Information Disclosure Based on TCFD Recommendations
Based on the goal of achieving a carbon-neutral society by 2050, we are seeking to create new environmental
value, such as next-generation urban development. With countering climate change as a key management
strategy, we have selected members from management and each department to create the ESG Promotion Group,
which has worked on disclosing information based on the TCFD framework recommendations.
After implementing capacity building activities for management and department heads and sharing these
activities as a crucial companywide effort, department heads and the ESG Promotion Group members led
discussions on the risks and opportunities posed by climate change that may affect the Group's core businessesof real estate sales and real estate leasing. Based on the results of these analyses, we plan to incorporate theappropriate measures as key elements of our business strategy.

1 Governance regarding climate change

Board of Directors
President and Representative Director
Nomination and Remuneration
Advisory Committee
President’s Office

Coordinate

Positioning “address social issues through promotion of ESG
initiatives” as a corporate strategy, the “ESG Promotion Group,”
which has a director serving as head of the President’s Officeappointed as the person in charge and consists of members
selected from each department, is divided into the “E Team,” “STeam” and “G Team” to set fiscal targets and promote initiatives for“Environment,” “Social” and “Governance.” The E Team is a key
team promoting activities to address environmental issues such as
climate change.
Each team reports their activities at monthly meetings of the ESG
Promotion Group. The director responsible for the President's Officereports his or her summary impressions to the Board of Directors tomake the oversight by the Board more effective.

Health & Culture
Fostering Team
(Launched in July 2021)

ESG Promotion GroupE TeamCoordinate

S Team

G TeamCoordinate

Related departments

2 Strategy(3) Results of scenario analysis: Risks and opportunities
Upon examining the transition to a decarbonized society and the physical risks/opportunities posed by climate change, we identified thesignificant risks/opportunities surrounding the real estate sales and leasing business by 2030, as shown in the table below. Evaluations
consider likelihood of occurrence and degree of impact.

䕪 Risks
Regarding transition risks associated with decarbonization, there will be greater impact under the 1.5qC scenario, with higher
procurement prices for steel, cement, and other highly carbon-intensive construction materials due to carbon tax implementation, as wellas increasing costs due to taxation of CO2 emissions from construction and owned properties. In addition, stricter GHG emission
regulations may lead to cost increases in taking low-carbon measures such as investments in energy-saving equipment, and changing
customer needs may lead to a rise in vacancy rates and a decline in closing rates, leases, and sales prices for properties that do notcomply with ZEH or ZEB. Moreover, shortfalls in decarbonization efforts at our Company may lead to increased financing costs.
With regard to physical risk, increasingly severe weather disasters may delay construction schedules at properties under development
and result in damage, equipment failure, or suspended operations at owned properties. This in turn could lead to the need for repair costs
and reduced property reputation that may result in increased vacancy rates.

䕪 Opportunities
With regard to opportunities in relation to climate change, it is possible that properties with low CO2 emissions may gain incompetitiveness, while properties with environmental certifications gain in value, leading to reduced travel distances and compact cities
for expanded opportunities in mixed-use development of urban areas where energy is produced locally for local consumption and a wide
range of generations can live together to enjoy high quality of life. Increasingly severe weather may also contribute to expanding sales ofdisaster-resistant properties. In addition, financing costs may reduce through environmentally-friendly loans or other factors and ourdecarbonization efforts may appeal to investors and strengthen the Company's share price.
As a condominium developer, we are registered as a ZEH developer and are working to construct more environmentally-friendly
condominiums. Specifically, we seek to introduce one ZEH-M condominium per year. In addition, we have established a target of 50%
ZEH diffusion within our subsidiaries ES-CON HOME and ESCON CRAFT from FY2020, and have completed registration as a ZEH
builder to continue providing environmentally-friendly homes. With regard to the acquisition of environmental certification, a communitybased commercial facility owned by ESCON Japan REIT Investment Corporation, which is managed by our subsidiary ES-CON ASSETMANAGEMENT as its asset management trustee, has acquired DBJ Green Building certification. We will continue to develop similarly
certified properties.
Significant risks for the real estate sales and leasing business through 2030

