Framework Overview and Second-Party Opinion

Sekisui House Reit, Inc. Green Bond
Evaluation Summary
Sustainalytics is of the opinion that the Sekisui House Reit, Inc. (“SHR”) Green Bond
Framework is credible and impactful, and aligns with the four core components of theGreen Bond Principles 2018. This assessment is based on the following:
The eligible category for the use of proceeds,
green buildings, is recognized by the Green Bond Principles 2018.
SHR will use the DBJ Green Building Certification or the CASBEE
Certification Rank to determine the eligibility of green buildings.
Sustainalytics considers that the Eligible Green Projects will lead topositive environmental impacts and advance the UN Sustainable
Development Goals (SDGs), specifically SDG 7 and 11.
Sustainability Committee willoversee SHR’s internal process in evaluating and selecting projects.
The Committee will be chaired by the president and representative
director and will consist of full-time directors from Sekisui House
Asset Management, Ltd. This is in line with market best practice.
SHR has an internal process in place
to track and monitor the amount of allocation of proceeds as well as
outstanding green bonds. The unallocated proceeds will be held incash or cash equivalents. This is in line with market practice.
SHR commits to report on allocation of proceeds on its
website on an annual basis. The allocation reporting will include thetotal acquisition price of Eligible Green Projects, the total amount of
the outstanding green bonds, and management assertions withregards to the allocation of green bond proceeds. Sustainalytics
considers this in line with the market best practice. The impact
reporting will include relevant metrics. Sustainalytics views SHR’s
impact reporting to be in line with market practice.

Alignment with Japan’s Green Bond Guidelines 2017
Sustainalytics is of the opinion that the SHR Green Bond Framework is in line with the
ICMA Green Bond Principles 2018. In addition, Sustainalytics has also assessed thealignment between the SHR Green Bond Framework and Japan’s Green Bond
Guidelines, which communicate processes and recommendations for credible green
bond issuance.

© Sustainalytics 2018

Evaluation dateNovember, 2018

Issuer Location

Tokyo, Japan

Report Sections
Introduction………………………………………………..2
Overview of Issuer………………………..…………..3
Framework Overview…………………………………4
Sustainalytics’ Opinion……………….…………….6
Appendices…………………………………………………11

For inquires, contact the Sustainable
Finance Solutions project team:Ankita Shukla (New York)
Project Manager
ankita.shukla@sustainalytics.com(+1) 617 603 3329
Mayur Mukati (Toronto)
Project Support
mayur.mukati@sustainalytics.com(+1) 647 936 5656
Wakako Mizuta (Tokyo)
Project Manager
wakako.mizuta@sustainalytics.com(+81) 3 4578 7516

Framework Overview and Second-Party Opinion

Sekisui House Reit Green Bond

Introduction
Sekisui House Reit, Inc. (“SHR”) has developed the SHR Green Bond Framework (the “framework”) under which
it is planning to issue multiple green bonds and use the proceeds for the acquisition of new and/or existing
green buildings and/or toward refinancing the existing loan/investment corporation bonds that has alreadybeen allocated to green buildings.
SHR engaged Sustainalytics to review the SHR Green Bond Framework and provide a second-party opinion on
the alignment of the green bond with the Green Bond Principles 2018 (the “GBP”), as administered by theInternational Capital Market Association (the “ICMA”),1 and on the framework’s environmental credentials.
As part of this engagement, Sustainalytics held conversations with various members of SHR's asset manager,
Sekisui House Asset Management Ltd. (“SHAM”) including Finance Department and Business Strategy
Department, which is a department dedicated to ESG promotion to understand the sustainability impact of
their business processes and planned use of proceeds, as well as management of proceeds and reporting
aspects of SHR’s green bonds. Sustainalytics also reviewed relevant public documents and non-public
information.
This document contains two sections: Framework Overview – summary of the SHR Green Bond Framework;
and Sustainalytics’ Opinion – an opinion on the Framework.

Overview of Issuer
SHR is a Japan-based company that operates as a real estate investment trust having residential properties
and office buildings as its core assets. The asset manager of the company, SHAM, is a subsidiary of Sekisui
House, Ltd. (“Sekisui House”), one of the leading homebuilders in Japan.
Sekisui House made a “Declaration of Sustainability” positioning sustainability as a management criterion in2005. Later, Sekisui House announced the “Sustainable Vision” and the Eco-First Promise and has beenpromoting sustainable management which is a pioneering idea in Japan at the time. As one of the leading
homebuilders in Japan, Sekisui House is actively promoting the initiatives to the SDGs, which are considered
as a common goal for the international community, especially aiming to contribute to the achievement of
national objectives for the reduction of greenhouse gas emissions in the residential sector.
SHAM invests on SHR’s philosophy of “provision of high quality social capital” and “maximization of unitholder
value” along with the “Sustainable Vision” and initiatives oriented toward “the realization of a sustainable
society” shared with Sekisui House.2
SHR is planning to issue green bonds aiming further promotion of real estate investment management withconsiderations given to environmental, social and governance (ESG) based on its Sustainability Policy.

