NEWS RELEASE
24-D-0333

June 18, 2024
Japan Credit Rating Agency, Ltd. (hereinafter referred to as "JCR") will announce the Sustainability Finance Framework Evaluation
Results as follows:

KDX Realty Investment Corporation
S u s t a i n a b i l i t y F i n a n c e F ra m e w o r kAssignment

Overall
Evaluation

Green andSocial Evaluation（Use of Proceeds）

Management,
Operation andTransparency Evaluation

SU 1(F)

gs1(F)

m1(F)Issuer/Borrower

KDX Realty Investment Corporation(Security Code: 8972)

Subject

Sustainability Finance Framework

Evaluation Overview▶▶▶ 1. Overview of KDXR Realty Investment Corporation

KDX Realty Investment Corporation ﴾hereinafter referred to as "KDXR"﴿ is a J-REIT that was establishedon May 6, 2005 and listed on the Real Estate Investment Trust Market of the Tokyo Stock Exchange
on July 21, 2005. The corporate name was changed to KDXR on November 1, 2023 due to a merger
through which Kenedix Office Investment Corporation ﴾hereinafter referred to as "KDO"﴿ being thesurviving corporation, and Kenedix Residential Next Investment Corporation ﴾hereinafter referred toas "KDR"﴿ and Kenedix Retail REIT Corporation ﴾hereinafter referred to as "KRR"﴿ being the dissolving
corporation. KDXR has 354 properties as its assets with a total acquisition price of 1,184.6 billion yen
as of May 29, 2024, making it one of the largest J-REITs. KDXR's asset management company is
Kenedix Real Estate Fund Management, Inc. ﴾hereinafter referred to as "the Asset Management

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Company"﴿ and its shareholder is Kenedix, Inc., a real estate asset management company ﴾its
investment ratio: 100 percent.﴿ KDXR has become a diversified REIT through the merger, and its
portfolio includes 36.8 percent of office buildings, 27.0 percent of residential properties, 24.8 percent
of retail facilities, 7.0 percent of healthcare facilities, 1.8 percent of logistics facilities and 2.6 percent
of hotels, all of which are based on acquisition prices, making it a diversified portfolio from an asset
type perspective.

▶▶▶ 2. KDXR's ESG Management and Sustainability Initiatives

KDXR has acknowledged the importance of Environmental, Social and Governance ﴾hereinafterreferred to as "ESG"﴿ consideration in real estate management and identified the enhancement ofsustainability as one of the material topics for its business to realize a sustainable society as acorporate responsibility, and KDXR is committed to reducing its environmental impact throughcollaboration and cooperation with its stakeholders. KDXR, as one of the largest REITs in Japan, isstrongly aware of its social responsibility and aims to be a leading company in sustainability initiatives
by integrating and elevating respective expertise of the 3 REITs prior to their mergers.
KDXR and the Asset Management Company have formulated their sustainability and environmental
policies to promote specific initiatives that respond to materialities of the Kenedix Group. KDXR and
the Asset Management Company have acknowledged that the reduction of energy consumption andCO2 emissions is one of their material issues and will make a contribution to environmental
sustainability by using their business activities or property management operations for continuously
cutting energy consumption and CO2 emissions so as to lower their environmental impact. KDXR has
set its targets for GHG emissions as this materiality target and has obtained Science Based Targets
﴾SBT﴿ certification.
Similarly, KDXR and the Asset Management Company have recognized that initiatives for an aging
society with fewer children are one of their materialities and have invested in healthcare facilities tomeet the needs of Japan's aging population. Acquisitions of healthcare facilities include fee-based
homes for the elderly and serviced housing for the elderly as well as investments in nursing andhealth facilities, which is a first among all J-REIT.
KDO was the first J-REIT to participate in the GRESB Real Estate Assessment - an annual benchmarking
assessment for real estate companies and funds. Since then, the Asset Management Company has
been awarded "Green Star" for 12 consecutive years by achieving high performance both in"Management Component," which evaluates policies or organizational structures for ESG promotionand "Performance Component," which assesses environmental performance or tenant engagement
at properties owned.

▶▶▶ 3. Sustainability Finance Framework Evaluation

In the Sustainability Finance Framework Evaluation, of the sustainability finance framework
﴾hereinafter referred to as "this Framework”﴿ formulated by KDXR, a use-of-proceeds type of

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financing will be evaluated whether it has been aligned with the Green Bond Principles1, the Social
Bond Principles2, the Sustainability Bond Guidelines3, the Green Loan Principles4, the Social Loan
Principles5, the Green Bond Guidelines6, the Green Loan Guidelines7 and the Social Bond Guidelines8.
These are principles and guidelines and are not regulations, which are not legally binding. JCR will
however make evaluation with reference to these principles and guidelines as standards unified
domestically and globally.
Of the use of proceeds under this Framework, KDXR has set green projects as follows: the proceeds
shall be used for acquisition of green buildings, refinancing of the acquisition proceeds, constructionthat contributes to energy conservation and environmental benefits or renovation work, such as
facilities. KDXR has also defined eligible projects as the following social projects: the proceeds toacquire senior living facilities and medical facilities and to refinance the acquisition proceeds.
Additionally, it has been stipulated to take appropriate measures in consideration of the adverse
impact on the environment and society in implementing eligible projects. Accordingly, JCR has
evaluated that the use of proceeds in this Framework is expected to improve the environmental andsocial benefits.
KDXR has appropriately determined its selection criteria and carried out its evaluation processes by
involving the management. The proceeds will be managed under definite rules. These processes andthe disclosure and reporting on the proceeds management have been also adequately made.
Accordingly, JCR has evaluated that the management and operation system in KDXR has establishedand provided transparency.
Consequently, JCR assigned "gs1﴾F﴿" for "Green and Social Evaluation ﴾Use of Proceeds﴿," "m1﴾F﴿" for"Management, Operation and Transparency Evaluation" and "SU 1﴾F﴿" for “JCR Sustainability Finance
Framework Evaluation” based on its JCR Sustainability Finance Evaluation Methodology. This
Framework meets the standards for the items required in the Green Bond Principles, the Social Bond
Principles, the Sustainability Bond Guidelines, the Green Loan Principles, the Social Loan Principles,
the Green Bond Guidelines, the Green Loan Guidelines and the Social Bond Guidelines.

International Capital Market Association ﴾hereinafter referred to as " ICMA"﴿ ﴾2021﴿ Green Bond Principles
https://www.icmagroup.org/green-social-and-sustainability-bonds/green-bond-principles-gbp/
2
ICMA ﴾2023﴿ Social Bond Principles
https://www.icmagroup.org/sustainable-finance/the-principles-guidelines-and-handbooks/social-bond-principles-sbp/
3
ICMA ﴾2021﴿ Sustainability Bond Guidelines
https://www.icmagroup.org/sustainable-finance/the-principles-guidelines-and-handbooks/sustainability-bond-guidelinessbg/
4
LMA, APLMA, LSTA ﴾2023﴿ Green Loan Principles
https://www.lsta.org/content/green-loan-principles/
5
LMA, APLMA, LSTA ﴾2023﴿ Social Loan Principles
https://www.lsta.org/content/social-loan-principles-slp/
6
Ministry of the Environment ﴾2021﴿ Green Bond Guidelines
https://www.env.go.jp/content/000062495.pdf
7Ministry of the Environment ﴾2022﴿ Green Loan Guidelines
https://www.env.go.jp/content/000062495.pdf
8Financial Services Agency ﴾2021﴿ Social Bond Guidelines
https://www.fsa.go.jp/news/r3/singi/20211026-2/01.pdf
1

