Second-Party Opinion

Sumitomo Mitsui Finance and Leasing
Green Bond Framework

Evaluation Summary
Sustainalytics is of the opinion that the Sumitomo Mitsui Finance and Leasing’s (SMFLor the Company) Green Bond Framework (the Framework) is credible and impactful andaligns with the four core components of the Green Bond Principles 2018 (GBP). This
assessment is based on the following:
The eligible categories for the use of proceeds,
Renewable Energy and Green Buildings, are aligned with thoserecognized by the GBP. Sustainalytics considers that investments
into renewable energy and green buildings in Japan will lead topositive environmental impacts and advance the UN Sustainable
Development Goals 7, and 9.
PROJECT EVALUATION / SELECTION Eligible projects are evaluatedand selected by the Treasury Dept. and the departments related toenvironmental and energy business and real estate business, and thefinal approval will be made by the Officer in charge of the Treasury
Dept. Sustainalytics considers that SMFL’s evaluation and selection
process is aligned with market practice.
MANAGEMENT OF PROCEEDS The proceeds are allocated andmanaged by the Treasury Dept. The allocation of the proceeds istracked and managed quarterly using an internal file. If the balance of
eligible assets falls below the outstanding amount of green bonds,
other eligible assets will be selected for re-allocation. Pending full
allocation, the unallocated proceeds will be held in cash or cash
equivalents. This is in line with market practice.
REPORTING SMFL will report on allocation and positiveenvironmental impacts of the proceeds annually on the company’s
website. SMFL will disclose a description of funded projects, amountof allocated and unallocated proceeds, and relevant qualitative andquantitative impact metrics. SMFL will receive a compliance review
from a third-party provider until full allocation. Sustainalytics views
SMFL’s allocation and impact reporting along with its commitment toreceiving a compliance review to be aligned with market bestpractice.

Alignment with Japan’s Green Bond Guidelines 2017
Sustainalytics is of the opinion that Framework (the “Framework”) is in line with Japan’sGreen Bond Guidelines 2017. The guidelines communicate what an issuer should do toissue a credible green bond, and also highlight what an issuer is recommended to do.
Sustainalytics assessed the alignment between the Framework and the ‘requirementsof’ items outlined in the Japan’s Green Bond Guidelines 2017.

© Sustainalytics 2020

Evaluation dateFebruary 12, 2020

Issuer Location

Tokyo Japan

Report Sections
Introduction .................................................. 2
Sustainalytics’ Opinion ................................ 3
Appendices .................................................. 9

For inquiries, contact the Sustainable
Finance Solutions project team:
Wakako Mizuta (Tokyo)
Project Manager
wakako.mizuta@sustainalytics.com(+81) 3 4510 7979
Marie Toyama (Tokyo)
Project Support
marie.toyama@sustainalytics.com(+81) 3 4510 7979
Mina Jang (Amsterdam)
Project Support
mina.jang@sustainalytics.com(+31) 20 205 02 09

Second-Party Opinion

Sumitomo Mitsui Finance and Leasing Green Bond Framework

Introduction
As a joint venture owned 50/50 by the Sumitomo Mitsui Financial Group and Sumitomo Corporation,
Sumitomo Mitsui Finance and Leasing Company, Limited (“SMFL” or the “Issuer”) is mainly engaged inlease and installment sales, providing finance, rental, management support, among other solutions. In
addition to Japan, it has 15 offices in 10 countries in Asia, North America, and Europe. Founded in 1963,
SMFL has its headquarters in Chiyoda-ku, Tokyo.
SMFL has developed the Sumitomo Mitsui Finance and Leasing Green Bond Framework (the“Framework”) under which it intends to issue multiple green bonds and use the proceeds to finance orrefinance projects that contribute to climate change mitigation. The Framework defines eligibility criteria
in the following area:
1.
2.

Renewable Energy
Green Buildings

SMFL engaged Sustainalytics on January 2020 to review the Framework, and provide a second-party
opinion on the Framework’s environmental credentials and its alignment with the GBP. 1 A summary
overview of this Framework has been provided in Appendix 1.
As part of this engagement, Sustainalytics held conversations with various members of SMFL’s Treasury
Depart. to understand the sustainability impact of their business processes and planned use of proceeds,
as well as management of proceeds and reporting aspects of SMFL’s green bond framework.
Sustainalytics also reviewed relevant public documents and non-public information.
This document contains Sustainalytics’ opinion of the Framework and should be read in conjunction withthat Framework.

1 The Green Bond Principles are administered by the International Capital Market Association and are available at:https://www.icmagroup.org/green-social-and-sustainability-bonds/green-bond-principles-gbp/.
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Sumitomo Mitsui Finance and Leasing Green Bond Framework

Sustainalytics’ Opinion
Section 1: Sustainalytics’ Opinion on the Sumitomo Mitsui Finance andLeasing Green Bond Framework
Summary
Sustainalytics is of the opinion that the Sumitomo Mitsui Finance and Leasing Green Bond Framework iscredible and impactful, and aligns with the four core components of the GBP. Sustainalytics highlights thefollowing elements of the Framework:•

