiveenvironmental impacts and advance the UN Sustainable
Development Goals (SDGs), specifically SDG 9.
CRR’s projects will be
evaluated and selected by the Investment Committee of TLC REITManagement Inc. (TRM), the asset manager for the Investment
corporation. The TRM Investment Committee is composed of the
President & CEO, Director, and General Managers of relevant
departments and divisions. CRR’s process for evaluating andselecting projects is in line with market practices.
CRR's green bond proceeds will be
tracked annually by TRM using an internal file, as long as the green
bonds are outstanding. TRM will ensure that the amount ofoutstanding green bonds do not exceed the sum of the total bookvalue of Eligible Green Projects and cost of refurbishments that meetthe Eligibility Criteria. Pending allocation, unallocated funds will beheld in cash or cash equivalents. The Investment corporation’s
process to manage proceeds is in line with market practices.

Introduction .................................................. 1
Sustainalytics’ Opinion ................................ 3
Appendices .................................................. 9

For inquiries, contact the Sustainable
Finance Solutions project team:
Wakako Mizuta (Tokyo)
Project Manager
wakako.mizuta@sustainalytics.com(+81) 3 4578 7516
Marie Toyama (Tokyo)
Project Support
marie.toyama@sustainalytics.com(+81) 3 4510 7394

CRR has committed to disclose annually, on its website,an allocation report until the proceeds are fully allocated as well as
an impact report as long as the green bonds are outstanding. The
disclosure on allocation will include the amount of financing andrefinancing of Eligible Green Projects and/or refurbishments, theamount of unallocated proceeds, allocation schedule, and themethod to manage unallocated proceeds. As environmental impact
metrics, qualitative metrics such as green building certifications andlevels achieved and quantitative metrics such as energy consumption
will be disclosed. Sustainalytics considers the Investment
corporation’s reporting to be in line with market practices.

Alignment with Japan’s Green Bond Guidelines 2020
Sustainalytics is of the opinion that the Framework is in line with Japan’s Green Bond Guidelines 2020. The guidelines communicate what
an issuer is expected to do to issue a credible green bond. Sustainalytics assessed the alignment between the Framework and the ‘should’
items outlined in the Japan’s Green Bond Guidelines 2020.
© Sustainalytics 2020

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Comforia Residential REIT, Inc. Green Bond Framework

Introduction
Founded in June 2010, CRR was listed on the Real Estate Investment Trust Securities Market of the Tokyo
Stock Exchange in February 2013. The Investment corporation invests in and manages rental residents mainlyin the Tokyo metropolitan area. Its portfolio as of the end of March 2020 stood at 133 properties, with a totalacquisition price of JPY 242.5 billion. 1 CRR outsources its asset management to TRM, a wholly owned
subsidiary of Tokyu Land Corporation, a comprehensive real estate company.
With the intention of issuing green bonds, CRR has developed the Comforia Residential REIT Green Bond
Framework (hereinafter referred to as the “Framework”) and plans to allocate the green bond proceeds tofinance or refinance projects that will reduce environmental impacts of the Investment corporation’s portfolio,
which is composed of domestic residential properties. The Framework defines eligibility criteria in thefollowing area:
1.

Green Buildings

CRR engaged Sustainalytics to review the Framework, dated May 2020, and provide a second-party opinion
on the Framework’s environmental credentials and its alignment with the GBP 2 and Japan’s Green Bond
Guidelines 2020.3 A summary overview of the Framework has been provided in Appendix 1.
Scope of work and limitations of Sustainalytics Second-Party Opinion
Sustainalytics’ Second-Party Opinion reflects Sustainalytics independent 4 opinion on the alignment of thereviewed Framework with the current market standards and the extent to which the eligible categories are
credible and impactful.
As part of the Second-Party Opinion, Sustainalytics assessed the following:•••

The Framework’s alignment with the GBP, as administered by ICMA, and Japan’s Green Bond
Guidelines 2020;
The credibility and anticipated positive impacts of the use of proceeds;
The alignment of the issuer’s sustainability strategy and performance and sustainability risk
management in relation to the use of proceeds.

For the use of proceeds assessment, Sustainalytics relied on its internal taxonomy, version 1.4.1, which isinformed by market practice and Sustainalytics’ expertise as an ESG research provider.
As part of this engagement, Sustainalytics held conversations with various members of TRM to understandthe sustainability impact of their business processes and planned use of proceeds, as well as managementof proceeds and reporting aspects of the Framework. TRM representatives have confirmed (1) they
understand it is the sole responsibility of TRM to ensure that the information provided is complete, accurate
or up to date; (2) that they have provided Sustainalytics with all relevant information and (3) that any provided
material information has been duly disclosed in a timely manner. Sustainalytics also reviewed relevant public
documents and non-public information.
This document contains Sustainalytics’ opinion of the Framework and should be read in conjunction with that
Framework.
Any update of the present Second-Party Opinion will be conducted according to the agreed engagement
conditions between Sustainalytics and CRR.
Sustainalytics’ Second-Party Opinion, while reflecting on the alignment of the Framework with market
standards, is no guarantee of alignment nor warrants any alignment with future versions of relevant market
standards. Furthermore, Sustainalytics’ Second-Party Opinion addresses the anticipated impacts of eligible
1 Comforia Residential REIT, Inc., “Portfolio Feature”, at: https://www.comforia-reit.co.jp/en/portfolio/data.html
2 The Green Bond Principles are administered by the International Capital Market Association and are available at https://www.icmagroup.org/green-social-and-sustainability-bonds/green-bond-principles-gbp/.
3
Ministry of the Environment, Japan, “Green Bond Guidelines, 2020”, at: http://www.env.go.jp/policy/guidelines_set_version_with%20cover.pdf
4 When operating multiple lines of business that serve a variety of client types, objective research is a cornerstone of Sustainalytics and ensuring analyst
independence is paramount to producing objective, actionable research. Sustainalytics has therefore put in place a robust conflict management frameworkthat specifically addresses the need for analyst independence, consistency of process, structural separation of commercial and research (andengagement) teams, data protection and systems separation. Last but not the least, analyst compensation is not directly tied to specific commercial
outcomes. One of Sustainalytics’ hallmarks is integrity, another is transparency.
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projects expected to be financed with bond proceeds but does not measure the actual impact. The
measurement and reporting of the impact achieved through projects financed under the Framework is the
responsibility of the Framework owner.
In addition, the Second-Party Opinion opines on the intended allocation of proceeds but does not guarantee
the realised allocation of the bond proceeds towards eligible activities.
No information provided by Sustainalytics under the present Second-Party Opinion shall be considered as
being a statement, representation, warrant or argument either in favour or against, the truthfulness, reliability
or completeness of any facts or statements and related surrounding circumstances that CRR has madeavailable to Sustainalytics for the purpose of this SPO.

