ESG R e p o r t 2020

⃝This document is provided for information purposes only and is not a solicitation for investment, nor a recommendation to enter into specific transactions. Please contact
your securities companies to purchase the investment units of Sekisui House REIT, Inc. (“SHR”). We caution readers to undertake investment decisions of their own volition.
⃝This document is not a disclosure document or a report under the Financial Instruments and Exchange Act, the Act on Investment Trusts and Investment Corporations,public listing regulations of the Tokyo Stock Exchange or other related laws and regulations.
⃝Strategies and goals contained herein are based on specific assumptions and judgments made as of the date of the document in accordance with information available to
SHR at the time. Accordingly, information herein is subject to impact from uncertainties, and actual results may differ significantly from explicit or implicit statements.
⃝While SHR has taken due care in the preparation of this document, it does not guarantee the accuracy, completeness, rationality or fairness of its content. Readers arealso cautioned that the contents of this document are subject to change or removal without prior notice.
⃝Duplication and reproduction of the contents contained herein without prior consent is prohibited.
⃝The material containing the information required under Article 23(1) and (2) of the AIFMD is available at https://sekisuihouse-reit.co.jp/en/ir/library.html

Asset Management Company : Sekisui House Asset Management, Ltd.

Registered by the Director of Kanto Local Finance Bureau, as a Financial Instruments
Business Operator Registration (Kinsho) No. 2791.
Member of the Investment Trusts Association, JapanA visio n fo r S e k i su i H ou se REI T b a sed on it s fundame nt al philo s o phy

Managing assets to
bet t er p rovi de for peopl e,s o c iet y a nd the future

ESG2020REPORT
ENVIRONMENT▪ Maximize unitholder value

Contents

SOCIAL
GOVERNANCE

Top Message………………………………………………………………………… 2▪ Provide high-quality social capital

Overview of Sekisui House REIT. Inc…………………………………… 3
History ………………………………………………………………………………… 4▪ A REIT that leads the way into an eraof the 100-year lifespan

Model of Value Creation through Asset Management………… 6
Sustainability Policy…………………………………………………………… 8
Sustainability Promotion System………………………………………… 9Materiality (Important Issues)……………………………………………… 10International Initiatives / External Certifications………………… 12［ Fundamental Philosophy of SHR ］

Environmental Commitment……………………………………………… 14
Measures for addressing Climate Change……………………… 14

SHR shares a corporate philosophy with Sekisui House and aims to "Provide high-quality
social capital" and "Maximize unitholder value" for the purpose of achieving growth with all
stakeholders through asset management.

Energy Reduction…………………………………………………………… 16
Biodiversity Conservation………………………………………………… 17
Urban Revitalization / Urban Redevelopment………………… 18
Collaboration with Tenants and Property Management
Companies……………………………………………………………………… 19

Corpora te Philoso p hy o f Se k i su i Ho u se Gro u p

Green Bonds…………………………………………………………………… 20
Social Responsibility…………………………………………………………… 22

Our Stance

Truth and Trust

Stakeholder Engagement………………………………………………… 22
Contribution to Local Communities………………………………… 23
Safety, Security, and Comfort for Tenants……………………… 24

Editorial Policy
Our Philosophy

Love of
HumanityThis report is issued since this year aiming to dialog

Employees of SHAM………………………………………………………… 26

and provide stakeholders with an understanding ofCorporate Governance………………………………………………………… 28

the initiatives at SHR and Sekisui House Asset

Governance Structure for Ensuring Objectivity
Regarding Conflict of Interest………………………………………… 28

Management, Ltd. ("SHAM") to reach a sustainable
society.
This report is compiled based on GRI Standards(2016)

Our Objective

Our Business Focus

Superior Quality
and Leading Technology

Comfortable Housing
and Ecologically Sound Communities

Risk Management System of SHAM………………………………… 29

as reference.
Issuance date: December 2020
Issuance frequency: Annual publication

Asset Management Fees to SHAM…………………………………… 29
GRI Content Index………………………………………………………………… 30

1

ESG REPORT 2020

Top M ess a ge

Overview of Sekisui House REIT. Inc

I would like to express my deepest condolences to those who passed away due to the
spread of COVID-19 pandemic. Also, express in appreciation to all medical professionals
and people who provide daily necessities everyday. SHR will strive to ensure the safety ofresidents and users as our tenants, as well as employees of SHAM to prevent the pandemic
of infections.

SHR is an investment corporation investing primarily in residences, office buildings and hotels, sponsored by Sekisui House, a leading
homebuilder representing Japan with a vast development and management track record also in the property development business.
Based on the fundamental recognition that there is a growing need for real estate located at sites suited for "bases for sustainableliving" for residents or sites suited for "sustainable bases of operation" of tenant companies and needs for real estate with high, basic
functionality as residences, such as comfort and safety, and functionality desired by tenant companies, SHR designates high quality
residential and commercial properties, etc. located at strategic locations "Prime Properties" and prioritize investments in Prime

Sekisui House Ltd.("Sekisui House"), the sponsor of SHR, was celebrated its 60th

Properties.

anniversary in 2020. Sekisui House entered the REIT business fully in March 2010, withchanging the sponsor of residential REIT, and newly launched comprehensive office REIT in
December 2014. In May 2018, the two REITs have merged and till now. Thanks to all of yoursupport, we have accumulated a record of achievements over the past 10 years in the REIT
business. In this milestone year, SHR decided to issue the first ESG Report.
It is said that an era of the 100-year lifespan is coming. Sekisui House extends its
business with the global vision "Make home the happiest place in the world“. Based on the

Overview
Name｜ Sekisui House Reit, Inc. (Securities code: 3309)

Account Closing Date｜ End of April and October of each year

Representative｜ Junichi Inoue, Executive Director

Asset Management Company

Listing date｜ December 3, 2014 (Tokyo Stock Exchange)

Sponsor｜ Sekisui House Asset Management, Ltd.
｜ Sekisui House, Ltd.

fundamental philosophy “Love of Humanity” advocated by the Sekisui House Group, SHR
also aims to achieve sustainable growth for all stakeholders—unitholders, tenants andemployees of SHAM alike—at the same time SHR aims to maximize unitholder value
through sustainable growth.
Through our asset management activities, we work together with Sekisui House toenhance building value and strive to provide high-quality real estate assets. These assets
are social capital built for a new era. They are environmentally friendly and provide safety,
peace of mind comfort to residents, workers, visitors and the broader community.
Moreover, we contribute to building a better
future by tackling social challenges through ourESG (Environment, Social and Governance)
strategy and pursuing sustainability for the REIT
and society as a whole, while we position SHR tolead the way into a new era of centenarians To
declaring the commitment of a REIT that leads
the way into an era of the 100-year lifespan, SHR

St ru ct u reGeneral Administrative Agent

Parent Company of theAsset Management Company/Sponsor

Mitsubishi UFJ Trust and Banking
Corporation

Sekisui House, Ltd.

②

100% ownership

Asset Management Company
Sekisui House Asset Management, Ltd.

③

Pipeline Support Company
Sekisui House Real Estate Tokyo, Ltd
Sekisui House Real Estate Tohoku, Ltd
Sekisui House Real Estate Chubu, Ltd
Sekisui House Real Estate Kansai, Ltd
Sekisui House Real Estate Chugoku & Shikoku, Ltd
Sekisui House Real Estate Kyushu, Ltd

Asset Custody Company①
General Meeting of Unitholders

Mitsubishi UFJ Trust and Banking
Corporation

Board of Directors
Executive Director
Junichi Inoue
Supervisory Director
Shigeru Nomura
Supervisory Director
Tatsushi Omiya
Independent Auditor
Ernst & Young ShinNihon LLC

Transfer Agent
Mizuho Trust & Banking Co., Ltd.

Administrator for Investment
Corporation Bonds
MUFG Bank, Ltd.

① Asset Management Agreement ② Sponsor Support Agreement ③Agreement on Preferential Negotiation Rights, (etc.)

believes it is meaningful to issue this report.
With the aim of becoming a REIT that loved byeveryone forever, all directors and employeesof SHAM will continue to engage in earnest
management. We ask for the continued support

Feat u res
Priority Investment in Prime Properties Centering on "Strategic Location" and1 "High Quality"

Growth Strategy that Take Full Advantage of the Versatile Support by Sekisui House

2 Groupof everyone.

Executive Director of Sekisui House REIT, Inc

Junichi Inoue

2

3 Strong Financial Foundation based on Sound and Stable Financial Operations

3

ESG REPORT 2020

History
With maximizing the support of Sekisui House Group, SHR will steadily achieve the growth in assets under management, andalso, in order to take the responsibility to realize the sustainable society, SHR has developed the real estate investment system
in consideration of ESG, and promoted various initiatives.

November 2019

May 2018

Issuance of green bonds(JPY5 billion for 5 years)

Merged with Sekisui House Residential Investment
Corporation through an absorption-type merger
Succeeded 27 assets qualifying as Green Assets at
JPY 73.2 billion.