Use of Proceeds:- The eligible categories for the use of proceeds, Renewable Energy and Green Buildings, arerecognized by the GBP as project categories with positive environmental impacts. For
additional information, please see Section 3 for Sustainalytics’ assessment on the use ofproceeds.
- SMFL’s framework restricts to the sustainable feedstock and waste biomass resources forthe biomass power sources. Sustainalytics considers that such restrictions on resources
will mitigate the risks of deforestation as well as competition with food resources.
- SMFL intends to use the proceeds for hydropower generation projects. While there is aconcern that the installation of large-scale hydropower may pose environmental risks suchas deterioration of biodiversity, Sustainalytics positively views SMFL’s commitment on
financing the projects limiting to a capacity of 25 MW or less, considering that this will
reduce the environmental risks.
- SMFL intends to allocate the proceeds to geothermal projects. While approximately twothirds of geothermal projects globally have a carbon intensity of below 100gCO2e/kWh,some geothermal facilities are considerably higher, ranging up to 1,300gCO2e/kWh. 2
Sustainalytics notes that emissions from geothermal power generation varies considerablyacross regions and encourages SMFL to invest in relatively low GHG emissions intensity inthe context of project selection and to report on the GHG emissions intensity of the projects
after allocation.
- SMFL will allocate the proceeds into acquisition of power facilities, development,
construction, and operation for renewable energy business. Sustainalytics acknowledges
that CAPEX is generally preferred by investors for financing projects. However, considering
the nature of eligible projects, it also views that OPEX is important to maintain the projects
and sustain their positive environmental impacts.
- SMFL intends to finance expenditures related to land acquisition, development, construction
or refurbishment of green buildings, or invest into buildings that have received or will receive
top two levels of recognized third-party certification certifications such as LEED Platinum
or Gold, CASBEE S or A, DBJ Green building certification 5 or 4 stars, BELS 5 or 4 stars
and BREEAM Outstanding or Excellent. Sustainalytics views these eligibility criteria to bealigned with best market practices. Please see Appendix 2 for an overview and comparisonof green-building certification schemes.
- SMFL will use green bond proceeds to finance future and past green projects and refinancerenewable energy projects that have taken place within 24 months preceding the green bondissuance and green building projects where the construction of the buildings has been
completed or the buildings have been certified or re-certified within 24 months preceding
the green bond issuance.

•

Project Evaluation and Selection:- Eligible projects are evaluated and selected by the Treasury Dept. and the departments
related to environmental and energy business and real estate business based on theeligibility criteria. The final approval is made by the Officer in charge of the Treasury Dept.
Sustainalytics considers that SMFL’s evaluation and selection process is aligned withmarket practice.

•

Management of Proceeds:
The proceeds are allocated and managed by the Treasury Dept. The allocation of theproceeds is tracked and managed quarterly using an internal file. If the balance of eligible

2 Climate Bonds Initiative, “Geothermal Energy and the Climate Bond Standard”, at:https://www.climatebonds.net/files/files/Geothermal%20Energy%20Criteria.pdf
3Second-Party Opinion

Sumitomo Mitsui Finance and Leasing Green Bond Frameworkassets falls below the outstanding amount of green bonds, other assets will be selected forreallocation. Pending full allocation to eligible green projects, the unallocated proceeds areheld in cash or cash equivalents. This is in line with market practice.
•

Reporting:
SMFL is committed to reporting on allocation and environmental impact of the proceeds
annually, on its website until the maturity of the green bond. Allocation reporting including
a description of funded projects and amount of allocated and unallocated proceeds will be
provided once a year, and will be updated after full allocation in the event of change ofallocation status. Impact reporting will include quantitative and qualitive environmental
performance indicators such as the amount of power generated (kWh) and CO2 emissions(t-CO2) reduced through the funded projects as well as the type and level of green building
certification.
SMFL intends to receive a compliance review from a third-party provider after the issue ofgreen bonds to confirm the allocation of proceeds to eligible products to be aligned with thegreen bond framework, until full allocation. Sustainalytics views SMFL’s allocation andimpact reporting along with its commitment to receiving a compliance review to be alignedwith market best practice.

Alignment with Green Bond Principles 2018
Sustainalytics has determined that the SMFL’s green bond framework aligns to the four core componentsof the Green Bond Principles 2018. For detailed information please refer to Appendix 3: Green Bond/Green
Bond Programme External Review Form.
Alignment with Japan’s Green Bond Guidelines 2017
Japan’s Green Bond Guidelines 2017 communicate what an issuer should do to issue a credible greenbond, and also highlight what an issuer is recommended to do. Sustainalytics assessed the alignment
between SMFL’s green bond framework and the ‘requirements of’ items outlined in the Japan’s Green
Bond Guidelines 2017.

GBP and Japan’s Green Bond
Guidelines, 20173

Alignment with
GBP and withJapan’s Green
Bond Guidelines
2017

1. Use of Proceeds

Yes

SMFL intends to use the proceeds tofinance expenditures relating to
renewable energy power generation
projects and green buildings, which arerecognized as green projects with clear
environmental benefits under Japan’s
Green
Bond
Guidelines
2017.
Furthermore, SMFL’s environmental
goals and processes to mitigate
potential negative environmental andsocial impacts associated with its
green projects are all described in theframework and have been madeaccessible to investors.

2. Process for Project Evaluation and
Selection

Yes

In the framework, SMFL explains that
thecompany
promotes
its
environmental business based on
environmental policies and goals, andthat the green bond issuancecontributes to the development of thebusiness. It also states in theframework that projects are evaluatedand selected, in accordance with the

Sustainalytics’ comments onalignment with Japan’s Green Bond
Guidelines 2017.4

3 Green Bond Guidelines, 2017, Summary, Ministry of the Environment, Japan: https://www.env.go.jp/en/policy/economy/gb/summary2017.pdf
4 For detailed comments on alignment with ICMA GBP, please see Appendix 3.

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Sumitomo Mitsui Finance and Leasing Green Bond Framework
eligibility criteria, by the Treasury Dept.
and the departments related toenvironmental and energy business andreal estate business, and finallyapproved by the Officer in charge of theTreasury Dept.
3. Management of Proceeds

Yes

In the framework, SMFL describes thatthe use of proceeds will be checked by
the Treasury Dept. on a quarterly basis.
SMFL has shared to Sustainalytics thatan internal file will be used to track andmanage the proceeds. Furthermore,
SMFL has stated that unallocatedproceeds will be held in cash or cash
equivalents.

4. Reporting

Yes

SMFL has also stated in the frameworkthat it is committed to reporting on the
allocation and environmental impactsof the proceeds annually on its website.
The allocation reporting will be
published until full allocation andincludes a description of funded
projects, amount of allocated andunallocated proceeds. After full
allocation, SMFL will disclose updates
as necessary in the event of changes
regarding the allocation of proceeds.
Impact reporting includes the amountof power generated (kWh) and CO2
emissions (t-CO2) reduced through the
projects funded by the proceeds as wellas the type and level of green building
certifications.

