Introduction

Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Environment
SocialESGREPORT

2021
Governance

ESG REPORT 2021

1

Introduction

Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Table of Contents

Introduction

Social Responsibility

3 Organization Overview

24 Role of SHR with Respect to Residents and Tenants

4 Sustainability Journey

25 Providing Residents and Tenants with Secure andComfortable Space that Offers Peace of Mind
27 Contributions to Society

Vision / Policy

28 Creating a Rewarding Workplace

5 Message from Senior Management
6 Business Environment Surrounding SHR
7 Value Creation Model Through Asset Management
8 Sustainability Management
10 Materiality (Important Issues)
12 Supporting Initiatives/
Acquisition Status of External Evaluations

17 Reduction of CO2 Emissions
19 Coexistence of Humankind and Nature andActivities for the Resources Environment
20 Urban Revitalization / Urban Redevelopment
21 Investing in Real Estate with
Excellent Environmental Performance
23 Green Bond

This document is issued to help readers understand the efforts of Sekisui
House Reit, Inc. (hereinafter referred to as the “SHR”) and Sekisui House AssetManagement, Ltd. (hereinafter referred to as the “SHAM”) toward the realization of a sustainable society and to engage with stakeholders.
This report is complied based on GRI Standards (2016) as reference.

Scope of Report
Sekisui House Reit, Inc. and Sekisui House Asset Management, Ltd.
(Sekisui House, Ltd. [ hereinafter referred to as “Sekisui House” ], the parent
company of SHAM, is partially included.)

Reporting Period

Corporate GovernanceSekisui House Reit Inc.
May 1, 2020 to April 30, 2021

30 Governance at SHR(Some details include information before and after the relevant period.)

31 Penetration of ComplianceSekisui House Asset Management, Ltd.
February 1, 2020 to January 31, 2021

32 Risk Management System(Some details include information before and after the relevant period.)

33 Strengthening Corporate Governance System

Issue Cycle

35 Information Disclosure andEngagement with Stakeholders

Published annually as an annual report

Environmental Commitment
13 Measures for Addressing Climate Change

Editorial Policy

Issue Data
December 2021 (Previous Data: December 2020)

ESG Data Book
36 ESG Data
38 GRI Content Index
40 Third-Party Assurance (Verification Statement)

Contact Information
Sekisui House Asset Management, Ltd.
Investor Relations Department and Business Strategy Department
TEL: +81 3-6447-4870 (Main)(Disclaimer)
The forward-looking statements in this document, including earnings forecasts,
are based on the judgment of SHAM in light of the information available at the timeof preparation and are subject to potential risks, uncertainties and other factors.
Therefore, actual results may differ significantly from the forecasts due to changes
in various factors.

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Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Organization Overview
Sekisui House Reit, Inc. (“SHR”) is sponsored by Sekisui House, Ltd. (“Sekisui House”), a leading homebuilder representing Japan with an established development and management track record
also in the property development business.
SHR invests in residential and office building as major investment targets and also invests in hotels. SHR designates “high quality” residential and commercial properties located in “strategic
location”, which are expected to secure stable earnings over the medium to long term as “Prime Properties” and prioritize investments in Prime Properties.

Reit

Structure of SHR

NameSekisui House Reit, Inc. (Securities code: 3309)

Representative

Atsuhiro Kida, Executive Director

Listing date

December 3, 2014 (Tokyo Stock Exchange)

Fiscal Period Ends

April and October of each year

Address
SponsorAkasaka Garden City 4-15-1 Akasaka, Minato-ku, Tokyo

Parent Company of
the Asset Management Company / Sponsor

4

Mitsubishi UFJ Trustand Banking Corporation

Sekisui House, Ltd.
100%
ownership

2

Asset Management Company

1

General Meeting ofUnitholders

Sekisui House Asset Management. Ltd.

Sekisui House, Ltd.
3

Asset Management Company
Trade Name

Sekisui House Asset Management, Ltd.

Representative

Toru Abe, President & Representative Director

Date of Establishment

February 17, 2014

Capital

400 million yen

Share holder

Sekisui House, Ltd. 100%

Licenses

Licensed for building lots and buildings transaction business, license No. (2)96411 issued by the Governor of Tokyo
Certified as entrustment-based agency, license No. 82 issued by the Ministerof Land, Infrastructure, Transportation and Tourism
Registered as a financial instruments business operator, registration No.2791
issued by the Director-General of the Kanto Finance Bureau (Kinsho)

General Administrative Agent

Sekisui House Real Estate Tohoku, Ltd.
Sekisui House Real Estate Tokyo, 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 Company

Mitsubishi UFJ Trustand Banking Corporation

Board of Directors
Executive Director

Atsuhiro Kida

Supervisory Director

Pipeline Support Companies

5

Shigeru Nomura

6

Transfer Agent

Mizuho Trust & Banking Co., Ltd.

Supervisory Director

Tatsushi Omiya

Independent Auditor

Ernst & Young
ShinNihon LLC

7Administrator for Investment
Corporation Bonds

MUFG Bank, Ltd.

❶ Asset Management Agreement ❷ Sponsor Support Agreement, etc. ❸ Agreement on Preferential Negotiating Rights, etc. ❹ General Administrative Agreement❺ Asset Custody Agreement ❻ Administrative Agreement (Administration of Investment Units) ❼ Financial Agent Agreement

Features of SHR
1 Priority Investment in Prime Properties Centering on “Strategic Location” and “High Quality”
2 Growth Strategy that Take Full Advantage of the Versatile Support by Sekisui House Group
3 Adopting Structure Focused on Unitholder Value
4 Strong Financial Foundation Based on Sound and Stable Financial Operations

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Social Responsibility

Corporate Governance

ESG Data Book

Sustainability JourneyWith maximizing the support of Sekisui House Group, SHR will steadily achieve the growth in assets under management, and also, 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
JPY73.2 billion.

July 2019
March 2019

June 2018
Acquired DBJ Green Building
Certification (6 residential properties)

Signing the Principles
for Responsible
Investment (PRI)

September 2019

PM Shirokanedai Tower

March 2019

December 2014

September 2018

Sekisui House Reit, Inc.
has been listed on theTokyo Stock Exchange

December 2014

Reorganized into the
Sustainability
Committee

Acquired DBJ Green
Building Certification

GC Shinagawa
Gotenyama

April 2016

September 2016

April 2017

Acquired DBJ Green
Building Certification

Establishment of the
Sustainability Promotion
Committee
Setting regulations for
Sustainability Policy,
promotion system ofsustainability

Acquired DBJ Green
Building Certification

Acquired DBJ Green
Building Certification

Hommachi GC(Office building
portion)Ended Apr. 2015 (FP1)

September 2017

Acquired DBJ Green Building Certification(10 residential properties)

Acquired GRESBReal Estate Assessment
GRESB rating 3 Stars,
Green Star

Acquired DBJ Green
Building Certification(3 residential properties)

PM
Mitatsunamachi

May 2017

May 2018

June 2019

Asset size at the time of listing

Asset size

Asset size

Asset size

JPY114.3 billion

JPY200 billion Achieved

JPY400 billion Achieved
1,554

1,229

1,238

801
114.3
62.8
End of FP1
4/30/2015

152.9
101.4

152.9
101.4

End of FP2

End of FP3

10/31/2015

4/30/2016

179.5
105.8

End of FP4
10/31/2016

February 2020
Issuance ofgreen bonds(JPY2 billion for
10 years)

March 2020
Acquired CASBEE
Real Estate Assessment
Certification(1 office received thehighest rating “S Rank”)

1,331

1,355

End of FP5
4/30/2017

June 2020
Identification of ESG
important issues(materiality)

Akasaka GC

Introduction ofwork-from-homesystem for SHAM
(Measures to prevent
COVID-19 pandemic)

Issuance of green bonds(JPY2 billion for 10 years)

September 2021
November 2020
Acquired GRESBReal Estate assessment
GRESB rating 3 Stars,
Green Star

July 2020
Supporting the
Recommendations of
TCFDAugust 2020
April 2020

May 2021

Change in the asset
management fee structure(Introduction of
performance-linked rates
to the Tokyo Stock
Exchange REIT Index)

Issuance of Annual
Green Bond Reporting

September 2020
Issuance of green
bonds(JPY4 billion for
5 years, JPY4 billion
for 10 years)

December 2020
Issuance of the first
ESG report

January 2021
Introduction ofelectricity fromrenewable energy
sources

Introduction of electricity
from renewable energy
sources at
Hommachi Minami GC

September 2021
Acquired CASBEE forReal Estate Certification(1 office received thehighest rating,“S Rank“)

October 2021
Acquired GRESBReal Estate Assessment
GRESB rating 3 Stars,
Green Star

November 2021
Acquired DBJ
Green Building Certification(5 residential properties)

Sha Maison stage
YahiroDecember 2021
Issuance of ESG reportat HK Yodoyabashi GA

200.7

200.7

112.1

112.1

End of FP6

End of FP7

10/31/2017

4/30/2018

Green assets (billion yen)

223.1

End of FP8
10/31/2018

Asset size (billion yen)

JPY500 billion Achieved

1,594

1,631
527.0

1,352
438.1

179.5
112.1

May 2020

Ended Oct. 2017 (FP6) Ended Apr. 2018 (FP7) Ended Oct. 2018 (FP8) Ended Apr. 2019 (FP9) Ended Oct. 2019 (FP10) Ended Apr. 2020 (FP11) Ended Oct. 2020 (FP12) Ended Apr. 2021 (FP13) Ended Oct. 2021 (FP14) Ended Apr. 2022 (FP15)

December 2014

1,298

Began disclosing
energy-related
indicators

September 2019

Acquired the highest“S rank” of“MUFG ESG Rating
Certificate for J-REIT
supported by JCR”

Hirokoji GA

Ended Oct. 2015 (FP2) Ended Apr. 2016 (FP3) Ended Oct. 2016 (FP4) Ended Apr. 2017 (FP5)GC Shinagawa
Gotenyama

April 2019
PM Fujimidai

HK Yodoyabashi
GA

Acquired GRESB Real
Estate Assessment
GRESB rating 3 stars,
Green Star, Selectionof sector leader

December 2019

October 2018

May 2015

HommachiMinami GC

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

Acquired GRESBReal Estate Assessment
GRESB rating 4 Stars,
Green Star

August 2016

For the first timefor SHR of issuinggreen bonds(JPY4 billion for
5 years, JPY2.5
billion for 10 years)

Distribution per unit (yen) (Note)

1,803
1,665

1,685

1,675

532.9

532.9

535.8

527.7

457.3

243.0

End of FP9
4/30/2019249.8

End of FP10
10/31/2019

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.

278.5

End of FP11
4/30/2020

278.5

End of FP12
10/31/2020

278.5

End of FP13
4/30/2021

278.5

End of FP14
10/31/2021

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Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Message from Senior Management
We would like to express our deepest condolences to those who have passed away due to the COVID-19 pandemic andtheir families, and extend our heartfelt sympathies to all who have contracted COVID-19, or have been otherwise affected. We
also offer our sincere appreciation to all the essential workers who have kept society functioning during this time.
We recognize that, during the COVID-19 crisis, people have been anxious about keeping themselves and their families
healthy, and their feelings about their own lifestyles and society have changed, leading them to place increasing value on
long-term sustainability.
Moreover, recent years have witnessed the acceleration of efforts to address social issues, such as the “Paris Agreement”,
which is the international framework for combating climate change, and the “Sustainable Development Goals (SDGs)”,
which aim to solve global challenges. All over the world, societies are expecting more of companies and demanding thatthey take greater responsibility.
Japanese Real Estate Investment Trusts (J-REITs) are no exception; we sense that for J-REITs, contributing to social
issues through their business is now more important than ever. And for Sekisui House Reit, Inc. (SHR) too, we believe thatefforts to realize a sustainable society are indispensable to sustainable growth of SHR.
Helping to solve social issues through asset management that takes environmental, social, and governance (ESG)
considerations into account is in line with the fundamental philosophy of SHR, which aims to achieve growth together withall stakeholders, including unitholders and tenants. Furthermore, we believe such efforts contribute to securing stableearnings and maximizing unitholder value over the medium to long term.
Guided by such beliefs, SHR have made full use of the collective capabilities and know-how of our sponsor, Sekisui
House, Ltd. (Sekisui House), pursuing energy reduction and environmental consideration, safety in residents’ lives, andcontinuity of business with regard to our assets held, while also actively striving to contribute to regions and communities,
and develop our governance structure.
Through our asset management activities, we will continue to work together with Sekisui House to enhance building
value and strive to provide high-quality real estate assets. These assets are social capital built for a new era; they areenvironmentally friendly and provide safety, peace of mind, and comfort to residents, workers, visitors, and the broader
community. Moreover, we will keep on contributing to building a better future by engaging in dialog with stakeholders andproactively disclosing information, as we pursue sustainability
for SHR and society as a whole. We ask for your continued
support as we do so.

A Vision of Sekisui House Reit

Managing assets to better provide for people,
society and the future
Maximize unitholder value

Aim to maximize unitholder value by achieving sustainablegrowth together with stakeholders

Provide high-quality social capital

Providing high-quality social capital by pursuing theenhancement of the overall asset value of the community

A REIT that leads the way into an era of
the 100-year lifespanPromote ESG strategies and become a REIT that leading
the way into an era of the 100-year lifespanCorporate Philosophyof Sekisui House Group

Our Stance

Truth and Trust

Our Philosophy

Love of
Humanity

Sekisui House Reit, Inc.

Atsuhiro Kida
Executive Director (Right)
Sekisui House Asset Management, Ltd.

Our Objective

Our Business Focus

Superior Quality
and Leading Technology

Comfortable Housing
and Ecologically Sound Communities

Toru Abe

President & Representative Director (Left)
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Vision / Policy

Environmental Commitment

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Corporate Governance

ESG Data Book

Business Environment Surrounding SHR
As the business environment changes rapidly, new issues are emerging that need to be addressed. SHR will analyze issues that affect value creation, identify risks, and strive to reduce them.
SHR will also position them as business opportunities for sustainable growth, and accelerate efforts to realize our vision, “Managing assets to better provide for people, society and the future”.

