Second-Party Opinion

Mitsubishi HC Capital Inc.
Sustainable Bond Framework
Evaluation Summary
Sustainalytics is of the opinion that the Mitsubishi HC Capital Inc. Sustainable Bond
Framework is credible and impactful and aligns with the Sustainability Bond Guidelines
2021, Green Bond Principles 2021, and Social Bond Principles 2021. This assessment
is based on the following:
The eligible categories for the use of proceeds –Renewable Energy, Green Buildings, and Access to Essential Services– are aligned with those recognized by both the Green Bond
Principles and Social Bond Principles. Sustainalytics considers thatinvestments in the eligible categories will lead to positiveenvironmental or social impacts and advance the UN Sustainable
Development Goals, specifically SDG 3, 7, and 9.
Mitsubishi HC Capital
Inc.’s Environment & Energy Business Department, Real EstateBusiness Department, or Healthcare Business Department will be
responsible for selecting candidate eligible projects. The final
decision will be made by a relevant approver ranging from the related
General Managers to the Board of Directors respectively, dependingon the monetary amount of the projects. Afterwards, from the list of
approved candidate projects, Mitsubishi HC Capital Inc.’s Treasury
Department will determine projects for the allocation of bondproceeds, verifying the alignment with the eligibility criteria under the
Framework. Mitsubishi HC Capital Inc. has in place environmental
and social risk management systems that are applicable to all eligible
projects under the Framework. Sustainalytics considers the project
selection process in line with market practice.
Mitsubishi HC Capital Inc.’s Treasury
Department will allocate proceeds to eligible projects using internalmanagement files. The proceeds will be tracked and managed until
the full redemption of bonds. Unallocated proceeds will be held incash or cash equivalents. This is in line with market practice.
Mitsubishi HC Capital Inc. will annually report on the
allocation of proceeds and environmental impacts on its website until
the full redemption of bonds. The report will include the outstanding
amount of the bond, the amount of allocated and unallocatedproceeds, and relevant qualitative and quantitative impact metrics by
eligible project category. Sustainalytics views Mitsubishi HC Capital
Inc.’s allocation and impact reporting as aligned with market practice.

© Sustainalytics 2023

Evaluation date

March 24, 2023

Issuer Location

Tokyo, Japan

Report Sections
Introduction ............................................. 2
Sustainalytics’ Opinion ........................... 3
Appendix ............................................... 11
For inquiries, contact the Sustainable
Finance Solutions project team:
Kosuke Kanematsu (Tokyo)
Project Manager
kosuke.kanematsu@sustainalytics.com(+81) 3 4571 2277
Shigeru Ogawa (Tokyo)
Project Support
Yukie Osari (Tokyo)
Project Support
Makiko Yamamoto (Tokyo)
Client Relations
susfinance.japan@sustainalytics.com(+81) 3 4520 2191

Second-Party Opinion

Mitsubishi HC Capital Inc. Sustainable Bond Framework

Introduction
Mitsubishi HC Capital Inc. (“Mitsubishi HC Capital” or the “Company”), headquartered in Tokyo, wasestablished in April 2021 from the integration of Mitsubishi UFJ Lease & Finance and Hitachi Capital. Byleveraging the strengths of each business and the complementary relationship between the two former
companies, Mitsubishi HC Capital develops an advanced asset business, comprising the five areas of focus;“Social Infrastructure & Life”, “Environment & Energy”, “Sales Finance”, “Mobility”, and “Global Assets”.
Mitsubishi HC Capital has developed the Mitsubishi HC Capital Inc. Sustainable Bond Framework (the“Framework”), dated March 2023, under which it intends to issue green, social, or sustainability bonds anduse the proceeds to finance and/or refinance, in whole or in part, existing and/or future projects that are
expected to generate positive environmental and/or social impact.
The Framework defines green eligibility criteria in two green categories:
1.
2.

Renewable Energy
Green Buildings

The Framework also defines social eligibility criteria in one category:1.

Access to Essential Services

Mitsubishi HC Capital engaged Sustainalytics to review the Mitsubishi HC Capital Inc. Sustainable Bond
Framework, dated March 2023, and provide a Second-Party Opinion on the Framework’s environmental andsocial credentials and its alignment with the Sustainability Bond Guidelines 2021 (SBG), Green Bond Principles
2021 (GBP), and Social Bond Principles 2021 (SBP). 1 This Framework has been published in a separate
document.2
Scope of work and limitations of Sustainalytics’ Second-Party Opinion
Sustainalytics’ Second-Party Opinion reflects Sustainalytics’ independent 3 opinion on the alignment of thereviewed Framework with the current market standards and the extent to which the eligible project categories
are credible and impactful.
As part of the Second-Party Opinion, Sustainalytics assessed the following:•••

The Framework’s alignment with the Sustainability Bond Guidelines 2021, Green Bond Principles
2021, and Social Bond Principles 2021, as administered by International Capital Market Association(ICMA);
The credibility and anticipated positive impacts of the use of proceeds; andThe 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 1.13.2, 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 Mitsubishi HC
Capital’s management team to understand the sustainability impact of their business processes and planned
use of proceeds, as well as management of proceeds and reporting aspects of the Framework. Mitsubishi HC
Capital representatives have confirmed (1) they understand it is the sole responsibility of Mitsubishi HC
Capital 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.
1 The Sustainability Bond Guidelines, Green Bond Principles, and Social Bond Principles are administered by the International Capital Market Association(ICMA) and are available at: https://www.icmagroup.org/green-social-and-sustainability-bonds/sustainability-bond-guidelines-sbg/
2 The Mitsubishi HC Capital Inc. Sustainable Bond Framework is available on Mitsubishi HC Capital’s website at:https://www.mitsubishi-hc-capital.com/english/sustainability/sustainable_finance.html
3 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
framework that 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.
2

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Mitsubishi HC Capital Inc. Sustainable Bond Framework
Any update of the present Second-Party Opinion will be conducted according to the agreed engagement
conditions between Sustainalytics and Mitsubishi HC Capital.
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
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. Upon twenty-four (24) months following the evaluation date set statedherein, Mitsubishi HC Capital is encouraged to update the Framework, if necessary, and seek an update to theSecond-Party Opinion to ensure ongoing alignment of the Framework with market standards andexpectations.
In addition, the Second-Party Opinion opines on the potential 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 Mitsubishi HC Capitalhas made available to Sustainalytics for the purpose of this Second-Party Opinion.