Section 2: Sustainability Strategy of the Issuer
Contribution of framework to SMFL’s sustainability strategy
SMFL is committed to sustainability-related initiatives for its business activities through CSR andenvironmental policies given the following reasons:••

While SMFL addresses environmental issues as a material business challenge, the company
promotes initiatives to reduce environmental impacts through its businesses including the projects
to be financed through the green bonds. The environmental policy which will be implemented into
its businesses addresses 6 areas of initiatives: (1) conducting initiatives through business activities
aimed at protecting the environment, preventing pollution, and establishing harmony with corporate
activities; (2) supporting customers’ efforts to address environmental problems through business;(3) reducing environmental impact; (4) complying with environment-related laws and regulations; (5)setting environmental goals and targets and continuously improving its environmental management
system; and (6) raising awareness of all employees regarding the environmental policy anddisclosing it outside the company.5
As its environmental activities through business, SMFL provides financing and leasing services
targeting: 1) renewable energy projects including solar power, wind power, biomass, small andmedium-sized hydropower, and geothermal power: and 2) facilities and equipment designed to saveenergy. As of November 2019, the total capacity of solar power generation facilities that SMFL
provided finance and lease services exceeded 1 GW.6

5 Sumitomo Mitsui Finance and Leasing, “Environmental Policy(Japanese)”, at:https://www.smfl.co.jp/corporate/csr/environment_strategy/policy.html.
6 Sumitomo Mitsui Finance and Leasing, “Corporate Profile 2019(Japanese)”, at: https://www.smfl.co.jp/corporate/about/pdf/book.pdf.
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Sumitomo Mitsui Finance and Leasing Green Bond Framework
Considering the above, Sustainalytics views that SMFL’s green bond framework is consistent with thecompany's sustainability policies and goals and is well positioned to issue green bonds.

Well positioned to address common environmental and social risks associated with the projects
Sustainalytics recognizes that the development, construction, and operation of power generation facilities
for renewable energy projects and green building projects create positive environmental impacts.
Sustainalytics also acknowledges that these activities also pose potential environmental and social risks
such as water pollution, noise, adverse effects on ecosystems, negative impacts on workers'
health/safety and local residents. SMFL has the following processes designed to control and reduce theabove risks:•

The departments related to environmental and energy business and real estate business are involvedin the project selection process to confirm compliance with environment-related laws, regulations,ordinances, and guidelines at the project selection stage. The company also has in place a process
to confirm that explanations have been provided to local residents and consent has been obtained
for all construction and development projects. Through these processes, SMFL ensures that it will
perform environmental impact assessments required by laws and regulations and obtain anunderstanding from local residents. The company has also committed to the compliance with laws,
rules, and regulations in its environmental policy.

•

To prevent contamination of the environment caused by illegal disposals of industrial wastematerials at the time of expiration of leases, SMFL conducts on-site investigations and interviews
when selecting waste transportation and disposal contractors, as well as annual assessments ofthe contractors with a focus on compliance.7•

SMFL sets environmental goals under the three pillars of: 1) management of environmental risks; 2)
reduction of impacts on environment; and 3) promotion of environmental businesses. By following
the procedures of Plan, Do, Check, and Act (PDCA), the company is continuously improving its
environmental management activities. 8

Considering the above, Sustainalytics is of the opinion that SMFL possess adequate processes to manage
and mitigate environmental and social risks associated with the development of facilities for its
renewable energy and green buildings businesses.

Section 3: Impact of Use of Proceeds
Importance of expanding renewable energy introduction for Japan
In response to the accident at the Fukushima Daiichi Nuclear Power Plant following the Great East Japan
Earthquake in 2011, the Japanese government developed the “Fourth Strategic Energy Plan” 9 for 2030,
publicly announcing its commitment to reduced reliance on the nuclear power generation and accelerated
introduction of renewable energies (wind, solar, geothermal, biomass, and hydro). 10 In 2015, thegovernment issued the “Long-term Energy Supply and Demand Outlook,”11 in which it set out a target ofincreasing the ratio of renewable energies to the total power generation in Japan from the pre-Great East
Japan Earthquake level of 10% to 22-24% by 2030. In addition, in its “Fifth Strategic Energy Plan” 12developed in 2018, the government outlined the policy to make renewable energies a major source ofpower supply by 2050.
Furthermore, in light of the Paris Agreement under the United Nations Framework Convention on Climate
Change, the Japanese government made a commitment in 2015 to reducing greenhouse gas (GHG)
emissions by 26% by FY2030 compared to the FY2013 level.13 In “Japan's Long-term Strategy under the

7 Sumitomo Mitsui Finance and Leasing Co., Ltd., “Environmental Activities (Japanese)”, at:https://www.smfl.co.jp/corporate/csr/environment_strategy/active.html.
8 Sumitomo Mitsui Finance and Leasing Co., Ltd., “Environmental Objectives and Goals (Japanese)”, at:https://www.smfl.co.jp/corporate/csr/environment_strategy/purpose.html.
9 Ministry of Economy, Trade and Industry, “Strategic Energy Plan” (2014), at:https://www.enecho.meti.go.jp/en/category/others/basic_plan/pdf/4th_strategic_energy_plan.pdf.
10 Ministry of Economy, Trade and Industry, “Strategic Energy Plan” (2014), at:https://www.enecho.meti.go.jp/en/category/others/basic_plan/pdf/4th_strategic_energy_plan.pdf.
11
Ministry of Economy, Trade and Industry, “Long-term Energy Supply and Demand Outlook"(2015), at:
http://www.meti.go.jp/english/press/2015/pdf/0716_01a.pdf.
12 Ministry of Economy, Trade and Industry, “Strategic Energy Plan" (2018), at: https://www.meti.go.jp/english/press/2018/pdf/0703_002c.pdf.
13 UNFCCC, “Submission of Japan's Intended Nationally Determined Contribution”(INDC) (Japan’s Intended Nationally Determined Contribution), at:https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Japan%20First/20150717_Japan's%20INDC.pdf.
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Sumitomo Mitsui Finance and Leasing Green Bond Framework
Paris Agreement,”14 which was approved by the Cabinet in June 2019, the government set an ambitious
goal of reducing GHG emissions by 80% by 2050 and achieving virtually zero GHG emissions at the earliest
possible time in the second half of the 21st century. Given that approx. 90% of the country’s GHG
emissions are accounted for by energy-derived CO2 emissions,15 promoting the use of renewable energies
will contribute to the reduction of CO2 emissions and the achievement of these GHG reduction targets.
As a result of the rapidly increasing use of renewable energy sources largely attributed to new installationsof solar power since 2012, the ratio of renewable energy-derived electricity reached 16% in FY2017. 16 On
the other hand, due to challenging geographical conditions required, new installation of wind, hydro-, andgeothermal power generation capacity lags behind, with progress ratio against the governments
installation goals remaining about 30% to 40%, requiring the country to accelerate its efforts to promote
the use of these renewable energies.17
Based on the above, Sustainalytics considers that the use of proceeds for projects relating to SMFL’s
renewable energy power generation business will contribute to the expansion of Japan's renewableenergy-based power generation capacity as well as to the achievement of Japan’s GHG reduction andclimate change mitigation goals.