Sustainalytics’ Opinion
Section 1: Sustainalytics’ Opinion on the Comforia Residential REIT, Inc. Green
Bond Framework
Sustainalytics is of the opinion that the Framework is credible and impactful, and aligns with the four corecomponents of the GBP. Sustainalytics highlights the following elements of the Framework:•

Use of Proceeds:- The eligibility category for the use of CRR’s green bond proceeds, Green Buildings, is recognizedby the GBP as a project category with positive environmental benefits. The allocation ofproceeds to Green Buildings will accelerate the achievement of the Investment corporation’s
medium-to-long-term targets for reducing the energy use intensity and the CO 2 emission
intensity by 1% per year on average, which have been set to address one of the key issues (the“Materiality”) faced by the Investment corporation in the area of sustainability. The allocation
will also contribute to the implementation of anti-climate change measures by society as awhole. Please refer to Section 3 for Sustainalytics’ assessment of environmental benefits
expected from the use of proceeds.
- The Eligibility Criteria A is met when at least one of the following certifications or recertifications
has been received: S, A, or B+ rank under the CASBEE (Comprehensive Assessment System for
Built Environmental Efficiency) certification; 5, 4, or 3 stars under the DBJ Green Building
Certification Program; or 5, 4, or 3 stars under the BELS (Building-Housing Energy-efficiency
Labeling System) certification. Furthermore, the Eligibility Criteria B is met when thecertifications and levels defined under the Eligibility Criteria A are achieved throughrefurbishments, or reduction of both its energy and water consumption by at least 20% areachieved. CRR has defined projects that meet the Eligibility Criteria A as “Eligible Green Projects,”
and intends to allocate green bond proceeds to the acquisition of Eligible Green Projects or
refurbishments that meet the Eligibility Criteria B.
- With regard to the Eligibility Criteria A, CRR has set the thresholds at any of the top three levelsof third-party green building certifications, as noted above. While Sustainalytics recognizes thatmarket practice is to allocate proceeds to green buildings that receive the top two levels ofcertifications as the market expects the proceeds to be allocated to green buildings with a higher
environmental performance, it considers that positive environmental impacts will be generated
by allocating proceeds to residential buildings that receive top three levels. (Please see
Appendix 2 for an overview and comparison of green-building certification schemes.)- With regard to the Eligibility Criteria B, CRR has set the thresholds at a reduction of at least 20%
in the energy and water consumption through a refurbishment project defined under the
Framework. Sustainalytics considers that the market prefers the proceeds to be allocated toprojects that reduce energy consumption by at least 20% to 30% and that CRR’s thresholds alignwith market practices.
- CRR intends to allocate the proceeds not only to new buildings but to existing ones. For
allocating proceeds to existing buildings, the framework has defined that the buildings havereceived certifications (Eligibility Criteria A) or completed the refurbishments (Eligibility CriteriaB) within 36 months prior to the bond’s payment date.
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Comforia Residential REIT, Inc. Green Bond Framework•

Project Evaluation and Selection:- The eligible green bond projects will be evaluated and selected by the TRM Investment
Committee, which discusses the management of CRR’s assets in line with the Eligibility Criteria
as to the use of proceeds. The Investment Committee of TRM, is composed of the President &CEO and Director of TRM, the Chief Division Officer of Comforia Management Division, theGeneral Manager of Asset Investment Department, the General Manager of Finance &Accounting Department, the General Manager of Corporate Planning & Administration
Department, the General Manager of Environmental Engineering Department, the General
Manager of Compliance Department, the General Manager of Asset Management Departmentin the Comforia Management Division, and the General Manager of the Strategy Department in
the Comforia Management Division. Sustainalytics considers the Investment corporation's
project evaluation and selection process to be in line with market practices.

•Management of Proceeds:- The proceeds of CRR's green bond will be tracked annually by TRM using an internal file, as longas the green bonds are outstanding. TRM will ensure that the amount of outstanding green
bonds do not exceed the sum of the total book value of Eligible Green Projects that meet the
Eligibility Criteria A and cost of refurbishments that meet the Eligibility Criteria B. CRR also plans
to allocate the total amount of proceeds raised through the green bond issuance immediately
to buildings that satisfy the Eligibility Criteria A or refurbishments that meet the Eligibility Criteria
B. Pending allocation, the Investment corporation commits to holding an amount equal to thatof unallocated funds in cash or cash equivalents. Sustainalytics considers the Investment
corporation's proceeds management process to be in line with market practices.

•

Reporting:- CRR will disclose allocation status annually on its website until the proceeds are fully allocated.
The disclosure will include the amount of Eligible Green Projects and/or refurbishments
financed/refinanced, and the amount of, allocation schedule for, and the method to manage,
unallocated proceeds as of the end of every January. The Investment corporation will also
disclose, as long as the green bonds are outstanding, the total book value of all the Eligible Green
Projects and the amount of outstanding green bonds as of the end of every January, and thereby
report that the outstanding amount of green bonds has not been in excess of the sum of thetotal book value of Eligible Green Projects and cost of refurbishments, defined in the Eligibility
Criteria.
- Additionally, CRR has committed to disclosing an impact report annually on its website, as longas the green bonds are outstanding. The disclosure will include a summary of Eligible Green
Projects, progress and levels of certifications, energy and water consumption by the Eligible
Green Projects, and the estimated rate of reduction (%) in the energy and water consumption
before and after refurbishment projects.
- Sustainalytics considers the Investment corporation’s allocation and impact reporting to be inline with market practices.