Environmental Changes

The Increasing Seriousness
of Global Warming
Accelerate trends toward decarbonization

Risks and Opportunities for SHR●

Risk
Scenario●

Rise in interest rates
Changes in J-REIT market

●

●

Risk
Scenario●

Economic fluctuations

Demographic Change
Decline in working population●

Risk
Scenario

Low birthrate and longevity

Ongoing urbanization
Behavioral change of people
due to spread of infectious diseases
Rise in health awareness●●Social Change
Risk
Scenario

Impact of increasingly severe natural disasters(Decrease in asset value, increase in countermeasure andmaintenance costs)

Increase in extreme weather events

Changes in the Economic
and Financial Environment

Impact of the introduction of a carbon tax●●

Diverse work styles●●

Opportunities
andCountermeasures

Impact of rising interest rates on funding costs
Impact on external growth due to deterioration in
financial environment
Reduction of rents due to worsening business performance of tenants and impact on earnings from tenants
moving out

Impact on earnings due to higher vacancy rates andlower rents
Impact on office demand due to decline in working
population●

Opportunities
andCountermeasures

Market segmentation due to the shrinkage of the
middle class
Intensifying competition for human resources

●

●

●

Opportunities
andCountermeasures

Intensifying competition to secure tenants and acquire
properties in cities
Impact of increased telework on demand for offices●

Opportunities
andCountermeasures●

Creation of tenant demand by building a portfoliowith high environmental performance
Improvement of asset value by enhancing
BCP measures

Diversification of funding methods
Acquisition of high quality properties by leveraging sponsor pipelines and a strong financial base
Attracting superior tenants with a stable financial base

Investment in properties that meet new needs
associated with demographic changes
Investment in properties that support universal
design and housing for the elderly●

Investment in high-value-added properties●

Responding to demand for regional revitalization●●

Investment in healthcare and well-being conscious properties
Creating innovation through diverse humanresources

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Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Value Creation Model Through Asset Management
SHR is working to create new value by leveraging the strengths of SHR based on Corporate Philosophy of Sekisui House Group, “Love of Humanity”.
SHR will accurately identify social issues that change with the times and contribute to the realization of a sustainable society as a REIT that leads the way into an era of the 100-year lifespan.

INPUT(Sources of Value Generation)(As of the end of April 2021)

Financial CapitalBusiness Environment
Surrounding SHR

The Increasing
Seriousness of
Global Warming

Changes in the
Economic andFinancial Environment

Demographic
ChangeStrong financial base that is indispensable forsupporting sustainable growth
LTV 45.4%

Priority investment in Prime Properties centering on“Strategic Location” and “High Quality”
Six Factors of Prime Properties
to Emphasize as Investment Focus

Strategic Location

Manufacturing Capital
High-quality portfolio with high environmental
performance and stable earnings
Asset size 535.8 billion yen
Percentage of portfolio 55.2%
with green certification

High Quality

Economic Zones

Safety / BCP

Livabilit /Functionality

Convenience

Brand

Environmental
Consideration

Know-how and information gathering capabilities
accumulated through asset management

Sustainable growthby securing stableearnings

Human Capital

Providing bases forsustainable living andsustainable bases ofoperation for residents andtenant companies

Human foundation with high level of expertise andenables employees to take on challenges

Diverse sponsor support of Sekisui House Group
Foundation of supply chain collaboration
Acquisition from Sekisui House Group 76.0%

Natural CapitalGreening space through tree planting based on
Gohon no ki (“5 trees”) projectFoundation for reducing environmental impact,
such as the use of renewable energy, etc.

OUTCOME(Value Provided to Stakeholders)

Residents andTenant Companies
Valuable residences and buildings
Safe, secure and comfortable space

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

Employees

Intellectual CapitalSocial / Relationship CapitalSocial Change

Investment Strategy of Value Creation

Energy-efficient workplace
Enrichment working system
Career development

Business Partners
Opportunities for further revenue growth
Improve sustainability

Aiming at(Purpose)Managing assets tobetter provide
for people,
society and the future

Environment and Society

Three Foundations Supporting
Value Creation
GrowthStrategy

Environment
and Society

Growth strategy that
optimally utilize theintegrated corporate
strengths andknow-how of the
Sekisui House Group

Contributing to therealization of asustainable
society throughefforts to solve
social issues

Reducing environment impact
Creating urban communities
Sustainable development of local communities

Governance
Aiming for sustainablegrowth by placing
governance at thefoundation of all
business activities

Corporate Philosophy of Sekisui House Group, “Love of Humanity”
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Social Responsibility

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ESG Data Book

Sustainability Management
SHR and SHAM are responsible for contributing to solve social issues that are becoming increasingly diverse and complex day by day through the business as a company. We believe that fulfilling
this responsibility not only enhances the sustainability of society and SHR, but also enhances competitiveness in the industry and ultimately maximizes unitholder value.
SHR has a vision, “Managing assets to better provide for people, society and the future” and conducts business activities from a medium to long term perspective. Based on Sustainability Policy
established by SHAM, we will strive to contribute to the realization of a sustainable society and increase corporate value by observing and implementing such policy.

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 ESGrelated laws, regulations and rules, and abide by such laws, regulations and rules in conducting
real estate investment management with considerations given to ESG.

2

Responding to Climate Change
We strive CO2 emission reduction and actively promote the efficient use of energy toward therealization of decarbonized society.

3 Water and Resource Saving Measures

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

4 Biodiversity

In accordance with Gohon no ki (“5 trees”) Project promoted by Sekisui House, we conduct
maintenance and management of planting and other greenery measures, centering on tree species
with consideration given to the native vegetation and other ecosystem matters. By doing so,
we aim to realize harmony with the nature and the surrounding environment.

5 Comfort and Safety

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

6 Contributing to Regions and Communities

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

7 Cooperation with Stakeholders

In order to implement initiatives based on Sustainability Policy, we will strive to cooperate withproperty management companies and other 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 andlively way by respecting diversity, personality, and individuality and promoting work-life balance.
We will also strive to develop the abilities of directors and employees, maximally extract theirabilities, and secure diverse and talented human resources.

9 Supply Chain Management

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

10 Information Disclosure and Acquisition of External Certifications
We will actively disclose ESG-related information to stakeholders.

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

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ESG Data Book

Sustainability Management
Sustainability Promotion System
SHAM has established Sustainability Committee for the purpose of continuous and organizational implementation of ESG initiatives based on Sustainability Policy. With the aim of strengthening thesustainability promotion system, the Committee is composed of full-time directors, compliance officer, and all chief managers of SHAM. Matters deliberated by the Committee are approved or
directed, and various actions are taken based on these. The progress of initiatives and the status of engagement with stakeholders are reported regularly to the Committee, and reports are also
made to the Board of Directors of SHR as appropriate. With the Committee at the core, SHR and SHAM will work together to implement sustainability initiatives across the organization and contributeto the resolution of social issues.

Major Items●

Board of Directors of SHR●●

Reporting●Identifying and reviewing materiality
Setting and revision of targets and KPIs (Key Performance Indicators)
Details and progress of efforts to solve materiality
Signing and supporting in sustainability related initiatives, etc.

Proposals and Reports

Sustainability
Committee

Chief Operating Director
Director of Business Strategy Dept.

Implementationand promotion

Plan

Do

Secretariat
Business Strategy Dept.

Act

Committee Members
Full-time Directors
Compliance Officer
All chief managers of SHAM

Frequency of Meetings
At least once every three months
in principle

Review andinstructions for
improvement

Check

Progress monitoring

Approvals and Instructions

Real Estate
Division

Real Estate Investment
No.1 Dept.

Real Estate Investment
No.2 Dept.

Real EstateManagement No.1 Dept.

Real EstateManagement No.2 Dept.

Real EstateManagement No.3 Dept.

Real Estate
Accounting Dept.

Engineering
Management Dept.

Business Strategy
Dept.

Internal Control
Promotion Dept.

Investor Relations
Dept.

General Affairs
Dept.

Finance
Dept.

Accounting
Dept.

Stakeholders

President and Representative Director

Consider andformulatesustainabilityrelated policies
and various
measuresEngagement

Chief Executive Director

All Departments of SHAMESG REPORT 2021

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Social Responsibility

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ESG Data Book

Materiality (Important Issues)
Materiality Identification Process
In 2020, SHR has identified our materiality in accordance with the following process with the aim of promoting more concrete initiatives for sustainability through our business activities.
Even after the identification of materiality, the environment surrounding stakeholders and SHR is expected to change over the medium to long term. By periodically reviewing the materiality in accordance with these trends and pursuing the sustainability of SHR in a manner that meets the demands of society, we will fulfill our responsibility toward the mutual sustainable growth of society and SHR.

Periodic Review of Issues
01 Classificationof Issues

02 Prioritization

Very important

Of the identified items,
the issues to be focused onwere prioritized by incorporatingthem into Materiality Matrix
from the perspective of impact
and importance to stakeholders
and impact and importance to
SHR and SHAM

Impact and importanceto stakeholders

List the issues, which should
be considered in the sustainablegrowth to SHR and SHAM
by referring to the internationaltargets such as SDGs,
guidelines like GRI Standards etc.
and assessments by ESG
evaluation organizations

Important

03 Identification
and Approval

04 Progress
Review

Identify and approve prioritizedmateriality candidates after
discussing their validity by
Sustainability Committee

Confirm the status of initiatives
for materialities andevaluate the outcome in
Sustainability Committee,
also continue implementation of
improvement activities
through PDCA cycle andpromote initiatives

Materiality Matrix

Materiality

Impact and importance to
SHR and SHAM

Very important

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Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Materiality (Important Issues)
SHR believes that sustainable growth in our business activities is built on a solid foundation of a sustainable society, and recognize that in order to continue providing “Prime Properties”, which SHR
focuses on as an investment strategy, it is necessary to carry out initiatives based on the guidelines of solving issues to build a sustainable society through business activities. Based on this recognition, SHR has identified eight materialities (important issues) as below and sets targets (KPIs) as indicators to resolve each of them. In light of the SDGs (Sustainable Development Goals) adopted
by the United Nations in 2015, we will pursue mutual sustainability of both society and SHR by promoting efforts to resolve materiality.

Materiality of SHR
In November 2021, we revised upward the targets (KPIs) for “Reduction of CO2 Emissions” and “Investing in Real Estate with Excellent Environmental Performance” in consideration of the growing social demand for the environment and theprogress of our initiatives. And also we have newly set quantitative targets for “Strengthening Corporate Governance System”.
Materiality
Reduction of CO2 Emissions

E

Coexistence of Humankind andNature and Activities for the
Resources Environment
Investing in Real Estate with
Excellent Environmental
Performance
Providing Residents andTenants with Secure andComfortable Space that Offers
Peace of Mind

Target (KPI)●

Previous Target: Reduce 20% CO 2 emission intensity of portfolio by FY 2030 compared to FY 2018

●

●

●

●

●

●

●

Contributions to Society●●

Creating a
Rewarding Workplace

●

●

●

●

G

Strengthening
Corporate Governance System

●

●

●

Information Disclosure andEngagement with Stakeholders

Advance greenification and respect biodiversity
No increasing waste emission intensity of portfolio compared to FY 2018
No increasing water use intensity of portfolio compared to FY 2018
Achieve 70% or more of the portfolio with green certification by FY 2022
Previous Target: Achieve 70% or more of the portfolio with green certification by FY 2030●

S

Reduce 50% CO2 emission intensity of portfolio by FY 2030 compared to FY 2018●●

Related SDGs

Relevant pages
P17-

P19-

P21-

Regular surveys on resident and tenant satisfaction
Regular monitoring and disclosing risks of earthquakes and floodings
Regular monitoring of initiatives toward ESG in the supply chain

P25-

As a member of society, contributing to greater vitality in the community and countermeasures aimed at preventing damage from natural andother disasters
By FY 2023, “Sekisui House Matching Program” (a joint donation system for employees and the company) participation rate: 40%

P27-

By FY 2023, 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 per person: twice
Annual internal training participation rate: 100%
Practicing Sekisui House Group Human Rights Policy

P28-

Enhance effectiveness of executive committee and board of directors / Conducting effectiveness evaluation questionnaire (once/year)
Penetration of compliance / Conducting compliance training by external experts, etc.(four times/year) participation rate: 100%Strengthen internal controls structure / Conducting internal audit (twice/year)
Strengthen risk management system / Conducting risk management meeting (twice/year)

P30-

Timely and appropriate disclosure of information and enhanced utility of disclosures
Building relationships of trust with stakeholders

P35-

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Introduction

Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Supporting Initiatives / Acquisition Status of External Evaluations
Through the signing and supporting of each initiative, SHR and SHAM have expressed the commitment to promote ESG initiatives. In addition, we will analyze the strengths and weaknesses of SHR
and SHAM through the acquisition of sustainability assessments from external organizations, which will lead to further strengthening of our initiatives.

Initiatives We Support

Major Evaluations from Extenal Organizations

GRESB Assessment
PRI(Principles of Responsible Investment)
SHAM agreed with PRI’s basic stance of advocating the incorporation of
ESG issues into investment-analysis and decision-making processes,
SHAM ratified the PRI in March, 2019.

TCFD(Task Force on Climate-related Financial Disclosures)
TCFD recommends that companies disclose their risks and opportunities
related to climate change. SHAM expressed agreement with TCFD recommendations in July 2020.

United Nations Global Compact
Sekisui House Group expressed its commitment to respect human rights
in the “Sekisui House Group Corporate Code of Conduct” and the “Sekisui
House Group Corporate Ethics Guidelines”, which are the explicit foundations of its corporate activities. The Group also has expressed support forthe 10 principles of the “United Nations Global Compact”.

In GRESB Real Estate Assessment, we have received 3 Stars in GRESB
Rating based on relative assessment (five-level rating with the highest
5 Stars) and have also received a “Green Star” designation for the fifth
consecutive year by achieving high performance in their environmental
considerations and sustainability. In addition, we have received thehighest “A” rating in GRESB Public Disclosure (five-level rating from A
to E) for evaluating information disclosure.

MSCI ESG Ratings
MSCI ESG Ratings investigate, analyze, and rate the extent to which companies
are appropriately managing the risks and opportunities related to ESG and provides a comprehensive corporate ESG rating of seven levels, ranging from “AAA”
to “CCC”. SHR acquired “A” in 2021, which has been upgraded two ranks from
“BB” in 2019.