1 ICMA’s Green Bond Principles 2018: https://www.icmagroup.org/green-social-and-sustainability-bonds/green-bond-principles-gbp/
2 Sekisui House Sustainability Report 2018: https://www.sekisuihouse.co.jp/english/sr/datail/__icsFiles/afieldfile/2018/07/25/all-A4.pdf

2

Framework Overview and Second-Party Opinion

Sekisui House Reit Green Bond

Framework Overview
For the purpose of issuing green bonds, SHR has developed the following framework which addresses thefour core components of GBP: use of proceeds, project evaluation and selection process, management ofproceeds, and reporting. The framework belongs to SHR, and a summary overview has been provided below.

Use of Proceeds
The proceeds of the green bond will be allocated to acquire the new and/or existing buildings that meet thefollowing eligibility criteria (‘Eligible Green Projects’) and/or to refinance the existing loan/investment
corporation bonds which have been allocated to Eligible Green Projects.
Eligibility Criteria
1.

Green Buildings

To be eligible for green bond proceeds, an Eligible Green Project must meet the following eligibility criteria:•
Buildings that have a valid third-party certification described below on the date of the green bondissuance and/or that are expected to receive the certification post issuance. At the time of reporting,buildings which meet the same criteria as of the end of March of each year:- 3, 4, or 5 Stars under the DBJ Green Building Certification, or- A or S rank under the Comprehensive Assessment System for Built Environment Efficiency(CASBEE) certification for real estate.
The current validity periods of the third-party certifications are two or three years for DBJ Green Building
Certifications and five years for CASBEE certifications for real estate from the date of receiving respective
certifications. These validity periods, however, may change when SHR obtains certifications or recertificationsin the future.

Project Evaluation and Selection Process
Application of Eligibility Criteria in Project Selection
Eligible Green Projects will be evaluated and selected by a Sustainability Committee, which is chaired by thepresident and representative director and includes all full-time directors of SHAM, in accordance with SHR
and SHAM’s Sustainability Policy and the Eligibility Criteria.
Sustainability Objectives
SHR and SHAM have established a Sustainability Policy, which is adhered to and put into practice throughout
its business activities. SHAM’s Sustainability Committee, meanwhile, sets targets, verifies compliance
therewith, quantifies the effects of the measures taken, and devises improvement actions, on a periodic basis.
SHAM has also created a department dedicated to ESG promotion in order to enhance its ESG initiatives.
Sustainability Policy
SHR and SHAM’s Sustainability Policy states the following:•
We implement in-house training for the purpose of enhancing knowledge with regard to ESG-related laws,
regulations and rules, and abide by such laws, regulations and rules in conducting real estate investment
management with considerations given to ESG.
•
To plan for the achievement of a low-carbon society and actively promote the efficient use of energy, we
have set reduction targets for energy use at the properties held by SHR in accordance with laws andregulations and shall follow a plan-do-check-act (PDCA) cycle to achieve the targets.
•
We shall actively contribute to the creation of a recycling-based society by promoting measures andpublic awareness activities for reducing water use and implementing the three Rs (reduce, reuse andrecycle) in relation to resources.
•
In accordance with the "Gohon no ki" (Five Trees) Planning promoted by Sekisui House, we conduct
maintenance and management of planting and other greenery measures, centering on tree species with3

Framework Overview and Second-Party Opinion

Sekisui House Reit Green Bond

•

•
•
•
•

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.
We shall provide high quality homes where residents of residential properties can lead their lives in
comfort, and convenient, safe and comfortable spaces that contribute to enhancing the productivity oftenant companies in commercial properties.
We will also promote the installation of facilities to ensure that residents can live safely and securely inthe event of a disaster and the provision of “sustainable bases of operation” to tenant companies withconsiderations given to their business continuity plans (BCPs).
We create activity and prosperity by cooperating with local events and through other means, in an effort
to find common interests with the regions and communities as well as to invigorate them.
To implement initiatives based on this policy, we shall strive to cooperate with property managementcompanies and other partners, residents of residential properties, tenant companies and facility users ofcommercial properties, and other stakeholders.
We adopt the perspectives of green procurement and corporate social responsibilities in our investment
and management operations in order to promote ESG awareness through our supply chains.
While regularly monitoring our action measures, etc. regarding ESG, we disclose information concerning
sustainability performance on our website and through other media. In addition, we will continue ourefforts to acquire environmental certification and recognition from outside assessment agencies.