Sustainalytics’ Opinion
Section 1: Sustainalytics’ Opinion on the Mitsubishi HC Capital Inc. Sustainable
Bond Framework
Sustainalytics is of the opinion that the Mitsubishi HC Capital Inc. Sustainable Bond Framework is credible,
impactful and aligns with the four core components of the GBP and SBP. Sustainalytics highlights thefollowing elements of Mitsubishi HC Capital’s Sustainability Bond Framework:•

Use of Proceeds:- The green eligible categories – Renewable Energy and Green Buildings – are aligned with thoserecognized by the GBP. The social eligible category – Access to Essential Services – is alignedwith those recognized by the SBP.
- In the Framework, Mitsubishi HC Capital has established a look-back period of 36 months forrefinancing its existing loans or existing projects on or prior to the date of issuance of bonds,
which Sustainalytics considers to be in line with market practice.
- Mitsubishi HC Capital intends to allocate the proceeds to general purpose loans and equity
investments. In such cases, the Company is committed to allocating the proceeds only to loans
for, or equity investments in, corporations that generate 90% or more of its revenue from eligible
activities set in the Framework. Sustainalytics recognises that the GBP and SBP favour projectbased financing, which provides more transparency than non-project-based financing in general.
Nevertheless, Sustainalytics recognises that the financing of pure play companies throughgreen, social, or sustainability bonds is commonly accepted as an approach which can generate
positive environmental and social impacts.
- Under the Renewable Energy category, Mitsubishi HC Capital intends to finance the development,
construction, and operation of solar power generation facilities in Japan. Sustainalytics
considers that these investments are aligned with market practice.
- Under the Green Buildings category, Mitsubishi HC Capital will allocate the proceeds to thedevelopment and acquisition of properties (office buildings and/or warehouses) that haveobtained or are expected to obtain a green building certification. Sustainalytics considers thecriteria for financing green buildings projects to be aligned with market practice, noting thefollowing:▪
Mitsubishi HC Capital will allocate the proceeds to properties which meet one of the
below certifications: CASBEE4 (A Rank or above), DBJ Green Building Certification 5 (44 Comprehensive Assessment System for Built Environment Efficiency (CASBEE), at: https://www.ibec.or.jp/CASBEE/english/
5

Development of Bank of Japan (DBJ) Green Building Certification, at: https://www.dbj.jp/en/service/program/g_building/3

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Mitsubishi HC Capital Inc. Sustainable Bond Framework

-

-

-

•

Stars or above), BELS6 (4 Stars or above), Net Zero Energy Building (ZEB) or nearly ZEB7
8 , or LEED 9 (Gold or above). Sustainalytics views these certification schemes to becredible and impactful and the selected levels as aligned with market practice.
▪
Mitsubishi HC Capital has confirmed to Sustainalytics that logistic facilities designed
for the storage or transportation of fossil fuels are excluded.
The warehouses, which are one of the uses of the proceeds in this category, include
freezer/refrigerated warehouses that have received the above-mentioned green building
certificates. Besides, Sustainalytics positively highlights that these freezer/refrigerated
warehouses install/use natural (green) refrigerants with a lower global warming potential(GWP)10 than hydrofluorocarbons (HFCs)11, which are widely used as refrigerants in general.
Under the Access to Essential Services category, Mitsubishi HC Capital may allocate theproceeds to the factoring of medical fee receivables and nursing care fee receivables. The
Company is committed to limiting the allocation of bonds to factoring for medical institutions
and nursing care service providers that generate at least 90% of its revenue from services
covered by Japan’s public health insurance and long-term care insurance. Sustainalytics views
that the allocation of proceeds is aligned with market expectation, as allocating the proceeds
only to pure play companies will ensure that the financed medical and nursing care services areaccessible to all regardless of ability to pay under Japan’s social security system12, which isdesigned to allow all the people who need these services to use at 10-30% of out-of-pocket
expenses with the universal health insurance 13 and the long-term insurance.14
In addition, under the Access to Essential Services category, Mitsubishi HC Capital may allocate
the proceeds to medical equipment leasing and instalment sales. In this project category, theCompany will allocate the proceeds only to the financing of medical equipment used by medical
institutions that generate at least 90% of its revenue from medical practices covered by Japan’s
public health insurance. Sustainalytics considers the allocation approach to be in line withmarket expectation, as it will ensure that the financed medical services are accessible to all
regardless of ability to pay under Japan’s social security system.
Under the Framework, Mitsubishi HC Capital is committed not to allocating the proceeds to any
project relating to the followings: i) unfair transactions that do not comply with relevant laws
and regulations of the jurisdiction; ii) inappropriate relationship such as bribery, corruption,
blackmail, and embezzlement; iii) transactions that may cause environmental and social issues
including human rights issue; and iv) property development for the tenants which are primarily
engaged in the business related to fossil fuels, weapons, and tobacco.