Importance of Green Buildings for reducing environmental footprint in Japan
Japan’s total GHG emissions were 1,244 million tonnes of carbon dioxide equivalents (Mt CO 2 eq.) in
FY2017. 18. Regarding the energy-related CO2 emissions from each sector, buildings (Commercial andother, and Residential) accounted for 35.6% in FY2017.19 With this background, the Japanese governmenthas been working on the strengthening of energy-saving measures for buildings, and adopted the Act for
the improvement of the Energy Consumption Performance of Buildings 20 in 2015. This Act introduced
mandatory compliance with energy efficiency standards for large-scale non-residential buildings, and thecoverage is planned to be expanded to include middle-scale and residential buildings.
Additionally, in line with Japan’s reduction GHG emissions commitments stated in the Intended Nationally
Determined Contributions (INDC)21, the Japanese government sets out a target to reduce CO2 emissions
by 40% in both the Commercial and other sector and Residential sector. It aims to achieve this target
through the implementation of measures such as improving newly-constructed buildings’ energy-saving
performance, renovating existing buildings, ensuring thorough energy management, and introducing
highly-efficient lighting equipment.
By financing buildings meeting the top two levels of nationally- and globally-recognized green building
certifications (LEED, CASBEE, DBJ Green building certification, BELS and BREEAM), SMFL’s investments
can help to mitigate building-associated negative environmental impacts by improving energy efficiency,
air quality, and water management. Overall, considering the large share of environmental footprint
generated by commercial and residential buildings, Sustainalytics views that SMFL’s investment in Green
Buildings will contribute to reducing Japan’s CO2 emissions from buildings and support the government’s
goal to reduce GHG emissions.
Alignment with/contribution to SDGs
The Sustainable Development Goals (SDGs) were set in September 2015 and form an agenda forachieving sustainable development by the year 2030. This green bond advances the following SDG goals
and targets:
Use of Proceeds
Category

SDG

SDG target

14 Ministry of the Environment, “Japan’s Long-term Strategy under the Paris Agreement(Japanese)” (2019), at:https://www.env.go.jp/press/111781.pdf.
15 Ministry of the Environment, “Japan’s National Greenhouse Gas Emissions in Fiscal Year 2017 (Final Figures) (Japanese)”, at:https://www.env.go.jp/earth/ondanka/ghg-mrv/emissions/results/JNGI2019_1.pdf.
16 Ministry of Economy, Trade and Industry, “Energy White Paper 2019 (Japanese)", at:https://www.enecho.meti.go.jp/about/whitepaper/2019pdf/whitepaper2019pdf_1_2.pdf.
17 Ministry of Economy, Trade and Industry, “Measures to Achieve Energy Mix 2030 - Energy Saving, Renewable Energy, etc. (Japanese)”, at:https://www.enecho.meti.go.jp/committee/council/basic_policy_subcommittee/022/pdf/022_006.pdf.
18
Ministry of the Environment, “Japan’s National Greenhouse Gas Emissions in Fiscal Year 2018, (2019), at: https://www.env.go.jp/press/814.pdf
19
Ministry of the Environment, “Japan’s National Greenhouse Gas Emissions in Fiscal Year 2018, (2019), at: https://www.env.go.jp/press/814.pdf
20 Ministry of Land, Infrastructure, Transport and Tourism, “Overview of the Building Energy Efficiency Act (Detailed Explanatory Session) (Japaneseonly)”, at: https://www.mlit.go.jp/common/001178846.pdf
21 Ministry of Foreign Affairs of Japan, “Intended Nationally Determined Contributions: GHG Emissions Reduction Target in FY2030”, at:https://www.mofa.go.jp/ic/ch/page1we_000104.html
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Renewable Energy

7. Affordable and Clean
EnergyGreen Buildings

9. Industry, Innovation andInfrastructure

7.2 By 2030, increase substantially theshare of renewable energy in the global
energy mix
9.4 By 2030, upgrade infrastructure andretrofit industries to make themsustainable, with increased resource-use
efficiency and greater adoption of clean
and environmentally sound technologies
and industrial processes, with allcountries taking action in accordance with
their respective capabilities

Conclusion
SMFL has developed a green bond framework under which it is planning to issue green bonds. The
proceeds will be allocated to expenditures and finance related to renewable energy power generation
businesses and green buildings. The renewable energy and green building projects described by SMFL as
Use of Proceeds within the Framework are recognized as having clear environmental benefits under the
GBP and Japan’s Green Bond Guidelines 2017. Sustainalytics views that these use of proceeds
categories are aligned with SMFL’s environmental strategy and contribute to the promotion of the UN
Sustainable Development Goals 7 and 9, as well as the achievement of GHG emission reduction goals set
by the Japanese government.
SMFL’s framework displays market practice considering that i) the projects evaluation and selection
process will be conducted by the Treasury Dept. and the departments related to environmental and energy
business and real estate business, ii) the proceeds will be allocated and tracked by the Treasury Dept.,
and iii) it is committed to annual reporting on the use of proceeds and environmental impacts. In addition,
SMFL intends to receive a compliance review after the issuance of green bonds. Sustainalytics views thisincreased transparency positively.
Based on the above, Sustainalytics is of the opinion that SMFL’s Framework is robust, credible, and in linewith the GBP and Japan’s Green Bond Guidelines 2017.