Process to Mitigate Environmental and Social Risks
To address environmental and social risks, the Sustainability Committee plans to identify and manage
significant potential environmental and social risks inherent in Eligible Green Projects, as well as reviewing
data pertaining to environmental and social issues.

Management of Proceeds
SHR plans to allocate the net proceeds of the green bonds to Eligible Green Projects. As long as the green
bonds are outstanding, SHR will conduct management to ensure that the total amount of the outstanding
green bonds does not exceed the total acquisition price of the Eligible Green Projects.
As long as the green bonds are outstanding, SHR will internally track and manage the allocated proceeds on
a portfolio basis. If the total or part of the proceeds of the green bonds are not immediately allocated to Eligible
Green Projects, SHR will specify the unallocated proceeds and, pending their allocation to Eligible Green
Projects, maintain total or part of the unallocated proceeds in cash or cash equivalents.

Reporting
Allocation Reporting
SHR will disclose on its website that the net proceeds of the green bonds are fully allocated to Eligible Green
Projects in accordance with its Green Bond Framework, and that the total amount of the outstanding green
bonds does not exceed the total acquisition price of Eligible Green Projects. While the green bonds areoutstanding, SHR will annually report the total acquisition price of Eligible Green Projects and the total amountof the outstanding green bonds, as of the end of March. It may also receive assertions by SHAM's president
and representative director that the net proceeds have been allocated to Eligible Green Projects.

4

Framework Overview and Second-Party Opinion

Sekisui House Reit Green Bond

Impact Reporting
SHR will disclose the following quantitative environmental performance indicators annually on its website, asof the end of March, as long as the green bonds are outstanding:•
The number of the buildings of Eligible Green Projects•
The levels of certifications acquired by respective Eligible Green Projects•
The total floor area of Eligible Green Projects•
The following quantitative indicators of Eligible Green Projects (where SHR has energy control authority)- Electricity consumption- Water consumption- CO2 emissions

5

Framework Overview and Second-Party Opinion

Sekisui House Reit Green Bond

Sustainalytics’ Opinion
Section 1: Sustainalytics’ Opinion on the SHR Green Bond Framework
Summary
Sustainalytics is of the opinion that the SHR Green Bond Framework is credible and impactful, and aligns withthe four core components of the Green Bond Principles 2018. Sustainalytics highlights the following elementsof SHR’s Green Bond Framework:
•

•

•

•

Use of Proceeds:- The green use of proceeds category, green buildings, is recognized for having clear
environmental benefits by the Green Bond Principles 2018.
- Sustainalytics is of the opinion that by selecting buildings with credible third-party certifications(DBJ Green Building Certification and CASBEE) with a focus on the top-tiers of certification, SHR
is allocating green bond proceeds to buildings with clear environmental impacts (please refer toAppendix 1).
- SHR’s look-back period of Eligible Green Projects are up to three years for DBJ Green Building
Certifications and five years for CASBEE certifications, from the date of receiving respective
certifications. Sustainalytics acknowledges that the market may view the 24-month lookback
period as market practice, however, it also views the SHR’s lookback period as acceptableconsidering that green buildings will sustain positive environmental impacts.
Project Evaluation and Selection:- The process of evaluating and selecting the assets, in accordance with the Eligibility Criteria andSustainability Policy, are overseen by a dedicated Sustainability Committee. The Committee will
be chaired by a C-level executive (president and representative director) with participation from
SHAM’s full-time directors.
- Sustainalytics considers that the C-level representation is in line with market best practice.
Management of Proceeds:- SHR commits that net proceeds from the green bonds will be fully allocated to the Eligible Green
Projects or to the refinancing of existing loan/investment corporation bonds, which havepreviously been allocated to the Eligible Green Projects. Pending the allocation of the net green
bond proceeds to Eligible Green Projects, SHR will track and maintain an unallocated green bondproceeds in cash and/or cash equivalents.
- The SHR’s management of allocated and unallocated proceeds is in line with market practice.
Reporting:- SHR has committed to provide annual allocation and impact reporting on its website, as of theend of March, as long as the green bonds are outstanding. Additionally, SHR may also receive
assertions by SHAM's president and representative director that the net proceeds have been
allocated to Eligible Green Projects. Sustainalytics considers this in line with market bestpractice.
- The allocation reporting will include the total acquisition amount of Eligible Green Projects aswell as the amount of outstanding green bonds.
- The impact reporting will include the environmental performance indicators, including thenumber of the buildings of Eligible Green Projects, levels of acquired certifications, as well as
the total floor area, electricity and water consumption and CO2 emissions.