Alignment with Green Bond Principles 2018
Sustainalytics has determined that the Framework aligns to the four core components of the GBP. For detailed
information please refer to Appendix 3: Green Bond/Green Bond Programme External Review Form.

Alignment with Japan’s Green Bond Guidelines 2020
Sustainalytics is of the opinion that the Framework is in line with Japan’s Green Bond Guidelines 2020. The
guidelines communicate what an issuer should do to issue a credible green bond. Sustainalytics assessed
the alignment between the Framework and the ‘should’ items outlined in the Japan’s Green Bond Guidelines
2020.

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5

GBP and Japan’s Green Bond
Guidelines 2020

Alignment with GBP andwith Japan’s Green Bond
Guidelines 2020

Sustainalytics’ comments on alignment
with Japan’s Green Bond Guidelines
20205

1. Use of Proceeds

Yes

The green building projects, defined by
CRR as use of proceeds within the
Framework, are recognized by Japan’sGreen Bond Guidelines 2020 as projects
with environmental benefits. The
Investment corporation also provides, inthe Framework, explanations about
environmental risks associated with
Eligible Green Projects and its measures
to manage and mitigate such risks,
allowing investors to access in advance.
Furthermore, in the event that green
bonds will be issued for multiple times
to refinance an asset that requires longterm maintenance, CRR commits todisclosing the asset’s age, and to theextent possible the remaining useful life
and the amount to be refinanced at thetime of the bond issuance.

2. Process for Project Evaluationand Selection

Yes

In the Framework, CRR explains its
environmental targets it seeks toachieve through the issuance of green
bonds. The Framework also provides
Eligible Criteria for the use of proceeds
and explains that projects are evaluatedand selected by the TRM Investment
Committee, which is comprised of
TRM’s President & CEO, Director, andGeneralManagersofrelevant
departments.

3. Management of Proceeds

Yes

In the Framework, it is explained that aslong as the green bonds are outstanding,
TRM will annually manage and ensure
the amount of outstanding green bonds
do not exceed the sum of the total bookvalue of Eligible Green Projects and costof refurbishments that meet the
Eligibility Criteria by using an internal
file. CRR plans to allocate the total
amount of proceeds raised through thegreen bond issuance immediately to
Eligible Green Projects. Pending
allocation, the Investment corporation
also commits to holding an amountequal to that of unallocated funds incash or cash equivalents.

4. ReportingYes

In the Framework, CRR provides that it
will report on the allocation of proceeds
annually until the proceeds are fully
allocated and whenever there has been

For detailed comments on alignment with ICMA GBP, please see Appendix 3.
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Comforia Residential REIT, Inc. Green Bond Frameworka major change in the situation in atimely manner even after the full
allocation. The disclosure will include
the amount of Eligible Green Projects
and/or
refurbishments
financed/refinanced, and the amount of,allocation schedule for, and the method
to manage, unallocated proceeds as ofthe end of every January. The
Investment corporation will also
disclose, as long as the green bonds areoutstanding, the total book value of all
the Eligible Green Projects and theamount of outstanding green bonds asof the end of every January. It has also
committed to provide an annual impact
report as long as green bonds areoutstanding. Metrics to be disclosed in
the report include a summary of Eligible
Green Projects, certifications received
and their levels, and estimated rates of
reduction (%) in the energy and water
consumption
beforeandafter
refurbishment projects.

Section 2: Sustainability Strategy of CRR
Contribution of framework to Comforia Residential REIT, Inc.’s sustainability strategy
As one of their significant medium- to long-term environmental and social issues (the “Materiality”), CRR andTRM have raised the “reduction of environmental impact.” 6 To address this issue, CRR has set a goal of
reducing, on a medium- to long-term basis, the energy consumption intensity and the energy-induced CO2
emission intensity by an annual average of 1% for its entire portfolio and individual projects, in accordancewith the Act on the Rational Use of Energy (the “Energy Saving Act”).7 In addition, TRM, the asset manager for
CRR, has established its Sustainability Policies 8 and identified energy efficiency, decarbonization, water
efficiency, and waste reduction as four major items in the “Environmental Considerations” category, promisingthat it would undertake improvement efforts through its asset management operations. As its concrete
initiatives at residential properties, CRR is undertaking refurbishment projects that contribute to the energy
efficiency, such as switching to LED lights and replacement of air conditioners. 9 Further, as a result of
promoting green building initiatives, the Investment corporation received a third-party green building
certification for four of its properties.10
In view of CRR’s efforts to achieve sustainability through the goals and policies mentioned above,
Sustainalytics is of the opinion that the Investment corporation is well-positioned to issue green bonds.
Sustainalytics also views that the Investment corporation’s use of proceeds is consistent with its initiatives toreduce environmental impact caused by buildings in its portfolio, and will contribute to the achievement of
medium- to long-term environmental goals.
Well positioned to address common environmental and social risks associated with the projects
Sustainalytics recognizes that, while CRR’s Eligible Green Projects have clear environmental benefits, they
may potentially pose environmental and social risks associated with the development, operation andrefurbishment of buildings. Major risks include negative impact on the surrounding environment such as
destruction of the ecosystem, energy and water consumption and health effects on workers caused by the
6 Comforia Residential REIT, Inc., ”Materiality”, at :https://www.comforia-reit.co.jp/en/sustainability/materiality.html
7 Comforia Residential REIT, Inc., ”Examples of initiatives”, at : https://www.comforia-reit.co.jp/en/sustainability/examples.html
8 TLC REIT Management Inc., “Sustainability Initiatives” at:https://www.tokyu-trm.co.jp/en/sustainability/

9 Comforia Residential REIT, Inc., ”Examples of initiatives”, at : https://www.comforia-reit.co.jp/en/sustainability/examples.html
10

Comforia Residential REIT, Inc., ”Environmental Certification”, at : https://www.comforia-reit.co.jp/ja/sustainability/evaluation.html
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Comforia Residential REIT, Inc. Green Bond Framework
release of hazardous substances into the environment. The Investment corporation is working to reduce theserisks through the following systems and policies:In order to reduce environmental impact at the stage of building operation, CRR has committed to
Sustainalytics to monitor the energy consumption intensity, energy-induced CO2 emissions and water
consumption at properties to which green bond proceeds are allocated, within the monthly meeting of
Comforia Management Division attended by the General Manager of Asset Management Department,
Comforia Management Division and other members. Additionally, CRR has committed to Sustainalytics
that in case of finding an increase in environmental impact as a result of monitoring, CRR will investigate
the cause of the increase and take measures such as updating the facilities.