MUFG ESG Rating Certificate for J-REIT supported by JCR
MUFG ESG Rating Certificate for J-REIT supported by JCR is a service provided by Mitsubishi UFJ Research and Consulting Co., Ltd.
and supported by Japan Credit Rating Agency, Ltd. (“JCR”), evaluates corporates’ ESG initiatives based on its own ESG-related
checklist and assigns the ratings. SHR and SHAM were collectively granted the highest rank of “S” among the five-level rating.

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Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Environmental
Commitment
ENVIRONMENT

Measures for
Adressing Climate Change

Strategy
SHAM conducted the analysis using a 4ºC scenario and a 1.5ºC scenario to identify climate-related risks andopportunities for SHR and evaluate potential financial impacts to its business.
Scope and Assumptions

Endorsement of TCFD Recommendations
In recent years, climate change, including global warming, is posing great risks to the environment, society, andcorporate activities. As a company that considers ESG factors in the management of its real estate investments,
SHR recognizes climate change and other environmental challenges as relevant to our aim of providing places forpeople to live, and for businesses to operate, sustainably. Recognizing these issues, SHAM has declared support
for the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), and in November
2021 joined the Japan TCFD Consortium, a body of TCFD supporters in Japan. This means that we have committed to forecasting and evaluating climate-related risks and opportunities to our business, to setting and pursuing targets, and to disclosing information following the TCFD framework.

Climate-Related Governance
SHAM has a Sustainability Committee as the decision-making body for sustainability issues. It meets at least
once every three months to define policies, targets, and various measures related to sustainability and to discuss
climate change risks (transition risks and physical risks) and material issues in relation to mitigation of and adaptation to climate change. SHAM also appoints directors in charge of climate change to oversee initiatives related
to climate risk mitigation and adaptation. The President and Representative Director directly oversees the Sustainability Committee and serves as the chief executive director of the Committee. The Sustainability Committee reports as needed to the board of directors of SHR on all ESG-related activities, including climate change.

[ Assets ] All held properties[ Scope ] Entire business, from financing to management of investments in real estate[ Period ] Short, medium, and long term time horizons from 2021 to 2050
(short term: 2021-2025, medium term: 2026-2030, long term: 2031-2050)

Scenarios Referenced
from External Sources

Future climate projections published by international organizations and other third
parties were used as the main source of information for the scenario analysis. The
referenced scenarios are shown in the table below.
Climate change risks were categorized into “transition risks” and “physical risks”,
with physical risks further categorized into “acute” and “chronic” types.

1. [ T r a n s i t i o n r i s k s ] : Policy and Legal risks, Technology risk, Market risk, Reputation risk
2. [ Acute physical risks ] : Climate risks that are event-driven, such as typhoons and floods
3. [ Chronic physical risks ] : Longer-term shifts in climate patterns, such as sustained high or low temperatures
References

Scenario

Transition risks

Physical risks

4ºC scenario

IEA World Energy Outlook 2020 SPS

IPCC Fifth Assessment Report RCP8.5

1.5ºC scenario

IEA World Energy Outlook 2020 NZE2050

IPCC Fifth Assessment Report RCP2.6*IEA: International Energy Agency *IPCC: UN’s Intergovernmental Panel on Climate Change
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Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

Measures for Addressing Climate Change

ESG Data Book

ENVIRONMENT

Future State Anticipated in Each Scenario

4°C Scenario

1.5°C Scenario

The 4ºC scenario is a future state that assumes no strict regulations or tax policies aimed at decarbonizing society
will be enacted and that greenhouse gas (GHG) emissions will continue to rise. This scenario is characterized byrelatively high physical risk and low transition risk.

The 1.5ºC scenario is a future state that assumes regulations and tax policies aimed at decarbonizing society will beenacted. This scenario is characterized by relatively low physical risk and high transition risk.

●

Warming progresses further:●. Rising temperatures (in Japan, lows will be around 4.6ºC higher and highs will 4.3ºC higher toward theheavy rains, is smaller than the 4ºC scenario (based on IPCC Fifth Assessment Report RCP2.6)

end of the 21st century (2076-2095) than they were at the end of the 20th century (1980-1999)). More summer days, fewer winter days (in Japan, around 48.6 more days when the high exceeds 30ºC●

and 46.8 fewer days when the low drops below 0ºC during the above-mentioned period). Increased frequency of heavy and torrential rains (each will roughly double during the above-mentioned

Key
Expectations

period) (based on IPCC Fifth Assessment Report RCP8.5 and Japan Meteorological Agency Global
Warming Projection Vol. 9)●

Key
Expectations

Current energy policies continue:. Carbon taxation not enacted in Japan

Focus on comfort andsafety related tometeorological disasters

Investors
Stricter requirements on
physical risk management ininvestment decision-making

Financial Institutions

Major shifts in the energy landscape:. Carbon taxation enacted. Dramatic reduction of CO2 emissions (globally, around 40% reduction by 2030, net-zero by 2050). Widespread development of solar and wind power (roughly quadrupling global capacity from 2020 to2030) (based on IEA NZE2050). Rise of carbon-neutral buildings (all newly developed buildings will be carbon-neutral by 2030, 85% of
global building stock by 2050)(Based on NZE2050 Key milestones in the pathway to net-zero)(based on IEA SPS)

Stricter requirements on
physical risk management
in financing decision-making

Maximum mitigation of global warming:. Magnitude of weather and climate changes, such as rising temperatures and increased frequency of

SHR
Safety measuresagainst meteorologicaldisasters andpreparation and response
against acute disasters

Use of BCP
for managing
disaster risk

Property / Building
Management Companies

Customers (Tenants)

Stricter laws
and regulations on
prevention andreduction of damage
from disasters

Government

Increased need for
ZEHs/ZEBs and focus onenvironmental performance

Investors

Customers (Tenants)

Stricter requirements ontransition risk management
in investment decision-making
Stricter requirements ontransition risk management
in financing decision-making

Financial Institutions

SHR
Regulatory compliance
Efforts for acquiring
green certification
and rating improvement

Carbon tax legislation,
Stronger building energy regulations

Government

Property / Building
Management Companies
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Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Measures for Addressing Climate Change

ENVIRONMENT

Financial Impacts Identified by Scenario Analysis
SHAM evaluated the financial implications to SHR’s business of risks and opportunities identified in each of the aforementioned scenarios, and organized them by short, medium, and long term time
horizons. Medium and long term climate change risks that could have a certain level of financial impact are shown below.

Category

Policyand
LegalTechnology
Transition
risks andopportunities

MarketReputation

Acute
Physicalrisks andopportunities
Chronic

Risk/Opportunity factors
in real estate management

Potential financial impacts

Financial
Financial
implications under implications under
1.5ºC scenario
4ºC scenario
Classification
Medium
term

Long
term

Medium
term

Long
term

Rising GHG emission prices following
carbon tax legislation

Tax burden on GHG emissions of properties

Risk

S

S

M

L

Stricter energy saving standards

Increased cost of renovating properties(fines in some cases)

Risk

S

S

M

M

Improved competitiveness of properties
from complying with laws and regulations

Increased rent income from attracting
residents/tenants

Opportunity

S

S

M

L

Risk

S

S

M

M

Opportunity

S

S

S

M

Innovation and penetration of renewableand energy efficiency technologies

Increased cost of adopting newtechnologies
Improved environmental performance
reduces utility expenses

Countermeasures

Set reduction targets for GHG emissions intensity and disclose progress against targets
Renovate properties for improved energy-saving performance
Procure renewable energy
Reallocate portfolio to increase investment ratio in properties with outstanding environmental performance
Acquire ZEH and ZEB properties

Collect information on new technologies and services and add to portfolio
Convert owned properties to ZEHs/ZEBs

Decline in asset value of properties caused bydecline in relative environmental performance

NAV declines

Risk

S

M

M

M

Collect information on real estate appraisal trends and respond as appropriate
Same as “Policy and Legal”

Deterioration of financing terms due to perceived
inadequacy of responses to climate change

Rising financing costs
Rising capital costs

Risk

S

S

S

S

Improve investor valuations by strengthening information disclosure using frameworks such as TCFD
Utilize green financing

Changes in the demand of residents/tenants(increased awareness of carbon-neutrality)

Occupancy and rents increase atproperties with outstanding
environmental performance

Opportunity

S

S

M

L

Identify needs through tenant satisfaction surveys, etc., and conduct energy-saving renovations
Acquire ZEH and ZEB properties
Acquire green certifications

Decline in brand value

Deterioration of stakeholder relations
due to inadequate progressin managing climate risk

Risk

S

S

S

M

Maintain brand image by managing climate risk responsibly
Strengthen collaboration within the Sekisui House Group

Damage to properties by typhoons

Increased repair and insurance costs

Risk

S

M

S

M

Flooding caused by torrential rain
and breaching of riverbanks

Decreased rent income
from decline in occupancy

Risk

S

M

S

M

Flooding of low-lying properties due tosea level rise

Increased cost of mitigatingstorm surge damage

Risk

S

M

S

S

Exclude high-risk properties from investment

Increased use of cooling/heating due toincreased frequency of extremely
hot/cold days

Increased cost of HVAC operation,
maintenance, and repair

Risk

S

S

S

S

Monitor changes in usage associated with weather and temperature change
Optimize HVAC operation through high-efficiency air-conditioning
equipment and building automation systems (BAS), etc.
Diligently inspect facilities for degradation caused by increased use

Identify risks using hazard maps, etc.
Implement BCP measures such as securing emergency power sources
and stocking emergency supplies
Keep tenants informed about disaster preparedness
Manage cash flow to prepare for rising fire insurance premiums

This evaluation was conducted based on the types of properties owned by SHR and on scenarios published by the IEA, IPCC, and objective forecast data published by other third-party expert bodies that can be obtained at this point in time.
The accuracy of this information is not guaranteed due to the inherent uncertainty surrounding known risks, the existence of unknown risks, and other factors.

Identify high-risk
properties byquantitively identifying
physical risks anddispose of suchproperties as needed,such as throughsale
Incorporate
quantitative physical-risk
information into
pre-acquisition
property evaluations

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Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Measures for Addressing Climate Change

ENVIRONMENT

Results of Scenario Analysis

Risk Management

The 4ºC scenario is a future pathway in which no strict regulations and tax policies aimed at decarbonizing
society are enacted, GHG emissions continue to rise, and the cost of repairs and various types of insurance
premiums for owned properties increase as weather-related disasters grow in intensity. The emergenceof weather-related disaster risks due to climate change will influence tenants’ property choices; properties
that underperform against more-competitive properties when it comes to environmental comfort and resilienceagainst such disasters are likely to see a drop in tenant demand.
In a 1.5ºC scenario, regulatory and tax policies aimed at curtailing GHG emissions and decarbonizing
society will be enacted, increasing the cost of renovations associated with avoiding carbon taxes on the
GHG emissions of held properties and with complying with more stringent energy saving standards andother environmental requirements. This regulatory tightening will influence tenants’ property choices, withtenant demand for green buildings rising as it falls for properties that are doing less to reduce environmental
impact; such properties also face the risk of declining asset value.
Considering that weather-related disasters will intensify in the 4ºC scenario, SHR is focusing its investments on properties that deliver high environmental performance and can withstand floods and other risks
by virtue of both their location and specifications. Moreover, to manage transition risk and maintain ourcompetitive advantage during the transition to a low-carbon society as projected by the 1.5ºC scenario, weare reducing the CO 2 emissions of our portfolio and focusing our investments on properties with green
certifications.
SHR is working proactively to address each risk to limit its impacts on our business. We believe these
efforts will, at the same time, open doors to new business opportunities in value creation.
And we will continue to take a strategic approach to climate change to both minimize risk and maximize opportunities.

SHAM’s Sustainability Committee identifies and evaluates climate-related risks and opportunities to SHR’s
business and updates its analysis when judged necessary by the President and Representative Director, who also
directly oversees the Sustainability Committee. SHAM has a clearly defined approach to managing climate changerisks and opportunities and is advancing efforts to manage such risks and opportunities and foster climate resilienceas part of a comprehensive risk management process.

Metrics and Targets
SHR recognizes the solution of environmental challenges such as climate change as one of the key issues forthe sustainable growth of our business. We have identified “Reduction of CO2 Emissions” and “Investing in Real
Estate with Excellent Environmental Performance” as materialities and have established the following metrics andtargets for use in identifying, evaluating, and managing climate change risks and opportunities.

●

CO2 Emission Reduction Target
Reduce 50% CO2 emission intensity of portfolio by fiscal year 2030 compared to fiscal year 2018●

Energy Consumption Reduction Target
Reduce 5% energy consumption intensity of portfolio by fiscal year 2023 compared to fiscal year 2018●

Target of Percentage of Green Certification
Achieve 70% or more of the portfolio with green certification by fiscal year 2022
(Note) In principal, energy consumption reduction target is set every five years after fiscal year 2023.

* See “ESG Data” on page 36 for performance against target for each metric.

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Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Reduction of CO2 Emissions

ENVIRONMENTSHR will contribute to the realization of a carbon-free society by actively promoting the efficient use of energy by implementing capital investment, energy-conservation initiatives, etc. in owned properties.

Switching to Renewable Energy-Derived Electricity

The following graph shows the progress of KPIs set by SHR in theenvironmental field.
Against the backdrop of a decrease in the percentage of employees
attending offices and a decrease in hotel occupancy due to the COVID-19
pandemic, the CO2 emission intensity and energy consumption intensity
in fiscal year 2020 decreased significantly from the previous year due
to the introduction of environmentally friendly facilities and various
measures, such as switching to renewable energy-derived electricity, atowned properties.

SHR is strengthening its efforts to optimize energy efficiency by introducing environmentally friendly facilities at owned properties.
We have focused on LED lighting and energy-saving air conditioners,
and have also introduced a variety of other equipment, including solar
power generation panels, Low-e double glazed windows with thermal
shielding and insulation capabilities, and electric vehicle chargers.