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Table of Contents■Evaluation Phase 1: Green and Social Evaluation
I. Overview of Use of Proceeds
JCR's Key Consideration in this Factor
Current Status of Evaluation Targets and JCR's Evaluation
1. Greenness and Socialness of the Project
2. Negative Impacts on the Environment and Society
3. Alignment with SDGs

■Evaluation Phase 2: Management, Operation and Transparency Evaluation
I. Selection Criteria and Processes for Use of Proceeds
JCR's Key Consideration in this Factor
Current Status of Evaluation Targets and JCR's Evaluation
1. Goals
2. Selection Criteria
3. Processes
II. Management of Proceeds
JCR's Key Consideration in this Factor
Current Status of Evaluation Targets and JCR's Evaluation
III. Reporting
JCR's Key Consideration in this Factor
Current Status of Evaluation Targets and JCR's Evaluation
IV. Organization's Sustainability Initiatives
JCR's Key Consideration in this Factor
Current Status of Evaluation Targets and JCR's Evaluation■Evaluation Phase 3：Evaluation Result (Conclusion)

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Evaluation Phase 1: Green and Social Evaluation

gs1(F)I. Overview of Use of Proceeds
JCR's Key Consideration in this Factor
In this section, JCR will firstly confirm that the proceeds have been allocated to projects with clear
environmental benefits or social benefits. Secondly, in cases where the use of proceeds is expected
to have an adverse impact on the environment or society, JCR will confirm that the impact has beenthoroughly examined by an in-house specialized department or an external third-party organizationand necessary workarounds and mitigation measures have been taken. Finally, JCR will confirm thatthe use of proceeds has been aligned with the Sustainable Development Goals ﴾hereinafter referred
to as "SDGs".﴿

▶▶▶ Current Status of Evaluation Targets and JCR's Evaluation

The eligible green projects and eligible social projects for which KDXR will use the proceeds under thisFramework have been important measures that contribute to materialities, respectively and are expected
to have environmental or social benefits.

This Framework has been structured to procure proceeds through green finance for which only
assets that meet the green eligibility criteria will be used, social finance for which only assets thatsatisfy the social eligibility criteria will be used and sustainability finance which includes both
assets that meet the green eligibility criteria or the social eligibility criteria, respectively will be
used9. These finances will be allocated to acquire assets that satisfy the following eligibility criteria
and refinance such acquisition proceeds or funding, which will repay borrowings and redeem
investment corporation bonds, including short-term investment corporation bonds.

9

Green finance, social finance and sustainability finance are collectively referred to as sustainability finance in this evaluation
report.
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This Framework for Use of Proceeds

1-1.

Use of Proceeds

The use of proceeds procured through green finance ﴾Note 1﴿ is limited to finance the followings:
﴾1﴿ the acquisition of assets that satisfy Green Eligibility Criteria 1 stated below and refinancing ofsuch acquisition proceeds ﴾the repayment of borrowings and the redemption of investment
corporation bonds, including short-term investment corporation bonds﴿; funding or ﴾2﴿
construction and/or refurbishments that meet Eligibility Criteria 2.
The use of proceeds raised through social finance ﴾Note 2﴿ is limited to finance the acquisition ofassets that meet Social Eligibility Criteria described below and refinancing of such acquisition
proceeds, which repay borrowings and redeem investment corporation bonds, including shortterm investment corporation bonds.
Sustainability finance ﴾Note 3﴿ refers to finance that includes both uses of proceeds which satisfy
the eligibility criteria for green finance or social finance, respectively.

﴾Note 1﴿ Green loans, including interest rate derivative contracts associated with such loans ﴾green
derivatives﴿ and green bonds
﴾Note 2﴿ Social loans, including interest rate derivative contracts associated with such loans ﴾social
derivatives﴿ and social bonds
﴾Note 3﴿ Sustainability loans, including interest rate derivative contracts associated with such loans﴾sustainability derivatives﴿ and sustainability bonds[Green Eligibility Criteria ﴾1﴿]Assets that meet any of the following requirements for recognition or certification ﴾Green
Qualifying Assets.﴿ Each certification is required to have obtained or renewed or obtain or renew
by the payment date or reporting date.

Type

Validity Period

DBJ Green Building Certification

Three years from the certification
obtained date
Five years from the certification
obtained date-

CASBEE for Real Estate
BELS Evaluation, including nonresidence and ZEB
Newly acquired on or after April 1,
2024

Eligibility Rank
3 stars or above
B+ rank or higher
・・

Existing buildings constructed on
or after April 1, 2016
4 or more
Existing buildings constructed onor before March 31, 2016
3 or more; however, for logistics
facilities, BEI shall be less than
0.75.

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BELS Evaluation, including nonresidence and ZEB
Already acquiredon or before March 31, 2024
BELS Evaluation, including
residence and ZEH
Newly acquiredon or after April 1, 2024-

3 or more; however, for logistics
facilities, BEI shall be less than 0.75.

-

・

Existing buildings constructed on
or after April 1, 2016
3 or more・ Existing buildings constructed onor before March 31, 2016
2 or more
3 or more

BELS Evaluation, including
residence and ZEH
Already acquiredon or before March 31, 2024

[Green Eligibility Criteria ﴾2﴿]﴾Construction or facility refurbishments that contribute to energy conservation or environmental
benefits﴿
・ Renovation work, including facilities, to reduce energy consumption, water consumption
and GHG emissions or improve other environmental benefits in real estate managed,
which shall be effective to reduce consumption or emissions by 30 percent or morecompared to the previous levels.
・ Facility refurbishments that improve the evaluation level by one or more in any of thecertification specified in the Eligibility Criteria ﴾1﴿
・ Introduction or acquisition of facilities related to renewables

The aforementioned energy-saving construction and renovation work, including facilities, arelimited to those for which have already been paid or will be paid by the payment date.

[Criteria Eligible for Social Finance]
Assets that fulfill the following eligibility criteria ﴾Assets Eligible for Social Finance﴿
・ Senior Living Facilities

・ Medical Facilities

・ Private senior homes
・ Serviced senior housing
・ Apartments for the elderly
・ Group homes for elderly with cognitive impairment
・ Small multi-function facilities
・ Daycare facilities, etc.
・ Hospitals
・ Clinics
・ Medical malls (healthcare facilities and pharmacies only)・ Nursing and health facilities, etc.

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Evaluation by JCR to this Framework

1. Greenness and Socialness of the Project﴾1﴿ Environmental Benefits of Use of Proceeds
﴾a﴿ Use of Proceeds 1: Green Buildings
Use of proceeds 1 covers the proceeds to acquire properties that have already obtained
environmental certification or will obtain such certification by the payment or reporting date andrefinancing thereof. This use of proceeds falls under "Green buildings which meet regional, national
or internationally recognized standards or certifications" in the Green Bond Principles and the Green
Loan Principles and "Projects concerning Green Buildings” among the use of proceeds illustrated in
the Green Bond Guidelines and the Green Loan Guidelines.
KDXR has defined the intended environmental certification in the use of proceeds as DBJ Green
Building Certification, CASBEE Certification and BELS, and the proceeds will be used for properties
that have earned a rating with the eligibility rank or higher set out by environmental certification orwill receive it by the payment date or reporting date.
As detailed below, each certification has been recognized as having significant environmental
benefits on the items that are subject to the environmental certification, which has been recognizedlocally, nationally or internationally. Accordingly, JCR has evaluated that projects with ranks thatsatisfy the eligibility criteria have had environmental benefits.