June 2018

Acquired DBJ Green Building Certification (6residential properties)

History of Sekisui
House Residential
Investment
Corporation

July 2005

Sekisui House Residential
Investment
Corporation(formerly
Joint REIT Investment
Corporation) listed on theTokyo Stock Exchange

July 2019
March 2019

Signing of the Principles for
Responsible Investment (PRI)

For the first time for SHR of
issuing green bonds(JPY4 billion for 5 years,
JPY2.5 billion for 10 years)

Sekisui House Reit, Inc. listedon the Tokyo Stock Exchange

PM Shirokanedai
Tower

Acquired GRESB Real Estate
assessment Green Star,
selection of sector leader,
GRESB rating 3 stars

December 2014

GC Shinagawa
Gotenyama

Sekisui House
participated as mainsponsor

Acquired DBJ Green
Building Certification

March 2017

Shift to a system of
Sekisui House as solesponsor

Acquired GRESB Real Estate
assessment Green Star, GRESB
rating 4 Stars

Reorganized into the
Sustainability Committee

May 2015

March 2010

HommachiMinami GC

FP 1 (Ended Apr. 2015)

Hommachi GC(office portion)

FP 2 (Ended Oct. 2015)

September 2016
April 2016

Establishment of the
Sustainability Promotion
Committee
Setting regulations forsustainability policy,
promotion system ofsustainability

FP 3 (Ended Apr. 2016)

Acquired DBJ Green
Building Certification

Acquired CASBEE Real Estate
Assessment Certification (All 4
offices received the highest
rating, "S Rank")

September 2018

August 2016

Acquired DBJ Green
Building Certification

March 2019

April 2017

Acquired DBJ Green
Building Certification

September 2017

Acquired GRESB Real
Estate assessment Green
Star, GRESB rating 3 Stars

FP 4 (Ended Oct. 2016)

FP 5 (Ended Apr. 2017)

Acquired DBJ Green Building Certification (10residential properties)

GC Shinagawa
Gotenyama

FP 7 (Ended Apr. 2018)

FP 8 (Ended Oct. 2018)

Introduction of work-fromhome system for SHAM
(Measures to prevent
PM
Mitatsunamachi COVID-19 pandemic)

FP 9 (Ended Apr. 2019)

FP 10 (Ended Oct. 2019)billion Achieved

1,331

1,355

1,352

801
438.1

114.3
62.8
End of FP1
4/30/2015

Green assets (billion yen)

Asset size (billion yen)

152.9
101.4

152.9
101.4

179.5
105.8

End of FP2

End of FP3

End of FP4

10/31/2015

4/30/201610/31/2016

179.5
112.1
End of FP5
4/30/2017

200.7
112.1
End of FP6
10/31/2017

200.7

223.1

JPY500
1,594
457.3

243.0

249.8

278.5

278.5

End of FP11

End of FP12

112.1
End of FP7
4/30/2018

End of FP8
10/31/2018

End of FP9
4/30/2019

End of FP10
10/31/2019

Distribution per unit (yen) (Note)

GC: Garden City GA: Garden Avenue PM: Prime Maison(Note)As a two-for-one split of investment units was implemented on May 1, 2018, and in consideration of the impact of the split, DPU for each period prior to the FP8 is calculated by dividing the actual figures by two.

4

Issuance of green bonds(JPY4 billion for 5 years ,JPY4 billion for 10 years)

532.9

billion Achieved

1,298

September 2020

532.9

billion Achieved

5

4/30/2020

Acquired GRESB Real
Estate asessment Green
Star, GRESB rating 3 Stars

Annual Green Bond
Reporting Issuance

527.0

billionNovember 2020

August 2020

1,685

Asset size

1,238

July 2020

1,665

June 2019

Asset size

1,229

Identification of ESG
important issues (materiality)

1,631

May 2018

Asset size

1,554

June 2020

FP 12 (Ended Oct. 2020)

May 2017

JPY400Change in the asset
management fee structure(Introduction of performancelinked rates to the Tokyo
Stock Exchange REIT Index)

FP 11 (Ended Apr. 2020)

Asset size at the time of listing

JPY200Akasaka GC

April 2020

December 2014

JPY114.3

Acquired CASBEE Real
Estate Assessment
Certification(1 office received
the highest rating, "S Rank")

Acquired DBJ Green Building
Certification(3 residential
properties)

Acquired the highest "S rank" of"MUFG ESG Rating Certificate
for J-REIT supported by JCR"PM Fujimidai

FP 6 (Ended Oct. 2017)

March 2020

September 2019

October 2018

Hirokoji GA

Issuance of green bonds(JPY2billion for 10 years)

May 2020

Supporting the
Recommendations of the
TCFD

April 2019
HK Yodoyabashi
GA

Began disclosing energyrelated indicators

February 2020

September 2019
December 2014

December 201910/31/2020

December 2020

Issuance of ESG reportESG REPORT 2020

Model of Value Creation throughAsset Management
SHR aims to achieve sustainable growth for all stakeholders at the same time to maximize unitholder value.
Providing social capital for the new era with Sekisui House through asset management, and based on our ESG strategy, as a
REIT that leads the way into an era of the 100-year lifespan, SHR contributes to building a better future by pursuing the mutual
sustainability between society and SHR.

INPUTOUTCOME(Sources of Value Generation)

Financial CapitalBusiness environment
surrounding SHR
Increasing Global
Warming Seriousness

Financial base with the ability offinancing environment improvement

Intellectual Property Capital
Accumulation of know-how andinformation-gathering capabilities
through specialized asset management
formed by human resource development(Value Provided to Stakeholders)

Investment strategy of value creation

Valuable residences and buildings
Safe, secure and comfortable space

P rio rit y i nv e st me nt i n Pri me Prop e rt i e s
c entering o n "St rat e g i c L ocat i on" and "H i g h Quali t y"Changes in ecosystems
and resources

6 Factors of Prime Properties Investment

Human Capital
Changes indemographic

Human foundation with high level ofexpertise and enables to take onchallenges

Manufacturing Capital
Changes in society
and the economy

Changes due to the
spread of infectious
diseases

Residents and Tenantcompanies

Strategic Location

High quality

Economic Zones

Safety/BCP

Livability/Functionality

Convenience

Brand

Environmental consideration

High-quality portfolio with highenvironmental performance and stableearnings

Investors
Stable return
Growth of market capitalization
Expansion of ESG investment market

Society SHR aims forManaging assets
to better provide
for people, society
and the future

Employees
Energy-efficient workplace
Enrichment working system
Career development

Business partners
Further improving in revenue
opportunities with growth Improvement
sustainability

Aspirations

A REIT that leads theway into an era of theSocial Relation Capital
Diverse sponsor support of Sekisui
House Group
Foundation of supply chain collaboration

Sustainable growth bysecuring stable earnings

Providing bases for sustainable living
and sustainable bases of operation forresidents and tenant companies

Environment and Society
Creating urban communities
Sustainable development of local
communities
Reducing environment impact

Nature CapitalGreening Space through Tree Planting
Based on Gohon no ki (five trees)
project.
Foundation for Reducing Environmental
ImpactRe sp o n se to Cl i m ate C hang e◦ Introduci ng faci l i ti es that cons i der the env i ronment◦ E f f i ci ent us e of energy

Re sp o n se to l i fe style along w i th COVI D - 19 pande m i c

Corporate Governance67100-year lifespanESG REPORT 2020

Sustainability Policy

Sustainability Promotion System

SHR and SHAM contribute to a sustainable society by conducting real estate investment management with due consideration

In order to implement initiatives continuously and systematically based on our “Sustainability Policy”, SHAM has establishedgiven to environment, social and governance in accordance with the Sustainable Vision advocated by Sekisui House, thesponsor.
SHAM has established Sustainability Policy as described below, in order to connect our overall business activities with theobjectives of Sustainable Policy, and shall comply and implement such policy.
Moreover, its Sustainability Committee sets up targets, monitors compliance and evaluates the effect of measures
implemented, and investigates improvement measures on a regular basis.

“Sustainability Committee” in August 2016, for building the system conducting establishment of the policy, target, measures
decision, progress management and other instructions as needed regarding sustainability. Based on the sustainability
committee, with comprehending and resolving issues from the cross organizational viewpoints, we have placed the departmentof sustainability promotion under the committee to enhance planning and promoting targets of activities.

Sustainability Committee
Sustainability Policy

1 Compliance with ESG-related Laws, Regulations and Rules

We implement in-house training for the purpose of enhancing knowledge with regard to ESG-related laws, regulations and rules, and abide bysuch laws, regulations and rules in conducting real estate investment management with considerations given to ESG.

2 Response to Climate Change

Chief executive officer

President and Representative Director

Chief operating officer

Director of Business Strategy Department

Members

Full-time Directors, Compliance Officer, General Managers of Internal Control Promotion
Department, Real Estate Division., Real Estate Management Departments, Engineering
Management Department, Investor Relations Department and General Affairs Department

Frequency of meetings

at least once every 3 months in principle

We strive CO₂ emission reduction and actively promote the efficient use of energy toward the realization of decarbonized society.

Sustainability Committee

3 Water and Resource Saving Measures

Approval and instructions

Proposals and reports

We shall actively contribute to the creation of a recycling-based society by promoting measures and public awareness activities for reducing
water use and implementing the 3Rs (reduce, reuse and recycle) in relation to resources.

4 Biodiversity

In accordance with the Gohon no ki (five trees) project promoted by Sekisui House, we conduct maintenance and management of planting andother greenery measures, centering on tree species with consideration given to the native vegetation and other ecosystem matters. By doing

Overall

Overall coordination
Planning and promotion, initiatives participation
Overseeing ESG rating compliance

E (Environment)

Correspondence of environmental measures andenvironmental certification in investment assets

so, we aim to realize harmony with the nature and the surrounding environment.