(1) Scenario Analysis

Category

We undertook a scenario analysis of the impact of climate change on our business based on the framework recommended by TCFD.
This year's analysis focused on the Group's core businesses of real estate sales and real estate leasing, examining transition risks andphysical risks/opportunities as of 2030. The analysis considered two hypothetical scenarios: the 3qC scenario, in which decarbonization
efforts do not progress beyond the current state; and the 1.5qC scenario, in which decarbonization makes advancements.
Scenario

Details

3qC
Scenario• This scenario is based on the assumption that countries that have already declared specific decarbonization
measures proceed as stated and no additional decarbonization measures are taken. See “Stated Policies
Scenario (STEPS)” provided by the International Energy Agency (IEA). GHG emissions are estimated to beslightly higher overall in 2030 than in 2020, with a temperature increase of 2.4–2.8qC as of 2100.
• Environmental certification standards and energy efficiency standards for buildings are estimated to remain
as is, with no increase in demand for energy efficiency retrofits or in the number of customers seeking ZEH
and ZEB properties.

1.5qC
Scenario• This scenario is based on the assumption that we achieve global net zero GHG emissions by 2050; see
IEA's scenario “Net Zero by 2050 (NZE).” Global GHG emissions are estimated to decrease byapproximately 40% as of 2030 compared to 2020, with a carbon tax introduced and rigorously implemented.
GHG emissions from buildings are assumed to fall by roughly 40% from 2020 to 2030. Temperature is
projected to rise 1.3–1.5qC as of 2100.
• New buildings will generally be constructed in alignment with net zero pathway guidelines. Zero carbon
building regulations are projected to be introduced. Existing buildings will be retrofitted for energy efficiency
to comply with these regulations.

Note: As the two scenarios referenced from the IEA show little difference in temperature increases (both about 1.5qC) as of 2030, we assume the physicalrisk to be the same for both the 1.5qC and 3qC scenario. Thus, we made no distinction with regard to magnitude of risk between the two scenarios as of
2030.

(2) Process of Scenario Analysis
We undertook scenario analysis according to the following process, in line with TCFD recommendations.

Policy andRegulations

Transition
MarketReputation

Physical

GHG emission regulations tighten; carbon
emission targets are set. Demands forenvironmental performance and energysaving retrofits of existing buildings
increase.

Costs grow for low-carbon measures such as investments inenergy-saving equipment. Operational and renovation costs for theproperties we own also rise.

Customer needs change; demands forenvironmental and energy efficiency
performance increase.
Pressure intensifies from investors andfinancial institutions to decarbonize realestate.

Properties that do not comply with ZEH or ZEB standards are nolonger attractive to customers, resulting in higher vacancy rates,
lower closing rates, rents, and sales prices.
Lack of decarbonization efforts related to held real estate and realestate for sale increase financing costs. Failure to meet investor
expectations with regard to decarbonization activities affects theCompany's share price.

Weather-related disasters growincreasingly severe.

Disruptions affect on-site work on properties under development;
construction timetables encounter delays.
The properties we own and located in disaster-prone areas may
see the need for repair costs and reduced property reputation due
to disasters that result in property damage, equipment failure,
and/or functional problems. This may result in increased vacancy
rates. In addition, the Company may be held liable for humancasualties caused by disasters at commercial facilities.

Significant opportunities for the real estate sales and leasing business through 2030
Category

Changes in the external environment

Opportunities for the Company

Products/Services

Regulations such as carbon taxes andbuilding energy standards are tightened.

Competitiveness of properties with low CO2 emissions grow—for
example, low-carbon buildings. The reputation of buildings withenvironmental certification also grows.

Promotion of regional and urban
development models, such as the compact
city concept

Compact cities contribute to reduced travel distances and expand
opportunities for mixed-use urban area development, where energy
can be produced locally for local consumption and where multiple
generations can coexist and enjoy high quality of life.

Decarbonization-related investments andloans grow. Investor appreciation of
decarbonization efforts grows.

Decarbonization efforts are recognized by financial institutions.
Financing costs are reduced by environmentally-friendly loans. In
addition, investors’ improved reputation of the Company
strengthens share price.

Weather disasters become increasingly
severe.