DBJ Green Building Certification
DBJ Green Building Certification refers to a certification system provided by DBJ ﴾Development Bankof Japan﴿ to evaluate real estate with social and environmental consideration. The evaluation results
are indicated with the number of stars, and the evaluation axis is buildings with social andenvironmental consideration. The evaluation with major five categories is as follows: “Energy &Resources ﴾environmental performance of buildings﴿”; “Amenity ﴾comfort of tenants﴿”; “Resilience﴾ability to respond to crises﴿”; “Community & Diversity ﴾consideration for diversity and thesurrounding environment﴿”; and “Partnership ﴾cooperation with stakeholders﴿" with 5 stars ﴾extremely
excellent and top-shelf buildings in Japan﴿, 4 stars ﴾excellent﴿, 3 stars ﴾great﴿, 2 stars ﴾good﴿ and 1 star﴾satisfactory.﴿ JCR has evaluated that this evaluation is equivalent to the "regional, national orinternationally recognized standards or certification" in the green project classification defined in theGreen Bond Principles as DBJ Green Building Certification has been highly recognized in Japan andhas had certain evaluation items for environmental performance although it is not specific toenvironmental performance. JCR however has considered that it is desirable to individually confirm
the evaluation of environmental performance as the certification is not exclusively limited toenvironmental performance.
DBJ Green Building Certification is based on a comprehensive assessment, including not only theenvironmental performance of properties to be evaluated but also the comfort of tenants, risk
management, such as disaster/crime prevention, consideration for the surrounding environment and8/29
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communities and collaboration with stakeholders. There are many properties that do not meet thecriteria for evaluation in the real estate market as scoring is designed by consolidating specific"excellent initiatives" for the environment and society. In order to be highly rated, a building isrequired to appropriately consider not only the environment but also all stakeholders involved in thebuilding.
The level of DBJ Green Building Certification is expected to be the top 20 percent or so of the allincome properties in Japan in the "concerns for the environment and society." Additionally, each
evaluation up to 3 stars is subject to the collection of the top 10 percent ﴾5 stars﴿, the top 30 percent
﴾4 stars﴿ and the top 60 percent ﴾3 stars﴿ of the properties that exceed the certification level. JCR has
therefore evaluated that KDXR's use of proceeds 1 has been narrowed down to properties with highenvironmental performance among the buildings that aim to obtain certification.

CASBEE ﴾Comprehensive Assessment System for Built Environment Efficiency﴿
CASBEE is an acronym standing for Comprehensive Assessment System for Built Environment
Efficiency and is a method to evaluate and rate the environmental performance of buildings. In April
2001, a comprehensive environmental evaluation research committee for buildings was established
as an industry-academia-government collaboration project with the support of the Housing Bureauof the Ministry of Land, Infrastructure, Transport and Tourism and has been continuously developed
and maintained since then. The evaluation tools include CASBEE for Construction, CASBEE for Cities
or CASBEE for Real Estate that was developed for the real estate market to show environmental
performance in an easy-to-understand manner.
CASBEE for New Construction is evaluated with the value of BEE ﴾Built Environment Efficiency﴿ with L
﴾L means Load﴿ as the denominator and Q ﴾Q refers to Quality﴿ as the numerator after thereconstruction from the viewpoint of environmental quality of buildings and environmental loads ofbuildings for the evaluation items in the four areas: energy consumption; resource recycling; regional
environment; and indoor environment. The evaluation results are categorized into five as follows:
Rank S ﴾excellent﴿; Rank A ﴾very good﴿; Rank B + ﴾good﴿; Rank B - ﴾slightly inferior﴿; and Rank C﴾inferior.﴿ CASBEE for Real Estate falls under four categories as follows: Rank S ﴾excellent﴿; Rank A﴾very good﴿; Rank B + ﴾good﴿; and Rank B ﴾satisfied with items required.﴿ In order to be highly
evaluated, consideration for indoor comfort or landscape is required in addition to concern for theenvironment, such as energy saving or using equipment with a low environmental burden, andintegrated buildings with high quality is required.
JCR has evaluated that buildings with Rank B + or higher in the CASBEE certification set as the eligible
criteria by KDXR have had environmental benefits with the following reasons: ﴾1﴿ such buildings have
BEE of 1.0 or higher in CASBEE for New Construction, and their environmental quality clearly exceeds
their environmental burden; and ﴾2﴿ such buildings are equivalent to Rank B + in the conventional
CASBEE for Construction although the measurement is not based on BEE in CASBEE for Real Estate.

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BELS ﴾Building Energy Efficiency Performance Labeling System﴿
BELS is an acronym standing for Building-Housing Energy-Efficiency Labeling System and is asystem under which energy-saving performance is evaluated and certified by a third-party
evaluation institution for new and existing buildings. The envelope performance and primaryenergy consumption are subject to evaluation, and the excellent energy-saving performance isrequired to be highly evaluated. The evaluation results are classified by level based on Building
Energy Index ﴾hereinafter referred to as "BEI".﴿ BEI refers to a scale to measure energy-saving
performance relative to the standard primary energy consumption, with design primary energy
consumption as the numerator and reference primary energy consumption as the denominator.
Evaluation was made on a five point scale ranging from one star to five stars under theconventional standard ﴾2016 standard﴿; however, BEI was revised to its new system with stricter
energy-saving criteria since the enforcement of the revised Building Energy Efficiency Act on April
1, 2024.
The energy conservation standard has tightened for large non-residential buildings whose areas
are 2,000 m2 or more as the revised Building Energy Efficiency Act came into effect on April 1,
2024. The new energy conservation standard varies depending upon the building uses: 25 percent
or more reduction for factories, including logistics facilities and 20 percent or more reduction for
offices, schools, hotels or department stores. Based on this revision, the Building-Housing Energyefficiency Labeling System at the time of sale and lease was enhanced in April 2024, and a new
standard ﴾2024 standard﴿ was introduced in BELS. Under the new standard, residential and nonresidential buildings with renewable energy facilities will be assessed on a scale of 7 from Level 6
﴾an energy consumption reduction rate of 50 percent or more﴿ to Level 0 ﴾an energy consumption
reduction rate of less than 0 percent﴿ while residential buildings without renewable energy
facilities will be assessed on a scale of 5 from Level 4 ﴾an energy consumption reduction rate of
30 percent or more﴿ to Level 0 ﴾an energy consumption reduction rate of less than 0 percent.﴿
Under the new standard, BELS Level 4 or above ﴾an energy consumption reduction rate of between
30 percent and 40 percent﴿ exceeds the energy conservation standard of non-residential buildings
and an induction standard or more is required for some uses, such as hotels, department stores,
hospitals, restaurants or meeting places. For residence, the previous standards remain unchanged:
the energy consumption reduction rate is 0 percent or more under the energy-saving standard
and 20 percent or more under the induction standard. The level 3 or more is required to meet theinduction standard under the new standard.
JCR updated its standard for the eligibility of green buildings and renovation work in evaluating
green finance and revised its standard on BELS along with the enforcement of the revised Building
Energy Efficiency Act on April 1, 202410. JCR has confirmed that the eligibility criteria for thisFramework have been established to meet JCR's eligibility criteria.
Accordingly, JCR has determined that the criteria in the BELS applied by KDXR have had energysaving performance and been adequate as the use of proceeds.