S (Social)

5 Comfort and Safety

We shall provide high quality homes where residents can lead their lives in comfort and safe.
We shall also provide convenient, safe, and comfortable spaces that contribute to enhancing the productivity of tenant companies.

6

G

Contributing to Regions and Communities
We create activity and prosperity in an effort to find common interests with the regions and communities as well as to invigorate them.

7 Cooperation with Stakeholders

In order to implement initiatives based on our ESG policy, we shall strive to cooperate with property management companies and other

Business Strategy Department

Measures for tenants, local communities, and suppliers
in investment assets

Real Estate Division, Real Estate investment Departments
and Engineering Management Department

Measures related to the working environment, humanresource development, and social contribution

General Affairs Department

Corporate governance and risk management

Internal Control Promotion Department

Information disclosure

Investor Relations Department(Governance)

Image of Sustainability Promotion Based on PDCA Cycle

business partners, residents, tenant companies and facility users, and stakeholders.

8

Efforts for Directors and Employees
We aim to create an organizational culture in which each employee can work in a healthy and lively way by respecting diversity, personality,

Review and instructions
for improvement

and individuality and promoting work-life balance.
We will also strive to develop the abilities of officers and employees, maximally extract their abilities, and secure diverse and talented human resources.

Act

Plan

Check

Do

Consider andformulate sustainability
policies, targets,and various measures

9 Supply Chain Management

We ask property management companies and other business partners to understand and cooperate in sustainability in order to promote
environmental and social considerations throughout the supply chain.

10 Information Disclosure and Acquisition of External Certifications

Progress monitoring

Implementation andpromotion

We will actively disclose ESG-related information to stakeholders.

We will also continue to acquire environmental certification and appraisals from external evaluation organizations.

89

ESG REPORT 2020

Materiality (Important Issues)
SHR believes that sustainable growth in our business activities is built on a solid foundation of a sustainable society. SHR also
recognize that in order to continue providing Prime Properties, which it focuses on as an investment strategy, it is necessary to
carry out initiatives based on the guidelines of solving problems to build a sustainable society through business activities.

Materiality of SHR
Based on the recognition, SHR has identified 8 materialties (important issues) as below. SHR sets targets (KPIs) for eachmateriality and pursues the mutual sustainability between society and SHR by promoting efforts to achievement.
Materiality

Reduction of CO₂ emissions

Process of Materiality Identification
SHR implemented the following processes in identifying materiality.
In the future, the environment surrounding stakeholders and SHR is expected to change over the med to long term. SHR shallfulfill our responsibilities for the sustainable growth of society and companies by reviewing materiality as appropriate in linewith trends and advancing initiatives in a manner that meets the demands of society.

1

Step

List the issues, which should be considered in the sustainable growth to SHR and SHAM, for each category toenvironmental, social and governance by referring to the international targets such as SDGs, Guidelines like GRI
standards etc, and assessments by evaluation organizations.

Target (KPI)・Reduce 20% of CO₂ emission (intensity) of our portfolio compared to 2018
(Target year : 2030)
Step

Environment

 oexistence of humankind and nature and activities
C
for the resources environment2

Prioritization
Prioritize the identified issues by narrowing down to be emphasized from the viewpoint of the impact andimportance to stakeholders, SHR and SHAM.

・Advance greenification and respect biodiversity
・Manage waste appropriately
・Promote reduction of water consumption
StepInvest in real estate with excellent environmental
performance

Identification of issues

3

Identification and Approval of Appropriateness
Identify and approve the prioritized issues with discussing their relevance in Sustainability Committee.

・Percentage of portfolio with green certification: 70%(Target year: 2030)

Step

Social rovide residents and tenants with secure andP
comfortable space

・Continual surveys on resident and tenant satisfaction
・Disclosure on risk of earthquakes and flooding
・Regular monitoring of initiatives toward sustainability in the supply chain

Contributions to society

・A s a member of society, contribute to greater vitality in the community andcountermeasures aimed at preventing damage from natural and other disasters
・P articipate in Sekisui House matching program (a joint donation system for
employees and the company)

Create a rewarding workplace

Percentage of female managers: 7%
Average monthly work hours per person: 162 hours
Take-up rate for male childcare leave: 100%
Annual paid leave take-up rate: 70%

・Annual participation in external training events: 2 times per person
・Annual training participation rate: 100%・Practice Sekisui House Group Human Rights Policy

Disclosure and dialog with stakeholders

・T imely and appropriate disclosure of information and enhanced utility of
disclosures
・Build relationships of trust with stakeholders

Governance

Strengthen our corporate governance system

・Enhance effectiveness of executive committee and board of directors
・Penetration of compliance・Strengthen internal controls structure
・Strengthen risk management system

Progress Review
Confirm and evaluate the results of initiatives in Sustainability Committee, also continue implementation of
improvement activities through PDCA cycle and promotes initiatives, with reviewing materiality regularly.

[Materiality Matrix]
Very important

Materiality

Impact and importance to stakeholders

・(Target year: 2023)

4

Very important

Important

Impact and importance to SHR and SHAM

1011

ESG REPORT 2020

International Initiatives / External Certifications
Throughout the signing and supporting of each initiative, SHR and SHAM have announced to promote ESG initiatives. In addition,
through acquisition of external certifications, we visualize the added value and sustainability of owned properties and use themas communication tools with stakeholders, as well as promoting environmental and social sustainability initiatives as a whole.

PRI(The Principles for Responsible Investment)
In March 2019, SHAM became a signatory and decided to support the basic approachesof the PRI advocating the incorporation of ESG issues into the investment analysis anddecision-making processes.

DBJ Green Building Certification and Certification for CASBEE for Real Estate
The DBJ Green Building Certification Program was launched by Development Bank of Japan Inc. (“DBJ”) in April 2011, for the
purpose of supporting the properties which give proper care to environment and society (“Green Building”). The assessment
is conducted on a 5-phase scale from 1 Star to 5 Stars, and SHR has acquired certification of more than 3 Stars for a total of
51 office buildings and residential properties.
CASBEE (Comprehensive Assessment System for Built Environment Efficiency) is a system that comprehensively evaluatesbuildings and structures in terms of their environmental performance including aesthetic appeal, in addition to eachbuilding's ability to reduce its environmental impact such as energy and resource conservation as well as recycling. SHR has
acquired the highest rating of "S Rank (Superior)" certification for 5 office buildings.
Green Certification Acquisition Ratio(As of December 15, 2020)(Total floor area basis)

TCFD(Task Force on Climate-Related Financial Disclosures)

Residence
46 properties
Garden City Shinagawa
Gotenyama

TCFD (Task Force on Climate-Related Financial Disclosure) encourages companies
to disclose information on climate change-related risks and opportunities. In July
2020, SHAM has expressed the supporting to the recommendations.

Prime Maison Gotenyama East

52properties
55.9％

UN Global Compact
Sekisui House Group has spelled out its commitment to respective human rights in
the Sekisui House Group Corporate Code of Conduct and Corporate Ethics Guidelines,
which are the explicit foundations of its corporate activities. Further, Sekisui HouseGroup has expressed support for the 10 principles of the UN Global Compact.

GRESB Real Estate Assessment
In GRESB Real Estate Assessment, SHR has been awarded "Green Star" for the
fourth consecutive year to participants who have received high marks for theirefforts in environmental considerations and sustainability. In addition, we haveacquired 3 stars ratings based on relative evaluations (on a 5-point scale, withthe highest rating as 5 Stars).
In addition, we have aquired the highest rank "A" in GRESB Disclosure Assessment(5-point rating from A to E) for evaluating information disclosures.

MUFG ESG Rating Certificate for J-REIT supported by JCR
MUFG ESG Rating Certificate for J-REIT supported by JCR, which is a service provided by Mitsubishi UFJ Research andConsulting Co., Ltd. (MURC) and supported by Japan Credit Rating Agency, Ltd. (JCR), intends to evaluate J-REITs’ initiatives
and implementations on the environment, ESG issues based on the items originally developed.
SHR and SHAM acquired S rank, which is the highest rank among the 5 grades.