Project Evaluation and Selection:- Mitsubishi HC Capital’s Environment & Energy Business Department, Real Estate Business
Department, or Healthcare Business Department will be responsible for conducting financial
assessment and selecting candidate eligible projects. The final decision will be made by arelevant approver ranging from the related General Managers to the Board of Directors
respectively, depending on the monetary amount of the projects. Afterwards, from the list of
approved candidate projects, Mitsubishi HC Capital’s Treasury Department will determine
projects for the allocation of bond proceeds, verifying the alignment with the eligibility criteria
under the Framework.
- Mitsubishi HC Capital has in place environmental and social risk management systems that are
applicable to all eligible projects under the Framework. Sustainalytics considers theseenvironmental and social risk management systems to be adequate and aligned with market
expectation.
- Based on the clear delineation of responsibility for project evaluation and selection,
Sustainalytics considers these processes to be in line with market practice.

6 Building-Housing Energy-efficiency Labelling System (BELS) (Japanese Only), at: https://www.bcj.or.jp/assessment/bels/
7 Agency for Natural Resources and Energy (ANRE), “Definition of ZEB and future measures proposed by the ZEB Roadmap Examination Committee”:

https://www.enecho.meti.go.jp/category/saving_and_new/saving/zeb_report/pdf/report_160212_en.pdf
8 Building Energy Index (BEI) of ZEB and nearly ZEB is superior to the five stars, the highest ranking, of BELS.
9 Leadership in Energy and Environmental Design (LEED), at: https://www.usgbc.org/leed
10 A value/coefficient that indicates the strength of the global warming impact when CO is set as 1.
2
11 A type of a chlorofluorocarbon (CFC) substitute. While their ozone depletion effect is limited, they cause a significant greenhouse effect.
12
For a case where recipients of the public assistance face financial difficulties, the expenses are covered by medical assistance and long-term careassistance, and recipients can access medical and nursing care services with no cost. (Ministry of Health, Labour and Welfare, “Outline of the Public
Assistance System”, at: https://www.mhlw.go.jp/english/topics/social_welfare/dl/outline_of_the_public_assistance_system_20101004.pdf)
13 Ministry of Health, Labour and Welfare, “Overview of Medical Service Regime in Japan”, at:https://www.mhlw.go.jp/bunya/iryouhoken/iryouhoken01/dl/01_eng.pdf
14
Ministry of Health, Labour and Welfare, “Long-term Care Insurance in Japan”, at: https://www.mhlw.go.jp/english/topics/elderly/care/index.html
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Mitsubishi HC Capital Inc. Sustainable Bond Framework•

Management of Proceeds:- Mitsubishi HC Capital’s Treasury Department will track and manage the allocation of proceeds
to eligible projects by using internal management files. The proceeds will be tracked andmanaged until full redemption of bonds.
- The Company intends to reach full allocation within approximately 24 months of issuance. If
there are unallocated proceeds caused due to repayment or other reasons, they will be reallocated within 24 months from the point in time. Pending allocation, unallocated proceeds will
be held in cash or cash equivalents until full allocation.
- Based on the presence of an internal tracking system, allocation timeframe and managementof temporary allocation, Sustainalytics considers these processes to be in line with market
practice.

•

Reporting:- Mitsubishi HC Capital intends to report on the allocation of proceeds and environmental andsocial impacts annually on its website until full redemption of bonds.
- Allocation reporting will include the amount of outstanding bonds, the amount of allocation byeligible category, and the amount of unallocated proceeds if any.
- Impact reporting will report on quantitative and qualitative impact indicators aggregated byeligible project category, to the extent practicable.
- Based on these elements, Sustainalytics considers the Company’s reporting process to be inline with market practice.

Alignment with Sustainability Bond Guidelines 2021
Sustainalytics has determined that the Mitsubishi HC Capital Inc. Sustainable Bond Framework aligns withthe four core components of the GBP and SBP. For detailed information please refer to Appendix 1:
Sustainability Bond/ Sustainability Bond Programme External Review Form.

Section 2: Sustainability Strategy of Mitsubishi HC Capital Inc.
Contribution to Mitsubishi HC Capital’s sustainability strategy
Mitsubishi HC Capital has established its management vision of “solving social issues by developing uniqueand progressive businesses with consideration for the global environment,” and promotes sustainability
initiatives through its business. 15 As its medium- to long-term management direction for the next 10 years,
the Company will promote Sustainability Transformation (SX), under which the Company is committed toworking for the achievement of “coexistence and co-prosperity with environmental and social values” and“sustainable growth,” through the efforts on Mitsubishi HC Capital’s materiality and a solid managementbase. 16 In terms of its priority areas in sustainability, the Company identified the following six materiality
themes: i) Promote a decarbonized society”, ii) Realize the circular economy, iii) Establish resilient social
infrastructure, iv) Realize healthy lifestyles that promote positive wellbeing, v) Create businesses utilizing thelatest technologies, and vi) Collaborate with partners locally and globally.17
As the basic philosophy of its environmental policy, Mitsubishi HC Capital declared that the Company “shallconduct business activities in harmony with the environment and society in order to contribute to the creationof a society that can conserve the global environment and achieve sustainable development”.18 Based on its
materiality theme i) “Promote a decarbonized society,” the Company is engaged in the realization of adecarbonized society through investments in renewable energy as well as businesses to provide solutions forenergy efficiency of power usage. 19 Mitsubishi HC Capital’s capacity for renewable energy generation in
operation is approximately 0.9 GW from solar power and 0.3 GW from wind power (as of the end of March
2022).20 The Company will work to further expand the scale of its renewable power sources.21 Furthermore,