10

JCR updated its Eligibility Criteria for green buildings and renovation work on March 29, 2024 ﴾23-D-1859.﴿
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﴾b﴿ Use of Proceeds 2: Construction or Facility Refurbishments that Contribute to Energy
Conservation and Environmental Benefits
Use of proceeds 2 includes: ﴾1﴿ facility refurbishments to reduce energy consumption, water
consumption and GHG emissions, or to improve other environmental benefits, which can reduce
consumption or emissions by 30 percent or more compared to the previous levels; ﴾2﴿ facility
renovation work that can improve the assessment level by one or more in any of the certification set
out in the use of proceeds 1; and ﴾3﴿ the introduction or acquisition of facilities on renewable energy
in real estate managed by KDXR. This use of proceeds falls under "Energy efficiency" and “Renewableenergy” in the Green Bond Principles and the Green Loan Principles, and "Projects for energy
efficiency" and “Projects for renewable energy” among the use of proceeds exemplified in the Green
Bond Guidelines and the Green Loan Guidelines.
With respect to the environmental benefits in the aforementioned ﴾1﴿, the reduction rate of energy
consumption through facility refurbishments has been set at 30 percent or more, which is comparable
to the global standard. Since all reduction effects will be quantitatively shown before and after
construction, concrete improvements are expectable. In terms of ﴾2﴿, JCR has evaluated that definite
environmental benefits can be recognized as the requirement is to rise the assessment level ofenvironmental certification by one or more.
Regarding ﴾3﴿, solar power generation refers to clean energy in place of fossil fuels by using solar
power as energy sources, has GHG reduction effects and does not depend upon finite resources,
such as fossil fuels. The power generation is therefore expected to play an important role in the Sixth
Strategic Energy Plan, which was approved by the Cabinet in October 2021. In the aforementioned
Plan, the government will make sure to use renewables as the main power source, prioritize
renewable energy over other energy and promote the introduction of renewables to the maximum
extent possible while minimizing the burden on citizens and coexisting with communities based on
the premise that energy is stably supplied or an energy cost is reduced ﴾e.g. S+3E﴿ in the renewableenergy sector, striving to realize the carbon neutral declaration in 2050, a 46 percent reduction in
CO2 emissions in 2030 and a new challenge that continuously aims even higher of a 50 percent
reduction in CO2 emissions. In the Plan, the renewable energy has been positioned as the main powersource in FY 2030, and the solar power generation accounts for the largest power production in
renewable energy sources.
Accordingly, JCR has evaluated that the introduction of renewable energy facilities for which theproceeds will be used under this Framework has been of significance in the domestic policy issues
and can expect to have environmental benefits as it is effective to reduce GHG emissions by replacing
fossil fuels with alternative sources.

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Figure 1. Overview of the Sixth Strategic Energy Plan11

﴾2﴿ Social Benefits of Use of Proceeds
﴾c﴿ Use pf proceeds 3: Senior Living Facilities
Use of proceeds 3 refers to the proceeds to acquire senior living facilities and refinancing thereof.
The use of proceeds is categorized into businesses that contribute to "Access to essential services"and “Socioeconomic advancement and empowerment”, which cover “the elderly, families with smallchildren and people in need of medical and nursing services” under the eligible social project
category in the Social Bond Principles, the Social Loan Principles and the Social Bond Guidelines.
﴾i﴿ Social Issues 1: Increasing Demand and Undersupply of Nursing Care Facilities
Japan is currently facing an aging society with fewer children, a rapidly progressing problem. The
domestic population aged 65 or over is 36.21 million and the aging rate is 28.9 percent12. Japan's
elderly population rate is the highest among developed countries in the world and is expected toremain high hereafter.
A structure was required to support the elderly care throughout society, and the long-term careinsurance system was introduced while the need for nursing care had been on the increase with theaging population. The number of people certified for long-term care/support need under the longterm care insurance system, such as a family member in need of nursing care reached 6.68 million13
including primary insured persons only as of the end of FY 2020. The estimation has shown thatapproximately 2.43 million care workers are essential by FY 202514 due to the increase in family

Agency for Natural Resources and Energy The Sixth Strategic Energy Plan
Cabinet Office ﴾2023) White Paper on the Aging Society
https://www8.cao.go.jp/kourei/whitepaper/index-w.html
13
Ministry of Health, Labor and Welfare ﴾2020﴿ Status Report on Long-term Care Insurance (Annual Report)
https://www.mhlw.go.jp/topics/kaigo/osirase/jigyo/20/index.html
14
Ministry of Health, Labour and Welfare ﴾July, 2021﴿ the Eighth Long-Term Care Insurance Business Plan
https://www.mhlw.go.jp/stf/houdou/0000207323_00005.html
11
12

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members in need of nursing care, and the demand for care facilities is expected to rise; however, care
workers and care facilities have been undersupplied.
﴾ii﴿ Social Issue 2: The Number of People who Leave Work to Care for Family Members inneed of Nursing Care Remains at High Levels
In Japan, the elderly population has been increasing and simultaneously the number of people
certified for needed long-term support/care has been on the increase under the long-term careinsurance system, and this trend is expected to continue as baby boomers get into their 70s. The bar
chart below shows the changes in the number of job leavers due to caregiving or nursing care, as
published in the Employment Trend Survey in the Ministry of Health, Labor and Welfare. Although
there are yearly variations for both men and women, the total number fluctuates between roughly
70,000 and 110,000, indicating the important issue is that many people have to leave their jobs to

120
100

(in thousands)

workforce due to caregiving and nursing

Number of employees leaving thecare for their family members in the aging society with fewer children.

80
60

66.7

57.1
63.3

79.5

79.8

71.2
46.9

52.7

40
20
23.3

24.5

2015

2016

35.8
18.8

20.4

17.8

24

25.7

2018

2019

2020

2021

2022

0
2017
Male

FemaleFigure 2: Changes in the Number of People who Leave their Jobs due to Caregiving/Nursing care15

﴾d﴿ Use of Proceeds 4: Medical Facilities
Use of proceeds 4 refers to the proceeds to acquire medical facilities and refinancing thereof. The
use of proceeds is categorized into “Access to essential services ﴾medical care﴿” that covers “People
in need of medical services” under the eligible social project category in the Social Bond Principles,
the Social Loan Principles and the Social Bond Guidelines.
﴾i﴿ Social Issue: Rapid Increase in Needs for Medical Services caused by the Aging
Population
The domestic elderly population rate that is the proportion of the population aged 65 or over reached27.7 percent in 2017, entering a serious aging society in which one quarter of the population is elderly.
15

Created by JCR based on "Employment Trend Survey," provided by Ministry of Health, Labor and Welfare.
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The declining birthrate and aging population are expected to continuously accelerate, and the needfor medical and nursing care is predicted to skyrocket in 2025 when the baby boomers will be 75
years old or above. Therefore the structures are being developed to provide medical and nursing
care services in preparation for 2025. The issues to be addressed hereafter is to improve medical
services from an acute stage to recovery and chronic stages and to develop and expand structures,such as home care in respective regions in Prefectures due to the rise in elderly.

<KDXR Initiatives to Address Social Issues>
KDXR has acknowledged that the shortage of healthcare facilities has become an even more serious
problem in the super-aging society in Japan while the wait-listed children for childcare facilities inurban areas is also one of the social issues due to women’s advancement in society or the lack ofnursery teachers. Kenedix, Inc., the parent company of the Asset Management Company has defined"Initiatives for an aging society with fewer children" as one of its materialities, and KDXR has beenworking to respond to the low birthrate and aging society through investments in healthcare facilities.
KDXR has invested in healthcare facilities whose needs will be socially accelerated hereafter, aiming
to meet the growing social demand for healthcare by purchasing and operating these facilities. KDXR
has been proactively making efforts to acquire healthcare facilities, including private senior homes,
serviced senior housing or nursing and health facilities, a first among all J-REIT. KDXR aims to growwith operators of its properties by providing the best solutions for their business, facility
management issues or other needs. KDXR fully understands the philosophy or business/facilities
operations of these partners while these operators of its properties sufficiently understand KDRX's
investment philosophy or management policies. This mutual understanding culminates in business
partner relationships that go well beyond the conventional boundaries of ties between a building
owner and a tenant.
JCR has highly evaluated that uses of proceeds 3 and 4 have been of great social significance,
respectively as these will contribute to resolving Japanese social issues, such as demand increases
and supply shortage of nursing care facilities or surges in needs for medical services caused by the
rapid transition to the super-aging society. The continuous increase in nursing care facilities with theproceeds is expected to reduce employed people who were forced to leave their jobs to care for theirfamily members and to increase in productivity in society, taking into consideration that 70,000 to
110,000 people quit their jobs to care for their family members.