12

Akasaka Garden City

Office 6 properties

TOPICS

Hommachi Minami
Garden City

Sekisui House--Aiming to become a leading ESG company

Our sponsor, Sekisui House, is doing business with the aim of becoming a leading company in ESG management under
the global vision, “Make home the happiest place in the world.”
Initiatives aimed at improving the environment and diversity have led to high marks from many external third parties.
As a result, the company has been selected for inclusion within the following evaluation systems and ESG investment
indexes.
▪ Selected for the Climate Change A List, the highest rank, for the second time and second consecutive year by CDP, anenvironmental non-profit organization with global renown in the environmental field.
▪ Acquired first certification in Japan's homebuilding industry for greenhouse gas reductions under the International initiative,
SBT (Science Based Targets) Initiative.
▪ Selected for Nadeshiko 2018 in recognition of the company's efforts to promote greater empowerment of women in theworkforce. The Nadeshiko index is jointly managed by the Ministry of Economy, Trade and Industry and the Tokyo Stock
Exchange.
▪Selected to as a Forward-looking IT Company 2019 for its IT strategy execution. The index is jointly managed by the Ministry of
Economy, Trade and Industry and the Tokyo Stock Exchange.
▪ Selected Silver Class for the second consecutive year in the Homebuilding division of the SAM Sustainability Award, asustainability rating run by Robeco SAM, a Swiss research firm that conducts research and ratings in socially responsible
investing (SRI) globally. Following three consecutive years since 2016 selected to Gold Class, selected to Class for fiveconsecutive years.
▪ Included in ESG investment indexes, Dow Jones Sustainability World Index (DJSI World) and Dow Jones Sustainability Asia
Pacific Index (DJSI Asia Pacific), for five and four consecutive years, respectively. Also, selected as Industry Leader for
acquiring the highest score in the Homebuilding Industry.
▪Selected for inclusion in all four ESG indexes adopted by the Government Pension Investment Fund (GPIF)・ FTSE Blossom Japan Index, created by FTSE Russell, a global index provider.
・ MSCI Japan ESG Select Leaders Index and MSCI Japan Empowering Women Index (WIN), developed by MSCI.
・ S&P/JPX Carbon Efficient Index, developed jointly by S&P Dow Jones Index and the Tokyo Stock Exchange.

13

ENVIRONMENTESG REPORT 2020

Environmental Commitment
Measures for addressing Climate Change[Opportunities for Climate Change]
Potential financial impact

Timehorizons

Countermeasures

Operating expenses cutting
Efficiency ofwith introduction of renewable
resources
energy on-site

Cutting in externally procuredenergy costs

Short
term

Same as "Transition Risk/Policies and Laws"

Promoting to residents, tenant
Products
companies and users by providing
andlow-emission equipment andservices
services

Increase in rental income
by attracting residents andtenant companies

Continuously provide rental
properties in line with changes inresidents and tenant companies
demand, and cultivate newcustomer segments

Increase in rent income byraising rent and acquiring andsecuring residents and tenantcompanies

To cultivate a new investor
base

Utilization of Green Bonds

Opportunity Classification Related to real estate management

In recent years, global warming is causing climate change and environment, society, people’s lifestyle and corporate activities
are highly affected. We recognize that resolving environmental issues represented by climate change is one of the key issues in
the policy of SHR, which conducts real estate investment management in consideration of ESG, aiming to provide "bases forsustainable living" and "sustainable bases of operation.“ Recognizing these issues, in July 2020 SHR supported therecommendations of TCFD (Climate-Related Financial Disclosure Task Force). We anticipate and evaluate the risks andopportunities posed by climate change in our business, and at the same time promote information disclosure in line with theframework as we work to achieve our established targets.

Opportunities

MarketGovernance
SHAM has established the Sustainability Committee, with the President and Representative Director as the chief executive
officer, as the decision-making body for sustainability. In principle, the committee meets once every three months to review
and draft various sustainability-related risks and opportunities, including climate change, and various policies and targets, aswell as various measures. The committee also reports to the Board of Directors of SHR as appropriate.

Strategy
In Sustainability Committee ,SHR shall continuously identify and evaluate the risks and opportunities associated with climatechange in our asset management, and if deemed necessary, update the evaluation details by the President andRepresentative Director, who is the chief executive officer of the Sustainability Committee.
SHR takes countermeasures by classifying risks related to climate change into "transition risks" and "physical risks," andviews new values created as opportunities related to climate change as it tackles these risks and utilize them in our asset
management.
[Risks Related to Climate Change]
Risk classification Related to real estate management

Policiesand Laws

Potential financial impact

Increasing of GHG Emission
Prices Due to the Introductionof a Carbon Tax

Tax burden on GHG emissionsof properties

Enhancement of energy-saving standards

Increase in renovation costsof properties (fines in somecases)

Evolution and dissemination of
Increase in the cost ofTechnology re-energy and energy-saving
introducing new technologies
technologies
Decline in asset value of
properties
Transition
risk
MarketDeterioration in procurement
conditions due to inadequate
responses to climate change
Increase in energy bills(including renewable energy
procured externally)
Changes in the demand ofresidents and tenantcompanies(Select properties that are
more responsive to climatechange or avoid properties
that are not responsive tothem)

Reputation Decrease of the brand value

Decrease in NAV

Physicalrisk

Chronic

Set reduction targets for GHG emission intensity, and disclose the status
Medium of achievement
term Consider energy-conservation renovations for properties
Encouraging expanded sourcing of renewable energy
Medium Collecting information and introducing new technologies and services toterm our portfolio

Increase in the Cost of Raising Medium Improving investor valuation by enhancing information disclosure such as
Funds
term TCFD
MediumSelection of favorable suppliers
term

Increase in utility expenses

Short
term

Decrease in rental income* "Time horizons" for risks and opportunities related to climate change are assumed to be short-term (within 5 years), medium-term (within 6 to 10 years), and long-term (11 years or more).

Risk Management
We clarify how to manage risks and opportunities related to climate change and promote efforts related to managing climatechange risks and opportunities and resilience as part of our overall risk management process.

Metrics and Targets
Metrics and targets used when identifying, evaluating and managing risks and opportunities related to climate change, areset as follows: With respect to the metrics, SHR discloses performance against the targets and targets set with due attention
to the consistency of the investment strategy and our comprehensive risk management.
■

Target of Energy Consumption■

Target of CO₂ Emission
Reduce CO₂ emission intensity of our portfolio by 5% or more over the next 5 years(Note)
Reduce 20% of CO₂ emission intensity of our portfolio by 2030 compared to 2018 as the mid-term target■

Target of Water Consumption
Maintain water consumption intensity of our portfolio at the level of 2018 over the next 5 years(Note)(Note) The period covered by the environmental targets is five years from 2018, which is the base year (until 2023) , and in principle, the environmental targets are set
every five years thereafter.

[ Environmental Performance]

2018(Base year)

Short
term
Short
term

Maintain brand image by steadily responding to climate change
Understand risks through hazard maps,
etc. Implement BCP measures such as
emergency power supply measures anddisaster prevention stockpiles
Provision of disaster prevention
information to tenants
Cash flow management in preparation forincreasing fire insurance premiums

Decrease in rental income due
to decrease in occupancy

Inundation of low sea levelproperties due to rise in sea
level

Increase in countermeasure
Medium Not invest the property with high risk or
costs for storm surge damage term dispose

Increase in air-conditioning
operation, maintenance, andrepair costs

14

Short
term

Short
term

Monitoring of changes in usage due tochanges in weather and temperature
Implement appropriate air-conditioning
management through the operation ofhigh-efficiency air-conditioning equipment
and BAS, etc.
Thorough inspection for deterioration offacilities due to an increase in operations

2019

Total energy consumption (thousand kWh)

41,58152,494

Electricity consumption (thousand kWh)

28,152

36,174

Fuel consumption (thousand kWh)

13,42916,319Energy use intensity (kWh / m )

174.0

179.1

Total CO₂ emissions (t-CO₂)

15,25318,318

Scope1(t-CO₂)

2,411

2,930

Scope2(t-CO₂)

12,842

15,389CO₂ use intensity(t-CO₂ / m2)

0.064

0.063

Total water consumption (m3)

780,360

876,419

Water use intensity (m / m )

1.7

1.7

2

Decrease in rental income

Same as "Transition Risk Market"
Responding and appealing to investors who emphasize environmental
issuesEnergy consumption

Identification of needs through tenant satisfaction surveys, etc. andconsideration of energy-saving renovations

Inundation and inland flooding
due to intensive heavy rains andthe destruction of neighboring
rivers, etc.

Air conditioning operation
increased due to an increasein extreme events such as hot
days and extreme cold days

Short
term

Reduce energy consumption intensity of our portfolio by 5% or more over the next 5 years(Note)
Risk Management/Countermeasures

Collecting information on trends in real estate appraisals and responding
Medium
as appropriate
termSame as "Policies and Laws"

Damage to the property due to Increase in repair andtyphoons
insurance costs
Acute

Time
horizons

Same as "Transition Risk/Policies and Laws"
MediumSpecifically, consideration of introduction of equipment for renewableterm
energy and EV chargers

Identify high-risk properties
by quantitatively identifying
physical risks and takeappropriate measures ormake them subject to transfer
Incorporate quantitative
physical risk information into
the evaluation at the time ofproperty acquisition

CO₂ emissions

Water consumption

3

2* The above figures are numerical data for the entire portfolio, and are for the period from April to March of the following year.
* Of the properties held as of the end of March every year, properties for which SHAM has energy management authority are subject to surveys (total floor area basecoverage ratio: 93.8% in 2018, 94.3% in 2019). However, areas where it is difficult to comprehend data, such as the exclusive floor area of residences, are excluded.

15

ENVIRONMENTESG REPORT 2020

Energy Reduction

Biodiversity Conservation

In order to realize a carbon-free society, SHR actively promotes the efficient use of energy by making capital
investments in its properties and implementing measures to conserve energy.

Recent extreme weather events that are believed to be associated with climate change make people's lives moredifficult; moreover, they can damage ecosystems. SHR strives to conserve biodiversity through the greening of ourproperties.