15 Mitsubishi HC Capital Inc., “Basic Management Policy”, at: https://www.mitsubishi-hc-capital.com/english/corporate/idea/index.html
16 Mitsubishi HC Capital Inc., “Integrated Report 2022”, at:https://www.mitsubishi-hc-capital.com/pdf/english/investors2/library/various-reports/cr_en_2022.pdf
17 Mitsubishi HC Capital Inc., “Materiality (Priority Key Challenges)”, at: https://www.mitsubishi-hc-capital.com/english/sustainability/materiality.html
18 Mitsubishi HC Capital Inc., “Environmental Policy”, at: https://www.mitsubishi-hc-capital.com/english/sustainability/environment/index.html
19
Mitsubishi HC Capital Inc., “Integrated Report 2022”, at:https://www.mitsubishi-hc-capital.com/pdf/english/investors2/library/various-reports/cr_en_2022.pdf
20 Mitsubishi HC Capital Inc., “Environmental Targets and Performance”, at:https://www.mitsubishi-hc-capital.com/english/sustainability/environment/achievements.html
21 Mitsubishi HC Capital Inc., “Integrated Report 2022”, at:https://www.mitsubishi-hc-capital.com/pdf/english/investors2/library/various-reports/cr_en_2022.pdf
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Mitsubishi HC Capital Inc. Sustainable Bond Framework
Mitsubishi HC Capital supports the promotion of its clients’ energy-saving investments through its ESCO22
business, by developing energy-saving plans for buildings and other constructions and by carrying out
renovation work with a guarantee for the energy-saving effect.23 In terms of its efforts to address climatechange, the Company discloses information on energy consumption and GHG emissions (Scopes 1-3). For
gasoline consumption (Scope 1) and electricity consumption (Scope 2), the Company has established asingle-year target on par with or below the average of the most recent three years. 24
As efforts to address social issues, Mitsubishi HC Capital is working on the creation and provision of services
that ensure stakeholders’ health, safety, and mental and physical wellbeing based on its materiality theme (iv)“Realize healthy lifestyles that promote positive wellbeing.” 25 The Company aims to develop and provide
value-added services that contribute to its customers and society, solving issues in a wide range of industries
including medical institutions and nursing care service providers.26
Sustainalytics is of the opinion that the Mitsubishi HC Capital Inc. Sustainable Bond Framework is alignedwith the company’s overall sustainability strategy and initiatives and will further the Company’s action on its
key environmental and social priorities.
Approach to managing environmental and social risks associated with the projects
Sustainalytics recognizes that the proceeds from the instruments issued under the Framework will be directed
towards eligible projects that are expected to have positive environmental and social impact. However,Sustainalytics is aware that such eligible projects could also lead to negative environmental and social
outcomes. Some key environmental and social risks possibly associated with the eligible projects may include
issues involving occupational safety and health, impacts of large-scale renewable energy projects on land use
and ecosystems, emissions and waste from facility construction and demolition processes, and financial risks
associated with both lenders and borrowers.
Sustainalytics is of the opinion that Mitsubishi HC Capital is able to manage and/or mitigate potential risks
through implementation of the following:•••

Mitsubishi HC Capital operates efficient and effective environmental management systems acrossfour groups of divisions, namely the sales, office-based, lease-up asset handling, and internal audit
divisions. These systems are overseen by the Head of the IT & Operations Division, who is also amember of the Sustainability Committee. Furthermore, as part of its compliance activities, theCompany ensures that all executives and employees fully comply with applicable laws andregulations, including those related to the environment, and carries out regular compliance checks.27
With respect to occupational safety and health, Japan's Industrial Safety and Health Act requires theassessment of workers’ health and the working environment to ensure that appropriate safety andhealth measures are taken in the workplace. 28 The Company recognizes that human rights andlabour practices are important issues and has committed to supporting and respecting international
norms related to human rights and labour practices such as the UN Guiding Principles on Businessand Human Rights (Ruggie Principles) and the ILO Declaration on Fundamental Principles and Rights
at Work, as well as the establishment of the Company’s “Human Rights Policy”.29
In terms of risks associated with environment and biodiversity, Mitsubishi HC Capital has obtained
the ISO 14001 certification, which provides organizations with a long-term environmental
management framework, while integrating social and economic needs. By doing so, Mitsubishi HC
Capital intends to achieve its environmental targets and continued improvement. Regarding themanagement/disposal of refrigerants in freezer/refrigerated warehouses, Mitsubishi HC Capital has
confirmed that it will check relevant policies at the timing of obtaining a green building certificationand implement them.

22 Energy Service Company business, where the costs of renovation for energy efficiency are compensated by the reduction in utility costs after therenovation.
23 Mitsubishi HC Capital Inc., “ESCO (Energy Service Company) (Japanese only), at: https://www.mitsubishi-hc-capital.com/service/mul/esco/index.html
24 Mitsubishi HC Capital Inc., “Environmental Targets and Performance”, at:https://www.mitsubishi-hc-capital.com/english/sustainability/environment/achievements.html
25 Mitsubishi HC Capital Inc., “Materiality (Priority Key Challenges)”, at: https://www.mitsubishi-hc-capital.com/english/sustainability/materiality.html
26
Mitsubishi HC Capital Inc., “Integrated Report 2022”, at:https://www.mitsubishi-hc-capital.com/pdf/english/investors2/library/various-reports/cr_en_2022.pdf
27 Mitsubishi HC Capital Inc., “Environmental Management System”, at:https://www.mitsubishi-hc-capital.com/english/sustainability/environment/management.html
28 Japanese Law Translation, “Industrial Safety and Health Act”, at: https://www.japaneselawtranslation.go.jp/ja/laws/view/3440
29
Mitsubishi HC Capital Inc., “Human Rights Initiatives”, at: https://www.mitsubishi-hc-capital.com/english/sustainability/social/index.html
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Mitsubishi HC Capital Inc. Sustainable Bond Framework•

To deal with financial risks, Mitsubishi HC Capital promotes the prevention of money laundering,terrorist financing, and anti-social conduct. The Company has established the “Principles for MoneyLaundering Prevention,” 30 “Principles for National Security Export Control,” 31 and the “Basic Policy
on Anti-social Elements”32 to prevent money laundering, terrorist financing, and anti-social conduct,
respectively, and ensures compliance in its project screening and management processes.