Sales opportunities for disaster-resistant properties expand indisaster-prone areas. The ability to serve as a local recovery centerin the event of a disaster gains the support of local residents andcustomers, leading to lower tenant vacancy rates.

We first identified climate change risks/opportunities that could have a significant impact on our business based on research on TCFD
recommendations and related reports.
MarketAfter identifying significant risks and opportunities as described in Step 䐟, we referenced information published by external organizations,such as scenarios by the IEA, to create the 1.5qC scenario and 3qC scenario, looking toward 2030.

䐡 Estimate financial impacts and assess risks and opportunities based on scenarios
Based on the scenarios created in Step 䐠, we estimated the financial impact on our business and evaluated the magnitude of eachrisk/opportunity along two axes: likelihood of occurrence and degree of impact. Risks and opportunities found difficult to evaluate
quantitatively were assessed through qualitative analysis.

Risks for the Company
Procurement prices for steel, cement, and other highly carbonintensive construction materials rise; costs increase due to taxes on
CO2 emissions generated by property construction and theproperties we own.

Urgent䐟 Examine climate-related risks and opportunities crucial to business activities䐠 Create scenarios

Changes in the external environment
Carbon taxes are introduced and/or
strengthened.

Resilience䐢 Consider countermeasures
We plan to consider countermeasures for risks and opportunities with an especially significant impact on our business.

1-2

(4) Assessment of Financial Impact
Based on available quantitative data, we assessed the financial impact on real estate sales and real estate leasing businesses in 2030.
We made qualitative assessments for aspects for which quantitative financial estimations were difficult.
With regard to negative financial impacts, we concluded that the 1.5qC scenario would lead to cost increases, including higher capital
investment in low-carbon facilities due to the introduction of a carbon tax and stricter energy standards/regulations, higher
operational/renovation costs for the properties we own, and an overall greater impact on financing costs and share prices. On the other
hand, we also saw this as a positive impact under the 1.5qC scenario, with increased profit-earning opportunities and positive feedback
from decarbonization efforts, including mixed-use development contributing to the creation of a compact city that reduces travel
distances and the creation of communities that produce and consume energy locally, allowing people of all generations to live inharmony and enjoy a high quality of life.
We concluded that increasingly severe weather disasters will have significant impact in both the 1.5qC and 3qC scenarios, with severe
weather disasters leading to increased costs due to construction delays for properties under development, repair costs at owned
properties, rising vacancy rates due to declining reputation, and compensation obligations in the event of disasters at commercial
facilities that lead to human casualties.
Assessment of
Financial Impact

Category

Risks/Opportunities relating to the Company

Financial Impact

Procurement prices for steel, cement, and other highly carbon-intensive
construction materials rise; costs increase due to taxing of CO2 emissions
from property construction and owned properties.

• Increase in procurement
costs for materials• Increase in costs related toCO2 emissions

Low

Costs increase for low-carbon measures such as investments in energysaving equipment. Operational and renovation costs for owned properties
also rise.

• Increase in costs for capital
investment and renovations,
etc.

Low

High

MarketProperties that do not comply with ZEH or ZEB standards are no longer
chosen by customers, resulting in higher vacancy rates, lower closing
rates, rents, and sales prices.

• Decrease in sales due tolower rents and sales prices

Low

Moderate

Lack of decarbonization efforts at real estate held and real estate for saleincreases finance costs. Failure to meet investor expectations with regard
to decarbonization activities affects Company's share prices.

• Increase in financing costs

Reputation

Low

High

On-site construction of properties under development is disrupted;
construction schedules are delayed.

• Increase in construction
costs

Owned properties located in disaster-prone areas may see property
damage, equipment failure, and other functional issues resulting fromdisasters. This could lead to the need for repair costs and reduced
property reputation that may result in increased vacancy rates. In addition,
the Company may be held liable for human casualties attributable todisasters at commercial facilities.

• Repair costs required• Decrease in sales due tohigher vacancy rates• Compensation obligations

Competitiveness of properties with low CO2 emissions grows. The
reputation of buildings with environmental certification increases.