In its Sustainability Policies, TRM has committed itself to complying with environmental and social laws
and regulations and evaluating environmental and social risks including soil contamination, presence of
hazardous substances, status of waste management, and implementation of environmental impact
assessments when required by ordinances, during the due diligence process at the time of acquiring areal estate.11 With regard to hazardous substances, etc., that contain asbestos, polychlorinated biphenyl(PCB), or CFCs, CRR and TRM commits to reducing risks associated with occupational safety and healthat properties to which proceeds are allocated, by following appropriate procedures for controlling andtreating hazardous substances and complying with work standards that conform to relevant laws andregulations, including the "Occupational Safety and Health Act (Ordinance on Prevention of Health
Impairment due to Asbestos),” “Air Pollution Control Act,” and “Act on Securing the Recovery and
Destruction of Fluorocarbons Contained in Specified Products.”

In light of the systems and policies mentioned above, Sustainalytics is of the opinion that CRR is well
positioned to manage and reduce environmental and social risks associated with eligible projects.

Section 3: Impact of Use of Proceeds
The use of proceeds category, Green Buildings, defined in the Framework, is recognized by the GBP andJapan’s Green Bond Guidelines 2020 as a project category with positive environmental impact. Sustainalytics
explains why this project category generates positive environmental impact in Japan as follows:
Importance of promoting energy efficiency at residential buildings
In FY2018, the volume of CO2 emissions originated from residential buildings in the residential sector
accounted for 15.6% of Japan’s total CO2 emissions. 12 Compared to the 1990 level, the total energy
consumption by the residential sector increased by approx. 15%,13 which indicates that it is imperative toincrease energy efficiency at residential buildings, to reduce CO2 emissions in Japan. The Japanese
government has been strengthening its energy efficiency-related regulatory measures in a phased manner. In
2015, it enacted the “Act on the Improvement of Energy Consumption Performance of Buildings (Building
Energy Efficiency Act),”14 which requires medium- to large-scale residential buildings with an area of 300 m2
or more to file an energy efficiency plan. In 2019, the government made partial amendments to the Act by
issuing the “Revised Building Energy Efficiency Act,”15 which made it mandatory for small-scale residences toprovide explanations about their compliance with energy-saving standards.
In addition, in its Nationally Determined Contribution (NDC) under the Paris Agreement, 16 the Japanese
government made a commitment that Japan would reduce its greenhouse gas emissions by 26% by 2030
from 2013 levels. To achieve this, the government set a target of reducing the residential sector’s final energy
consumption and CO2 emissions by 27% and 39%, respectively.17 Energy saving measures to be implemented
collectively to achieve the target include the improvement of energy efficiency in newly-built residential

11 TLC REIT Management Inc., “Sustainability Initiatives” at: https://www.tokyu-trm.co.jp/en/sustainability/
12 Ministry of the Environment, “Japan’s National Greenhouse Gas Emissions in Fiscal Year 2018 (Final Figures) <Executive Summary>”, at:https://www.env.go.jp/press/files/en/829.pdf
13 Ministry of Land, Infrastructure, Transport and Tourism, “Future Energy Conservation Measures for Housing and Buildings (Second Report) (Reference
Material) (Japanese only)”, at: https://www.mlit.go.jp/common/001275971.pdf
14 Ministry of Land, Infrastructure, Transport and Tourism, “Overview of the Building Energy Efficiency Act (Detailed Explanatory Session) (Japaneseonly)”, at: https://www.mlit.go.jp/common/001178846.pdf
15
Ministry of Land, Infrastructure, Transport and Tourism, Housing Bureau, Housing Production Division, Building Environment Planning Office, “Outlineof Amendments to the Building Energy Conservation Law and Future Schedule, etc. (Japanese only)”,at :https://www.mlit.go.jp/jutakukentiku/shoenehou_assets/img/library/R1gaiyousetumeikaitext.pdf
16 "Submission of Japan’s Nationally Determined Contribution”, at :https://www.env.go.jp/press/files/jp/113675.pdf
17 Ministry of Land, Infrastructure, Transport and Tourism, “Energy Consumption Reduction Targets in the Global Warming Prevention Plan Based on the
Paris Agreement (Japanese only)”,at : https://www.mlit.go.jp/common/001270436.pdf
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Comforia Residential REIT, Inc. Green Bond Frameworkbuildings, promotion of existing residential buildings’ heat-insulation refurbishment, introduction of highefficiency lighting equipment, and implementation of thorough energy management.
In the Framework, CRR intends to use green bond proceeds to finance the acquisition of green buildings andrefurbishments that contribute to the improvement of environmental performance. Items to be evaluatedunder the third-party green building certification schemes that apply to the use of proceeds, include energysaving performance, water consumption, and waste management. Sustainalytics is of the opinion that CRR’s
use of proceeds will contribute to the reduction of energy consumption and other environmental impacts ofdomestic residential buildings, as well as to the achievement of climate change measures that have been
implemented by the Japanese government.
Alignment with/contribution to SDGs
The Sustainable Development Goals (SDGs) were set in September 2015 and form an agenda for achieving
sustainable development by the year 2030. This green bond advances the following SDG goal and target:
Use of Proceeds
Category
Green Buildings