Based on these policies, standards and assessments, Sustainalytics is of the opinion that Mitsubishi HC
Capital has implemented adequate measures and is well positioned to manage and mitigate environmental
and social risks commonly associated with the eligible categories.

Section 3: Impact of Use of Proceeds
All three use of proceeds categories are aligned with those recognized by GBP or SBP. Sustainalytics has
focused on the impact of these use of proceeds, specifically relevant in the local and global context.
Importance of renewable energy
In 2021, global energy-related CO2 emissions rose by 6% to 36.3 billion tonnes.33 According to the International
Energy Agency’s (IEA)’s Net Zero Emissions by 2050 Scenario (NZE), 34 a scenario in line with 1.5°C
commitment under the Paris Agreement, the power sector needs to reduce CO 2 emissions by 7.6% annuallyon average by 2030. The NZE also requires the sector to increase the proportion of renewable energy in power
generation from 29% in 2020 to more than 60% by 2030. 35 In 2050, renewable energy is expected to reachapproximately 90% of global power generation, with wind power and solar power together accounting fornearly 70%.36
In Japan, in FY2020, while the proportion of renewable energy from total power generation was 19.8%, fossil
fuel-based thermal power accounted for 76.3%.37 In April 2021, the Japanese government has committed toreducing GHG emissions by 46% by FY2030 with the baseline of FY2013. 38 In line with the commitment, thegovernment aims to raise the proportion of renewable energy to 36-38% by FY2030 in the Japanese energy
mix.39 Furthermore, the government pledged to achieve net-zero GHG emissions by 2050 and has formulated
the Green Growth Strategy, which describes the policy directions and action plans toward achieving carbon
neutrality in 2050.40 In the strategy, the government states that it will promote renewable energy installation,with the reference goal of achieving approximately 50-60% of power generation by renewable energy in 2050.
Considering the above, Sustainalytics is of the opinion that Mitsubishi HC Capital’s use of proceeds is
expected to contribute to reducing CO2 emissions in the power sector globally and to the achievement ofJapan’s medium- to long-term climate goals.
Importance of green buildings
In 2021, global building energy demand increased by almost 20% and reached 135 EJ (compared to 115 EJ in2010).41 The operation of buildings in 2021 accounted for 30% of global final energy consumption and 27% of
total energy sector CO2 emissions. 42 As per the IEA, carbon emissions from buildings operations should
Mitsubishi HC Capital Inc., “Principles for Money-Laundering Prevention", at:https://www.mitsubishi-hc-capital.com/pdf/english/sustainability/various_policies/laundering.pdf
31 Mitsubishi HC Capital Inc., “Principles for National Security Export Control”, at:https://www.mitsubishi-hc-capital.com/pdf/english/sustainability/various_policies/exportcontrol.pdf
32 Mitsubishi HC Capital Inc., “Basic Policy on Anti-social Elements”, at:https://www.mitsubishi-hc-capital.com/pdf/english/sustainability/various_policies/antisocial.pdf
33 International Energy Agency (IEA), “Global Energy Review: CO2 Emissions in 2021”, at:https://iea.blob.core.windows.net/assets/c3086240-732b-4f6a-89d7-db01be018f5e/GlobalEnergyReviewCO2Emissionsin2021.pdf
34 International Energy Agency (IEA), “Net Zero Emissions by 2050 Scenario (NZE)”, at:https://www.iea.org/reports/world-energy-model/net-zero-emissions-by-2050-scenario-nze
35 International Energy Agency (IEA), “Renewable Power”, at: https://www.iea.org/reports/renewable-power
36 International Energy Agency (IEA), “Net Zero by 2050 A Roadmap for the Global Energy Sector”, (2021), at:https://www.iea.org/reports/net-zero-by-2050
37 “Agency for Natural Resources and Energy (ANRE), “FY2020 Energy Supply and Demand Report (Final Figures) (Japanese only)”, at:https://www.meti.go.jp/press/2022/04/20220415003/20220415003-1.pdf
38 Ministry of the Environment (MoE), “Japan’s Nationally Determined Contribution (NDC)”, at: https://www.env.go.jp/earth/ndc/JAPAN_NDC.pdf
39
Agency for Natural Resources and Energy (ANRE), , " Outline of Strategic Energy Plan", at:https://www.enecho.meti.go.jp/en/category/others/basic_plan/pdf/6th_outline.pdf
40 Ministry of Economy, Trade and Industry (METI), “Green Growth Strategy through Achieving Carbon Neutrality in 2050”, at:https://www.meti.go.jp/english/policy/energy_environment/global_warming/pdf/ggs_full_en.pdf
41 International Energy Agency (IEA), “Buildings Sectoral Overview”, (2022), at: https://www.iea.org/reports/buildings
42
Ibid.
30