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Sumitomo Mitsui Finance and Leasing Green Bond Framework

Appendices
Appendix 1: Framework Overview
For the purpose of issuing green bonds, SMFL has developed the following framework which addresses
the four key core components of the GBP: use of proceeds, project evaluation and selection process,management of proceeds, and reporting, in January 2020. The framework belongs to SMFL.

1. Use of proceeds
The proceeds from green bond issuance will be allocated to new or existing expenditures and financethat meet one of the following eligibility criteria. If the project is carried out by SMFL MIRAI Partners
Co., Ltd., the subsidiary is eligible to receive loans financed by the proceeds.
Eligibility criteria
Criterion 1 － Renewable energy
Expenditures and finance related to purchasing, developing, constructing, or operating power
generation facilities, as well as investment and lending relating to any of the following renewableenergy power generation projects from (a) to (e):However, eligible projects must (i) be launched within 24 months prior to the date of green bondissuance, or (2) expected to be launched after the date of green bond issuance.
(a) Solar power generation(b) Wind power generation(c) Biomass power generation
Limited to projects that use sustainable feedstock or waste biomass resources-.
(d) Geothermal power generation(e) Small hydropower generation
Limited to projects with a capacity of 25 MW or less
Criterion 2 － Green Buildings
Expenditures and finance related to land acquisition costs, planning and development costs,
construction costs, renovation costs, and others for assets that have acquired or are expected toacquire at least one of the following green building certifications (a) to (e):However, eligible projects must (i) have acquired environmental certification within 24 months prior to
the date of green bond issuance, or (ii) expected to acquire environmental certification after the dateof green bond issuance.
(a) LEED Platinum or Gold(b) CASBEE (CASBEE for Buildings / CASBEE for Real Estate) S or A(c) DBJ Green building certification 5 or 4 stars(d) BELS 5 or 4 stars(e) BREEAM Outstanding or Excellent

2. Process for project evaluation and selection
2.1 Application of Eligibility and Exclusionary Criteria in Project Selection.
Eligible projects will be assessed and selected according to the eligibility criteria by the Treasury Dept.
and the departments related to environmental and energy business and real estate business. Finalapproval of the green bond issuance will be executed by the Officer in charge of the Treasury Dept.
2.2 Environmental Objectives
SMFL promotes initiatives to reduce environmental impacts through its businesses by setting out
environmental goals based on its environmental policy. For example, we contribute to the realizationof a circular society by promoting the reuse and recycling of machineries and equipment through thelease of facilities for solar and other renewable energy power generation as well as through the usedequipment business. The green bond issuance will help achieve our environmental goal of promoting
environmental businesses through our own business activities.
2.3 Process to Mitigate Environmental and Social Risks
Regarding negative impacts of renewable energy projects on surrounding areas, SMFL will confirm
within the project selection process, that environmental laws and regulations, ordinances, guidelines,
etc. are complied with and that explanations are provided to local residents, and construction ordevelopment will be carried out with the consent of them prior to the construction or development.

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3. Management of Proceeds
3.1 Proceeds allocation plan
To be decided based on the status and nature of the project each time green bonds are issued inaccordance with the framework.
3.2 Tracking and management until the maturity, management of total amount, and frequency
The Treasury Dept. will be responsible for allocating and managing the green bond proceeds so that allof them are allocated to projects that meet the eligibility criteria. The Treasury Dept. will check the useof proceeds on a quarterly basis, using an internal file. If the balance of eligible projects falls below theoutstanding amount of green bonds, SMFL will select other projects that are compliant with theeligibility criteria for re-allocation.
3.3 Management of unallocated proceeds
Green bond proceeds will be held in cash or cash equivalents until they are allocated to projects thatmeet the eligibility criteria.
3.4 Retention of relevant documents
Documents relevant to the green bond issuance will be retained for an appropriate period of time inaccordance with internal document retention rules.

4. Reporting
4.1 Allocation Reporting
Until full allocation, SMFL will provide and keep readily available, information on the allocation ofproceeds on its website. This information will be updated at least annually until full allocation, and asnecessary thereafter in the event of a change regarding the allocation of proceeds. This information
includes description of funded projects, amount of allocated and unallocated proceeds, while taking
confidentiality obligations into account.
4.2 Impact Reporting
Until full allocation, SMFL will annually report on the following information for funded projects on its
website.
Renewable Energy•
Amount of power generated (kWh: theoretical value based on output standard), and CO2
emissions (t-CO2: theoretical value based on output standard) reduced
Green Building•
The type and level of green building certification

5. Compliance Review
SMFL will engage Sustainalytics to review the issuance of green bond under the framework in order toassess the compliance with the framework. Sustainalytics will provide a report of the review annually
until full allocation, which SMFL will publish on its website. In an unlikely event that the annual review
identifies allocations made to activities that do not comply with the green bond eligibility criteria, SMFL
will reallocate the corresponding amounts to different projects that are compliant with the framework’s
eligibility criteria.

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Appendix 2: Comparison of Referenced Green Building Certification Schemes
LEED22BREEAM23

CASBEE
Certification24

Background

Leadership in
Energy andEnvironmental
Design (LEED) is a
US Certification
System forresidential andcommercial
buildings usedworldwide. LEED
was developed by
the non-profit U.S.
Green Building
Council (USGBC)
and covers thedesign,construction,
maintenance andoperation ofbuildings.

BREEAM (Building
Research
Establishment
Environmental
Assessment
Method) was firstpublished by the
Building Research
Establishment(BRE) in 1990.
Based in the UK.
Used for new,refurbished andextension ofexisting buildings.

Certification levels

CertifiedSilverGold
Platinum

Pass
Good
Very Good
Excellent
Outstanding

The
Comprehensive
Assessment
System for Built
Environment
Efficiency(CASBEE)
Certification is agreen building
certification
scheme in Japan,
which a third party
certifies theenvironmental
performance ofbuildings. The
certification
scheme includes,
based on types ofbuildings: CASBEE
for Buildings,
CASBEE for Real
Estate, andCASBEE for
Housing.
C (Poor)B- (Slightly Poor)
B+ (Good)A (Very Good)S (Excellent)* 4-gradeevaluation for
CASBEE for Real
Estate excluding C
rank

DBJ
Green
Building
Certification25
DBJ Green
Building
Certification
Programme waslaunched by
Development Bankof Japan in 2011
and is operated
together withJapan Real Estate
Institute(JREI).The
programme isrecognized as oneof regional
standards.The
certification isavailable for officebuildings, logistics,
residential & retailfacilities.