SHR switched to electricity derived from renewable energy in the
power supply of two properties, HK Yodoyabashi Garden Avenue andHommachi Minami Garden City.
We use FIT electricity, which is generated from renewable energy andpurchased by electric utilities under the Feed-in Tariff Scheme for
Renewable Energy(FIT), and non-fossil fuel energy certificates withtracking information to verify the environmental value of electricity produced from non-fossil power sources. By repurchasing the environmental
value of FIT electricity and reducing the CO2 emission factor to zerothrough the use of substantial renewable energy, we have achieved virtuallycarbon-free properties when using electricity.
In residences as well, we plan to gradually switch electricity to renewableenergy in common areas, and we will work on a medium to long termbasis to reduce CO2 emissions.

▼Introduction of Environmentally Friendly Facilities

Solar Power Generation Panels

CO2 Emission Intensity

KPI Reduce 50% CO2 emission intensity of portfolio
by fiscal year 2030 compared to fiscal year 2018
(Unit: t-CO₂/m2)

0.052

Low-e Double Glazed Windows

0.032 (Target)

0.03

▼

LED Lighting

Prime Maison Gotenyama East▼

▼ 18.8% 2030

Garden City Shinagawa Gotenyama

0.064
0.063
▼

FY 2020 Result
Vs. base year

2018
2019
2020

0.04

0.05

0.06

0.07

Energy Consumption Intensity
HK Yodoyabashi Garden Avenue

KPI Reduce 5% energy consumption intensity of portfolio
by fiscal year 2023 compared to fiscal year 2018

HK Yodoyabashi Garden Avenue

Hommachi Minami Garden City

(Unit: kWh/m2)▼ 7.5%

2018
2019
2020

174.0

▼

FY 2020 Result
Vs. base year

179.1

Electric Vehicle Chargers▼▼

Target (KPI)

Flow of Supply of Electricity Derived
from Renewable Energy
FIT Power Source

160.9
Power Source
Identified

2023
155.0

165.3 (Target)
165.0

175.0

Hommachi Minami Garden City

185.0

(Note) In principal, energy consumption reduction target is set every five years after fiscal year 2023.

Electric Power
Company

Repurchase
Environmental Value of
FIT Electricity

Prove
The Electricity
Environmental Value
Available to RE100

Non-fossil Fuel Energy
Certificates with Tracking
Information, etc.

Properties Owned by SHR

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Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Reduction of CO2 Emissions

ENVIRONMENT

Promotion of Green Leasing

SHR asks property management companies to propose ways for energy savings in managed properties. We
also share the results of the CO2 reduction potential diagnoses conducted by SHR with property managementcompanies to work together for the purpose of reducing environmental impact.
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 in conjunction with these reports to raise environmental awareness.
At Garden City Shinagawa Gotenyama, the initial illuminance of the illuminance sensor is adjusted to ensure
proper lighting brightness. In parallel, daylight is used during the daytime to reduce electricity consumption.
In addition, SHR evaluates the performance of property management companies’ management operations oncea year in principle to verify their appropriateness. For evaluation, in addition to property management capabilities
and operational systems, SHR also considers the organizational structure for promoting corporate sustainability
and the energy conservation promotion system for owned properties.

Green leasing refers to the establishment and implementation of environmental provisions in lease agreementswith tenants at owned properties. SHR has entered into green lease agreements with certain tenants. From theperspective of energy saving and environmental consideration, we are accelerating our environmental efforts by
sharing our thoughts on maintaining and improving the comfort and productivity of our properties with our
tenants, and we have established a system for mutual cooperation. We will continue to strengthen cooperation
with tenants and promote green leasing.

▼Collaboration with Tenants and Property Management Companies

Green Lease Agreements

Mutual Cooperation System●

SHR

Materials of the CO2 Reduction Promotion Meeting (excerpt)

●

●

●

▼

●

Comparison of CO 2 Emission Intensitywith Other Offices

Cooperation of counterparties in environmental-related measures
Requests for compliance with environment-related laws
and regulations

TenantSharing of environmental performance data
Reduction of waste generated in renovation work
Use of materials that consider the environment and the comfort oftenants and users
etc.

Major Properties with Green Lease Agreements

アタリ
Monthly Changes in CO 2 Emission Intensity

Garden City
Shinagawa Gotenyama

Hommachi Minami
Garden City

HommachiGarden City
(Office building portion)

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Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Coexistence of Humankind and Nature and Activities for the Resources Environment

ENVIRONMENT

Extreme weather in recent years has not only made people’s lives severe, but has also caused significant damage to ecosystems. In addition to providing space for residents and tenants to spend
safely, securely, and comfortably, we believe that protecting limited resources in harmony with nature is necessary for the sustainable business development of SHR.

Prevention of Pollution Risksa
Satoy ma

ForestPark
Garden Garden
Town

ForestIn acquiring the assets to be invested, SHAM has established survey
items such as the use history, use status and storage status of asbestos,
PCBs, and other hazardous substances, geological status, land use history, and soil contamination status in the due diligence standards, andhas sufficiently conducted surveys to examine the appropriateness of
the investment targets. Even after the acquisition of assets, we maintainlegal compliance by investigating whether there are any violations ofenvironmental laws and regulations in owned properties through continuous acquisition of engineering reports and other means.

Appropriate Waste Management

Garden City Shinagawa Gotenyama and Hommachi Garden City have rooftop gardens. The greening of rooftops
improves insulation performance and contributes to the creation of natural environments in urban areas. The
entrance of Prime Maison Yokohama Nihon-odori has an entire wall covered with plants to prevent heat penetration
into the building and also to provide a space for residents to relax.

At Garden City Shinagawa Gotenyama, SHR is promoting the effective
use of water resources by utilizing stored rainwater for watering rooftop
gardens. In-house, we have posted an awareness-raising poster for
three Rs (Reduce, Reuse, Recycle) aimed at reducing waste emissions.
Furthermore, Hommachi Garden City was certified as an excellent
building for waste reduction and HK Yodoyabashi Garden Avenue wasawarded the “Excellent Marker for Waste Reduction” by the Osaka
City Environment Bureau for these excellent performances in promoting
the reduction and proper disposal ofcommercial waste. SHR continue ourefforts to appropriately manage waste
through management of owned properties.

▼

Examples ofIntroduction

Satoyama NetworkaSatoy ma

The Gohon no ki (“5 trees”) Project is a landscaping and greening project that takes the ecosystem
into consideration launched by the sponsor, Sekisui House since 2001, based on the approachthat “three trees are for birds, two trees are for butterflies, and all are local native tree species”.
By planting 288 local tree species that are in harmony with the climate of each region of Japanand are beneficial to birds, butterflies, and other creatures can be used as garden trees, we aim
to create a garden that coexists with the nature around us and deepens our attachment over time.
In fiscal year 2020, Sekisui House planted 0.98 million trees and the cumulative number of planted
trees since the start of the project has reached 17.09 million.
The creation of greenery spaces in cities, even on a small scale, creates a corridor for thehabitat and movement of insects, wild birds, and other creatures, which creates food chains andforms 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 for creatures, 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 tree planting and other activities based on ecosystem-friendly tree species in accordance with Gohon no ki Project.

▼

The Gohon no ki (“5 trees”) Project

Garden City Shinagawa Gotenyama

Hommachi Garden City

Prime Maison Yokohama Nihon-odori

HK Yodoyabashi
Garden Avenue Excellent Marker
for Waste Reduction
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Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

Urban Revitalization / Urban Redevelopment

ESG Data Book

ENVIRONMENT

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

“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 basedon the revitalization of the original landscape of “Gotenyama”, which isrich in nature, the familiarity of human-scale with its rich expression, andthe creation of a comfortable townscape. In addition, the project focuseson 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 project, which is
ecosystem-conscious, based on the “Satoyama”, which can be said tobe the original landscape of Japan, a green network that is integrated
with the greenery in the surrounding area is created through preservation of existing trees and planting over 26.4 thousand trees, mainly
indigenous species.

Major Awards
Granted to
the ProjectFebruary 2012

September 2012

October 2012

Sponsored by Shinagawa Ward, Tokyo“Greening Grand Prize” of the Green Honoring System

Sponsored by Organization for Landscape and Urban Green Infrastructure
Minister of Land, Infrastructure, Transport and Tourism Award in the Rooftop Greening Category
at the “Rooftop / Wall / Special Greening Technology Contest”

Sponsored by Organization for Landscape and Urban Green Infrastructure
Urban Greenery Organization Chairman’s Award in the Green Community
Development Category at the Urban Green City Award

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Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Investing in Real Estate with Excellent Environmental Performance

ENVIRONMENTSHR invests and manages real estate with excellent environmental performance, and is actively acquiring green certification to evaluate the environmental performance of its properties.
Through these certifications, SHR objectively assesses the environmental performance and refers to such assessment for improvement.
The target(KPI) regarding the green certification is brought forward the target date from fiscal year 2030 to fiscal year 2022, taking into consideration the achievement status.

The Rate of the Portfolio with Green Certification

Certification for CASBEE for Real Estate(Total floor base)

Green Certification

CASBEE (Comprehensive Assessment System for Built Environment Efficiency) is a system for comprehensive assessment of the quality of a building, evaluating features such as interior comfort and scenic aesthetics, in consideration of environment practices that include using materials and equipment that save energy or achievesmaller environmental loads.
CASBEE for Real Estate Certification was developed with the aim of making use of the results of the environmental assessment of buildings under CASBEE in real estate evaluation. It scores buildings under each of theevaluation items in five categories, comprising “1. Energy & Greenhouse Gases”, “2. Water”, “3. Use of Resources& Safety”, “4. Biodiversity & Sustainable Site”, and “5. Indoor Environment”. Based on the scores, the evaluation
results are given one of four ranks: Rank S, Rank A, Rank B+, and Rank B.
SHR has acquired the highest rating of “S Rank (excellent)” certification for 6 office buildings.

Green certification means “Certification for CASBEE for Real Estate” and/or “DBJ Green Building Certification”.
SHR has acquired “Certification for CASBEE for Real Estate” mainly for office buildings, and “DBJ Green Building
Certification” mainly for residential buildings.

List of Properties with CASBEE Certification

Achievement

Target (KPI)(As of December 15, 2021)

70% or more

58.2%

by fiscal year 2022

Certification

TopicsSekisui House’s Efforts in ZEH
In October 2021, Sekisui House announced that all residential units of "Grande Maison", a condominium that will be sold after 2023, will be made to meet ZEH standards, and all buildings will bemade to meet ZEH-M (ZEH Mansion) standards.
All new construction started in the fiscal year 2021 is already expected to meet ZEH and ZEH-M
standards. Going forward, we plan to actively promote ZEH for all major buildings, including custom
detached housing and rental housing, and steadily work toward achieving these targets.
SHR will contribute to decarbonization by actively investing in ZEH properties developed by
Sekisui House.

S
Rank

Property No,

Property Name

O-001

Garden City Shinagawa Gotenyama

O-003

Hommachi Minami Garden City

O-004

Hommachi Garden City (Office building portion)

O-005

HK Yodoyabashi Garden Avenue

O-006

Hirokoji Garden Avenue

O-007

Akasaka Garden City

ESG REPORT 2021

21

Introduction

Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Investing in Real Estate with Excellent Environmental Performance

ENVIRONMENTDBJ Green Building Certification
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 program evaluates and certifies properties which are required by society and economy, based on a comprehensive assessment of properties, while evaluating various factors which range from properties’ environmental features to theircommunication with stakeholders, such as disaster prevention and proper care for surrounding communities. Certification is evaluated on a 5-point scale from 1 Star to 5 Stars. SHR has acquired this certification for 55 of its office buildings and residence properties, of which 54 achieved “3 stars” or higher.

List of Properties with DBJ Green Building Certification (As of December 15, 2021)
Certification

★★★★★

2018

Property No.

Property Name

O-001

Garden City Shinagawa Gotenyama

R-072

Prime Maison Gotenyama East

Certification
★★★★

2021

Property No.

Property Name

Certification

2018

2019

★★★★

2020

Prime Maison Shinagawa

O-003

Hommachi Minami Garden City

Property Name

R-106

Esty Maison Toyosu Residence

R-094

Prime Maison Shibuya

R-077

Esty Maison Ojima

R-095

Prime Maison Hatsudai

R-093

Kobe Women’s Student Housing

R-098

Prime Maison Shirokane-takanawa

R-110

Prime Maison Hongo

R-099

Prime Maison Ichigayayamabushicho

R-100

Esty Maison Morishita

R-034

Prime Maison Higashisakura

R-042

Prime Maison Yuhigaoka

R-043

Prime Maison Kitatanabe

R-069

Prime Maison Waseda

R-070

Prime Maison Hatchobori

R-071

Prime Maison Jimbocho

R-080

Prime Maison Morishita

R-086

Sha Maison Stage Yahiro

R-088

Sha Maison Stage Kanazawa Nishiizumi

2018
R-081

Property No.

2020

2019

O-004

Hommachi Garden City
(Office building portion)

R-111

Prime Maison Kuramae

O-006

Hirokoji Garden Avenue

R-001

Esty Maison Ginza

R-047

Prime Maison Ginza East

R-003

Esty Maison Ebisu ll

R-092

Prime Maison Yokohama Nihon-odori

R-013

Esty Maison Kyobashi

R-109

Prime Maison Mitatsunamachi

R-033

Prime Maison Musashinonomori

R-048

Prime Maison Takami

R-035

Prime Maison Kayabakoen

R-082

Prime Maison Odorikoen

R-038

Sha Maison Stage Hakata

R-085

Prime Maison Central Park

R-050

Prime Maison Teriha

R-041

Prime Maison Gokiso

R-055

Esty Maison Nishitemma

R-049

Prime Maison Yadaminami

R-056

Esty Maison Shirokanedai

R-091

Sha Maison Stage Hino

R-078

Prime Maison Fujimidai

R-067

Esty Maison Akabane

R-102

Prime Maison Otsuka

R-101

Prime Maison Shirokanedai Tower

R-083

Prime Maison Minami 2-jo

R-104

Prime Maison Daikanyama

R-103

Prime Maison Asakusabashi

R-084

Prime Maison Kamokamogawa

R-114

Sha Maison Stage Hirose-dori

R-105

Prime Maison Gotenyama West

R-087

Prime Maison Ebisu

R-073

Sha Maison Stage Akihabara

★★★

2020

★★★

2021

2021

★★

2021

ESG REPORT 2021

22

Introduction

Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Green Bond

ENVIRONMENTSHR issues Green Bonds with the intention to further promote asset management with due consideration given to ESG and to strengthen fund procurement base through the expansion of investors
interested in ESG.