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Mitsubishi HC Capital Inc. Sustainable Bond Framework
reduce by more than half by 2030 compared to 2021, to align with the Net Zero Scenario.43 Therefore, it isindispensable for not only developed countries but also for emerging and developing countries to improvenew and existing buildings’ energy efficiency as a measure to address climate change.
In Japan, the building sector was responsible for 30% of CO2 emissions in 2019 with final energy consumption
by buildings having increased by 20% in 2019 when compared to 1990. 44,45 In its Nationally Determined
Contribution (NDC) submitted to the Secretariat of the United Nations Framework Convention on Climate
Change (UNFCCC) in 2021, Japan committed to increasing its GHG emissions reduction target from 26% to
46% of the 2013 level and to achieving net zero emissions by 2050.46 Regarding the building sector, it isestimated that the reduction of CO2 emissions by 50-65% by 2030 compared to 2013 is required based on the
reduction targets of residential, commercial and others. 47 Given the significant contribution of buildings inJapan’s total CO2 emissions, the Japanese government has been working to strengthen energy-saving
measures in buildings. Japan’s Building Energy Efficiency Act of 2015 sets mandatory energy efficiency
standards for large-scale non-residential buildings (2,000m2 or more).48 In 2019, the Act was amended also
mandating compliance with the energy efficiency standards for medium-size non-residential buildings (300m2
or more).49 The 2022 amendment of the Act mandates new construction after 2025 of both non-residential
and residential, irrespective of size, to comply with the energy efficiency standards and also sets incentive
measures toward the zero-energy building or zero-energy house level.50
Based on the above, Sustainalytics is of the opinion that Mitsubishi HC Capital’s use of proceeds is expected
to promote higher energy efficiency in the building sector and help achieve Japan’s GHG emissions reduction
targets.
Importance of medical services
Under Japan’s universal health insurance system, everyone is entitled to access basic medical services. The
universal health insurance system, which is partly supported by public funds, enables residents in Japan toreceive various medical services at a low cost. 51 While Japan’s health insurance system covers 84% of
healthcare costs, which is higher than the Organization for Economic Co-operation and Development (OECD)
countries’ average of 74%,52 the nation’s healthcare sector is facing challenges such as increasing demand
for medical services due to the ageing population and the shortage of doctors. In relation to the increasing
demand for healthcare services, the number of people aged 65 and over accounted for 28% of the total
population of Japan in 2019 and is estimated to increase to 38% by 2050. 53 Elderly people tend to havemultiple chronic diseases including hypertension, and changes in the disease structure due to the ageing of
the population have led to an increase in demand for healthcare services and medical expenditures. 54 With
the increase in the ageing population, the percentage of healthcare spending against Japan’s GDP continued
to increase from 7% in 2000 to 11% in 2019.55 In terms of the shortage and the uneven distribution of doctors,

43 Ibid.

Ministry of the Environment (MoE), “Greenhouse Gas Emissions in Fiscal Year 2019 (Final Figures) (Japanese only)”,
at: https://www.env.go.jp/press/files/jp/116118.pdf
45 Ministry of Land, Infrastructure, Transport and Tourism (MLIT), “Overview of the Act on the Improvement of Energy Consumption Performance of
Buildings”, at: http://www.mlit.go.jp/common/001134876.pdf
46 Government of Japan, “Japan’s Nationally Determined Contribution (NDC)”, (2021), at:https://unfccc.int/sites/default/files/NDC/2022-06/JAPAN_FIRST%20NDC%20%28UPDATED%20SUBMISSION%29.pdf
47 Ibid.
48 Ministry of Land, Infrastructure, Transport and Tourism (MLIT), “Overview of the Act on the Improvement of Energy Consumption Performance of
Buildings”, (2016), at: http://www.mlit.go.jp/common/001134876.pdf
49 International Energy Agency (IEA), “Japan’s Roadmap to Carbon Neutrality in the Building and Housing Sectors”, (2021), at:https://iea.blob.core.windows.net/assets/993f67a2-054e-41ba-9adbf782358a4e73/3.JapansRoadmaptoCarbonNeutralityintheBuildingandHousingSectors.pdf
50 Rethink Tokyo, ‘Energy conservation architecture to be mandatory for Japan real estate from 2025’, at:https://www.rethinktokyo.com/news/2022/04/25/energy-conservation-architecture-be-mandatory-japan-real-estate-2025/1650839788
51 Ministry of Health, Labour and Welfare, “Overview of Medical Service Regime in Japan”, at:https://www.mhlw.go.jp/bunya/iryouhoken/iryouhoken01/dl/01_eng.pdf
52 Organisation for Economic Co-operation and Development (OECD), “Extent of health care coverage”, at:https://www.oecd-ilibrary.org/sites/85214623-en/index.html?itemId=/content/component/85214623-en
53 Organisation for Economic Co-operation and Development (OECD), “Demographic trends”, at:https://www.oecd-ilibrary.org/sites/9989e95c-en/index.html?itemId=/content/component/9989e95c-en
54 Ministry of Health, Labour and Welfare, “Current state of medical care for the elderly people (Japanese only)”, at:https://www.mhlw.go.jp/file/05-Shingikai-12601000-Seisakutoukatsukan-Sanjikanshitsu_Shakaihoshoutantou/0000125582.pdf
55
The World Bank, “Current health expenditure (% of GDP) – Japan”, at: https://data.worldbank.org/indicator/SH.XPD.CHEX.GD.ZS?locations=JP
44