Introduction of Environmentally Friendly Facilities
SHR has actively introduced LED lighting, energy-saving air conditioner, and other equipment with low environmental
impact in our residential properties. In the 12th FP, the number of LED lighting and energy-saving air conditioner has also
increased, and we will continue to promote the introduction of such equipment.
■

Introduction of LED lighting(common area)

FP 9
Ended Apr. 2019

FP 10
Ended Oct. 2019

FP 11
Ended Apr. 2020

FP 12
Ended Oct. 2020

Number of properties implemented in each FP

6

5

5

3

Cumulative total number of properties
implemented

49

53

58

61

Estimated reduction in annual electricity
consumption(kWh)Approx. 1,279,616

Approx. 1,320,102

Approx. 1,428,270

Approx. 1,443,755

Approx. 636

Approx. 650

Approx. 697

Approx. 703

FP 9
Ended Apr. 2019

FP 10
Ended Oct. 2019

FP 11
Ended Apr. 2020

FP 12
Ended Oct. 2020

Number of implemented air conditioners
in each FP

162

254

306

526

Cumulative total number of implemented

1,094

1,348

1,654

2,180

Estimated reduction in annual electricity
consumption (kWh)Approx. 243,962

Approx. 300,604

Approx. 368,842

Approx. 486,140

Approx. 112

Approx. 136

Approx. 167

Approx. 214

Estimated reduction in annual CO₂
emission(t-CO₂)

Gohon no ki (five trees) project
Gohon no ki project is a proposal by Sekisui House, the sponsor for the creation of gardens and communities. In this planning,With thought of "Three are for birds and two are for butterflies.", we aim to co-exist with the surrounding nature and create agarden for which admiration will grow as time passes by planting indigenous trees that have close ties to the lives of living
things and are in harmony with Japan’s climate. As a result of this activity, Sekisui House planted 1.09 million of trees in
FY2019. The cumulative number of planted trees since the start of the project in 2001 has reached 16.11 million.
The creation of greenery spaces in cities, even on a small scale, creates a corridor for the habitat and movement of insects,
wild birds, and other creatures, which creates food chains and forms ecosystem networks among live. This ecosystem
network will enrich the biodiversity of local communities and Japan. These spaces not only make them easy to use forcreatures, but also make them a place where tenants can enjoy the richness of nature at the same time.
SHR will continue to maintain and manage planting based on ecosystem-friendly tree species in accordance with Gohon no ki
project.

* One property which had been introduced LED lighting was disposed in 10th FP.
■

Introduction of energy-saving air conditioner(exclusive area)

Estimated reduction in annual CO₂
emission(t-CO₂)

Satoyama NetworkPark

In addition, we have introduced various other facilities, including solar power generation panels, Low-e doubleglazed windows with thermal shielding and thermal insulation capabilities, flow control valves that prevent
overflow of water, showerhead with water-saving features, and chargers for electric vehicles.
■

Solar power generation panels■

Sato
Forest yama

GardenGardenSatoyama Forest

Town

LED lighting[Examples of Introduction]
Garden City Shinagawa Gotenyama■

Low-e double-glazed windows

Prime Maison Gotenyama East■

Water-saving equipment(Flow control valve, showerhead, etc.)

Hommachi Minami Garden CityHK Yodoyabashi Garden Avenue■

Electric vehicle charger

Garden City Shinagawa Gotenyama and Hommachi Garden City have rooftop gardens. The greening of rooftops improves thermal insulation
performance and contributes to the creation of natural environments in urban areas. The entrance of Prime Maison Yokohama Nihon-odori isplanted on the 1 surface of the walls to prevent heat from permeating inside the building. It also serves as a space for tenants to relax.

Garden City Shinagawa Gotenyama

16

Hommachi Garden City

17

Prime Maison Yokohama Nihon-odori

ENVIRONMENTESG REPORT 2020

Urban Revitalization / Urban Redevelopment

Collaboration with Tenants and Property Management Companies

Sekisui House, the sponsor, focuses proactively on environmental creation development through using natural energy andadopting energy-saving technologies. SHR, in cooperation with Sekisui House, aims to provide high-quality social capital and tocreate a sustainable city through the acquisition of environmentally conscious properties.

SHR is, in collaboration with tenants and property management companies, actively engaged in environmental measures, suchas energy conservation measures and CO₂ reduction measures, for certain properties held by SHR.

Gotenyama Project, a large-scale complex developed by Sekisui House"Prime Maison Gotenyama East," "Prime Maison Gotenyama West," "Garden City Shinagawa Gotenyama," and "Gotenyama
SH Building" held by SHR are properties planned and developed by Sekisui House's large-scale complex development"Gotenyama Project.“ It is not a mere large-scale development that advocates a sense of scale, but is based on therevitalization of the original landscape of Gotenyama, which is rich in nature, the familiarity of human-scale with its rich
expression, and the creation of a comfortable townscape. In addition, the project focuses on environmental considerations
through the active use of natural energy and advanced energy-saving technologies.
In the "Gotenyama Project", more than 40% of the total development area is greened by planting the exterior and greening
the roof and walls. Based on Sekisui House's proprietary “Gohon no ki” Planning, which is ecosystem-conscious, based on the"Satoyama," which can be said to be the original landscape of Japan, a green network that is integrated with the greenery inthe surrounding area is created through preservation of existing trees and planting over 26.4 thousand trees, mainly
indigenous species.

Efforts to reduce energy consumption
At Akasaka Garden City, tenant companies are regularly convened to hold a CO₂ reduction promotion meeting. At the meeting,energy consumption and CO₂ emissions are reported to each tenant, and explanations on energy conservation are provided inconjunction with these reports to raise environmental awareness.
■

CO2 Reduction Promotion Meeting Materials (excerpt)

Comparison of CO2 emission intensity with other offices

Monthly changes in CO2 emissions intensity

At Garden City Shinagawa Gotenyama, daylight is used to reduce the brightness of lighting and reduce power consumption
during the day. We also try to save energy by adjusting the initial luminosity of the illuminance sensor to avoid the lighting
becoming brighter than necessary. We are promoting the effective use of water resources by utilizing stored rainwater for
sprinkling rooftop gardens. In-house, we have posted an awareness-raising poster for 3Rs (Reduce, Reuse, Recycle) aimed at
reducing waste emissions.

Promotion of green leasing
Green leasing refers to the establishment and implementation of environmental provisions in lease contracts with tenants at
owned properties. SHR has entered into green lease contracts with certain tenants. From the perspective of energy saving
and environmental consideration, we share our thoughts on maintaining and improving the comfort and productivity of ourproperties with our tenants, and we have established a system for mutual cooperation through the acquisition of green
certification and sharing of energy data. We will continue to strengthen cooperation with tenants and promote green leasing.
[Main Green Lease Contracts Introduced Properties]

Major awards
granted to theproject▪ February 2012

▪September 2012

▪October 2012

Sponsored by Shinagawa Ward, Tokyo

Sponsored by Organization forLandscape and Urban GreenInfrastructure

Sponsored by Organization forLandscape and Urban GreenInfrastructure

Minister of Land, Infrastructure,
Transport and Tourism Award in the
Rooftop Greening Category at the"Rooftop / Wall / Special Greening
Technology Contest"

Urban Greenery Organization Chairman's
Award in the Green Community
Development Category at the Green City
Award

Tree planting award at the Green
honoring system

18

Garden City Shinagawa
Gotenyama

Hommachi Minami Garden City

19

Hommachi Garden City
(Office Building part)ENVIRONMENTESG REPORT 2020

Green Bonds

3 Management of Proceeds
As long as the green bonds are outstanding, SHR conducts management to ensure that the total amount of the outstanding green bonds does not

Green Bonds are a type of bond instrument issued by issuers to finance eligible green projects (environmentally-friendly
investment projects). The issuance of Green Bonds must adhere to the Green Bond Principles of International Capital Market
Association (ICMA). SHR issues green bonds with the intention to further promote asset management with due consideration
given to ESG.

exceed the total acquisition price of the Eligible Green Projects.
In addition, as long as there are Green Bonds outstanding, we track appropriated funds on a portfolio basis and, if all or a portion of the proceeds
raised in Green Bonds are not allocated to Green Eligible Assets, SHR manages all or a portion of the proceeds in cash and cash equivalents until
such time as the unallocated funds are identified and allocated to Green Eligible Assets.
Assets held

121

Issuance of Green Bonds

properties

Green Balance Sheet

As of December 15, 2020
Issued amount(Million yen)Interest Rate(%)

Issue Date

Redemption Date

The 1st Green Bonds(The 3rd Unsecured Investment
Corporation Bonds)

4,000

0.220

Jul. 11, 2019

Jul. 11, 2024

The 2nd Green Bonds(The 4th Unsecured Investment
Corporation Bonds)

2,500

0.570

Jul. 11, 2019

Jul. 11, 2029

The 3rd Green Bonds(The 5th Unsecured Investment
Corporation Bonds)

5,000

0.220

Nov. 1, 2019Nov. 1, 2024

The 4th Green Bonds(The 6th Unsecured Investment
Corporation Bonds)

2,000

0.500

Feb. 28, 2020Feb. 28, 2030

The 5th Green Bonds(The 7th Unsecured Investment
Corporation Bonds)

4,000

0.250

Sep. 9, 2020

Sep. 9, 2025

The 6th Green Bonds(The 8th Unsecured Investment
Corporation Bonds)

4,000

0.510

Sep. 9, 2020

Sep. 9, 2030

Total

21,500Maximum Issue Amountof Green Bonds

Eligible Green
Projects

52
278.5

propertie
billion yen

Issuance ofGreen Bonds

21.5

billion yen

4 Reporting
Allocation Reporting
SHR discloses that the net proceeds of the green bonds are fully allocated to Eligible Green Projects, and that the total amount of the outstanding
green bonds does not exceed the total acquisition price of Eligible Green Projects. While the green bonds are outstanding, SHR will annuallyreports the total acquisition price of Eligible Green Projects and the total amount of the outstanding green bonds, as of the end of March, andSHR also receives assertions by SHAM's president and representative director that the net proceeds have been allocated to Eligible Green
Projects.