SDG

SDG target

9. Industry, innovation andinfrastructure

9.4 By 2030, upgrade infrastructure and retrofit
industries to make them sustainable, withincreased resource-use efficiency and greater
adoption of clean and environmentally soundtechnologies and industrial processes, with allcountries taking action in accordance with theirrespective capabilities

Conclusion
CRR plans to issue green bonds based on the Framework and allocate the proceeds to finance/refinanceprojects related to green buildings. Sustainalytics considers that the use of proceeds will not only contributeto the achievement of the Investment corporation’s goals to reduce its portfolio’s environmental impact, butalso support the achievement of the Japanese government’s anti-climate change measures and the promotionof the SDG 9, through the reduction of energy consumption by residential buildings in Japan.
CRR’s use of proceeds is recognized by the Green Bond Principles and Japan’s Green Bond Guidelines 2020
as a project category with environmental benefits. The Eligibility Criteria defines the green bond proceeds to
be used for acquisition of buildings that have received, or are expected to receive, any of the top three levelsof nationally-recognized third-party green building certifications, as well as refurbishments that contribute to
the acquisition of the said certifications or to the improvement of environmental performance. Furthermore,in the Framework, CRR has provided explanations about the Investment corporation’s management ofproceeds, project evaluation and selection processes, and reporting policies, which Sustainalytics considers
to be in line with market practices.
Based on the above considerations, Sustainalytics is of the opinion that the Framework is credible andtransparent, and in alignment with the four core components of the Green Bond Principles and Japan's Green
Bond Guidelines 2020.

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Appendices
Appendix 1: Framework Overview
For the purpose of issuing green bonds, CRR has developed the following Framework which addresses thefour key core components of the GBP: use of proceeds, project evaluation and selection process,management of proceeds, and reporting, on May, 2020. The framework belongs to CRR.

1. Use of proceeds
The proceeds of the green bond will be allocated to acquire the existing or new buildings that meet thefollowing Eligibility Criteria A (‘Eligible Green Projects’), or refurbishments that meet the following Eligibility
Criteria B or to refinance the existing loan/investment corporation bonds which have been allocated to
Eligible Green Projects or refurbishments. Additionally, in the event of refinancing assets that requires longterm maintenance through the issuance of multiple green bonds, CRR will disclose at the time of issuancethe age of the asset, and to the extent possible the remaining useful life and the amount to be refinanced.
1.1 Eligibility Criteria
CRR shall apply one or more of the following criteria to allocate the proceeds into Eligible Projects:
A. Buildings that have achieved the following top three levels of third-party green building
certification/recertification within 36 months prior to the payment date of green bonds or will achieve:- B+, A, or S Rank under CASBEE- 3, 4, or 5 Stars under DBJ Green Building Certification Program- 3, 4, or 5 Stars under BELS
B. Refurbishments with a primary purpose of achieving one of the following criteria and are completed
within 36 months prior to the payment date of green bond or will be completed:- Refurbishments with more than 20% reduction in energy consumption and water consumption- Newly achieve the top three levels of green building certifications listed above Eligibility Criteria A or
more than one level of star/rank improvement in the green building certifications

2. Process for project evaluation and selection
2.1 Application of Eligibility and Exclusionary Criteria in Project Selection
CRR declares that it will use the proceeds to finance the acquisition of buildings that meet the Eligibility
Criteria A or finance refurbishments that meet the Eligibility Criteria B, or refinance the loans or financeredemption of bonds that have been allocated to Eligible Green Projects or refurbishments, and not use theproceeds for the purposes other than the above, excluding the portion allocated to the costs associatedwith the issuance of the green bonds.
Eligible Projects are evaluated and selected based on eligible criteria by the Investment Committee of TRM,
which comprises the President & CEO, Director, the Chief Division Officer of Comforia Management Division,
the General Manager of Asset Investment Department, the General Manager of Finance & Accounting
Department, the General Manager of Corporate Planning & Administration Department, the General
Manager of Environmental Engineering Department, the General Manager of Compliance Department,
the General Manager of Asset Management Department in Comforia Management Division, and theGeneral Manager of Strategy Department in Comforia Management Division.
2.2 Environmental Objectives
CRR is aware of the importance of incorporating the social demand for ESG (Environment, Society, andGovernance) into its business operation and realizing a sustainable society. TRM established its
Sustainability Policies in April 2019 and identified the priority ESG issues as “Materiality” in July 2019.
In order to reduce environmental impact, the Investment corporation has set the following medium- to longterm targets: (i) for energy use, 1% average annual reduction in energy use intensity; and (ii) for energyinduced CO2 emissions, 1% average annual reduction in greenhouse gas emissions intensity. Its initiatives
include implementation of refurbishments for higher energy efficiency, acquisition of environmental
certifications, assessments, etc., efforts to improve waste management, introduction of green leases, andmonitoring by Sustainability Promotion Council.
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Comforia Residential REIT, Inc. Green Bond Framework
2.3 Process to Mitigate Environmental and Social Risks
CRR has established a system to identify and manage environmental and social risks. More specifically, theInvestment corporation regularly monitors not only its progress in implementing sustainability goals andmeasures but also relevant data on properties. Furthermore, CRR will hold the Comforia Management
Division Meeting led by the Chief Division Officer of Comforia Management Division and attended by theGeneral Manager of Asset Management Department, Comforia Management Division, the General Manager
of Strategy Department, Comforia Management Division, and other members to report and discuss the
progress, key issues, and solutions. The Chief Division Officer of Comforia Management Division oversees
the execution of businesses as the person responsible for managing CRR’s assets. Accordingly, approvalby the Chief Division Officer of Comforia Management Division is required for the execution of plans or
solutions.