BELS26

1 Star (Properties
with satisfactory
environmental &social awareness)

1 Star
2 Stars
3 Stars
4 Stars
5 Stars

The BuildingHousing Energyefficiency
Labelling System(BELS) is anenergyperformance label,issued underguidelines
established by
Japan’s Ministry ofLand,
Infrastructure,
Transport, andTourism. The BELS
certification
scheme evaluates
primary energy
consumption inorder to measureperformance ofenergyconservation.

2 Stars (Properties
with highenvironmental &social awareness)
3 Stars (Properties
with excellent
environmental andsocial awareness)
4 Stars (Properties
with exceptionallyhighenvironmental &social awareness)

Areas of
Assessment:
Environmental
Project
Management

Integrative
process, which
requires, from the
beginning of thedesign process,Management(Man) addresses
various aspects:
projectmanagement,

CASBEE assesses
two main factors:
inside and outside
the building site,which translate

5 Stars (Properties
with the best classenvironmental &social awareness)
Evaluation of DBJ
Green Building
Certification
includesconstruction

None

22 U.S. Green Building Council, “Green building leadership is LEED”, at: https://new.usgbc.org/leed.

Building Research Establishment, “BREEM”, at: https://www.breeam.com/
Institute for Building Environment and Energy Conservation, “CASBEE certification scheme (Japanese only)”, at:
http://www.ibec.or.jp/CASBEE/certification/certification.html.
25 Development Bank of Japan, Japan Real Estate Institute (JREI), “DBJ Green Building”, at: http://igb.jp/en/index.html.
26 Association for Housing Performance Evaluation & Labeling, “Building-Housing Energy-efficiency Labelling System Building Energy-efficiency
Performance Labeling System (Japanese only)“, at: https://www.hyoukakyoukai.or.jp/bels/bels.html.
23
24

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Areas of
Assessment:
Environmental
Performance of
the Building

Requirements

the identificationand creation ofsynergies between
the various projectstakeholders
regarding theconstruction
choices and thetechnical systems.

deployment,
minimalenvironmental
disturbanceworksite andstakeholder
engagement.

Energy andatmosphere•
Sustainable
Sites•
Location andTransportation•Materials andresources•
Water
efficiency•
Indoorenvironmental
quality•Innovation in
Design• Regional Priority•••

into Q (Built
Environment
Quality) and, L(Built Environment
Load),
respectively.
* The above are
not applied to
CASBEE for Real
EstateEnergyLand Use andEcology•
Pollution•
Transport•
Materials
•
Water
•
Waste
•
Health andWellbeing• Innovation• Energy Efficiency• Resource
efficiency• Localenvironment• Indoor
environment
*
Areas
for
assessment
of
CASBEE for Real
Estateareenergy/GHG, water,
resource,
biodiversity, indoor
environment

specifications,environmental
features as well as
the following
factors:- Disasterprevention andanticrime
measures;- Tenants’ comfort
and convenience;- Harmony with thesurrounding
environment; Collaboration withstakeholders(including tenants
and investors); and- Environmental
Investor Relations
activities.
Assessment
include three areas
with someexamples offollowing
subcategories:•

Energyefficiency

Ecology• Energy
conservation• Water resources
conservation• 3R (Reduce,
Reuse andRecycle)• Use of renewableenergyRisk management&
amenities/diversity• Security & Safetyof tenant users• Convenience oftenant users

Prerequisites(independent oflevel ofcertification) +Credits withassociated points

Prerequisites
depending on thelevels ofcertification +Credits withassociated points

These points arethen added
together to obtain

This number ofpoints is thenScore-based
performance level.
CASBEE uses theBEE (Built
Environment
Efficiency) as its
assessment
indicator, which is
calculated from Q

Community &partnership• Landscape• Biodiversity •Relation with thelocal community •Owner&stakeholder
relationshipScore-based
performance level
Assessment
structurecomposed of thefollowing threepillars:
1. Areas ofassessment

Score-based
performance level.
The BELS score isbased on the
Building Energy
Index, obtained bycomparing theenergyconsumption of a12

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Sumitomo Mitsui Finance and Leasing Green Bond Framework
the LEED level ofcertification
There are several
different rating
systems within
LEED. Each rating
system isdesigned to apply
to a specific sector(e.g. New
Construction,
Major Renovation,
Core and Shell
Development,
Schools-/Retail/Healthcare New
Construction and
Major
Renovations,
Existing Buildings:
Operation and
Maintenance).

weighted by item27
and gives a
BREEAM level ofcertification, which
is based on theoverall scoreobtained(expressed as apercentage).
Majority of
BREEAM issues
are flexible,
meaning that theclient can choose
which to comply
with to build their
BREEAM
performance
score.
BREAAM has twostages/ audit
reports: a‘BREEAM DesignStage’ and a ‘Post
Construction
Stage’, withdifferent
assessment
criteria.

(Built Environment
Quality) as thenumerator and L(Built Environment
Load) as thedenominator. Q
and L are obtained
through theclassification andrearrangement of
the four areas ofassessment.
Buildings may
receive ranks
ranging from C(poor) to S
(excellent), in
order of increasing
BEE value.
For authorization,a building mustreceive a reportfrom the CASBEE
Certification
system, which isafterwards
assessed by the
local government.
* CASBEE for Real
Estate does not
use BEE, additional
point system.
Certification will
not be given, if
required item are
not met.

The features andcharacteristics ofthe green building
will be classified
into three maincategories:
ecology, risk
management &amenities/diversit
y, and community& partnership.
Each main area
consists of fivesubcategories andhas a full score of
100 points. The
entire assessment
consists of 58
questions.
2. Comprehensive
assessment
Among theconventional
assessment
points, someparticularimportance is
attached to theowner operation of
the property, suchas, in the risk
management part,
disasterprevention &anticrime
measures, and in
the community &partnership part,
local environmentawarenessinitiatives.

building to thestandard primaryenergyconsumption of
the building type in
official guidelines.
A two-star rating isequivalent tomeeting existingenergyconservation
standards, withhigher star ratings
implying greatersavings.
The score is
calculated by anaccredited third
party.