Overview of Green Bond

[ Allocation Reporting ]The allocation status of funds procured by Green Bonds, the total acquisition price of Eligible
Green Projects, and the outstanding balance of Green Bonds issued are published annually.

ReportingGreen Bonds are any type of bond instrument issued by issuers to finance eligible green projects (environmentallyfriendly investment or financing projects). The issuance of Green Bonds must adhere to the Green Bond Principles
of International Capital Market Association (ICMA). SHR issues green bonds in accordance with its green bondframework endorsed by a second-party opinion from an ESG rating agency (“Green Bond Framework”).

[ Impact Reporting ]The following information on Eligible Green Projects are published annually.
●

Green Bond Framework▼

Use ofProceeds●●

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 “Eligible Green Projects”) and/or toward refinancing the existing loans/investment corporation bonds that have alreadybeen allocated to Eligible Green Projects.

Eligibility Criteria

The number of the buildings and the total amount of the floor area
The levels of third-party certifications acquired
The following quantitative indicators (where SHR has energy control authority)
Electricity consumption

CO2 emissions

Water consumption

Third-Party Eligibility Assessment

To be eligible for green bond proceeds, Eligible Green Project mustmeet the following eligibility criteria:. Buildings that have a valid third-party certification described below
on the date of a green bond issuance and at the time of reporting,and/or that are expected to receive the certification post issuance:
3, 4, or 5 Stars under DBJ Green Building Certification, or
A or S rank under Certification for CASBEE for Real Estate[ Second-Party Opinion ]SHR has obtained a second-party opinion from Sustainalytics,
an ESG rating agency, for the eligibility of Green Bond Framework.
(Note) Being eligible for Green Bond Framework means complying with the four requirements set by the Green Bond Principles: use of proceeds,
project evaluation and selection process, management of proceeds and reporting.

●●

Outstanding of Green Bond Issuance
As long as the green bonds are outstanding, SHR will conduct management to ensure thatthe total amount of the outstanding green bonds does not exceed the total acquisition priceof the Eligible Green Projects.

Number of Owned Properties: 117
549.0 billion yen
Eligible
Green Projects

Maximum Issuable Amount of Green Bonds
Eligible Green Projects: 56properties 283.3 billion yen
Issuance of Green Bonds

23.5 billion yen

SHR actively issues Green Bonds, The amount of the Green Bonds is 23.5 billion yen. The percentage of investment
corporation bond issuance balance is 68.1%. (As of December 15,2021)▼

Managementof Proceeds

Green Bond issued since May 2020
Issue Date

Issued amount (million yen)

Maturity

Interest Rate(%)

The 5th Green Bonds

Bond nameSep. 9, 2020

4,000

5 years

0.250

The 6th Green Bonds

Sep. 9, 2020

4,000

10 years

0.510

The 7th Green Bonds

May 19, 2021

2,000

10 years

0.460(The 7th Unsecured Investment Corporation Bonds)(The 8th Unsecured Investment Corporation Bonds)

(The 9th Unsecured Investment Corporation Bonds)(As of December 15, 2021)

ESG REPORT 2021

23

Introduction

Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

SocialResponsibility▼

In recent years, the significance of SHR’s efforts to provide resilient buildings that can withstand disasters, etc.,
and to prepare for minimal damage in the event of a crisis has become greater. We believe that our role is to makeowned properties in safe and secure spaces and comfortable places that improve the quality of life on a daily basis.
Based on the fundamental recognition that there is a growing need for real estate located at sites suited for“bases for sustainable living” 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 Properties.
SHR will pursue both the sustainable lives and business activities of its residents and tenants through investments in properties that qualify as “Prime properties” and the sustainable asset management of SHR.
Six Factors of Prime Property

Convenience

Economic Zones
Convenience
Livability
Environmental
Consideration
SafetyBrand

High Quality
Safety / BCP

Livability / Functionality

Brand

Environmental
Consideration

Focus Points
●

●

●

●

●

●

●

●

●

●

Areas where stable rental demand can be expected in terms of commuting distance, residential population,
number of passengers at stations, etc.
Good access to major transport routes and major terminals, and adjacent to commercial stores, etc.
Design to provide comfort as a living space and installation of functional equipment
Installation of comfortable common spaces and functional equipment, and provision of services
Environmental performance is provided by energy-saving equipment, etc. in common areas and exclusive areas
Biodiversity-friendly planting and landscape design
Buildings with risk management considerations for disasters
Location with high safety, earthquake resistance of buildings, and disaster resilience
Popularity as an area and recognition of properties
High quality in terms of building grade, design, etc.

Focus Points on Office Building
Element
Economic Zones
Convenience

Strategic Location
Economic Zones

Focus Points on Residential
Element▼

Role of SHR with Respect to
Residents and Tenants▼

SOCIAL

Functionality
Environmental
Consideration
BCP
Brand

Focus Points
●

●

●

●

●

●

●

●

●

Population of the commercial area, residential population, number of passengers at stations, and thickness as an
economic zone
Good access from major transport routes
Convenience, commercial concentration, and prosperity that contribute to commuting and attracting customers
Functional design with comfort that leads to increased productivity for tenant companies
Sufficient standard floor space and comfortable spacious design, etc.
Environmental performance is provided by energy saving, rooftop greening, etc.
Provide important facilities as a foundation for “business continuity”
Resilience to disasters, both location and specifications
Dignity as an area, luxury and cleanliness as a building
ESG REPORT 2021

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Introduction

Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Provide Residents and Tenants with Secure and Comfortable Space that Offers Peace of Mind

SOCIAL

Residence in Preparation for Disasters

SHR’s investment criteria require that the company’s portfolio in Japan
have a seismic PML (probable maximum loss) of 10% or less in principle
and that the addition of earthquake insurance be considered for individual
properties with a PML of 20% or more. The seismic PML of SHR’s portfolio as of October 31, 2021, was 1.56%; there were no individual properties with a PML exceeding 20%.

Garden City Shinagawa Gotenyama was built with business continuity
in mind. The building is located on elevated terrain with low flood risk andhas a quake absorbing structure for improved seismic resilience. Its on-site
emergency power generator can supply electricity to common areas
during a disruptive event. And its disaster prevention center is standingby and can respond rapidly to an incident 24 hours a day, 365 days a year.

Prime Maison Shinagawa is a rental condominium developed by
Sekisui House in response to heightened interest in power conservationand disaster prevention, in addition to the climate change, following theGreat East Japan Earthquake. We are introducing emergency power
generators and building an emergency power supply system in conjunction
with solar batteries and storage batteries in the event of a blackout. This
illuminates some of the lights in the common corridors and entrances,
securing traffic lines and providing a sense of security even at night. The
generator also supplies power to electrical outlets by the entrance, allowing residents to charge mobile phones and other devices, in addition to
the collection of information via the monitor in the control room. Electricity
is also supplied to water pumps, and water can be supplied to common
areas and dwelling units provided the water supply has not been cut off.

Seismic PML of Top Five Properties by Investment Ratio (as of Oct. 31, 2021)
Property name

Investment ratio(acquisition price basis)

Seismic PML

Garden City Shinagawa Gotenyama
Gotenyama SH Building
Hommachi Minami Garden City
Hommachi Garden City (office building portion)
Akasaka Garden City

13.6%
9.8%
8.3%
7.3%
5.4%

0.82%
1.35%
2.28%
2.29%
1.59%
Quake-Absorbing
Structure

Emergency
Power Facility

Measures Against Flooding

Flood Depth Classification of Owned Properties (acquisition price basis)

Office building
Greater Tokyo
Osaka area
Nagoya area
Residential properties
Greater Tokyo
Osaka area
Nagoya area
Other
Hotel
Osaka area
Total

<0.5m

≥0.5m

Total

28.8%

17.7%

46.5%

28.8%

0.0%

28.8%

─

16.5%

16.5%

─

1.2%

1.2%

25.2%

20.9%

46.0%

18.2%

16.9%

35.1%

0.5%

1.1%

1.6%

3.6%

0.3%

3.9%

2.9%

2.6%

5.4%

─

7.4%

7.4%

─

0.0%

0.0%

54.0%

46.0%

100.0%

Conceptual Diagram of Emergency Power Supply System

Normal Solar power generationtimes(in operation)

Blackout

Solar power generation(in operation)

DisasterPrevention
CenterSimilarly, Hommachi Minami Garden City takes business continuity
into account by using seismic bracing installed on each floor to absorb
the forces that would act on the building in a major earthquake, and bysituating its mechanical room on the 3rd floor, above flood level. Despite
these features, it still offers over 1,300 square meters of column-lessfloor spans and a ceiling height of 2.8 meters on standard floors.

Electric powercompany(Supplying)

Electric powercompany(non-operating)Storagebattery
Commonareas

Emergency power
generator (inactive)

Commonareas

Supply from electric
power company

Typical earthquake- Vibration-damping
resistant structure
structure

Storagebattery
Commonareas

Emergency power
generator (active)

supplied inemergency▼▼

SHR has a system for minimizing damage from natural disasters byinvestigating the risks of inland flooding, river flooding and storm surge
for our owned properties to assess our portfolio’s flood risk and use thefindings to improve our business continuity plan (BCP).
As of December 15, 2021, properties with a flood depth of 0.5 meters
or more account for 46.0% of our portfolio. There have been no cases ofany property experiencing flooding above the lowest floor level during
the time that we have owned them.

▼

Disaster-Resilient Office Buildings▼

Measures Against Earthquakes

Supply from solar battery
and storage battery

Commonareas
Supplied inemergency

Supply from emergency
power generator

Examples of Disaster Prevention Equipment for Residences

Seismic
brace

Earthquake
ground motion

Earthquake
ground motion

Bench with oven function
Esty Maison Kyobashi

Backup supplies for disaster AED (Automated External Defibrillator)
Esty Maison Ojima, etc.
Prime Maison Yokohama Nihon-odori, etc.

ESG REPORT 2021

25

Introduction

Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Provide Residents and Tenants with Secure and Comfortable Space that Offers Peace of Mind

Introducing Barrier-Free Facilities

Fiscal Year 2021 Survey Results
Office buildings

All responding tenants answered thatthey were “satisfied”

Major Points of Evaluation●●●

Building grade and specifications
Exterior
Interior design of entrances, etc.

Residence

Satisfaction

100%

A total of 84.8% responded that they were“generally satisfied” or “highly satisfied

Major Points of Evaluation
Conduct tenantsatisfaction
surveys●●●Convenience of location
Good surrounding environment
Design and atmosphere of
the room, etc.

Hommachi Minami Garden City was designed based on the Building
Movement Facilitation Guidance Standard required by the Act on Promotion of Smooth Transportation, etc. of Elderly Persons, Disabled Persons,etc. (known as Barrier-Free Act) and is the first office building in Osaka
City to be designated as barrier-free under the law.
▼

SHR regularly conducts tenant satisfaction surveys with the aim not
only to improve and stabilize leasing operations, but also to communicate
with residents and tenants and build a reliable relationship.
For the surveys conducted in fiscal year 2021, we incorporated
the response to the COVID-19 pandemic, along with awareness of ESG
and the implementation status of telework into the survey items.
The survey results are shared with property management companies,
building management companies, and others, and measures will be
developed to further improve services.
In addition, we will consider new ESG initiatives that will allow us togain the cooperation and collaboration of residents and tenants.

▼

Conducting Tenant Satisfaction Surveys

SOCIALKey Features●

Two multipurpose restrooms accessible to ostomates andwheelchair users on each office floor●

Wheelchair-accessible elevators●

Wide hallways that allow two wheelchairs to pass●Three wheelchair-accessible spaces in the parking garage

Satisfaction

84.8%

Points Cited as Areas of Improvement

Implement
measures toimprove tenantsatisfaction

Identify areas
for improvement●●

Expansion of home delivery lockers
Expansion of bicycle parking, etc.

Summary of Fiscal Year 2021 Survey
Considermeasures with
PM/BM
companies

Survey period
Respondents
Survey items

Response rate

March to April 2021
Office building

32 Tenants of owned office buildings

Residence

8,638 tenants of Prime Maison, Esty Maison, etc.

Office building

Overall satisfaction, ESG,
Regarding the COVID-19 pandemic etc.

Residence

Property search, name brand, management status,
global warming countermeasures,
Regarding the COVID-19 pandemic, etc.

Office building

90.6%

Residence

21.4%

ESG REPORT 2021

26

Introduction

Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Contributions to Society
Utilization of Common Space

We open the entrances, pilotis, building site, and conference rooms of our properties as event spaces.
In addition, SHR has introduced Share Bikes and Food Trucks in some properties so that they can be used not
only by tenant companies but also by local residents.
Participation in
Midosuji Illumination Event▼“Sekisui House Matching Program” is an employee-led donation
program that has been implemented since fiscal year 2006 by Sekisui
House Group to support NPOs and other organizations. The amountdesired by directors and employees of SHAM is accumulated from 100
yen per unit, and the amount accumulated is donated by Sekisui House
with a grant of the same amount.
The “Children’s Fund” and the “Environmental Fund” have been
established, and employees can freely choose which one to donate.
In fiscal year 2021, a total of approximately 49 million yen was raisedand earmarked to support 49 organizations, primarily involved in efforts
related to the SDGs as Sekisui House Group.

▼

Participation in “Sekisui House Matching Program”

SOCIAL

Contributions fromdirectors andemployees of SHAM

(Same amount as donations fromdirectors and employees)

Garden City Shinagawa GotenyamaChildren’s FundEnvironmental Fund

Aiming to nurture children who
will lead the next generation, we
support activities related to thesound development of children

Supporting activities related to global warming prevention, ecosystem conservation, andresource recycling with the aim of contributing to the resolution of environmental issues

Education system promotion activities for children in rural Cambodia

Coastal forest restoration activities in Sammu-shi, Chiba, whichsuffered salt damage from the tsunami on March 11, 2011.