3. Management of Proceeds
CRR extracts the Eligible Green Projects out of CRR’s portfolio and uses the calculable total book value of
the Eligible Green Projects as of the end of the latest fiscal period prior to the date of each bond issuanceas the Debts of Eligible Green Projects. As long as the Green Bond is outstanding, TRM will monitor once a
year, to ensure that the total amount of outstanding green bonds does not exceed the sum of Debts ofEligible Green Projects and green bond proceeds allocated to refurbishments by using an internal file.
Payment of principal and interest on the green bonds will be made from CRR’s general funds and will not
be directly linked to the performance of any Eligible Green Projects.
CRR will disclose that the net proceeds from the green bonds will be immediately, or shortly thereafter, fully
allocated to finance the acquisition of buildings that meet the Eligibility Criteria A, or finance refurbishmentsthat meet the Eligibility Criteria B, or refinance the loans or finance redemption of bonds that have been
allocated to Eligible Green Projects or refurbishments.
If the proceeds from the green bonds are temporarily not allocated to finance the acquisition of buildingsthat meet the Eligibility Criteria A, or finance refurbishments that meet the Eligibility Criteria B, or refinancethe loans or finance redemption of bonds that have been allocated to Eligible Green Projects or
refurbishments, CRR will identify the unallocated amount of the funds and manage them in cash or cash
equivalents until they are allocated.

4. Reporting
4.1 Allocation reporting
CRR will disclose on its website the amount of Eligible Green Projects and/or refurbishments
financed/refinanced, allocation status, including the amount of unallocated proceeds, schedule ofallocation and managing method, of the net proceeds of green bonds as of end of every January until theproceeds are fully allocated. In the event of major change in situation, such as the accrual of unallocatedfunds as a result of the sale of relevant assets, such facts will be disclosed in a timely manner. CRR will
also disclose that the total amount of outstanding green bonds does not exceed the sum of Debts of Eligible
Green Projects and green bond proceeds allocated to refurbishments. Furthermore, after issuance, for as
long as the green bonds are outstanding, it will annually report on the book value of all the Eligible Green
Projects and the total amount of outstanding amount of the green bonds as of the last day of January ineach year.
4.2 Impact reporting
As long as there is an unredeemed balance of the relevant green bonds, CRR will annually disclose on its
website summary and the progress and levels of certifications of Eligible Green Projects. Additionally, CRR
will annually disclose the following indicators of Eligible Green Projects where CRR has energy control
authority:
Energy consumption
Water consumption
As for the refurbishments that have been funded by the green bonds, the environmental benefits broughtby each project will be disclosed. CRR will indicate an estimated rate of reduction (%) of energy
consumption and water usage before and after the refurbishment.

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Comforia Residential REIT, Inc. Green Bond Framework
Appendix 2: Overview and Comparison of Green Building Certification Schemes
CASBEE Certification18
Background

The
Comprehensive
Assessment System for Built
Environment
Efficiency(CASBEE) Certification is agreen building certification
scheme in Japan, which athird party certifies theenvironmental performanceof buildings. The certification
scheme includes, based on
types of buildings: CASBEE for
Buildings, CASBEE for Real
Estate, and CASBEE for
Housing.

CertificationlevelsC (Poor)B- (Slightly Poor)
B+ (Good)A (Very Good)S (Excellent)

Areas
of
Assessment:
Environmental
Project
Management

Areas
of
Assessment:
Environmental
Performance of
the Building* 4-grade evaluation for
CASBEE for Real Estate
excluding C rank
CASBEE assesses two main
factors: inside and outside thebuilding site, which translate
into Q (Built Environment
Quality)and,L(BuiltEnvironment
Load),
respectively.
* The above are not applied to
CASBEE for Real Estate• Energy Efficiency• Resource efficiency• Local environment• Indoor environment• * Areas for assessment of

CASBEE for Real Estate areenergy/GHG, water,
resource, biodiversity,
indoor environment

DBJ
Green
Building
Certification19
The Development Bank ofJapan (DBJ) Green Building
Certification Programme waslaunched by Development
Bank of Japan in 2011 and isoperated in conjunction with
the Japan Real Estate Institute(JREI), a major appraisal firmin Japan. The certification
scheme is recognized as one
of Japan’s major regional
standards. The certification isavailable for office buildings,
logistics, residential, and retailfacilities.
1 Star
2 Stars
3 Stars
4 Stars
5 Stars

BELS20The scope of evaluation of the
DBJ
Green
Building
Certification
includesconstruction specifications,environmental features, aswell as social factors.

None








Energy & Resources(Energy efficiency,
resource efficiency, etc.)
Amenity (Convenience/
comfortableness)
Resilience (Environmental
risk, regulatorycompliance, etc.)
Community & Diversity(Considerations tosurrounding environment,
biodiversity, etc.)
Partnership (Information
disclosure, etc.)

The Building-Housing Energyefficiency Labelling System(BELS)
isanenergyperformance label, issued
under guidelines establishedby Japan’s Ministry of Land,
Infrastructure, Transport, andTourism.
The
BELS
certification
schemeevaluates primary energy
consumption in order tomeasure performance ofenergy conservation.
1 Star
2 Stars
3 Stars
4 Stars
5 Stars

Energy efficiency

18 Institute for Building Environment and Energy Conservation, “CASBEE certification scheme (Japanese only)”, at:

http://www.ibec.or.jp/CASBEE/certification/certification.html.
19 Development Bank of Japan, Japan Real Estate Institute (JREI), “DBJ Green Building”, at: http://igb.jp/en/index.html.
20 Association for Housing Performance Evaluation & Labeling, “Building-Housing Energy-efficiency Labelling System Building Energy-efficiency
Performance Labeling System (Japanese only)“, at: https://www.hyoukakyoukai.or.jp/bels/bels.html.
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Comforia Residential REIT, Inc. Green Bond Framework
Requirements

Score-based
level.

performance

CASBEE uses the BEE (Built
Environment Efficiency) as its
assessment indicator, whichis calculated from Q (Built
Environment Quality) as thenumerator and L (Built
Environment Load) as thedenominator. Q and L areobtainedthroughtheclassification
andrearrangement of the fourareas of assessment.
* CASBEE for Real Estate does
not use BEE, additional point
system. Certification will not
be given, if required item are
not met.

Score-based
level

performance

The assessment is based on a
300-point scale and consistsof 85 questions (73 ordinary
questions and 12 innovationquestions).
JREI will conduct an on-site
reviewofthebuilding
performance based on theindicators above, and acommittee set within JREI will
make the final decision on thecertification results.