Impact reporting

Green Bond Framework

SHR discloses the following indicators as of the end of March once a year on its website, as long as the green bonds are

1 Use of Proceeds

outstanding.

The proceeds of the green bond are allocated toward the acquisition of the new and/or existing assets that meet the following eligibility criteria▪ The number of the buildings and the total amount of the floor area of Eligible Green Projects(the “Eligible Green Projects”) and/or toward refinancing the existing loans/investment corporation bonds that have already been allocated to▪ The levels of certifications acquired by respective Eligible Green Projects

Eligible Green Projects.

▪ The following quantitative indicators (limited to the properties for which SHR has energy management authority)◦Electricity consumption

Eligibility Criteria
Buildings that have a valid third-party certification described below as of the date of a green bond issuance and as of thetime of reporting, and/or that are expected to receive the certification post issuance:◦CO 2 emission◦Water consumption◦3, 4, or 5 Stars under the DBJ Green Building Certification◦A or S rank under the Comprehensive Assessment System for Built Environment Efficiency(CASBEE) certification for real estate

Third-party Eligibility Assessment
Second-Party Opinion
SHR has obtained a second-party opinion from Sustainalytics, an ESG appraisal
company, regarding the eligibility of the Green Bond Framework (Note).

2 Project Evaluation and Selection Process
Eligible Green Projects are evaluated and selected by Sustainability Committee in accordance with its Sustainability Policy and eligibility criteria.

20(Note) Being eligible for green bond framework means complying with the four requirements set by the Green Bond Principles: use of proceeds, project evaluation andselection process, management of proceeds and reporting.

21

SOCIAL

ESG REPORT 2020

Social Responsibility
Stakeholder Engagement

Contribution to Local Communities

SHR conducts its business activities in the context of its ties with stakeholders, and in order to continue as aninvestment corporation that contributes to society, it is important to accurately understand the demands andexpectations of stakeholders for society and SHR, and to respond to them through its business activities. For thisreason, SHR will build long-term relationships of trust with its stakeholders and utilize the requests andexpectations gained through communication in its business activities.

Installation of disaster prevention equipment, etc.
SHR is also working to coexist with local communities by introducing disaster relief installed vending machines that enable
anybody to take out drinks for free at times of disasters or other emergency, as well as AEDs for prompt lifesaving measures for
cardiovascular resuscitation at some properties.
■

Opportunities for engagement with stakeholders

Investors

Disaster relief vending machines■

AED (Automated External Defibrillator)

Prime Maison Ginza East, etc.

Prime Maison Yokohama Nihon-odori, etc.

▪F inancial results briefings and generalunitholders meetings▪I R Meetings with Domestic and Overseas
Institutional Investors▪IR Seminar for Individual Investors

Business
partners

Employees

We open the entrances and pilots of our property to the public and use it as an event space. We have also introduced Bike
Shar and Food Truck for some properties so that they can be used not only by tenants but also by local residents.

Sekisui House REIT, Inc.
Sekisui House Asset Management(Asset Management Company)▪P ersonal Interviews▪V arious types oftraining

Utilization of common space▪C ommunications
through operations■

Concert held in entrance hall■

Participation in Midosuji Illumination Event▪M onitoring throughexternal evaluation
organizations▪Awareness Survey▪I nternal Consultation
Counter System

Local communities
and international
communities

Tenants▪T enant Satisfaction Survey▪P articipation in local communities▪C ommunication throughvarious business activities▪P rovision of space for our properties tolocal events

Hommachi Garden City■

Hommachi Garden City

Introduction of share bike■

Introduction of Food truck▪Support for the international Initiative

Garden City Shinagawa Gotenyama

22

Akasaka Garden City

23

SOCIAL

ESG REPORT 2020

Safety, Security, and Comfort for Tenants
Introduction of disaster prevention facilities, etc.
As SHR believes that it is important to give consideration to ensuring that tenant companies and residents operate their lives
and business activities in a safe and secure manner in preparation for typhoons, earthquakes, and other disasters caused byclimate change, SHR has installed and introduced equipments in some properties to enable tenant companies and residents
to stay with security and safe.

■Installation of emergency power
generation equipment■

Disaster prevention center■(24-hour/365-day system for security anddisaster prevention measures, etc. operating)(Supplying power to common areas in times of disaster)

Installation of solar battery, storage battery,and emergency generator at Prime Maison Shinagawa

TOPICS

Prime Maison Shinagawa is a rental apartment that was developed by Sekisui House in response to rising concerns
about power conservation and disaster prevention performance, in addition to the prevention of global warming,
following the Great East Japan Earthquake. This property has an emergency power generator introduced to ensure ahigher level of safety and security in the event of an emergency. The generator is connected with solar batteries andstorage batteries, ready to serve as an emergency power supply system for use in the event of a blackout.

Quake-absorbing structure(Reducing shaking caused by earthquakes)[Conceptual Diagram of Emergency Power Supply System]■

Garden City Shinagawa Gotenyama

Garden City Shinagawa Gotenyama

Gotenyama SH Building

Normal times■

Blackout

Solar power generation(in operation)■Installation of disaster prevention
cabinets for elevators■

 istribution of disaster preventionD
supplies to tenants■

Solar power generation(in operation)

Stockpiling disaster prevention toilets

Storagebattery

Storagebattery

Common areas

Common areas

Electric powercompany(non-operating)Electric powercompany(Supplying)

Prime Maison Gotenyama East, etc.

Esty Maison Ojima, etc.

Conducting tenant satisfaction surveys

Common areas(supplied in emergency)

Common areas(supplied in emergency)

Prime Maison Shinagawa

Emergency Powergenerator(active)

Emergency Powergenerator(inactive)
Supply from electric power company

Supply from solar battery and storage battery

Supply from emergency Power generator

SHR intends not only to improve leasing and achieve stable operation but also to communicate and build a reliable
relationship with tenants as well as conduct tenant satisfaction surveys to collect the opinions and requests of tenants, as
needed. The survey findings are shared with property management companies, building management companies, andothers, and we are actively responding to the requests of tenants and improving services such as introducing free-ofcharge Wi-Fi and Internet facilities to each residential unit, and introducing preserved flower decorations and aroma
diffusers to entrance lobbies.

When power is cut due to a natural disaster or similar event, the emergency power generator is activated and supplies
power to common areas for approximately 19 hours. It can continue to supply power even longer when connected withsolar batteries and storage batteries. As a result, some lights for common corridors and the entrance are illuminated,securing traffic lines and providing a sense of security even at night.
In addition, the generator also supplies power to the electrical outlets in the entrance, where residents gather,allowing them to charge mobile phones and other devices. The generator also permits the collection of information via
the monitor in the control room. Power is also supplied to the feed water pump. This means that water is supplied tocommon areas and dwelling units provided the water supply has not been cut off.

24

25

SOCIAL

ESG REPORT 2020

Employees of SHAM

Respect for Human Rights
SHAM strives to ensure that there are no infringements of human rights, including harassment, in order to contribute to
the creation of a workplace environment where all employees can work enthusiastically and lead to growth, according to
the Sekisui House Group Human Rights Policy, established by Sekisui House in April 2020.

▼

Creating Comfortable Workplace Environment

Human Resource Development

Promoting Work-Life Balance

SHAM, as a member of Sekisui House Group, has made efforts to reduce overtime work and increase the ratio of employees
taking annual paid leave. In addition, by-the-hour annual paid leave system and "Slide Work" was established which arewidely used for child rearing, family care, family events, and etc.
[Major welfare programs used by Employees]• Collaboration with welfare service providers• Congratulatory or condolence payment system• Parental leave system• Slide Work• Employee award system• Qualification allowance system• By-the-hour annual paid leave system• Child care leave system• Employee stock ownership plan of Sekisui House Group• Short working hour system• Family care leave system

TOPICS

Encouraging male employees to take parental leave for one month or more▼

As a member of Sekisui House Group, SHAM encourages eligible
male employees to take at least one month of parental leave.
Sekisui House announced “Parental leave of more than one monthfor all male employees” in September 2018 to become a “kids-firstcompany” that leads society in support for child rearing, promoting
diversity.

◦All male employees entitled to take parental leave areencouraged to take the leave for one month or morethan one month with the first one month paid leave◦ Promoting full paternity leave acquisition throughcompany-wide initiatives◦ Developed internal support systems and provided
training for supervisors and eligible employees, inorder to ensure a smooth introduction

SHAM has made efforts to encourage employees to acquire qualifications to develop expertise such as “The Association forReal Estate Securitization (ARES) Certified Master.” It bears the expenses for enhancing expertise through participation intraining and taking of exams for acquiring various qualifications, maintaining of qualifications and attendance to various
seminars. In addition, SHAM regularly holds compliance training and human-relations training (for human rights, abuse of
authority and sexual harassment). After the introduction of the Work from Home system as a measure against the COVID-19
pandemic, we held skills improvement training for all directors and employees using the online meeting system.