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the number of doctors per 1,000 population in Japan is 2.5, which is lower than the OECD countries’ averageof 3.6.56 In particular, local hospitals face difficulties in securing a sufficient number of healthcare workers.57
To address issues including the growing need for healthcare resources and the excessive burden on
healthcare workers, the Ministry of Health, Labour and Welfare formulated “Health Care 2035” in 2015 tolayout medium-term initiatives up to 2035. As one of the three visions to be achieved by the healthcare sector
by 2035, the Ministry proposed to provide better care at lower costs by improving the quality and efficiency of
medical care services, while securing sustainable financial resources for healthcare as a basis required forthe achievement of the vision.58 Furthermore, the Ministry has been engaged in establishing an efficient andhigh-quality medical care system in an ageing society, by formulating the “Regional Medical Care Vision,”
which looks ahead to 2025 when the baby boomers will be 75 years old or older.59 In 2014, for the achievementof the Regional Medical Care Vision, the Fund for securing comprehensive medical and long-term care in local
communities was established to provide financial support to medical institutions. In 2022, 102.9 billion yen
was budgeted as the Fund’s healthcare expenses. The Fund will be used to support, for example, the provisionof medical facilities and equipment, the change of bed functions and the number of beds, the staffing ofhealthcare workers, and the improvement of the working environment at medical institutions. 60
Based on the above, Sustainalytics is of the opinion that Mitsubishi HC Capital’s use of proceeds is expected
to contribute to the sustainable operation of medical institutions, which meet the increasing demand for
medical services in Japan.
Contribution to SDGs
The Sustainable Development Goals were adopted in September 2015 by the United Nations General
Assembly and form part of an agenda for achieving sustainable development by 2030. The instruments
issued under the Mitsubishi HC Capital Inc. Sustainable Bond Framework are expected to help advance thefollowing SDGs and targets:
Use of Proceeds
Category
Renewable Energy
Green Buildings

Access to Essential
Services

SDG

SDG target

7. Affordable and clean
energy9. Industry, innovation andinfrastructure

7.2 By 2030, increase substantially the share of
renewable energy in the global energy mix
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
3.8 Achieve universal health coverage, including
financial risk protection, access to quality
essential health-care services and access tosafe, effective, quality and affordable essential
medicines and vaccines for all

3. Good health and wellhealth56 Organisation for Economic Co-operation and Development (OECD), “Doctors (overall number)”, at:https://www.oecd-ilibrary.org/sites/b39949d7-en/index.html?itemId=/content/component/b39949d7-en
57 Ministry of Health, Labour and Welfare, “Report of the Study Group on the Vision for the Work Style of Doctors and Nurses in Light of the New Healthcare
System (Japanese only)”, at: https://www.mhlw.go.jp/file/05-Shingikai-10801000-Iseikyoku-Soumuka/0000162693.pdf
58
Ministry of Health, Labour and Welfare, “Health Care 2035”, at:https://www.mhlw.go.jp/seisakunitsuite/bunya/hokabunya/shakaihoshou/hokeniryou2035/future/en/
59 Ministry of Health, Labour and Welfare, “Regional Medical Care Vision (Japanese only)”, at:https://www.mhlw.go.jp/stf/seisakunitsuite/bunya/0000080850.html
60 Ministry of Health, Labour and Welfare, “the Fund for Comprehensive Securing of Regional Medical and Nursing Care (Japanese only)”, at:https://www.mhlw.go.jp/jigyo_shiwake/dl_2022/mtg0509_04.pdf
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Mitsubishi HC Capital Inc. Sustainable Bond Framework
Conclusion
Mitsubishi HC Capital Inc. has developed the Mitsubishi HC Capital Inc. Sustainable Bond Framework underwhich it may issue green, social, or sustainability bonds and use the proceeds to finance projects in thefollowing categories: Renewable Energy, Green Buildings, and Access to Essential Services. Sustainalytics
considers that the projects funded by the bond proceeds are expected to provide positive environmental andsocial impact.
The Mitsubishi HC Capital Inc. Sustainable Bond Framework outlines a process by which proceeds will be
tracked, allocated, and managed, and commitments have been made for reporting on the allocation andimpact of the use of proceeds. Furthermore, Sustainalytics believes that Mitsubishi HC Capital Inc.
Sustainable Bond Framework is aligned with the overall sustainability strategy of the company and that theuse of proceeds categories will contribute to the advancement of the UN Sustainable Development Goals 3,7, and 9. Additionally, Sustainalytics is of the opinion that Mitsubishi HC Capital Inc. has adequate measures
to identify, manage and mitigate environmental and social risks commonly associated with the eligible
projects funded by the proceeds.
Based on the above, Sustainalytics is confident that Mitsubishi HC Capital Inc. is well positioned to issue
green, social, or sustainability bonds and that Mitsubishi HC Capital Inc. Sustainable Bond Framework is
robust, transparent, and in alignment with the four core components of the Green Bond Principles 2021 andSocial Bond Principles 2021.

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Appendix
Appendix 1: Sustainability Bond / Sustainability Bond Programme - External
Review Form
Section 1. Basic Information
Issuer name:

Mitsubishi HC Capital Inc.

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

Mitsubishi HC Capital Inc. Sustainable Bond
Framework

Review provider’s name:

Sustainalytics

Completion date of this form:

March 24, 2023

Publication date of review publication:
Original publication date [please fill this out for
updates]:

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 GBP and SBP:☒

Use of Proceeds☒

Process for Project Evaluation and
Selection☒

Management of Proceeds☒

Reporting

ROLE(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.