Score-based
level.

performance

The BELS score is based on
the Building Energy Index,
obtained by comparing theenergy consumption of abuilding to the standard
primary energy consumptionof the building type in official
guidelines.
A two-star rating is equivalent
to meeting existing energy
conservation standards, withhigher star ratings implying
greater savings.
The score is calculated by anaccredited third party.

Performance
display
22
21

Qualitative
considerations

CASBEEiscontinuously
developed based on industrygovernment-academia
collaboration
under
the
support of Ministry of Land,
Infrastructure, Transport andTourism. In Japan, many local
governments have madeCASBEE assessment resultsmandatoryforbuilding
permits.

23

In addition to LEED and
CASBEE, DBJ Green Buildings
Certification Programme isconsidered as one of theaccepted
green
building
standards
inJapan.
According to its website, as ofMarch 2019, 695 properties inJapan have been certified by
the Programme. 24

BELS is aligned with official
government standards.
The scheme assesses only
energy performance, without
any broader consideration ofholistic
environmental
factors.

Institute for Building Environment and Energy Conservation, “Method of Evaluation and Built Environment Efficiency (BEE)”, at:
http://www.ibec.or.jp/CASBEE/CASBEE_outline/method.html.
22 Development Bank of Japan, “DBJ Green Building”, at: http://www.dbj.jp/en/pdf/service/finance/g_building/gb_presentation.pdf.
23
Institutefor
Building
Environment
andEnergyConservation,“Displayexampleof
BELS(Japaneseonly)”,
at:https://www.hyoukakyoukai.or.jp/bels/pdf/170401bels_07.pdf.
24
Development Bank of Japan, Japan Real Estate Institute (JREI), “DBJ Green Building”, at: http://igb.jp/en/index.html
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Comforia Residential REIT, Inc. Green Bond Framework
Appendix 3: Green Bond / Green Bond Programme - External Review Form
Section 1. Basic Information
Issuer name:

Comforia Residential REIT, Inc.

Green Bond ISIN or Issuer Green Bond Framework
Name, if applicable:

Comforia Residential REIT, Inc. Green Bond
Framework

Review provider’s name:

Sustainalytics

Completion date of this form:

July 7, 2020

Publication date of review publication:

Section 2. Review overview
SCOPE OF REVIEWThe following may be used or adapted, where appropriate, to summarise the scope of the review.
The review assessed the following elements and confirmed their alignment with the GBPs:☒

Use of Proceeds☒

Process for
Selection☒

Management of Proceeds☒

Reporting

Project

Evaluation

andROLE(S) OF REVIEW PROVIDER☒

Consultancy (incl. 2nd opinion)☐

Certification☐

Verification☐

Rating☐Other (please specify):
Note: In case of multiple reviews / different providers, please provide separate forms for each review.

EXECUTIVE SUMMARY OF REVIEW and/or LINK TO FULL REVIEW (if applicable)
Please refer to Evaluation Summary above.

Section 3. Detailed review
Reviewers are encouraged to provide the information below to the extent possible and use the comment
section to explain the scope of their review.
1. USE OF PROCEEDS
Overall comment on section (if applicable):13

Second-Party Opinion

Comforia Residential REIT, Inc. Green Bond Framework
The eligible category for the use of proceeds Green Buildings, is aligned with those recognized by the GBP.
Sustainalytics considers that the eligible category will lead to positive environmental impacts and advance
the UN Sustainable Development Goals (SDGs), specifically SDG 9.

Use of proceeds categories as per GBP:☐

Renewable energy☐

Energy efficiency☐

Pollution prevention and control☐

Environmentally sustainable management ofliving natural resources and land use☐

Terrestrialandconservation☐

Sustainable
management

aquatic

biodiversity☐

Clean transportation

andwastewater☐

Climate change adaptation☐

Eco-efficient and/or circular economy adapted
products, production technologies andprocesses☒

Green buildings☐

Unknown at issuance but currently expected toconform with GBP categories, or other eligible
areas not yet stated in GBPs☐

Other (please specify):

water

If applicable please specify the environmental taxonomy, if other than GBPs:

2. PROCESS FOR PROJECT EVALUATION AND SELECTION
Overall comment on section (if applicable):
CRR’s projects are evaluated and selected by the Investment Committee of TLC REIT Management Inc. (TRM),
the asset manager for the Investment corporation. The TRM Investment Committee is composed of the
President & CEO, Director, and General Managers of relevant departments and divisions. CRR’s process forevaluating and selecting projects is in line with market practices.

Evaluation and selection☒

Credentials on the issuer’s environmental
sustainability objectives☒

Documented process to determine thatprojects fit within defined categories☒

Defined and transparent criteria for projects
eligible for Green Bond proceeds☐

Documented process to identify andmanage potential ESG risks associatedwith the project☒

Summary criteria for project evaluation andselection publicly available☐

Other (please specify):

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Information on Responsibilities and Accountability☒

Evaluation / Selection criteria subject toexternal advice or verification☐

Other (please specify):☐

In-house assessment

3. MANAGEMENT OF PROCEEDS
Overall comment on section (if applicable):
CRR's green bond proceeds will be tracked annually by TRM using an internal file, as long as the green bonds
are outstanding. TRM will ensure that the amount of outstanding green bonds do not exceed the sum of thetotal book value of Eligible Green Projects and cost of refurbishments that meet the Eligibility Criteria. Pending
allocation, unallocated funds will be held in cash or cash equivalents. The Investment corporation’s process
to manage proceeds is in line with market practices.