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2. Negative Impacts on the Environment and Society
KDXR has listed the following risks that may wield a negative impact on the environment and society
by projects for which the proceeds will be used: hazardous substances, such as industrial waste areburied in the land to be acquired; and toxic materials, including asbestos or PCBs are used in thebuilding materials or equipment of the properties to be acquired.
KDXR has thoroughly examined a property by receiving an engineering report, an earthquake
probable maximum loss ﴾PML﴿ assessment and a soil contamination survey before acquiring theproperty so as to ensure that it complies with laws and regulations for the building to be managed
by KDXR. The engineering report includes a confirmation that a building is free of asbestos, PCB or
fluorocarbons. If any hazardous substances are discovered, appropriate actions are taken, such as byestablishing countermeasures, managing or disposing of these substances in accordance with laws
and regulations. If a property KDXR plans to acquire has soil contamination, it makes the investment
only after the completion of soil contamination countermeasures.
KDXR has determined that operators' operational capabilities and management stability are essential
to keep sustainability or maintain/improve the asset value of the target properties in acquiring
healthcare and medical facilities, and it has secured a structure to adequately avoid, mitigate andimprove risks that may arise in healthcare facilities by complying with various laws and regulations
and conducting examinations based on unique items thereof. In cases where there is any problem,the department in charge of the Asset Management Company promptly contacts the relevant
operator, urges the operator to properly examine the facility concerned and take measures to prevent
recurrence.
Accordingly, JCR has evaluated that the adverse environmental and social impacts of all eligible
projects have been taken into consideration.

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3. Alignment with SDGs
JCR has evaluated that the use of proceeds set out in this Framework has contributed to the following
SDGs’ goals and targets in light of ICMA's SDGs mapping.

Goal 3: Good health and well-being
Target 3.8. Achieve universal health coverage (UHC), including financial risk protection, access toquality essential health-care services and access to safe, effective, quality and affordable essential
medicines and vaccines for all
Goal 7: Affordable and clean energy
Target 7.2. By 2030, increase substantially the share of renewable energy in the global energy mix
Target 7.3. By 2030, double the global rate of improvement in energy efficiency

Goal 8: Decent work and economic growthTarget 8.2: Achieve higher levels of economic productivity through diversification, technologicalupgrading and innovation, including through a focus on high-value added and labor-intensive sectors
Target 8.3: Promote development-oriented policies that support productive activities, decent job
creation, entrepreneurship, creativity and innovation, and encourage the formalization and growthof micro-, small- and medium-sized enterprises, including through access to financial services
Goal 9: Industry, Innovation and Infrastructure
Target 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 all countries taking action in accordance with theirrespective capabilities

Goal 10: Reduce inequalities
Target 10.2 By 2030, empower and promote the social, economic and political inclusion of all,regardless of age, sex, disability, race, ethnicity, origin, religion or economic or other status
Goal 11: Sustainable cities and communities
Target 11.2. By 2030, provide access to safe, affordable, accessible and sustainable transport systems
for all, improving road safety, notably by expanding public transport, with special attention to theneeds of those in vulnerable situations, women, children, persons with disabilities and older persons
Target 11.3. By 2030, enhance inclusive and sustainable urbanization and capacity for participatory,
integrated and sustainable human settlement planning and management in all countries
Target 11.6. By 2030, reduce the adverse per capita environmental impact of cities, including by
paying special attention to air quality and municipal and other waste management
Goal 13: Climate Action
Target 13.1. Strengthen resilience and adaptive capacity to climate-related hazards and natural
disasters in all countries

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Evaluation Phase 2:
Management, Operation and Transparency Evaluation

m1(F)I. Selection Criteria and Processes for Use of Proceeds
JCR's Key Consideration in this Factor
In this section, JCR will confirm that the objectives to be achieved through sustainability financing,
the appropriateness of sustainability project selection criteria and processes, and whether or not aseries of processes are properly disclosed to investors/lenders and others.

▶▶▶ Current Status of Evaluation Targets and JCR's Evaluation

JCR has determined that departments with specialized knowledge and the management have been

appropriately involved in the goals, selection criteria for green and social projects and processes in thisFramework and that transparency has also been provided.

1. Goals
KDXR and the Asset Management Company have recognized the importance of ESG ﴾Environmental,
Social and Governance﴿ awareness in real estate management, have positioned the enhancement ofsustainability as one of the material management issues to realize a sustainable society as a corporate
responsibility and have established the sustainability and environmental policies, aiming to reduce
the environmental burden or cooperate with stakeholders.
Setting forth "Contributing to a sustainable environment" as one of the sustainability policies, KDXR
and the Asset Management Company are to engage to their social mission of improving theenvironmental performance of the properties under their management, to reduce the environmental
impact of such properties, including energy consumption, GHG emissions, water consumption or
waste generation, and to contribute to environmental sustainability through the continuous
reduction of environmental impacts or appropriate management of hazardous substances.
KDXR and the Asset Management Company will contribute to the diversity of society by considering
the social impact of their properties as "Commitment to a diverse society" and strive to ensure thesafety, confidence, health, comfort and diversity of their tenants or local communities. KDXR and theAsset Management Company have invested in large, multi-purpose properties, such as “officebuildings, residential properties or hotels designed to meet the needs of retail tenants on lower floors”
or “properties with multi-uses, such as stores or medical clinics that are directly linked to a railway
station" based on the above-cited policy. KDXR and the Asset Management Company aim tocontribute to tenants and residents of their buildings as well as everyone living in the surroundingarea by utilizing areas of its building sites set aside for public use and providing properties for abroad range of applications. KDXR has additionally identified initiatives for an aging society withfewer children as one of its material issues and has invested in residential facilities with healthcare orchildcare facilities and healthcare facilities to meet the needs of Japan's aging population.

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JCR has evaluated that the use of proceeds set out in this Framework has contributed to the abovedescribed sustainability policy and been aligned with KDXR's goals.

Sustainability Policies 16

Contribution to a Sustainable Environment
Improving the environmental performance of the properties we manage is one of our

1social missions. We will lower the environmental impact and make contribution toenvironmental sustainability by constantly reducing the negative environmental impactof these properties, such as energy consumption, GHG emissions, water consumption
and the generation of waste materials. We also have activities for the proper managementof hazardous substances and reduction in their use.
Commitment to a Diverse Society

2

We contribute to the diversity of society while taking into account the social impact ofour properties. We are committed to maintaining safety, confidence, good health,comfort and diversity regarding our tenants and the communities where we operate.
Stakeholder Engagement3

We manage our properties as a responsible real estate asset management company bystressing the importance of engagement with our stakeholders such as investors, tenants,business partners, communities and property management companies.
Attractive Working Environment

4

We aim to maintain an attractive working environment by implementing measures for
employees' health and wellbeing and for diversity and equal opportunities. To enable
employees to realize their full potential, we will provide a variety of training programs
and other educational opportunities.
Responsible Organization

5

We have sound compliance and risk management activities in all of our business activities.
We are committed to the principle of responsible property investments by a responsibleorganization by aligning our operations with global ESG initiatives and actively disclosing
ESG information.

16

KDXR's website
https://www.kdx-reit.com/eng/sustainability/basic_policies.html
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2. Selection Criteria
The eligibility criteria for this Framework are described in Evaluation Phase 1 in this report. JCR has
evaluated that the selection criteria for the project have been appropriate.