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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):
The eligible categories for the use of proceeds – Renewable Energy, Green Buildings, and Access to Essential
Services – are aligned with those recognized by both the Green Bond Principles and Social Bond Principles.
Sustainalytics considers that investments in the eligible categories will lead to positive environmental orsocial impacts and advance the UN Sustainable Development Goals, specifically SDG 3, 7, and 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☐

Terrestrial and aquatic biodiversity
conservation☐

Clean transportation☐

Sustainable water and wastewater
management☐

Climate change adaptation☐

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

Green buildings☐

Unknown at issuance but currently expected
to conform with GBP categories, or othereligible areas not yet stated in GBPs☐

Other (please specify):

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

Use of proceeds categories as per SBP:☐

Affordable basic infrastructure☒

Access to essential services☐

Affordable housing☐

Employment generation (through SME financing
and microfinance)☐

Food security☐

Socioeconomic advancement andempowerment☐

Unknown at issuance but currently expected
to conform with SBP categories, or othereligible areas not yet stated in SBP☐

Other (please specify):

If applicable please specify the social taxonomy, if other than SBP:

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2. PROCESS FOR PROJECT EVALUATION AND SELECTION
Overall comment on section (if applicable):
Mitsubishi HC Capital Inc.’s Environment & Energy Business Department, Real Estate Business Department,
or Healthcare Business Department will be responsible for selecting candidate eligible projects. The final
decision will be made by a relevant approver ranging from the related General Managers to the Board of
Directors respectively, depending on the monetary amount of the projects. Afterwards, from the list of
approved candidate projects, Mitsubishi HC Capital Inc.’s Treasury Department will determine projects for the
allocation of bond proceeds, verifying the alignment with the eligibility criteria under the Framework.
Mitsubishi HC Capital Inc. has in place environmental and social risk management systems that are applicable
to all eligible projects under the Framework. Sustainalytics considers the project selection process in line withmarket practice.
Evaluation and selection☒

Credentials on the issuer’s social and green
objectives☒

Documented process to determine thatprojects fit within defined categories☒

Defined and transparent criteria for projects
eligible for Sustainability Bond proceeds☒

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

Summary criteria for project evaluation andselection publicly available☐

Other (please specify):☐

In-house assessment

Information on Responsibilities and Accountability☒

Evaluation / Selection criteria subject toexternal advice or verification☐

Other (please specify):

3. MANAGEMENT OF PROCEEDS
Overall comment on section (if applicable):
Mitsubishi HC Capital Inc.’s Treasury Department will allocate proceeds to eligible projects using internalmanagement files. The proceeds will be tracked and managed until the full redemption of bonds. Unallocatedproceeds will be held in cash or cash equivalents. This is in line with market practice.
Tracking of proceeds:☒

Sustainability Bond proceeds segregated or tracked by the issuer in an appropriatemanner☒

Disclosure of intended types of temporary investment instruments for unallocatedproceeds☐

Other (please specify):

Additional disclosure:☐

Allocations to future investments only☒

Allocations to both existing and future
investments

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Mitsubishi HC Capital Inc. Sustainable Bond Framework☐

Allocation to individual disbursements☒

Allocation to a portfolio of
disbursements☒

Disclosure of portfolio balance of
unallocated proceeds☐

Other (please specify):

4. REPORTING
Overall comment on section (if applicable):
Mitsubishi HC Capital Inc. will annually report on the allocation of proceeds and environmental impacts on its
website until the full redemption of bonds. The report will include the outstanding amount of the bond, theamount of allocated and unallocated proceeds, and relevant qualitative and quantitative impact metrics by
eligible project category. Sustainalytics views Mitsubishi HC Capital Inc.’s allocation and impact reporting asaligned with market practice.
Use of proceeds reporting:☐

Project-by-project☒

On a project portfolio basis☐

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

Information reported:☒

Allocated amounts☒

Other (please specify):☐

Sustainability Bond financed share of
total investment☐

Semi-annual

the outstanding amount of thebond, the amount of unallocatedproceeds

Frequency:☒

Annual☐Other (please specify):

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☐

Number of beneficiaries☐

Target populations☒

Other ESG indicators (please
specify):
Renewable Energy
Annual power
generation produced

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output standards)
Green Buildings
Acquisition status ofgreen building
certification

Balance by green
building certification /asset type
In the case freezer or
refrigerator installed
assets, outline of such
equipment (refrigerant,
etc.)
Access to Essential Services

Number of Eligible
Projects executed(annual basis)Cumulative amount of
Eligible Projects (annual
basis)
Frequency:☒

Annual☐Other (please specify):☐

Semi-annual

Means of Disclosure☐

Information published in financial report☐

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

Other (please specify):
The Company’s website☐

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):

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Review provider(s):Date of publication:

ABOUT ROLE(S) OF REVIEW PROVIDERS AS DEFINED BY THE GBP AND THE SBPi.

Second-Party Opinion: An institution with sustainability expertise that is independent from the issuer may
provide a Second-Party Opinion. The institution should be independent from the issuer’s adviser for its
Sustainability 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 normallyentails an assessment of the alignment with the Principles. In particular, it can include an assessment of theissuer’s overarching objectives, strategy, policy, and/or processes relating to sustainability and an evaluationof the environmental and social 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 sustainability criteria. Verification may focus on alignment withinternal or external standards or claims made by the issuer. Also, evaluation of the environmentally or sociallysustainable 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 Sustainability Bond proceeds, statement of environmental or social impact or alignment ofreporting with the Principles may also be termed verification.

iii.

Certification: An issuer can have its Sustainability Bond or associated Sustainability Bond framework or Useof Proceeds certified against a recognised external sustainability 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, Social and Sustainability Bond Scoring/Rating: An issuer can have its Sustainability Bond, associatedSustainability 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 establishedscoring/rating methodology. The output may include a focus on environmental and/or social performancedata, process relative to the Principles, or another benchmark, such as a 2-degree climate change scenario.
Such scoring/rating is distinct from credit ratings, which may nonetheless reflect material sustainability risks.

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The information, methodologies and opinions contained or reflected herein are proprietary of Sustainalytics
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Sustainalytics accepts no liability for damage arising from the use of the information, data or opinions
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About Sustainalytics, a Morningstar Company
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