Tracking of proceeds:☒

Green Bond proceeds segregated or tracked by the issuer in an appropriate manner☒Disclosure of intended types of temporary investment instruments for unallocated proceeds☐

Other (please specify):

Additional disclosure:☐

Allocations to future investments only☒

Allocations to both existing and future
investments☐

Allocation to individual disbursements☐

Allocation to a portfolio of disbursements☐

Disclosure of portfolio
unallocated proceeds☐

Other (please specify):

balanceof

4. REPORTING
Overall comment on section (if applicable):
CRR has committed to disclose annually, on its website, an allocation report until the proceeds are fully
allocated as well as an impact report as long as the green bonds are outstanding. The disclosure on allocation
will include the amount of financing and refinancing of Eligible Green Projects and/or refurbishments, theamount of unallocated proceeds, allocation schedule, and the method to manage unallocated proceeds. As
environmental impact metrics, qualitative metrics such as green building certifications and levels achieved
and quantitative metrics such as energy consumption will be disclosed. Sustainalytics considers that theInvestment corporation’s reporting is in line with market practices.

Use of proceeds reporting:☐

Project-by-project☒

On a project portfolio basis

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Comforia Residential REIT, Inc. Green Bond Framework☐

Linkage to individual bond(s)☐Other (please specify):

Information reported:☒

Allocated amounts☒

Other (please specify): Amount offinancing/refinancing, amount of
unallocated proceeds, scheduleof allocation and managing
method,book value of all the
Eligible Green Projects and thetotal amount of outstanding
amount of the green bonds☐

Green Bond financed share of total
investment☐

Semi-annual

Frequency:☒

Annual☒Other (please specify): In the eventof major change in situation

Impact reporting:☐

Project-by-project☒

On a project portfolio basis☐

Linkage to individual bond(s)☐Other (please specify):

Information reported (expected or ex-post):☐

GHG Emissions / Savings☐

Energy Savings☐

Decrease in water use☒

Other ESG indicators (please
specify): Progress and levelsof certifications of Eligible
Green
Projects,
energyconsumption,
water
consumption, and estimatedrate of reduction (%) of energy
consumption
and
water
usage before and after the
refurbishment☐

Semi-annual

Frequency☒

Annual☐Other (please specify):

Means of Disclosure☐

Information published in financial report☐

Information published in sustainability
report☐Information published in ad hoc documents☒

Other (please specify):
CRR’s website

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Reporting reviewed (if yes, please specify which parts of the reporting are subject toexternal review):

Where appropriate, please specify name and date of publication in the useful links section.
USEFUL LINKS (e.g. to review provider methodology or credentials, to issuer’s documentation, etc.)

SPECIFY OTHER EXTERNAL REVIEWS AVAILABLE, IF APPROPRIATE
Type(s) of Review provided:☐

Consultancy (incl. 2nd opinion)☐

Certification☐

Verification / Audit☐

Rating☐Other (please specify):

Review provider(s):Date of publication:

ABOUT ROLE(S) OF INDEPENDENT REVIEW PROVIDERS AS DEFINED BY THE GBPi.

Second Party Opinion: An institution with environmental expertise, that is independent from the issuer may
issue a Second Party Opinion. The institution should be independent from the issuer’s adviser for its Green
Bond framework, or appropriate procedures, such as information barriers, will have been implemented within
the institution to ensure the independence of the Second Party Opinion. It normally entails an assessment of
the alignment with the Green Bond Principles. In particular, it can include an assessment of the issuer’s
overarching objectives, strategy, policy and/or processes relating to environmental sustainability, and anevaluation of the environmental features of the type of projects intended for the Use of Proceeds.

ii.

Verification: An issuer can obtain independent verification against a designated set of criteria, typicallypertaining to business processes and/or environmental criteria. Verification may focus on alignment withinternal or external standards or claims made by the issuer. Also, evaluation of the environmentally
sustainable features of underlying assets may be termed verification and may reference external criteria.
Assurance or attestation regarding an issuer’s internal tracking method for use of proceeds, allocation offunds from Green Bond proceeds, statement of environmental impact or alignment of reporting with the GBP,
may also be termed verification.

iii.

Certification: An issuer can have its Green Bond or associated Green Bond framework or Use of Proceeds
certified against a recognised external green standard or label. A standard or label defines specific criteria,
and alignment with such criteria is normally tested by qualified, accredited third parties, which may verify
consistency with the certification criteria.

iv.

Green Bond Scoring/Rating: An issuer can have its Green Bond, associated Green Bond framework or a key
feature such as Use of Proceeds evaluated or assessed by qualified third parties, such as specialised research
providers or rating agencies, according to an established scoring/rating methodology. The output may include
a focus on environmental performance data, the process relative to the GBP, or another benchmark, such as
a 2-degree climate change scenario. Such scoring/rating is distinct from credit ratings, which may
nonetheless reflect material environmental risks.

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Disclaimer
Copyright ©2020 Sustainalytics. All rights reserved.
The information, methodologies and opinions contained or reflected herein are proprietary of Sustainalytics
and/or its third party suppliers (Third Party Data), and may be made available to third parties only in the form
and format disclosed by Sustainalytics, or provided that appropriate citation and acknowledgement is ensured.
They are provided for informational purposes only and (1) do not constitute an endorsement of any productor project; (2) do not constitute investment advice, financial advice or a prospectus; (3) cannot be interpreted
as an offer or indication to buy or sell securities, to select a project or make any kind of business transactions;(4) do not represent an assessment of the issuer’s economic performance, financial obligations nor of its
creditworthiness; and/or (5) have not and cannot be incorporated into any offering disclosure.
These are based on information made available by the issuer and therefore are not warranted as to theirmerchantability, completeness, accuracy, up-to-dateness or fitness for a particular purpose. The informationand data are provided “as is” and reflect Sustainalytics` opinion at the date of their elaboration and publication.
Sustainalytics accepts no liability for damage arising from the use of the information, data or opinions
contained herein, in any manner whatsoever, except where explicitly required by law. Any reference to third
party names or Third Party Data is for appropriate acknowledgement of their ownership and does notconstitute a sponsorship or endorsement by such owner. A list of our third-party data providers and theirrespective
terms
of
use
is
availableonourwebsite.
For
more
information,
visit http://www.sustainalytics.com/legal-disclaimers.
The issuer is fully responsible for certifying and ensuring the compliance with its commitments, for theirimplementation and monitoring.
This document is translated from the Japanese language. In case of discrepancies between the Japanese
language and translated versions, the Japanese language version shall prevail.

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