[Training Investment]

(Period covered: Feb. 1, 2019 to Jan. 31, 2020)(As of Jan. 31, 2020)

Average hours of training per person

16.5 hours

Total number of directors
and employees

57(male 43, female 14)

Average amount of training investment perperson5,436 yen

Number of directly
hired employees

39(male 29, female 10)

In-house training

100.0%

Number of seconded
employees

12(male 8, female 4)

Outside training

57.1%

Number of employees
aged 60 and over2

(Note) Participation rate = The number of participants / The number of
employees (excluding directors and employees taking maternity/parental leave)
as of Jan. 31, 2020

Number of non-Japaneseemployees0[Number of Qualified Holders]

Number of personnel
with disabilities

0

Percentage of female
managers

3.8%

Participation rate

Initiatives for the Health and Safety of Employees

Qualification

SHAM holds Health Committee Meeting once a month with a occupational physician. The Health Committee works to ensure
health and safety by offering workshops to employees and encouraging them to manage health and safety in their workplaces.
SHAM also conducts stress checks aiming for primary prevention to protect employees from mental distress.

[Status of officers and employees]

(As of Jan. 31, 2020)
Number of holders
30

Average length ofservice

Real Estate Notary38

Number of newly hired
employees

3

Real Estate Appraiser

1

Turnover rate

0%First-Class Certified Architect

1

Number of employees
taking childcare leave

2

Chartered Member of the Securities Analysts
Association of Japan

1

Number of employees
taking family care leave

0

Certified Building Administrator

10

Number of short-term
workers3

In 2006, Sekisui House Group to which SHAM belongs declared as its basic human resource policy “Human Resources
Sustainability,” supported by the three main pillars of “encouraging female employees to pursue career development,”“promoting a variety of work styles and work-life balance” and “utilization of various human resources.” Under this policy,
efforts have been made to create an environment and mechanisms where employees can achieve sustainable growthalongside companies.

MBA holders

1

Average monthly work
hours per person

16.9 hours

Real Estate Consulting Master

5

CASBEE Accredited Professional for Real
Estate6

Internal Reporting System and Whistleblower Protection

Licensed Strata Management Consultant

4

Licensed Representative of Condominium
Management Company

6

Labor and Social Security Attorney

1▼

ARES Certified Master

Employee Satisfaction Survey

By utilizing a governance awareness survey conducted every year targeting all Sekisui House Group employees, SHAM
regularly conducts an annual survey of all employees on corporate ethics awareness and workplace environment. Throughsuch, SHAM understands the current situations and focuses efforts on creating a more open workplace culture by providing
opportunities for internal exchanges of opinions.

Promoting Diversity

The internal reporting system, known as Sekisui House Group Compliance Support (SCS System), is made available to all
employees of SHAM.
The SCS system is addressed by the compliance secretariat or the attorney's office and they response while protecting theprivacy of whistleblower.

26

Annual paid leave
take-up rate

6.8 years

67.9%(Note 1) The average length of service is calculated from the years service yearsof each employee before the merger excluding seconded employees.
(Note 2) The number of newly hired employees, the number of employees taking
childcare leave, the number of employees taking family care leave,
and the number of short- term employees have been calculated fromFebruary 1, 2019, the fiscal year of SHAM.
(Note 3) The turnover rate is calculated by dividing the number of employees
leaving SHAM during the fiscal year by the number of employees at the
beginning of the fiscal year multiplied by 100.
(Note 4) Average monthly work hours per person and Average usage of paid
leave are calculated using the one-year average from March 2019.

(Note) Successful examinees are included.

27

GOVERNANCE

ESG REPORT 2020

Corporate Governance
Governance Structure for Ensuring Objectivity Regarding Conflict of Interest

Risk Management System of SHAM

For the purpose of tightening examinations on transactions with interested parties, including the acquisition of portfolio assets andthe entrustment of property management services, SHAM has adopted frameworks under which each decision to be made by
Investment Committee and Compliance Committee must be conditional upon the attendance and assent by external members
appointed from among professionals who have no special interest with interested parties of SHR and SHAM and preliminary review
by Compliance Officer and Internal Control Promotion Department, deliberations and resolution in respective meetings ofInvestment Committee and Compliance Committee, and deliberations and resolution for approval of the Board of Directors of
SHAM, and consent of SHR based on deliberations and resolution of the Board of SHR are required.

▪SHAM has stipulated the methods of risk management, monitoring the status of risk management, and how to respond in theevent of unforeseen serious contingencies, etc. in the Risk Management Rules. Each organization of SHAM will implement thefollowing cycles for every fiscal year to respond to discrete individual risks related to operations of the division of duties. It
works to clear “weaknesses” and “oversights” in operations.

[An example of a decision making flow]

Remanded

Proposingdepartment

ProposalCompliance
Officer andInternal Control
Promotion
Department

After searching discrete risks and evaluating numerical

Rejected

Screening.
Approval

Investment
Committee

Rejected

Deliberation.
Resolution

Compliance
Committee

Rejected

Deliberation.
Resolution

Board ofDirectors

discuss methods to control such risks and1 value of risks,develop
risk management plan.

2

4

Department and reported at
3 Internal Control Promotion
meetings.

Deliberation.
Resolution

Board ofDirectorsof SHR

Deliberation.
Approval[Prevention measures of conflicts of interest transaction]
SHAM stipulates Rules for Transactions with Interested Parties concerning transactions between the Interested Parties of
SHAM and SHR as an internal rule to exclude adverse effect of conflicts of interest.
An overview of Rules for Transactions with Interested Parties is as follows:
The acquisition price (excluding taxes, cost of acquisition and others) must be no more than the amount of theappraisal value, etc. determined by a real estate appraiser who is a non-interested party appointed at the time of theacquisition.
(However, in the event that a SPC is temporarily formed on the assumption that it will be transferred to SHR, theamount shall be less than the amount added to the cost.)

Each department’s status of initiatives is examined by theConsider improvements to methods of risk control ifneeded, and continue initiatives to decrease risks.

Asset Management Fees to SHAM
With regard to the asset management fee paid by SHR to SHAM, the following management fee structure has been adopted
from the viewpoint of emphasizing unitholder profits. In particular, from the fiscal period ended October 31, 2020 (12th fiscal
period), in the management fee Ⅰ , SHR has introduced a mechanism of "total assets and unit price performance-linked
compensation," in which the fee rate fluctuates by comparing the performance of the investment unit price of SHR with theperformance of the Tokyo Stock Exchange REIT Index. This will enable SHAM and, consequently, Sekisui House as stockholder
of SHAM, to align their interests with those of the unitholders and further strengthen the incentive for SHR to maximize
unitholder value.
[Asset Management Fee Structure]<Fees linked to total assets and unit price performance>

Sale of property to Interested Parties

The sale price (excluding taxes, cost of transfer and others) must be no less than the amount of the appraisal
value determined by a real estate appraiser who is a non-interested party appointed at the time of the sale.

Payment of an agency fee to Interested
Parties

The amount of intermediary charge to be paid must be within the range of remuneration set forth in the Building Lots
and Buildings Transaction Business Act and decided based on the level of contract terms and the difficulty level ofbrokerage, etc.

Entrusting management, etc. of real estateand other assets to Interested Parties

Entrustment of management services, etc. for real estate and other assets must be based on conditions consideredappropriate upon comprehensive consideration of market levels of management consignment fees, the content ofprovided services, total workloads and so on.
(The appropriateness of contractors is verified by independent external evaluation organizations which have nointerest with SHAM once a year, in principle.)

Conclusion of leasing contract for realestate and other assets with Interested
Parties

Lease contracts must be based on conditions considered appropriate upon investigation of market rent levels andprices of similar transactions in surrounding areas, etc. and by using the opinions of third parties as a reference, who
are non-interested parties, as needed.

Management fee Ⅳ

Placing orders for construction work, etc.
to Interested Parties

If the contract amount exceeds a certain amount, Placement of orders with interested parties must be limited
to cases in which the estimated price, content of services provided, etc. are not disadvantageous to SHR uponcomparison with third parties.

Management fee Ⅴ

28

Conduct initiatives for risk control at each department
based on the risk management plans.

Disapproved

Attendance and assent by some or all
external members are required.

Acquisition of property from Interested
Parties▪The Compliance Officer and the Internal Control Promotion Department of SHAM are responsible for risk management at
SHAM, supervising and monitoring risk management in each organization, and reporting to the Board of Directors.

Management fee Ⅰ

Total assets × 0.14% (annual rate) + Rates linked to the Tokyo Stock Exchange REIT Index performance (upper limit: +0.02%; lower limit:-0.02%)↓* The rate fluctuates depending on the performance of the investment unit price of SHR in comparison with the Tokyo Stock Exchange REIT Index.

<Fees linked to DPU and operating income>Management fee Ⅱ(Distributable amount per unit × Operating income × 0.002%) × 2 (split ratio)* The above "Distributable amount per unit" and "Operating Income" are before deduction of management fee Ⅱ .
*A s SHR implemented a 2-for-1 split of the investment units with May 1, 2018 as the effective date, Management Fee Ⅱ is calculated bymultiplying by 2, which is the split ratio.