［Administrative board］ Six board members, auditors, and external advisors engage in screening.
［Secretariat］ Sekisui House ESG Management Promotion Headquarters

Akasaka Garden City

Participation in the Minato-ku Adopt Program
SHAM has concluded an agreement with Minato-ku, Tokyo, where the office is located, and regularly conducts
cleanup activities in the vicinity of the office through participation in the Minato-ku Adopt Program.
Adopt refers to a series of activities involving the “adoption”, local roads, parks, etc. as “foster child”, andgroups or citizens, etc. consisting of ward residents, etc. as “foster parents”, in beautification, cleaning, etc. of“foster child”. We will contribute to cooperation with tenants and local communities and comfortable lifestyles
through cleanup activities.
▼

Sekisui House Matching Program Association

Grant recipient organizations

Introduction of Food Trucks

Subsidy from Sekisui House

Donation

Application

Introduction of Share Bikes

Garden City Shinagawa Gotenyama▼

Structure of Sekisui House Matching Program▼

Hommachi Garden City

Providing Conference rooms
for Blood Donation Events

Cleanup activity

Screening and grant
Volunteer organizations, NPOs, educational institutions and others

ESG REPORT 2021

27

Introduction

Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Creating a Rewarding Workplace

SOCIALSHAM strives to foster a company culture where all directors and employees are respected for their diversity and unique individuality and can work healthy and lively. By attracting diverse teamsof exceptional talent and drawing out their full potential, we will strengthen our organizational capabilities and achieve sustainable growth.

Generous Employee Benefits

The Sekisui House Group has positioned respect for human rights as one of the key issues for promoting ESG
management. By asking all employees to practice our corporate philosophy rooted in a love of humanity, theGroup works together to meet its responsibility to respect 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 directors and employees can work enthusiastically andlead to growth, according to the Sekisui House Group Human Rights Policy, established by Sekisui House in April 2020.

SHAM strives to provide a workplace environment where employees can enhance their motivation to work anddemonstrate their skills through various welfare programs for all directors and employees.

Sekisui House Group Human Rights Policy (excerpt)
We are committed to respecting human rights as stipulated
in the International Bill of Human Rights and the ILO (International Labour Organization) Declaration on Fundamental
Principles and Rights at Work. We are a signatory of the United Nations Global Compact and we support its ten principles.
We strictly prohibit any form of forced labor and child labor.
We shall continue to promote the creation of a corporate
structure with zero tolerance for any discrimination or harassment based on birth, nationality, race, ethnicity, beliefs,
religion, gender, sexual orientation, gender identity, age,disabilities, preference, educational background, family or
any other ground. We also strive to maintain a healthy working
environment without discrimination in employment or treatment of employees.

We respect the freedom of association and the right to collective bargaining. We comply with labor-related laws and regulations and observe labor-management agreements. We arecommitted to engaging in employees or their representatives
in good faith through dialogue and consultations and continuously
work to build constructive relations.
We comply with national and regional laws and regulations incountries and regions where we operate.
Where national and regional laws and regulations conflictwith international human rights standards, we seek ways tohonor the principles of internationally recognized humanrights while complying with national and regional laws andregulations.
Full Text

Initiatives for Health and Safety
SHAM has formulated the Rules on the Health Committee and established Health Committee for the purposeof promoting the safety and health management activities of directors and employees. The committee includes an
occupational physician and meets monthly to discuss workplace environment and gain insights for preventing
health issues in the workplace and promoting improvements in employee health.
The committee also set up working groups to discuss healthcare and hygiene management, and conductedradio calisthenics and distributed sanitizers to prevent COVID-19 infection.
SHAM also conducts stress checks for all directors and employees to prevent the occurrence of any mental healthissues. We encourage each employee to be aware of stress and provide consultation services from specialists(counselors). In this way, we provide support in dealing with stress and strive to improve the workplace environment.

▼

Respect for Human Rights

Key Benefit Systems
System Name

Eligibility

Description
Paid leave for raising children under three years of age (includes children of legal
guardians, opposite-sex common-law spouses, and same-sex domestic partners)

Parental leave

All directors and employees

Family-care leave

All directors and employees

Paid leave for providing nursing care to a family member
Paid leave for nursing a sick or injured child or taking them to receive medical
services (vaccinations, checkups, etc.)

Sick child care leave

All directors and employees

Short working hours

All directors and employees

System for working shorter hours to raise a child

Congratulatory or
condolence payment

All directors and employees(excluding contract and part-time employees)

One-time payment granted in the event of a marriage, childbirth, death, injury,
illness, or damaging event experienced by director/employee or their family

Staggered working hours

All directors and employees

Permits employees to move their daily start and finish times forward or backfollowing designated patterns

All directors and employees (excluding part-time employees)

Allows up to five days of annual paid leave to be taken in hourly units

All directors and employees regardless of without duration*Includes contract employees contracted for more than 3 years

Allows recipients to accumulate annual leave past the legal two-year limit and takeas many as 100 days off in combination with standard annual leave

Credentialing stipend

All directors and employees (excluding non-regular, contract,and part-time employees)

Payment granted to those who pass a national certifying exam or other eligible
credentialing exam

Employee stock ownershipplan (with incentives)

All directors and employees (excluding non-regular, contract,and part-time employees)

Allows Sekisui House Group members to purchase Sekisui House, Ltd. stock
through payroll deductions at a 10% discountDefined-contribution
pension planAll directors and employees (excluding part-time employees)

Corporate pension plan in which future benefits are determined based on the total ofcontributed lump sum and investment earnings

By-the-hour annual leave
Accumulated annual leave

Encouraging Male Employees to Take Childcare Leave
As a member of the Sekisui House Group, SHAM encourages male employees who have a child under three
years of age to take at least one month of parental leave. SHAM began its parental leave system for working fathers
in September 2018. The first month is paid, and leave can be taken in as many as four segments based on theirrespective situations. In April 2021, SHAM expanded the system into an eight-week postpartum benefit that canbe used in one-day increments, to enable more choices and flexibility. SHAM has raised awareness of the importance of the father’s presence during this period, when new mothers are physically and emotionally taxed and at
higher risk of postpartum depression.

Employee Satisfaction Survey
SHAM gauges employee satisfaction using an annual governance awareness survey of all Sekisui House Group
employees. Utilizing the survey, the company provides opportunities for all employees to share thoughts on topics
such as corporate ethics and the workplace environment, encouraging more-active communication in the workplace.
ESG REPORT 2021

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Introduction

Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Creating a Rewarding Workplace

SOCIAL

Support for Acquiring and Retaining Qualifications

The fundamental corporate philosophy of Sekisui House Group is “love of humanity”. It means “we will wish forthe happiness of others, make their joy our own, and act with integrity and in the spirit of service”. Cultivating this“love of humanity” in our employees contributes to greater trust from society and drives our work of creating amore sustainable world. Accordingly, we proactively promote the development of employees and their capabilities.
Being part of this philosophy as a Sekisui House Group member, SHAM is focused on career building anddeveloping autonomous human resources. We follow a new kind of meritocracy, where job competency, role
(duties), and outcomes make up the key elements of our HR practices.
Performance reviews include multiple stages of discussion to foster understanding and motivation, thus tying
the process to development. We also use multifaceted reviews for managers, with employees providing feedbackon their observations with the goal of eliciting new understandings and behavior change.

SHAM helps and encourages employees to level up their expertise by acquiring qualifications such as the“Association for Real Estate Securitization (ARES) Certified Master”, an educational program that provides systematic study in the fields of real estate and finance. SHAM aims to improve the professional abilities of employees
by covering the cost of training, examination, continuing education, and seminars for these qualifications.

Performance Review Process Using Discussions
Job
execution

Reviewee

Reviewer

GoalSetting
Discussion

Progresscheck-in,support,
guidance

Job
execution

Interim
Discussion

Progresscheck-in,support,
guidance

Lookback
Discussion

Appraisal/evaluation

Feedback
Discussion

Training System
SHAM offers a comprehensive training program for all directors and employees to develop their skills per the newprinciple centered on job performance and roles/achievements, which are the basic policies of the personnel system.
This tiered professional development program builds leadership for raising organizational productivity by tailoring
learning to the skills and requirements of each job level.
In addition, to develop human resources with expertise as real estate investment management professionals anda broader perspective and insight, SHAM also offers free voluntary training opportunities such as seminars.
Furthermore, to bring more comfort and ease to the workplace, all directors and employees of SHAM attend anannual human relations training (training on human rights, power harassment, and sexual harassment), a training
program of Sekisui House Group.
▼▼

Strategy for Developing Human Resources

Training Framework

TieredTraining

Staff Assistant managers

Managers Senior managers

Deputy chief managers
Chief managers

Directors

Staff / assistant manager training

Senior manager / Manager training

CM / Deputy CM training

Director training

OJT (by department)
Compliance training

Recruitment
SHAM realizes high-performing asset management by accepting specialized seconded personnel from Sekisui
House Group who have a wide range of experience and know-how in real estate investment and management. In
addition, SHAM works to recruit great talent and uses job rotation to promote varied work experiences and skill
development relevant to changes in the business environment and organization.

CompanyWide Training

Sekisui House Group-wide training (human relations, corporate ethics, diversity)
Thematic training (ESG, internal engagement)

SelfDevelopment
Training

Training hosted by Association for Real Estate Securitization (ARES)
Cafeteria Plan training

Promoting Employment of Older Workers
SHAM has a mandatory retirement age of 65 to enable directors and employees to demonstrate their motivation
and abilities for longer, more productive employment. In addition, as of April 2021, SHAM has introduced are-employment system for employees aged 65 to 70 to help post-retirement employees to remain active.

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Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Corporate
Governance
CORPORATE GOVERNANCE

SHR’s governing bodies consist of a general meeting of unitholders, a board of directors with at least one
executive director and two supervisory directors, and an accounting auditor.
The executive director oversees SHR’s operations and, as SHR’s representative, has the authority to act in andout of court with respect to any and all of SHR’s affairs. The supervisory directors supervise the executive director’s
execution of duties. The board of directors makes important decisions regarding SHR’s operations, including
approval of the execution of important duties by the executive directors and financial statements. The supervisory
directors supervise the executive director’s work by means of reports provided by the executive director on thestatus of the management of SHR’s assets as needed and on investigations results and other tasks requested by
the supervisory directors.
SHR has selected Ernst & Young ShinNihon LLC as our accounting auditor. The accounting auditor audits SHR’s
financial statements and also serves legally mandated roles, such as reporting to the supervisory auditors in theevent that, in its auditing process, it discovers an illegal action or serious violation of the law or of SHR’s articles
of incorporation in connection with the executive director’s execution of duties.
For more information on the above topics, see “1. Overview of SHR / (4) SHR’s organization” in the latest annual securities
report(available in Japanese only).

Current Board of Directors
Attendance
Position

Name

Reasons for appointment

Executive
Director

Atsuhiro Kida

Kida possesses wide-ranging knowledge and a wealth of experience
regarding the operation of asset management companies as director of
the asset management company of a publicly-traded REIT.

─

4/4 meetings(100%)

Executive
Director

Junichi Inoue(Note)

Inoue has wide-ranging knowledge and a wealth of experience regarding
real estate investment management, as well as experience as theexecutive director of a publicly-traded REIT.

7/7 meetings(100%)

5/5 meetings(100%)

Supervisory
Director

Shigeru Nomura

Nomura has a wealth of knowledge and experience regarding theaccounting and tax management of real estate as a certified public
accountant.

7/7 meetings(100%)

9/9 meetings(100%)

Supervisory
Director

Tatsushi Omiya

As an attorney, Omiya has a wealth of knowledge and experience
regarding the legal matters of real estate securitization, as well as
experience as an auditor.

7/7 meetings(100%)

9/9 meetings(100%)

The fiscal period Six months ended
ended Oct 31, 2020
April 30, 2021

(Note) Junichi Inoue stepped down from the position of executive director on January 31, 2021; substitute executive director Atsuhiro Kida was appointed to executive
director on February 1, 2021.

On December 15, 2021, the board resolved to present the matter of electing a new team of directors to the 5thGeneral Meeting of Unitholders to be held on January 26, 2022. In the spirit of valuing diversity, the board has selected
Atsuhiro Kida (incumbent) as a nominee for executive director and Yu Yada (attorney) and Rei Yamashita (CPA) as nominees
for supervisory director. If the proposal is resolved as proposed, female representation on the board of directors will be 33.3%.
▼

Governance at SHR

Restrictions on the Trading of Investment Units by Directors

For the purpose of preventing insider trading, SHR’s “Insider Trading Management Regulation” prohibits SHR officers
from trading investment units or bonds issued by SHR. Neither executive directors nor supervisory directors own SHR’s
investment units.
ESG REPORT 2021

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Introduction

Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Penetration of Compliance

GOVERNANCE[ Basic Policies ]Awareness of Fundamental Compliance Policies

a. SHAM is fully aware that lack of compliance could undermine SHAM’s management base, and has positioned thoroughcompliance as one of its most important management issues.

At SHAM, compliance means that directors and employees accurately understand the purpose
and content of laws and regulations, etc., comply with them, and practice honest and fair corporate
activities in accordance with social standards. SHAM has established compliance regulations forthe purpose of ensuring that its directors and employees comply with laws and regulations, establish
a system to appropriately manage the assets and conduct appropriate business operations, inorder to ensure thorough compliance.

b. As a company that conducts financial instruments business and manages the assets of registered investment corporations, SHAM recognizes its responsibility to strive to realize the value of works of SHAM, which is socially demanded.
In order to increase the value of the work of SHAM qualitatively and quantitatively, SHAM will actively and constantly
engage in compliance.
c. SHAM aims to contribute to the development of the economy and society by developing the above-mentioned complianceactivities, thereby enhancing the reputation from investors and establishing the trust of society at large.

Compliance Structure
Organizational Chart of SHAM

General Meeting of
Shareholders

A
Auditor[ Investment Committee ]Committee members:
President & Representative Director (chairman), all full-time Directors including Compliance
Officer who has the status as a Director, and General Manager of Real Estate Division, Chief
Manager of Business Strategy Dept., Finance Dept., IR Dept., Accounting Dept., General Affairs
Dept., and Internal Control Promotion Dept., and the external committee members (Note).

Board of Directors

A

Investment
Committee

Compliance
Committee

B

Compliance
OfficerPresident &Representative
Director

The organization that deliberates and makes decisions on matters related tocompliance in asset management

C

B[ Compliance Committee ]C

Organization responsible for complianceInternal Control
Promotion
Department

Business Strategy
Department

The organization that deliberates and makes decisions on matters related to
management policy and other asset management issues

Real Estate Division

Committee members:
Compliance Officer (chairman) , President & Representative Director
and all full-time Directors, and the external committee members (Note).