3. Innovation point
systemAn additional point
system is adopted
to reflect
exceptionallyinnovative
initiatives in eachsubcategory. Suchinitiatives need not
fit in the scope ofthe respective
questions.
JREI will conduct
on the groundreview of building
performance on
the indicators
above, and acommittee set in
27 BREEAM weighting: Management 12%, Health and wellbeing 15%, Energy 19%, Transport 8%, Water 6%, Materials 12.5%, Waste 7.5%, Land Useand ecology 10%, Pollution 10% and Innovation 10%. One point scored in the Energy item is therefore worth twice as much in the overall score as
one point scored in the Pollution item13

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Sumitomo Mitsui Finance and Leasing Green Bond Framework
JREI will decide
the result ofcertification rank.
Performance
display
30
29

28

Qualitative
considerations

Widely recognised
internationally, andstrong assuranceof overall quality.

Worldwide
recognition
and application.

CASBEE iscontinuously
developed basedon industrygovernmentacademia
collaboration
under the supportof Ministry ofLand,
Infrastructure,
Transport andTourism. In Japan,
many local
governments havemade CASBEE
assessment
results mandatory
for building
permits.

31

In addition to LEEDand CASBEE, DBJ
Green Buildings
Certification
Programme isconsidered as oneof the green
building standards
in Japan.
According to its
website, as ofMarch 2019, 695
properties inJapan are certified
by theprogramme.32

BELS is alignedwith official
government
standards.
The scheme
assesses only
energyperformance,
without any
broaderconsideration ofholistic
environmental
factors.

Compared tosimilar tools
availableinternationally,
CASBEE
displays a uniqueandsimple structure.

28

U.S. Green Building Council, “Green building leadership is LEED”, at: https://new.usgbc.org/leedInstitute for Building Environment and Energy Conservation, “Method of Evaluation and Built Environment Efficiency (BEE)”, at:
http://www.ibec.or.jp/CASBEE/CASBEE_outline/method.html.
30 Development Bank of Japan, “DBJ Green Building”, at: http://www.dbj.jp/en/pdf/service/finance/g_building/gb_presentation.pdf.
31 Institute for Building Environment and Energy Conservation, “Display example of BELS (Japanese only)”, at:https://www.hyoukakyoukai.or.jp/bels/pdf/170401bels_07.pdf.
32 Development Bank of Japan, Japan Real Estate Institute (JREI), “DBJ Green Building”, at: http://igb.jp/en/index.html.
29

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Appendix 3: Green Bond / Green Bond Programme - External Review Form
Section 1. Basic Information
Issuer name:

Sumitomo Mitsui Finance and Leasing Company,
LimitedGreen Bond ISIN or Issuer Green Bond
Framework Name, if applicable: [specify as
appropriate]

Sumitomo Mitsui Finance and Leasing Company,
Limited Green Bond Framework

Review provider’s name:Completion date of this form:

Sustainalytics
February 12, 2020

Publication date of review publication: [whereappropriate, specify if it is an update and add
reference to earlier relevant review]

Section 2. Review overview
SCOPE OF REVIEWThe following may be used or adapted, where appropriate, to summarise the scope of the review.
The review assessed the following elements and confirmed their alignment with the GBPs:☒

Use of Proceeds☒

Process for Project Evaluation and
Selection☒

Management of Proceeds☒

Reporting

ROLE(S) OF REVIEW PROVIDER☒

Consultancy (incl. 2nd opinion)☐

Certification☐

Verification☐

Rating☐Other (please specify):
Note: In case of multiple reviews / different providers, please provide separate forms for eachreview.

EXECUTIVE SUMMARY OF REVIEW and/or LINK TO FULL REVIEW (if applicable)
Please refer to Evaluation Summary above.

Section 3. Detailed review
Reviewers are encouraged to provide the information below to the extent possible and use the comment
section to explain the scope of their review.

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1. USE OF PROCEEDS
Overall comment on section (if applicable):
The eligible categories for the use of proceeds, Renewable Energy and Green Buildings, are aligned withthose recognized by the Green Bond Principles. Sustainalytics considers that SMFL’s eligible projects willlead to positive environmental impacts and advance the UN Sustainable Development Goals 7 and 9.

Use of proceeds categories as per GBP:☒

Renewable energy☐

Energy efficiency☐

Pollution prevention and control☐

Environmentally sustainable management ofliving natural resources and land use☐

Terrestrial and aquatic biodiversity
conservation☐

Clean transportation☐

Sustainable water and wastewater
management☐

Climate change adaptation☐

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

Green buildings☐

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

Other (please specify):

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

2. PROCESS FOR PROJECT EVALUATION AND SELECTION
Overall comment on section (if applicable):
Eligible projects are evaluated and selected by the Treasury Dept. and the departments related toenvironmental and energy business and real estate business, and finally approved by the Officer in chargeof the Treasury Dept. Sustainalytics considers that SMFL’s evaluation and selection process is alignedwith market practice.

Evaluation and selection☒

Credentials on the issuer’s environmental
sustainability objectives☐

Documented process to determine thatprojects fit within defined categories☒

Defined and transparent criteria for projects
eligible for Green Bond proceeds☐

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

Summary criteria for project evaluation andselection publicly available☐

Other (please specify):☒

In-house assessment

Information on Responsibilities and Accountability☒

Evaluation / Selection criteria subject toexternal advice or verification

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Sumitomo Mitsui Finance and Leasing Green Bond Framework☐

Other (please specify):

3. MANAGEMENT OF PROCEEDS
Overall comment on section (if applicable):
The proceeds are allocated and managed by the Treasury Dept. The allocation of the proceeds are tracked
and managed quarterly using an internal file. If the balance of eligible assets falls below the outstanding
amount of green bonds, other assets will be selected for re-allocation. Pending full allocation to eligible
green projects, the unallocated proceeds will be held in cash or cash equivalents. This is in line withmarket practice.