<Acquisition fees>
Management fee Ⅲ

Trading value related to the acquisition of real estate-related assets × 0.3%
→ However, in the case of acquisition from interested parties, there is no acquisition fee.
* The acquisition purchase price does not include consumption tax, etc. and expenses, etc.

<Disposition fees>

Trading value related to the transfer of real estate-related assets × 0.3%
→ However, in the case of disposition to interested parties, there is no disposition fee.
* The sale price does not include consumption tax, etc. and expenses, etc.

<Merger fees>

Value of Real Estate-Related Assets held by the merger counterparty at the time of the merger × 0.4%

29

ESG REPORT 2020

GRI Content Index
Item-specific standards
Disclosure Items

Corresponding page of the ESG Report

Corresponding place on the HP

Disclosure Items

Name of the organization

Overview of Sekisui House REIT. Inc (P.3)

Employees of SHAM (P.27)

Profile of SHR

Overview of Sekisui House REIT. Inc (P.3)
Fundamental Corporate Philosophy, Vision and Features of SHR

Activities, brands, products, and services

Investment Strategy
Portfolio

102-3

Location of headquarters

Profile of SHR

102-4

Location of operations

Profile of SHR

102-5

Ownership and legal form

Economy102-2

Corresponding place on the HP

History (P.4-5)

1. Organizational Profile
102-1

Corresponding page of the ESG Report

GRI 201: Economic Performance

GRI 102: General Disclosures 2016

2016

201-1

Direct economic value generated and distributed

Cash Distributions
Social Responsibility
11th FP securities report (only in Japanese)

201-2

Financial implications and other risks and opportunities due to climate change Measures for addressing Climate Change (P.14-15)

GRI 205:Anti-corruption
2016

205-3

Confirmed incidents of corruption and actions taken

Not Applicable

GRI 206:Anti-competitive Behavior

Overview of Sekisui House REIT. Inc (P.3)

2016

Profile of SHR

206-1

Legal actions for anti-competitive behavior, anti-trust, and monopoly practices

Not Applicable

Overview of Sekisui House REIT. Inc (P.3)
102-6

Fundamental Corporate Philosophy, Vision and Features of SHR

Markets served

Disclosure Items

Investment Strategy
Financial Highlights

102-7

Scale of the organization

2016

Portfolio
History (P.4-5)
Employees of SHAM (P.27)

Information on employees and other workers

102-9

Supply chain

102-10Significant changes to the organization and its supply chain

102-11

Precautionary Principle or approach

Employees of SHAM (P.27)
Social Responsibility
Overview of Sekisui House REIT. Inc (P.3)
Structure of SHR
Not Applicable
Sustainability Policy (P.8)

External initiatives

102-14

Statement from senior decision-maker

2018

Energy consumption within the organization

302-3

Energy intensity

Environmental Measures

302-4

Reduction of energy consumption

Environmental Measures

303-3

Water withdrawal

305-1

Sustainability Policy / Promotion System
2016

International Initiatives / External Certifications

11th FP securities report (only in Japanese)

Energy indirect (Scope 2) GHG emissions

305-4

GHG emissions intensity

Environmental Measures

305-5

Reduction of GHG emissions

Environmental Measures

307-1

A vision for Sekisui House REIT based on its fundamental philosophy (Table 2)Social Responsibility

2018102-18Governance structure
Delegating authority

Sustainability Promotion System (P.9)
GovernanceConsulting stakeholders on economic, environmental, and social topics Sustainability Promotion System (P.9)

102-22Composition of the highest governance body and its committees

Profile of SHR

102-23Chair of the highest governance body

Profile of SHR

102-24

Nominating and selecting the highest governance body

11th FP securities report (only in Japanese)

Conflicts of interest

Governance

2016

Identifying and managing economic, environmental, and social impacts Sustainability Promotion System (P.9)

102-31

Review of economic, environmental, and social topics

Sustainability Promotion System (P.9)

102-32Highest governance body's role in sustainability reporting

Sustainability Promotion System (P.9)

Communicating critical concerns

102-34Nature and total number of critical concerns

102-35

Remuneration policies

102-36

Process for determining remuneration

2016

2016

Governance Structure for Ensuring Objectivity Regarding Conflict of Interest (P.28)
Governance
Not Applicable
Asset Management Fees to SHAM (P.29)
Governance
11th FP securities report (only in Japanese)

5. Stakeholder engagement102-40

List of stakeholder groups

102-41

Collective bargaining agreements

102-43

Approach to stakeholder engagement102-44

Key topics and concerns raised

Not Applicable

102-47

List of material topics

102-48

Restatements of information

Not Applicable

102-49Changes in reporting
Reporting period

102-51

Date of most recent report102-52

Reporting cycle

102-53

Contact point for questions regarding the report102-55

GRI content index

Materiality (Important Issues) (P.10)
Not Applicable

103-2

Explanation of the material topic and its Boundary
The management approach and its components

2016

2016

2016

Promotion of worker health403-9

Work-related injuries

Not Applicable403-10Work-related ill health

Not Applicable

Social Responsibility

404-1

Average hours of training per year per employees

404-2

Programs for upgrading employee skills and transition assistanceprograms

Employees of SHAM (P.27)
Social Responsibility
Employees of SHAM (P.27)
Social Responsibility

405-1

Diversity of governance bodies and employee

Employees of SHAM (P.27)
Social Responsibility

406-1

Incidents of discrimination and corrective actions taken

Not Applicable

407-1

Operations and suppliers in which the right to freedom of associationand collective bargaining may be at risk

Not Applicable

408-1

Operations and suppliers at significant risk for incidents of child labor

Not Applicable

409-1

Operations and suppliers at significant risk for incidents of forced orcompulsory labor

Not Applicable

410-1

Security personnel trained in human rights policies or procedures

Not Applicable

2016

411-1

Incidents of violations involving rights of indigenous peoples

Not Applicable

GRI 415: Public Policy
415-1

Political contributions

Not Applicable

GRI 416:Customer Health and Safety
2016

416-2

Incidents of non-compliance concerning the health and safety impacts
of products and services

Not Applicable

GRI 417: Marketing and Labeling
2016

Not Applicable

417-2

Incidents of non-compliance concerning product and service
information and labeling

Not Applicable

417-3

Incidents of non-compliance concerning marketing communications

Not Applicable

GRI 418: Customer Privacy

Editorial Policy (P.1)
Contact

2016

418-1

Substantiated complaints concerning breaches of customer privacy
and losses of customer data

Not Applicable

GRI 419: Socioeconomic Compliance

GRI 103: Management Approach 2016
103-1

Employees of SHAM (P.27)

403-6

GRI 409: Forced or Compulsory Labor

Not Applicable
Editorial Policy (P.1)

GRI Content Index (P.30-31)

Social Responsibility

GRI 408: Child Labor

2016
Structure of SHR
11th FP securities report (only in Japanese)

102-50Social Responsibility
Employees of SHAM (P.27)

GRI 411: Rights of Indigenous Peoples

Stakeholder Engagement (P.22)

Overview of Sekisui House REIT. Inc (P.3)
Entities included in the consolidated financial statements

Parental leave

GRI 410:Security Practices

Stakeholder Engagement (P.22)

6. Reporting practice102-45

401-3

Employees of SHAM (P.27)

GRI 407:Freedom of Association and Collective Bargaining

Society102-33New employee hires and employee turnover

GRI 406:Non-discrimination

Sustainability Promotion System (P.9)

102-29Corresponding place on the HP

GRI 405:Diversity and Equal Opportunity

11th FP securities report (only in Japanese)Role of highest governance body in setting purpose, values, and strategy

401-1

2016

Governance Structure for Ensuring Objectivity Regarding Conflict of Interest (P.28)

102-26

Corresponding page of the ESG Report

GRI 404: Training and Education

Sustainability Promotion System (P.9)

102-21

102-25

Not Applicable

GRI 403:Occupational Health and Safety

Fundamental Corporate Philosophy, Vision and Features of SHR

4. Governance102-19Environmental Measures

Non-compliance with environmental laws and regulations

2016

3. Ethics and integrity

Mechanisms for advice and concerns about ethics

Environmental Measures
Measures for addressing Climate Change (P.15)

GRI 401:Employment

Measures for addressing Climate Change (P.14-15)

102-17

Environmental Measures

305-2

Disclosure Items

Top Message (P.2)

Key impacts, risks, and opportunities

Values, principles, standards, and norms of behavior

Measures for addressing Climate Change (P.15)

GRI 307:Environmental ComplianceInternational Initiatives / External Certifications (P.12-13)

Materiality (Important Issues) (P.10)

102-16

Environmental Measures

Direct (Scope 1) GHG emissions

2. Strategy

102-15

Measures for addressing Climate Change (P.15)

302-1

GRI 305:Emissions

2016

Biodiversity Conservation (P.17)
Environmental Measures102-12

Corresponding place on the HP

GRI 303: Water and Effluents
Environment

102-8

Corresponding page of the ESG Report

GRI 302: Energy

Portfolio

Materiality (Important Issues) (P.10-11)

2016

419-1

Non-compliance with laws and regulations in the social and economic area

Not Applicable

Sustainability Promotion System (P.9)
Materiality (Important Issues) (P.10)30

31