3. Processes
This Framework for Processes

1-2. Project Evaluation and Selection Process
Eligible Project Selection Process
The Sustainability Department, which is a secretariat for the Sustainability Committee establishedin the Asset Management Company and the Listed REIT Department, which handles operations
related to the Asset Management Company’s asset management, will act as the center ofoperations relating to sustainability, including the Eligible Green Projects.
Chaired by the president & CEO of the Asset Management Company, the Sustainability Committee
consists of Head of Listed REIT Department, Head of Private REIT Department, Head of Strategic
Planning Department, Head of Strategic Planning of each REIT Department, Head of AssetManagement Division of each REIT Department, Head of Portfolio Management Division of Listed
REIT Department, Head of Finance & Accounting Department, Head of Corporate Administration
Department and other members. The Committee has examined and monitored sustainability
policies, targets and various initiatives with regard to sustainability while taking into considerationsocial situations or the asset management status of the Asset Management Company, KDXR andPrivate REIT.
The selection of Eligible Project requires the approval of the Asset Management Committee of
Listed REIT Department of the Asset Management Company, which reports to the Sustainability
Committee on the evaluation and use of proceeds of Eligible Project, alignment of use of proceedswith Eligibility Criteria or prospects of the status of allocation of net proceeds after allocatingproceeds to Eligible Project.
How to Disclose the Selection Criteria and Processes of Eligible Project
The project selection criteria and processes will be disclosed to investors in supplementary
documents for issuance when issuing investment corporation bonds, and these will be released tolenders in a third-party evaluation report formulated by JCR when making loans.

Evaluation by JCR to this Framework
The selection of projects eligible for the use of proceeds through sustainability finance based on thisFramework will be carried out in collaboration with Finance & Accounting Department, Strategic
Planning Department and Sustainability Department in accordance with the Eligibility Criteria definedin this Framework. The projects selected will be approved by Head of Finance & Accounting
Department, Head of Strategic Planning Department and Head of Sustainability Department, and the
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final decision will be made with the approved of the Asset Management Committee of Listed REIT
Department by Finance & Accounting Department.
Accordingly, JCR has evaluated that Department dedicated to sustainability and the management
have been adequately involved in the selection processes of projects defined in this Framework in
KDXR.
Additionally, the goals, selection criteria and processes for sustainability finance in KDXR will be
disclosed in the supplementary documents for issuance or this evaluation report, providing investors
with transparency.

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II. Management of Proceeds
JCR's Key Consideration in this Factor
It is usually assumed that the management of proceeds varies widely depending uponissuers/borrowers. JCR will confirm whether the proceeds are surely appropriated to the green project
and/or social project and whether a mechanism and internal system are in place to make tracking
easy.
JCR has also focused on whether the proceeds are scheduled to be used for green projects and/or
social projects at an early stage and on the management and operation methods for unallocatedproceeds.

▶▶▶ Current Status of Evaluation Targets and JCR's Evaluation

JCR has evaluated that the proceeds management system of KDXR has been adequately established andhow to manage proceeds will be disclosed in this evaluation report, and this Framework will be releasedon its website and therefore KDXR has provided high transparency.

This Framework for Management of Proceeds

1-3. Management of Proceeds
Proceeds Allocation Plan
The proceeds procured through sustainability finance, green finance and social finance will be
confirmed whether these are linked to the acquisition of green eligible assets and social eligible
assets or refinancing thereof and investment corporation bonds required for the acquisition, andthen the allocation will be promptly made.
・ The upper limit amountThe upper limit amount of green finance refers to the sum of ﴾1﴿ an aggregate amount of an
acquisition price of eligible green assets multiplied by the total asset LTV as of the end ofeach fiscal period and ﴾2﴿ the total investment in Eligibility Criteria 2, and the upper limit ofgreen finance will be set.
The upper limit amount of social finance refers to the figure calculated as follows: anaggregate amount of an acquisition price of eligible social assets multiplied by the total asset
LTV as of the end of each fiscal period and the upper limit of social finance will be set.
The balance of each financing will be managed so as not to exceed the amount of eacheligible debt. In cases where the balance exceeds the debt, an amount equivalent tounallocated proceeds will be managed in cash or cash equivalents.

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How to Track and Manage Proceeds
The proceeds and unallocated proceeds will be appropriately managed internally in collaboration
with personnel in charge of Strategic Planning Department and a person responsible for Finance& Accounting Department.
The proceeds and unallocated proceeds will be managed separately from other proceeds inseparate accounts for deposits and withdrawals exclusively for sustainability finance, green financeand social finance, and the proceeds transferred will be recorded and the balances will be checkedon a regular basis.
The proceeds procured through sustainability finance, green finance and social finance will beinternally tracked and managed in the Asset Management Company. In cases where proceeds willbe allocated to the acquisition of assets and refinancing thereof, the payment completion will be
confirmed and the amount paid will be recorded in internal files.
Internal Control and External Audit on Tracking Method
In cases where proceeds will be appropriated to the acquisition of assets and refinancing thereof,
Finance & Accounting Department will report the settlement, which will be reported to Head of
Strategic Planning Department, and then the payment amount will be recorded in internal files.
KDXR's accounting books will be prepared by a general administrator and audited by anaccounting auditor.
How to Manage Unallocated Proceeds
KDXR strives to promptly allocate proceeds raised through sustainability finance, green financeand social finance to the intended use of proceeds unless the circumstances are exceptional. KDXR
will however manage the proceeds and unallocated proceeds in cash or cash equivalents until the
allocation of the proceeds is completed.
In cases where the assets for which proceeds will be used are disqualified prior to the redemptionof bonds as the permitted use of proceeds as a result of disposition or physical damages after thefull amount is allocated, such assets - the evaluation target - will be transferred to the portfolio
management ﴾Note.﴿

﴾Note﴿ Portfolio management
KDXR will confirm that the total balance of green finance is compliant with the upper limit
amount of green finance ﴾Aggregate amount of Acquisition price of Eligible Green Assets ×
Total asset LTV + Total investment in Eligibility Criteria 2.﴿
KDXR will check that the total balance of social finance is compliant with the upper limit amountof social finance ﴾Aggregate amount of Acquisition price of Eligible Social Assets × Total Asset
LTV.﴿

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Evaluation by JCR to this Framework
The proceeds procured through sustainability finance will be managed in a dedicated account for
deposits and withdrawals. Accounting Department and Strategic Planning Department havemanaged the books on the proceeds in electronic files, respectively to supervise accounts fordeposits and withdrawals. In cases where proceeds are transferred, Accounting Department reportsthat effect to Strategic Planning Department, and the transfer is recorded in the account book under
Strategic Planning Department after the confirmation is made by Head of Strategic Planning
Department. The details in the books of both Accounting Department and Strategic Planning
Department will be regularly reconciled so as to tally with their records: transfer of proceeds orbalances for instance.
The management of proceeds is subject to internal and external audit. The books on the
management of proceeds will be stored in internally shared folders indefinitely.
The proceeds raised through sustainability finance will be immediately allocated to the intended useof proceeds unless the circumstances are exceptional; however, these will be managed in cash or
cash equivalents until the proceeds are allocated.
In cases where the assets for which proceeds will be used are disqualified prior to the redemption
and repayment of bonds as the permitted use of proceeds as a result of disposition or physicaldamages after the proceeds are allocated, such assets - the evaluation target - will be transferred tothe portfolio management. In the portfolio management, the balances of green finance and social
finance will be managed and controlled, respectively by confirming that the total balance of green
finance and social finance is compliant with the permitted upper limit of the amount of Green/Social
Eligible Debts at each fiscal period.
Accordingly, JCR has evaluated that KDXR's proceeds management system has been properly
established, how to manage the proceeds will be disclosed in this evaluation report and thisFramework will be released on its website; therefore, KDXR has a high level of transparency.