Tracking of proceeds:☒

Green Bond proceeds segregated or tracked by the issuer in an appropriate manner☒Disclosure of intended types of temporary investment instruments for unallocatedproceeds☐

Other (please specify):

Additional disclosure:☐

Allocations to future investments only☒

Allocations to both existing and future
investments☐

Allocation to individual disbursements☐

Allocation to a portfolio of
disbursements☐

Disclosure of portfolio balance of
unallocated proceeds☐

Other (please specify):

4. REPORTING
Overall comment on section (if applicable):
SMFL plans to report on allocation and positive environmental impacts of the proceeds annually on thecompany’s website. The disclosure includes description of funded projects, amount of allocated andunallocated proceeds, and relevant qualitative and quantitative impact metrics. SMFL also plans toundertake a compliance review after the green bond issuance until full allocation. Sustainalytics views
SMFL’s allocation and impact reporting along with its commitment to receiving a compliance review to
be aligned with market best practice.

Use of proceeds reporting:☐

Project-by-project☐

On a project portfolio basis☒

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

Information reported:17

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Sumitomo Mitsui Finance and Leasing Green Bond Framework☒

Allocated amounts☐

Other (please specify):☐

Green Bond financed share of total
investment☐

Semi-annual

Frequency:☒

Annual☒Other (please specify): in theevent of changes in the allocation
status after full allocation

Impact reporting:☐

Project-by-project☒

On a project portfolio basis☐

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

Frequency:☒

Annual☐Other (please specify):☐

Semi-annual

Information reported (expected or ex-post):☒

GHG Emissions / Savings☐

Energy Savings☐

Decrease in water use☒

Other ESG indicators (please
specify): Amount of power
generated (kwh), types andlevels of green building
certifications

Means of Disclosure☐

Information published in financial report☐

Information published in ad hoc☒
documents
Reporting reviewed (if yes, please specify which parts of the reporting are subject toexternal review):☐☐

Information published in sustainability
reportOther (please specify): SMFL website

Where appropriate, please specify name and date of publication in the useful links section.

USEFUL LINKS (e.g. to review provider methodology or credentials, to SMFL’s documentation, etc.)

SPECIFY OTHER EXTERNAL REVIEWS AVAILABLE, IF APPROPRIATE
Type(s) of Review provided:☐

Consultancy (incl. 2nd opinion)☐

Certification☐

Verification / Audit☐

Rating☐Other (please specify):18

Second-Party Opinion

Sumitomo Mitsui Finance and Leasing Green Bond Framework
Review provider(s):Date of publication:

ABOUT ROLE(S) OF INDEPENDENT REVIEW PROVIDERS AS DEFINED BY THE GBPi.

Second Party Opinion: An institution with environmental expertise, that is independent from the issuer
may issue a Second Party Opinion. The institution should be independent from the issuer’s adviser for its
Green Bond framework, or appropriate procedures, such as information barriers, will have been
implemented within the institution to ensure the independence of the Second Party Opinion. It normallyentails an assessment of the alignment with the Green Bond Principles. In particular, it can include anassessment of the issuer’s overarching objectives, strategy, policy and/or processes relating toenvironmental sustainability, and an evaluation of the environmental features of the type of projects
intended for the Use of Proceeds.

ii.

Verification: An issuer can obtain independent verification against a designated set of criteria, typicallypertaining to business processes and/or environmental criteria. Verification may focus on alignment withinternal or external standards or claims made by the issuer. Also, evaluation of the environmentally
sustainable features of underlying assets may be termed verification and may reference external criteria.
Assurance or attestation regarding an issuer’s internal tracking method for use of proceeds, allocation offunds from Green Bond proceeds, statement of environmental impact or alignment of reporting with the
GBP, may also be termed verification.

iii.

Certification: An issuer can have its Green Bond or associated Green Bond framework or Use of Proceeds
certified against a recognised external green standard or label. A standard or label defines specificcriteria, and alignment with such criteria is normally tested by qualified, accredited third parties, which
may verify consistency with the certification criteria.

iv.

Green Bond Scoring/Rating: An issuer can have its Green Bond, associated Green Bond framework or a
key feature such as Use of Proceeds evaluated or assessed by qualified third parties, such as specialised
research providers or rating agencies, according to an established scoring/rating methodology. The
output may include a focus on environmental performance data, the process relative to the GBP, oranother benchmark, such as a 2-degree climate change scenario. Such scoring/rating is distinct fromcredit ratings, which may nonetheless reflect material environmental risks.

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Disclaimer© Sustainalytics 2020. All rights reserved.
The intellectual property rights to the information contained herein is vested exclusively in Sustainalytics.
No part of this deliverable may be reproduced, disseminated, comingled, used to create derivative works,
furnished in any manner, made available to third parties or published, parts hereof or the information
contained herein in any form or in any manner, be it electronically, mechanically, through photocopies orrecordings without the express written consent of Sustainalytics.
As the information herein is based on information made available by the issuer, the information isprovided “as is” and, therefore Sustainalytics does not warrant that the information presented in thisdeliverable is complete, accurate or up to date, nor assumes any responsibility for errors or omissions
and Sustainalytics will not accept any form of liability for the substance of the deliverable and/or any
liability for damage arising from the use of this deliverable and/or the information provided in it. Anyreference to third party names is for appropriate acknowledgement of their ownership and does notconstitute a sponsorship or endorsement by such owner.
Nothing contained in this deliverable shall be construed as to make a representation or warranty on thepart of Sustainalytics, express or implied, regarding the advisability to invest in companies, selection ofprojects or make any kind of business transactions. It shall not be construed as an investment advice (asdefined in the applicable jurisdiction), nor be interpreted and construed as an assessment of the issuer’s
economic performance, financial obligations nor its creditworthiness.
The issuer is fully responsible for certifying and ensuring the compliance with its commitments, for theirimplementation and monitoring.
This document has been written in the Japanese language and translated to English language. In case of
discrepancies between the Japanese language and translated versions, the Japanese language version
shall prevail.

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Sustainalytics
Sustainalytics is a leading independent ESG and corporate governance research, ratings and analytics
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