• Increase in sales due toimproved competitivenessof properties

Compact cities contribute to reduced travel distances and expand
opportunities for mixed-use urban area development, allowing energy to
be produced locally for local consumption and a wide range of generations
to coexist and enjoy a high quality of life.

• Increase in sales due toincreased opportunities formixed-use development

Decarbonization efforts are recognized by financial institutions; theacquisition of environmentally-friendly loans reduces financing costs. The
improved reputation of the Company for decarbonization efforts boosts
share prices.

•

Sales opportunities for disaster-resistant properties expand in disasterprone areas. The ability to serve as a local recovery center in the event ofdisasters helps gain the support of local residents and customers, leading
to lower tenant vacancy rates.

• Increase in sales due toexpanded property sales
opportunities and lower
tenant vacancy rates

Policy andRegulations

Transition
Risks

Physical
Risks

UrgentProducts/
Services

Opportunities

MarketResilience

3qC
1.5qC
Scenario Scenario

Moderate

3

Risk Management

We monitor cross-organizational risk conditions and share information throughout the company through the Risk
Management Committee, which is composed of directors and department heads. The Risk Management Committee
discovers, identifies, and evaluates a wide range of risks and deliberates on possible countermeasures. These risks
include those related to climate change, as well as compliance, legal, labor, and safety management. Discussions anddeliberations within the Risk Management Committee are reported to the Company meeting, which are then reported to theBoard of Directors through the President and Representative Director. The Board of Directors makes decisions on key
matters concerning the Company’s risk management efforts and solicits reports on these activities.

4

Metrics and Targets

䕪 Targets
In realizing a carbon-neutral society by 2050 with the goal of creating new environmental values such as next-generation urban
development, we have set the following targets for our efforts in the ESG management plan:• Reduced CO2 emissions• Application/registration of one ZEH-M condominium Stee per year
• Expanded development of buildings with green building certification
Based on the results of this scenario analysis, we will continue to study the establishment of metrics and targets to reduce climate
related risks and evaluate our progress in seizing opportunities.

䕪 Metrics

High

High

Low

Moderate

Low

High

Low

High

Lower financing costs

Moderate

We classify the degree of financial impact assessment as follows:
High: More than 10% of net sales; moderate: 3% to 10% of net sales; low: less than 3% of net sales
Risks and opportunities for which quantitative data is difficult to obtain are analyzed qualitatively.

• GHG emissions
The table below shows GHG emissions from our offices and company vehicles. We plan to continue with calculations and thedisclosure of GHG emissions from our business activities.
2018

2019

2020

2021

GHG emissions fromvehicle fuel 1)

2030 (Goal)

16 tons of CO2

16 tons of CO2

18 tons of CO2

17 tons of CO2――

GHG emissions fromelectricity use 2)

130 tons of CO2 133 tons of CO2 139 tons of CO2 137 tons of CO2

―

―

Total

146 tons of CO2 149 tons of CO2 157 tons of CO2 154 tons of CO2

40% Reduction*vs FY2021

2050 (Goal)

Net Zero(1) Emissions from fuel consumption by company-owned vehicles(2) Emissions from electricity used at company-owned offices• Other Metrics
As a condominium developer, we are registered as a ZEH developer (Registration D) and are currently seeking to introduce one ZEHM condominium per year to promote the development of more environmentally-friendly condominiums. The table below showsdevelopment results for condominiums falling into the ZEH-M category.

Development of
ZEH-M condominium
per term

2018

2019

2020

2021

0

1

0

1

ZEH (net Zero Energy House) is “a residence designed to achieve an annual primary energy consumption balance of zero by significantly improving theinsulation performance of the exterior skin, introducing highly efficient equipment systems that achieve significant energy savings while maintaining thequality of the indoor environment and introducing renewable energy.”(5) Strategies based on scenario analysis
We plan to further consider measures for risks/opportunities that pose especially significant impact on our business based on the resultsof scenario analysis and financial impact assessments.
䕪 Examples of response measures• Increase percentage of electricity use from renewable energy sources.
• Promote installation of LED lighting and other energy-saving equipment/devices among commercial facilities.
• Further promote ZEH-M development.
• Promote improvement of environmental performance evaluation by acquiring DBJ Green Building
certification and CASBEE for Real Estate Certification.

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