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III. Reporting
JCR's Key Consideration in this Factor
In this section, JCR will evaluate whether the disclosure system for investors/lenders before and after
the issuance of sustainability bonds/loans, which is implemented with reference to this Framework,is planned in detail and in an effective manner.

▶▶▶ Current Status of Evaluation Targets and JCR's Evaluation

JCR has evaluated in terms of KDXR's reporting that the allocation of proceeds and environmental andsocial benefits will be adequately disclosed to investors and lenders.

This Framework for Reporting

1-4. Reporting
Where to disclose the allocation of proceeds and the detailed disclosure
KDXR will annually disclose the following information on its website:
Allocation of Proceeds
Allocation if there are any unallocated proceeds until the proceeds are fully allocated toprojects that meet the eligibility criteria
The fact that the unallocated proceeds were transferred to the portfolio management
and its management status ﴾eligible green/social assets and eligible green/social debts﴿
in cases where there are any unallocated proceeds between the completion of theallocation of proceeds and the maturity/repayment dates of the finance.
Where to disclose environmental benefits of eligible sustainability projects and thefrequency of the disclosure
In cases where there are any unallocated proceeds, the allocation and the following indicators will
be annually disclosed on KDXR's website.
KPI ﴾Key Performance Indicator﴿ that indicates the environmental benefits on this eligible
projects
The following indicators will be published to the extent operationally feasible until the arrival of
maturity/repayment dates of the finance.
・ Green Eligibility Criteria ﴾1﴿
Number and certification of Eligible Green Assets
Aggregate amount of total floor area of Eligible Green Assets

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Energy consumption, water consumption and GHG emission of Eligible Green Assets where
KDXR has energy control authority
・ Green Eligibility Criteria ﴾2﴿
In the cases in which construction or facility refurbishments that are expected to result in
improvements in terms of energy saving or environmental benefits are implemented, anestimated reduction rate ﴾percentage﴿ of energy consumption, water consumption or GHG
emissions before and after the construction or refurbishments
In the cases in which facilities related to renewable energy are installed or acquired,anticipated annual energy production related to the said facilities
・ Social Eligibility Criteria
The following output, outcome and income indicators will be annually released.
Output Indicator

Outcome Indicator

Impact(Qualitative Targets)

Overview of building and lease
However, in case that the operator’s consent has not been obtained, the information is notdisclosed.
J-REIT and healthcare market size
Assets under management of healthcare facilities
Number of people who could receive benefits by operating healthcare facilities: Overview
of operations (Number of rooms, capacity or utilization rate)
Services provided at healthcare facilities
By linking capital market needs with healthcare facilities operators' needs, KDRX will
promote the provision of superior healthcare facilities and contribute to the promotion ofsocially beneficial capital investments.

Evaluation by JCR to this Framework

Reporting on the allocation status of the proceeds
KDXR will annually disclose the details set out in this Framework with respect to the allocation ofproceeds procured through sustainability finance on its website. JCR has confirmed that in cases
where there are any major changes in the situation, such as the disposition of properties for which
the proceeds will be used, KDXR will disclose such changes on its website or through a press release.

Reporting on environmental and social benefits
KDXR plans to annually disclose reporting on the environmental benefits of green eligible projects
and the social benefits of social eligible projects until the maturity and repayment dates of the financeto the extent operationally feasible on its website. These disclosure items include quantitative
indicators, such as energy production, GHG reductions or occupancy rates of healthcare facilities. For
projects whose indicators are difficult to quantitatively measure, their outcomes have been quantified
to the extent possible, and appropriate disclosure targets have been identified.
Accordingly, JCR has evaluated that KDXR has properly established its reporting structure.

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IV. Organizational Sustainability Initiatives
JCR's Key Consideration in this Factor
In this section, JCR will evaluate whether the management of the issuer/borrower has positioned
sustainability issues as a high priority for management and whether the sustainability policy,
processes and selection criteria for green/social projects have been clearly positioned through theestablishment of a department specializing in environmental issues or in collaboration with externalorganizations.

▶▶▶ Current Status of Evaluation Targets and JCR's Evaluation

JCR has highly evaluated that KDXR has positioned sustainability issues as key management challenges, has
had a council on sustainability issues and has dealt with issues from a practical and administrative
perspective while taking in the knowledge and expertise of both internal and external experts.

KDXR has acknowledged the importance of ESG consideration in real estate management andidentified the enhancement of sustainability as one of the material topics for its business to realize asustainable society as a corporate responsibility, and KDXR is committed to reducing its
environmental impact through collaboration and cooperation with its stakeholders. KDXR, as one of
the largest REITs in Japan, is strongly aware of its social responsibility and aims to be a leading
company in sustainability initiatives by integrating and elevating respective expertise of the 3 REITs
prior to their mergers.
KDXR and the Asset Management Company have formulated their sustainability and environmental
policies to promote specific initiatives that address the materialities of the Kenedix Group. KDO was
the first J-REIT to participate in the "GRESB Real Estate Assessment," an annual benchmarking
assessment for real estate companies and funds. Since then, the Asset Management Company has
been awarded "Green Star" for 12 consecutive years by achieving high performance both in"Management Component," which evaluates policies or organizational structures for ESG promotion
and the "Performance Component," which assesses environmental performance or tenant
engagement at properties owned.
Reduction of energy consumption and CO2 emissions is one of the material issues in the AssetManagement Company who is to make a contribution to environmental sustainability by using its
business activities or property management operations for continuously cutting energy consumption
and CO2 emissions so as to lower its environmental impact. KDXR has set GHG emission targets as
its goals on this materiality and has obtained Science Based Targets ﴾SBT﴿ certification.
In October 2021, the Asset Management Company expressed support for the recommendations of
the Task Force on Climate-related Financial Disclosures ﴾hereinafter referred to as “TCFD”﴿ and alsojoined the TCFD consortium, a group of domestic companies that support TCFD recommendations,based on which it has been working on disclosure. The Asset Management Company has conducteda scenario analysis to identify the short-, medium- and long-term climate change risks and26/29
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opportunities of KDXR and to discuss and handle their potential impacts based on the world outlookof respective scenarios. Specific risks and opportunities include increases in carbon tax costs while
decreases in costs due to energy-saving or conversion to ZEB/ZEH at properties owned, lowenvironmental performance properties becoming stranded with tenant behavior changes due toenvironmental orientation, and conversely, maintaining and improving occupancy rates of properties
with high environmental burden. The concrete measure for these risks and opportunities refers togreen buildings for which the proceeds will be used in this Framework.
The Asset Management Company has contributed to the diversity of society by considering the social
impact of the properties held by KDXR and the Asset Management Company, and it also strives toensure the safety, confidence, health and comfort and diversity of its tenant and local communities.
The Asset Management Company has been making various initiatives to be prepared for emergency
situations in its properties for the safety and security of tenants' employees, visitors and local
communities. KDXR entered into agreements with Yoshikawa City, Ina Town and Konosu City in
Saitama Prefecture and Ashikaga City in Tochigi Prefecture under which some properties held can beused as temporary shelters at times of emergency.
Initiatives for an aging society with fewer children are one of the material issues for the AssetManagement Company who have been making efforts to satisfy the needs of aging population by
investing in residential facilities with healthcare and childcare facilities, and healthcare facilities.
Acquisitions include fee-based homes for the elderly and serviced housing for elderly as well as
investments in senior living intermediate nursing home, which is a first among all J-REIT. The AssetManagement Company aims to grow together by mutually understanding the operator's
management philosophy or business/facility operations and its investment philosophy or
management policies, building a relationship of trust as business partners that goes beyond therelationship between a landlord and a tenant and providing optimal solutions to the challenges orneeds on business and facility operations faced by the operators.
These initiatives for sustainability have been promoted under the leadership of the Sustainability
Committee organized by the Asset Management Company. Chaired by the president & CEO of theAsset Management Company, the Sustainability Committee consists of Head of each REIT
Department and Head of each Department. The Sustainability Committee is held, in principle, every
three months and gathers, analyzes and examines the policies, targets, activity plans, various
initiatives, risk management and other important sustainability or ESG related matters for KDXR and
the Asset Management Company and shares these with related parties. The discussions made in such
Committee are reported to the Asset Management Company's Board of Directors or to KDXR's Boardof Directors with independent supervisory directors. JCR has confirmed that external institutions haveadvised or verified the efforts for sustainability of the Asset Management Company.
Accordingly, JCR has highly evaluated that KDXR has positioned sustainability issues as key
management challenges, has had a council on sustainability and has made efforts from a practicaland administrative perspective while taking in the knowledge and expertise of both internal andexternal experts.