[ Compliance Officer ]Person responsible for the compliance of SHR and SHAM. Personnel with sufficient screening
and surveillance capabilities are selected to observe compliance with legislation and norms.

[ Internal Control Promotion Department ]Real estate
Investment
No.1 Dept.

Real estate
Investment
No.2 Dept.

Real estate
Real estate
Real estateManagement Management Management
No.1 Dept.
No.2 Dept.
No.3 Dept.

Real estate
Accounting
Department

Engineering
Management
Department

Finance
Department

Investor
Relations
Department

Accounting
Department

GeneralAffairs
Department

Internal Control Promotion Department conducts work related to SHAM’s risk management, monitoring the status of legislation and regulations, and internal auditing.
(Note) For information on the external committee members, please refer to “Strengthening Corporate Governance
System/Efforts for Conflicts of Interest” on page 33.
ESG REPORT 2021

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Introduction

Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Penetration of Compliance

Risk Management System

Efforts to Prevent Bribery, Corruption, etc.

Risk Management System of SHAMSHAM stipulates in the “Compliance Manual” that prohibits fraudulent acts, such as money laundering, insider transactions trading, bribery, embezzlement for self-interest, etc., with strictly punishing those who have committed
fraudulent acts. There were no fraudulent acts identified in fiscal year 2020 (February 1, 2020 to January 31, 2021).
In addition, SHAM is working to raise employee awareness by conducting compliance training for all employees
appropriately. In fiscal year 2020, compliance training sessions was held twice, with a participation rate of 100%.

SHAM has stipulated the methods of risk management, monitoring the status of risk management, and how to
respond in the event of unforeseen serious contingencies, etc. in the Risk Management Rules. Each organizationof SHAM will implement the following cycles for every fiscal year to respond to discrete individual risks related tooperations of the division of duties. It works to clear “weaknesses” and “oversights” in operations.
Also, 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 theBoard of Directors.

Internal Reporting System
SHAM has set up the Compliance Hotline based on Whistleblower Protection Act with an aim to strengthen
compliance management through early detection and correction of fraudulent acts. The Hotline is a system foraccepting consultations or reports from all directors and employees regarding organizational or personal violationsof laws and regulations, and appropriately dealing with it. The person in charge of the Hotline is the Compliance
Officer, and the consultation counter is the Compliance Officer or Internal Control Promotion Department.
Personal information protection of whistleblower and no retaliation treatment is articulated in the regulation of
the Hotline based on Whistleblower Protection Act.
The Compliance Officer or Internal Control Promotion Department will investigate the matter of consultations
or reports, with taking corrective action and measures promptly to prevent recurrence of such incidents, as wellas conduct internal punishment of the parties concerned. In fiscal year 2020, the number of consultations with
the Compliance Hotline was zero, and no director or employee was disciplined.
The directors and employees of SHAM may also use the Sekisui House Group Compliance Helpline. The Sekisui
House Group Compliance Helpline is a contact point for directors and employees of the Sekisui House Group, as
well as directors and employees of subcontractors and business partners who have ongoing business relationships with the Sekisui House Group, to consult on matters that are difficult to resolve through normal reporting
channels. A lawyer’s office has been set up as an external contact point, and the Compliance Office in the Legal
Department of Sekisui House has been set up as an internal contact point, where anonymous reporting is possible.

Internal Audit System
SHAM has established “Internal Audit Regulations” and conducts internal audits after formulating an internal
audit plan for each fiscal year.
In the audit, SHAM verifies if our operations are carried out appropriately and efficiently in line with laws, internal
regulations, etc. also provides recommendations or instructions of improvement based on the results of theinspection as necessary. The results are then reported to the Compliance Committee, President & Representative
Director, and the Board of Directors.
SHAM has also introduced a system which evaluates from external perspectives by conducting audits by external
specialist organizations as necessary.

1

After searching discrete risks and evaluating numericalvalue of risks, discuss methods to control such risks
and develop risk management plan2

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

3

Each department’s status of initiatives is examined by
the Internal Control Promotion Department and reported at meetings

4

Consider improvements to methods of risk control ifneeded, and continue initiatives to decrease risks

GOVERNANCE

ESG REPORT 2021

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Introduction

Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

Strengthening Corporate Governance System▼

For the purpose of tightening examinations on transactions with interested parties, including the acquisition of
portfolio assets and the entrustment of property management services, SHAM has adopted frameworks underwhich each decision to be made by Investment Committee and Compliance Committee must be conditional upon
the attendance and assent by external members appointed from professionals who have no special interest withinterested parties of SHAM, such as Sekisui House; and preliminary review by Compliance Officer and Internal
Control Promotion Department, deliberations and resolution in respective meetings of Investment Committee andCompliance Committee, and deliberations and resolution for approval of the Board of Directors of SHAM, andconsent of SHR based on deliberations and resolution of the Board of SHR are required.
An Example of Decision Making Flow
Ensuring Third-Party Potential for Conflicts of Interest

Prevention Measures of Conflicts of Interest Transactions
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:

Disapproved

Compliance
Officer &Internal
Control
Promotion
Dept.

Investment
Committee

Compliance
Committee

Board ofDirectorsof SHAM

Board ofDirectors of
SHR

Scope of Stakeholders
From the viewpoint of preventing conflict of interest transactions, the scopeof "interested persons, etc." in SHAM
has been expanded from the “interested
persons, etc.” under the Act on Investment
Trusts and Investment Corporations (Investment Trust Act) as follows.

Attendance and assent by external members are required.

The acquisition price (excluding taxes, cost of acquisition and others) must be no morethan the amount of the appraisal value, etc. determined by a real estate appraiser who isa non-interested party appointed at the time of the acquisition. (However, in the eventthat a SPC is temporarily formed on the assumption that it will be transferred to SHR, theamount shall be less than the amount adding such cost.)

Sale of property toInterested Parties

The sale price (excluding taxes, cost of transfer and others) must be no less than theamount 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 toInterested 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 basedon the level of contract terms and the difficulty level of mediation, etc.

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

Entrustment of management services, etc. for real estate and other assets must be
based on conditions considered adequate upon comprehensive consideration of market
levels of management consignment fees, the content of provided services, total workloads and so on. (The appropriateness of contractors is verified by independent external
evaluation organizations which have no interest with SHAM once a year, in principle.)

Conclusion of leasing contract
for real estate and other assets
with Interested Parties

Lease contracts must be based on conditions considered adequate upon investigation ofmarket rent levels and prices 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.

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 upon comparison with third parties.

▼

Functions Performed by External Members in Relation to Conflict of Interest Transactions
The Investment Committee and the Compliance Committee each require the attendance and approval of external
members, thereby ensuring fairness, objectivity, and appropriateness in the decision-making of the committee.
The appointment and removal of outside members is subject to the resolution of Board of Directors of SHAM, but
it is required to obtain the approval of the Board of Directors of SHR in advance or after. External members
appointed from among experts who do not have special interests are as follows.
Title

External members of the Investment Committee
External members of the Compliance Committee

Name

Ayako Sugiura (real estate appraiser)
Yuto Okoshi (attorney)
Fumihiro Takimoto (attorney)a. “Interested persons, etc.” as defined in the Investment Trust Law
b. Shareholder of SHAM
c. Special Purpose Companies, etc. for which discretionary investment contracts are concluded by those stipulated in (a) or (b) aboved. Special Purpose Companies, etc. for which the total amount of thecontributions of those set forth in (a) or (b) above is a majority

Acquisition of property fromInterested Parties
Deliberation& approval

Rejected

Deliberation& resolution

Rejected

Deliberation& resolution

Rejected

Deliberation& resolution

Remanded

Investigation& approval

Proposal

Proposing
Department

GOVERNANCE▼

Efforts for Conflicts of Interest

ESG Data Book

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Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

Strengthening Corporate Governance System

ESG Data Book

GOVERNANCE

Asset Management Fee Structure Linked to Unitholders’ Profits

Sekisui House Ownership of SHR’s Investment Units (Same Boat Investment)

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. Regarding the management fee ①, SHR
introduced a mechanism of “Fees linked to total assets and unit price performance”, in which the fee rate fluctuatesby comparing the performance of the investment unit price of SHR with the performance of the Tokyo Stock Exchange REIT Index. Through this process, we are further strengthening the incentives to maximize the unitholder
value of SHR by aligning the interests of SHAM and, consequently, Sekisui House, as stockholder of SHAM, with
the interests of unitholders of SHR.

SHR has accepted same boat investment from Sekisui House in order to align the interests of the investors andthe sponsor Sekisui House. As of December 15, 2021, Sekisui House held 200,750 units of SHR’s investment
units (unitholding ratio: 4.5% ).

[ Asset Management Fee Structure ]Management
fee ①Managementfee ②

Fees linked to total assets and unit price performance
Total assets × (0.14% (annual rate) + Rates linked to the Tokyo Stock Exchange REIT Index(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(Distributable amount per unit × Operating income × 0.002%) × 2 (split ratio)* The above "Distributable amount per unit" and "Operating income" are before deductionof management fee ②.
* As SHR implemented a 2-for-1split of the investment units with May 1, 2018, as the effective date,
Management fee ② is calculated by multiplying by 2, which is the split ratio.

Managementfee ③Acquisition fees
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.

Compensation for Executive Directors and Independent Auditors[ Compensation for Executive Directors and Supervisory Directors ]Compensation for Executive Directors is up to 1 million yen per month, and compensation for Supervisory Directors is up to 0.5 million yen per month. The amount is determined at the Board of Directors in light of general pricetrends, wage trends, and other factors.
Position

Name

Atsushi Kida

Executive Director

─Total amount of compensation for theyear ended April 2021 (thousand yen)─Junichi Inoue (Note)──Supervisory Director

Shigeru Nomura

1,800

1,800

Supervisory Director

Tatsushi Omiya

1,800

1,800

(Note) Junichi Inoue resigned as an Executive Director on January 31, 2021, and Supplementary Executive Director Atsuhiro Kida was appointed
as an Executive Director on February 1 of the same year.

[ Compensation of Independent Auditors ]Compensation of Independent Auditors is determined at the Board of Directors up to 25 million yen for eachaccounting period subject to audit.

* The trading value does not include consumption tax, etc. and expenses, etc.

Management
fee ④

Total amount of compensation for theyear ended October 2020 (thousand yen)

Name

Total amount of compensation for the year
ended October 2020 (thousand yen)

Total amount of compensation for the year
ended April 2021 (thousand yen)

Ernst & Young ShinNihon LLC

19,20016,500

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

Management
fee ⑤

Merger fees
Value of real estate-related assets held by the merger counterparty at the time of the merger × 0.4%

ESG REPORT 2021

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Introduction

Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Information Disclosure and Engagement with Stakeholders

GOVERNANCESHR conducts its business activities in the context of its ties with stakeholders. In order to continue as an investment corporation that contributes to society, it is important to accurately understand thedemands and expectations of its stakeholders and society, and to respond to them through its business activities. For this reasons, SHR actively discloses ESG-related information in order to gain a better
understanding of its initiatives. At the same time, SHR strives to strengthen engagement by utilizing the demands and expectations gained through communication with stakeholders in its business activities.

●●

Investors●

Holding financial results briefings andgeneral unitholders meetings
Setting up IR meetings withinstitutional investors
Participation in IR seminars
for individual investors

Business
partners

Employees[ Investment Corporation ]●●●Support for obtaining and maintaining
professional qualifications,
free participation invarious training programs
Ensuring an internal consultation
counter system
Promoting diversity●●[ Asset Management Company ]●Communication through operations
Monitoring through external evaluation
organizations
Efforts to reduce energy consumption

●

●

●

●

Contribution to local communities
Endorsement of international initiatives
Implementation of environmental
protection activities

Local andinternational
communities●

Tenants●

Communication and building
relationships of trust through tenantsatisfaction surveys
Communication through various
business activities
Promotion of green lease contracts

ESG REPORT 2021

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Introduction

Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

ESG Data
Environment
FY 2018 (Base year)
Unit
Total CO 2 emission
Scope1
Scope2CO 2 emission intensity

t-CO2
t-CO2 /m2

Entire portfolio
15,253
2,411
12,842
0.064

Residence
3,955
─
3,955
0.041

Office building
7,362
1,221
6,141
0.063

FY 2019
Hotel
3,936
1,190
2,746
0.147

Entire portfolio
18,3182,930
15,3890.063

Residence
3,959
─
3,959
0.040

FY 2018 (Base year)
Unit
Total energy consumption
Electricity
Fuel
Energy consumption intensity

thousand kWh
kWh/m2

Entire portfolio
41,581
28,152
13,249174.0

Residence
8,181
8,181
─
85.4

Office building
20,45913,6576,801
175.9

Total water use
water use intensity

m3
m3/m2

Entire portfolio
780,360
1.7

Residence
601,691
2.0

Office building
107,571
0.9

Hotel
12,941
6,313
6,628
483.3

52,49436,174
16,319179.1

Total waste emission
Landfill
Incineration
Recycled
Waste emission intensity

t

kg/m2

Entire portfolio
1,055
357
197
501
7.5

Office building
871
244
194
433
7.5

Entire portfolio
15,892
2,473
13,4200.052

Residence
2,897
─
2,897
0.029

Residence
8,352
8,352
─
85.0

Office building
28,18019,388
8,792
176.0

Hotel
71,0982.7

876,419
1.7

Residence
638,837
2.0

Office building
152,0900.9

Hotel
15,961
8,434
7,527
461.3

48,99835,227
13,772
160.9

Hotel
184
113
3
68
7.3

1,045
357
207
481
5.4

Office building
869
248
203
418
5.1

Hotel
3,276
1,005
2,271
0.089

Residence
8,219
8,219
─
83.1

Office building
28,041
19,865
8,176
166.0

Hotel
12,738
7,143
5,596
347.0

FY 2020
Hotel
85,493
2.5

Entire portfolio
845,551
1.6

FY 2019
Entire portfolio

Office building
9,719
1,468
8,251
0.058
FY 2020

Entire portfolio

FY 2019
Entire portfolio

FY 2018 (Base year)
Unit

Hotel
4,320
1,351
2,969
0.125

FY 2019
Entire portfolio

FY 2018 (Base year)
Unit

Office building
10,039
1,578
8,461
0.063

FY 2020

Residence
677,399
2.2

Office building
119,520
0.7

Hotel
48,632
1.3

FY 2020
Hotel
176
109
4
63
7.0

Entire portfolio
714
200
162
352
3.7

Office building
618
144
160
314
3.7

Hotel
96
56
2
38
3.8

(Note1) Data aggregation period is from April to next March of each year.
(Note2) The properties held as of the end of March every year are subject to surveys. However, properties that were disposed of during the period and areas where it is difficult to comprehend data are excluded.
(Note3) CO 2 emission is calculated using basic emission factors for fiscal year 2019 and earlier, and adjusted emission factors for fiscal year 2020, based on a method established by Ministry of the Environment “Greenhouse gas emission calculation / reporting / publication system”.			
(Note4) The environmental performance data of fiscal year 2020 are subject to third party verification by SGS Japan Inc. and the scope of such verification includes properties disposed of during the period. For details, please refer to “Third Party Assurance (Verification Opinion)” on page 40.
Unit
Renewable energy power generation

thousand kWh

FY 2018
11.44

FY 2019
1.15

FY 2020
8.96

FP ended Apr. 2021 (13th FP)
55.2

FP ended Oct. 2021 (14th FP)
57.2(Note) Target of aggregation in renewable energy power generation is 1 office building and data aggregation period is from April to next March of each year.
Unit
Percentage of the portfolio with green certification%

FP ended Oct. 2020 (12th FP)
55.9

ESG REPORT 2021

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Introduction

Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

ESG Data(Note) The fiscal year of SHAM is from February 1 to January 31 of the following year.