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Evaluation Phase 3：
Evaluation Result (Conclusion)

SU 1(F)JCR assigned "gs1﴾F﴿" for the "Green and Social Evaluation ﴾Uses of Proceeds﴿", "m1﴾F﴿" for the"Management, Operation and Transparency Evaluation" and "SU 1﴾F﴿" for the "JCR Sustainability
Finance Framework Evaluation" based on its JCR Sustainability Finance Evaluation Methodology. This
Framework meets the standards for the items required in the Green Bond Principles, the Social Bond
Principles, the Sustainability Bond Guidelines, the Green Loan Principles, the Social Loan Principles,
the Green Bond Guidelines, the Green Loan Guidelines and the Social Bond Guidelines.

Management, Operation and Transparency Evaluation

Green and Social

Evaluation

m1(F)

m2(F)

m3(F)

m4(F)

m5(F)

gs1(F)SU 1(F)SU 2(F)

SU 3(F)SU 4(F)SU 5(F)

gs2(F)SU 2(F)SU 2(F)

SU 3(F)SU 4(F)SU 5(F)

gs3(F)SU 3(F)

SU 3(F)SU 4(F)SU 5(F)

N/A

gs4(F)SU 4(F)SU 4(F)SU 5(F)

N/A

N/A

gs5(F)SU 5(F)SU 5(F)

N/A

N/A

N/A

﴾Responsible analysts for this evaluation﴿ Rieko Kikuchi and Tomohiko Inamura

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Important Explanations of this Evaluation
1. Assumptions, Significance and Limitations of JCR Sustainability Finance Framework Evaluation
JCR Sustainability Finance Framework Evaluation, which is determined and provided by Japan Credit Rating Agency, Ltd.
(JCR), covers the policies set out in the Sustainability Finance Framework, and expresses JCR's comprehensive opinion at thistime regarding the appropriateness of the Green Project and/or Social Project as defined by JCR and the extent of management,
operation and transparency initiatives related to the use of proceeds and other matters. Therefore, JCR Sustainability Finance
Framework Evaluation is not intended to evaluate the effects of specific environmental and social benefits and the management,
operation and transparency of individual bonds and borrowings, etc. to be implemented based on these policies. In the event
an individual bond or individual borrowing based on this Framework is subject to a sustainability finance evaluation, a separate
evaluation is needed. JCR Sustainability Finance Framework Evaluation does not prove the environmental and social benefitsof individual bonds or borrowings implemented under this Framework, and does not assume responsibility for theirenvironmental and social benefits. JCR confirms the environmental and social benefits of proceeds procured under the
Sustainability Finance Framework measured quantitatively and qualitatively by the issuer/borrower or by a third party
nominated by the issuer/borrower, but in principle it does not directly measure such effects.
2. Method used to conduct this evaluation
The methodologies used in this assessment are described in "JCR Sustainability Finance Evaluation" on the "Sustainable
Finance ESG" section of the JCR website (https://www.jcr.co.jp/en).
3. Relationship with Acts Concerning Credit Rating Business
JCR Sustainability Finance Framework Evaluation is determined and provided by JCR as a related business, which is different
from its activities related to the credit rating business.
4. Relationship with Credit Ratings
The Evaluation is different from the Credit Rating and does not assure to provide or browse a predetermined credit rating.
5. Third-Party Evaluation of JCR Sustainability Finance Framework Evaluation
There are no capital and/or personnel relationships that may result in a conflict of interests between the subject of thisevaluation and JCR.
■Matters of Attention

The information contained in this document was obtained by JCR from the issuer/borrower and from accurate and reliable sources; however, such information may be
mistaken for human and/mechanical errors or other reasons. Therefore, JCR makes no representation or warranty, whether express or implied, as to the accuracy, result,appropriateness, timeliness, completeness, marketability or fittingness for any particular purpose of such information, and assumes no responsibility for any errors,omissions or consequences of using such information. JCR shall not be liable for any loss of opportunity and extraordinary, indirect, incidental or consequential damagesof any kind, including any loss of money, which may result from any use of such information under any circumstances, whether contractual liability, tort liability,
negligence or other causes of liability, and whether or not such damages are foreseeable or unforeseeable. JCR Sustainability Finance Framework Evaluation does not
express any opinion on various risks (credit risk, price fluctuation risk, market liquidity risk, price fluctuation risk, etc.) related to sustainability finance based on thesustainability finance framework, which is the target of the evaluation. Furthermore, it is an expression of JCR's opinion at the present time and does not represent facts
nor does it make any recommendation regarding risk assessment or decisions on the purchase, sale or holding of individual bonds, commercial paper, etc. JCR
Sustainability Finance Framework Evaluation may be modified, suspended or withdrawn due to changes in information, lack of information or other reasons. All rights
pertaining to this document, including data from JCR Sustainability Finance Framework Evaluation, are held by JCR. All or part of this document, including data fromJCR Sustainability Finance Framework Evaluation, is prohibited from being reproduced, modified or otherwise altered without the permission of JCR.

■ Glossary

JCR Sustainability Finance Framework Evaluation: This evaluates the extent to which the proceeds procured through Sustainability Finance are appropriated for green
projects and/or social projects as defined by JCR and the degree to which the management, operation and transparency of the Sustainability Finance are ensured.
Evaluations based on a 5-point scale are given from top to bottom using the SU 1(F), SU 2(F), SU3 (F), SU4 (F), and SU5 (F) symbols.

■ Status of Registration as an External Evaluator of Sustainability Finance・Registered as an External Reviewer of Green Bonds by the Ministry of the Environment
・ICMA (registered as an observer with the Institute of International Capital Markets)
・UNEP FI Positive Impact Financial Principles Working Group Member
・Climate Bonds Initiative Approved Verifier■ Status of registration as a credit rating agency or others
・Credit Rating Agency: the Commissioner of the Financial Services Agency (Rating) No.1
・EU Certified Credit Rating Agency
・NRSRO: JCR has registered with the following four of the five credit rating classes of the U.S. Securities and Exchange Commission's Nationally Recognized Statistical
Rating Organization (NRSRO): (1) financial institutions, broker-dealers; (2) insurance companies; (3) general business corporations; and (4) governments andmunicipalities. If the disclosure is subject to Section 17g-7 (a) of the Securities and Exchange Commission Rule, such disclosures are attached to the news releases
appearing on the JCR website (https://www.jcr.co.jp/en/).

■For all other inquiries, please contact us below

TEL: 03-3544-7013 FAX: 03-3544-7026 at Information Service Department

Japan Credit Rating Agency, Ltd.
Jiji Press Building, 5-15-8 Ginza, Chuo-ku, Tokyo 104-0061, Japan
Tel. +81 3 3544 7013, Fax. +81 3 3544 7026

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