SocialStatus of Directors and Employees

Training Achievements
Unit

FY 2019

FY 2020Unit

FY 2019

Total number of directors and employees

57(Male 43 Female 14)60(Male 44 Female 16)

Average hours of training per person

Hours

16.5

16.9

Directly hired employees

39(Male 29 Female 10)41(Male 30 Female 11)

Average amount of training investment per person

Yen

5,436

53,61312(Male 8 Female 4)13(Male 8 Female 5)

2

3

Non-Japanese employees

01

Employees with disabilities

00

Seconded employees
Employees aged 60 and over

Persons

Percentage of female managers

%

3.8

3.6

Average years of service

Years

6.8

6.1

Number of newly hired employees

Persons

3

7

%

0

10.5

Number of employees taking childcare leave

Persons2

3

Number of male employees taking childcare leave

Persons0(Not applicable)0(Not applicable)

Turnover rate

Number of employees taking family care leave

Persons00Number of short-term workers

Persons

3

2

Average monthly work hours per person

Hours

169.5

166.3

Annual paid leave take-up rate

%

67.9

40.5

Training participation rate

In-house training%

External training

Annual participation in external training events per person

Times

FY 2020

100

100

57.1

96.1

1.57

1.54

Calculation Standards
Average years of service

Number of years of employee service from the date of hire prior to themerger/Number of employees (excluding seconded employees)

Number of newly hired employees
Number of employees taking childcare leave
Number of employees taking family care leave
Number of short-term workers

Calculated from February. 1, which is the fiscal year of SHAM

Turnover rate

Number of employees who left the company during the fiscal year/Numberof employees at the beginning of the fiscal year x 100

Average monthly work hours per person

Average of one year from January each year

Annual paid leave take-up rate

Average of one year from March each year

Training participation rate

Number of employees participating in training/Number of employees as of the end of
the fiscal year (excluding directors and employees on childcare or maternity leave)

Annual participation in external training events per person

Total number of external training courses attended/Number of employees

Number of Qualified Holders
As of Jan. 31, 2020

As of Jan. 31, 2021

ARES Certified Master

Name of qualifications

Unit

30

27

Real Estate Notary

38

36

Real Estate Appraiser

1

1First-Class Certified Architect

1

1

Chartered Member of the Securities Analysts Association of Japan

1

1

Certified Building Administrator

10

9

1

1

Attorney0

1

Real Estate Consulting Master

5

3

CASBEE Accredited Professional for Real Estate

6

5

Licensed Strata Management Consultant

4

2

MBA

Persons

Licensed Representative of Condominium Management Company

6

4

Labor and Social Security Attorney

1

1GovernanceStatus of Use of Internal Reporting System
Compliance Hotline

Unit

FY 2019

FY 2020

Cases

0

0

Status of Legal ComplianceUnit

FY 2019

FY 2020

Number of serious violations of laws and voluntary standards

Cases

0

0

Fines for violations of various laws and regulations

Yen

0

0

Unit

FY 2019

FY 2020

Yen

0

0

Amount of political contribution

ESG REPORT 2021

37

Introduction

Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data BookGRI Content Index
Disclosures Items

Corresponding page of the ESG Report

Corresponding place on the website

Disclosures Items

Name of the organization

Organization Overview (P.3)

102-2

Activities, brands, products, and services

Organization Overview (P.3)

102-24

Nominating and selecting the highest governance body

Profile of SHR

102-25

Conflicts of interest

Strengthening Corporate
Governance System (P.33)

13th FP securities report (only in Japanese)

Fundamental Corporate Philosophty,
Vision and Features of SHR

102-26

Role of highest governance body in setting purpose,values, and strategy

Sustainability Management (P.9)

Sustainability Policy / Promotion System

Portfolio

Identifying and managing economic, environmental,
102-29and social impacts

Sustainability Management (P.9)

Sustainability Policy / Promotion System

102-31 Review of economic, environmental, and social topics

Sustainability Management (P.9)

Sustainability Policy / Promotion System

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

Sustainability Management (P.9)

Sustainability Policy / Promotion System

102-33 Communicating critical concerns

Strengthening Corporate
Governance System (P.33)

Investment Strategy

102-3

Location of headquarters

Organization Overview (P.3)

Profile of SHR

102-4

Location of operations

Organization Overview (P.3)

Profile of SHR

102-5

Ownership and legal form

Organization Overview (P.3)

102-6

Markets served

Profile of SHR
Fundamental Corporate Philosophty,
Vision and Features of SHR

Organization Overview (P.3)

Investment Strategy
Portfolio

102-7

Scale of the organization

Sustainability Journey (P.4)
ESG Data (P.37)

102-8

Information on employees and other workers

ESG Data (P.37)

102-9

Supply chain

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

Financial Highlights
Social Responsibility

Portfolio

Organization Overview (P.3)

Structure of SHR
Not Applicable102-11

Precautionary Principle or approach

Sustainability Management (P.8)
Sustainability Policy / Promotion System
Coexistence of Humankind and Nature andActivities for the Resources Environment (P.19) Environmental Measures102-12External initiatives

Supporting Initiatives /Acquisition Status of External Evaluations (P.12)

International Initiatives /External Certifications

102-15

Statement from senior decision-maker

Message from Senior Management (P.5)

Key impacts, risks, and opportunities

Business Environment Surrounding SHR (P.6)
Materiality (Important Issues) (P.11)

To Our Unitholders
13th FP securities report (only in Japanese)

Measures for Addressing Climate Change (P.15-16)

13th FP securities report (only in Japanese)

102-34 Nature and total number of critical concerns

Governance

Governance
Not Applicable

102-35 Remuneration policies

Strengthening Corporate
Governance System (P.34)

Governance102-36 Process for determining remuneration

Strengthening Corporate
Governance System (P.34)

13th 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

Information Disclosure andEngagement with Stakeholders (P.35)

Social Responsibility
Not Applicable

Information Disclosure andEngagement with Stakeholders (P.35)

Social Responsibility
Not Applicable

102-45 Entities included in the consolidated financial statements

Organization Overview (P.3)

102-47 List of material topics

Materiality (Important Issues) (P.11)

102-48 Restatements of information

3. Ethics and integrity
Values, principles, standards, and norms of behavior

Message from Senior Management (P.5)

Fundamental Corporate Philosophty,
Vision and Features of SHR

102-17

Mechanisms for advice and concerns about ethics

Risk Management System (P.32)

Governance

4. Governance
Sustainability Management (P.9)

102-18Governance structure102-19Delegating authority

Sustainability Management (P.9)

102-20Executive-level responsibility for economic,
environmental, and social topics

Sustainability Management (P.9)

102-21

Consulting stakeholders on economic, environmental,
and social topics

Sustainability Management (P.9)

Corporate Governance (P.30-34)

Governance at SHR (P.30)

Governance

Table of Contents (P.2)

102-51

Table of Contents (P.2)

Date of most recent report

Materiality (Important Issues)
Not Applicable

102-50 Reporting period
102-52 Reporting cycle

Structure of SHR
13th FP securities report (only in Japanese)
Not Applicable

102-49 Changes in reporting

102-16Composition of the highest governance body102-22and its committees

Profile of SHR

6.Reporting practice

2. Strategy
102-14Governance at SHR (P.30)

Corresponding place on the website

Chair of the highest governance body

1. Organizational Profile
102-1

Corresponding page of the ESG Report102-23

GRI 102: General Disclosures 2016

Table of Contents (P.2)

102-53 Contact point for questions regarding the report

Table of Contents (P.2)

102-55 GRI content index

GRI Content Index (P.38-39)

Contact

GRI 103: Management Approach 2016
103-1
103-2

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

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

Materiality (Important Issues)

Sustainability Management (P.8-9)

Sustainability Policy / Promotion System

Materiality (Important Issues) (P.11)

Materiality (Important Issues)

Profile of SHR

ESG REPORT 2021

38

Introduction

Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data BookGRI Content Index
Item-specific standards
Disclosures Items

Corresponding page of the ESG Report

Corresponding place on the website

Disclosures Items

GRI 201: Economic Performance
201-1

Direct economic value generated and distributed

2016
Economy201-2

Financial implications and other risks andopportunities due to climate change

Cash Distributions

Sustainability Journey (P.4)
ESG Data (P.37)

2016

Social Responsibility
13th FP securities report (only in Japanese)

Materiality (Important Issues) (P.11)

205-3

206-1

2016

Confirmed incidents of corruption and actions taken

Not Applicable

2016

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

207-1

2016

2016
Corresponding page of the ESG Report

Corresponding place on the website

ESG Data (P.36)

302-3

Energy intensity

ESG Data (P.36)

Environmental Measures

302-4

Reduction of energy consumption

Reduction of CO 2 Emissions (P.17)

Environmental Measures

GRI 303: Water and Effluents
2018

303-3

Water withdrawal

ESG Data (P.36)

Environmental Measures

2016

406-1

Incidents of discrimination andcorrective actions taken

407-1

Operations and suppliers in which the right to freedomof association and collective bargaining may be at risk

408-1

Operations and suppliers at significant risk forincidents of child labor

409-1

Operations and suppliers at significant risk forincidents of forced or compulsory labor

410-1

Security personnel trained in human rights
policies or procedures

411-1

Incidents of violations involving rights ofindigenous peoples

Environment

Direct (Scope 1) GHG emissions

ESG Data (P.36)

Environmental Measures

GRI 415: Public Policy

305-2

Energy indirect (Scope 2) GHG emissions

ESG Data (P.36)

Environmental Measures

2016

305-4

GHG emissions intensity

ESG Data (P.36)

Environmental Measures

GRI 416: Customer Health and Safty

305-5

Reduction of GHG emissions

Reduction of CO2 Emissions (P.17)

Environmental Measures306-3

Waste generated

ESG Data (P.36)

306-4

Waste diverted from disposal

ESG Data (P.36)

306-5

Waste directed to disposal

ESG Data (P.36)

2016

307-1

Non-compliance with environmental laws
and regulations

Disclosures Items

Not Applicable

Not Applicable

Not Applicable

Not Applicable

Not Applicable

415-1

416-2

Political contributions
Incidents of non-compliance concerning the healthand safety impacts of products and services

Not Applicable

Not Applicable

Not Applicable

GRI 417: Marketing and Labeling
417-2

Incidents of non-compliance concerning productand service information and labeling

Not Applicable

417-3

Incidents of non-compliance concerning marketing
communications

Not Applicable2016

Not Applicable

GRI 418: Customer Privacy
2016

Corresponding page of the ESG Report

Corresponding place on the website

GRI 401: Employment
2016

Social Responsibility

Diversity of governance bodies and employee

GRI 411: Righs of Indigenous Peoples

GRI 307: Environmental Compliance2016

ESG Data (P.37)

405-1

305-1

GRI 306: Waste
2020

Social Responsibility

GRI 410: Security Practices

2016

GRI 305: Emissions

2016

2016

Environmental Measures
Society

2016

Energy consumption within the organization

Social Responsibility

GRI 409: Forced or Compulsoty LaborGRI 302: Energy
302-1

ESG Data (P.37)
Creating a Rewarding Workplace (P.29)

GRI 408: Child Labor

13th FP securities report (only in Japanese)

Approach to tax

Disclosures Items

Average hours of training per year per employees
Programs for upgrading employee skills andtransition assistance programs

GRI 407: Freedom of Association and Colleective Bargaining

Not Applicable

GRI 207: Tax
2019

404-1
404-2

GRI 406: Non-discrimination

GRI 206: Anti-competitive Behavior
2016

Corresponding place on the website

GRI 405: Diversity and Equal Opportunity

Environmental Measures

GRI 205: Anti-corruption
2016

Corresponding page of the ESG

GRI 404: Training and Education

Society

New employee hires and employee turnover

ESG Data (P.36)

Social Responsibility

401-3

Parental leave

ESG Data (P.36)

Social Responsibility

Substantiated complaints concerning breaches ofcustomer privacy and losses of customer data

Not Applicable

GRI 419: Socioeconomic Compliance
2016

401-1

418-1

419-1

Non-compliance with laws and regulationsin the social and economic area

Not Applicable

GRI 403: Occupational Health and Safty
2018

403-6

Promotion of worker health403-9

Work-related injuries

Creating a Rewarding Workplace (P.28)

Not Applicable

Social Responsibility

403-10Work-related ill health

Not Applicable

ESG REPORT 2021

39

Introduction

Vision / Policy

Environmental Commitment

Social Responsibility

Corporate Governance

ESG Data Book

Third-Party Assurance (Verification Statement)
In order to increase data reliability, we have acquired a third-party assurance from SGS Japan Inc. for our environmental performance data.

ESG REPORT 2021

40