Alignment with Green Bond Principles 2018
Sustainalytics has determined that the SHR Green Bond Framework aligns to the four core components of theGreen Bond Principles 2018. For detailed information please refer to Appendix 2: Green Bond/Green Bond
Programme External Review Form.
Alignment with Japan’s Green Bond Guidelines 20176

Framework Overview and Second-Party Opinion

Sekisui House Reit Green Bond

Sustainalytics has also assessed and determined the alignment between the SHR Green Bond Framework andJapan’s Green Bond Guidelines, which communicate processes and recommendations for credible green
bond issuance.

ICMA Green Bond Principles 2018
and Japan’s Green Bond
Guidelines, 20173

Alignment with GBP
and with Japan’sGreen Bond
Guidelines

1. Use of Proceeds

Yes

SHR’s eligibility criterion, green buildings, isclearly recognized as green project with clear
environmental benefits in the Japanese Green
Bond Guidelines. Additionally, the informationon the green bond proceeds, green project
category as well as the process to mitigate
negative impacts are all described in theframework for investors.

2. Process for Project Evaluationand Selection

Yes

SHR, through its Sustainability Policy andunderlying objectives, clearly targets the
reduction of greenhouse gas (GHG) emissions
by supporting the development of low-carbon(green) buildings. Furthermore, SHR ensuresthat projects are evaluated and selected by the
Sustainability Committee, chaired by thepresident and representative director withparticipation from SHAM’s full-time directors.
The Eligible Green Projects will be selectedbased on the Eligibility Criteria that is alignedwith the above mentioned DBJ Green Building
Certification and CASBEE certification andSustainability Policy.

3. Management of Proceeds

Yes

SHR commits that net proceeds from the green
bonds will be fully allocated to the Eligible
Green Projects or to the refinancing of existing
loan/investment corporation bonds, whichhave previously been allocated to the Eligible
Green Projects. Additionally, it explains that theamount of unallocated proceeds will betemporally invested in cash and/or cash
equivalents.

4. ReportingYes

SHR to report on allocation of proceeds on its
website on an annual basis. The allocation
reporting will include the total acquisition priceof Eligible Green Projects, the total amount of
theoutstanding
green
bonds,
andmanagement assertions with regards to theallocation of green bond proceeds, as well as
the and impact reporting will include relevant
metrics, such as the total floor area, electricity
and water consumption and CO2 emissions.

Sustainalytics’ comments on alignment withJapan’s Green Bond Guidelines

3 Green Bond Guidelines, 2017, Summary, Ministry of the Environment, Japan: https://www.env.go.jp/en/policy/economy/gb/summary2017.pdf

7Framework Overview and Second-Party Opinion

Sekisui House Reit Green Bond

Section 2: Sustainability Performance of the Issuer
Contribution of Framework to SHR’s sustainability strategy
Sustainalytics believes that SHR’s Sustainability Policy and the underlying Sekisui House’s “Sustainable
Vision”, its transparent governance structure, as well as its environmental and social initiatives, strengthen
SHR’s position to issue green bonds which will help the company to advance its sustainability strategy. Thisview is based on the following:
•

•

•
•

•

SHR and SHAM aim to consider environmental, social, and governance (ESG) issues in real estate
investment management in accordance with “Sustainable Vision” advocated by Sekisui House andunderlying objectives of (a) the “provision of sustainable living basis for residents” and (b) the “provisionof sustainable basis of operation of tenant companies”.4
SHAM has created a Sustainability Committee overseen by the president and representative director to
set targets, verify compliance, assess the effects of measures taken, as well as devise an action plan ona regular basis. Sustainability Policy established by SHR and SHAM is committed to the following
objectives: (i) complying with ESG-related laws, regulations and rules; (ii) taking initiatives for low-carbon
society and promoting energy-efficiency; (iii) promoting water and resource conservation; (iv) promotingof biodiversity; (v) ensuring comfort and safety; (vi) cooperating with the community; (vii) engaging withthe relevant stakeholders; (viii) promoting ESG through supply-chain; and (ix) regularly monitoring anddisclosing relevant ESG information as well as pursuing certifications and recognition.4
In 2018, SHR participated in the Global Real Estate Sustainability Benchmark (“GRESB”) Assessment andqualified as “Green Star” with a Rating 4 (out of 5)5 having an absolute performance which represented
an integrated approach to measure and manage environmental key performance indicators6.
SHR provides several quantitative and qualitative environmental measures for its properties, including
the forecasted approx. 647 tCO2 annual reduction in Greenhouse gas (GHG) emissions through light
replacement with LED lightings and approx. 88 tCO2 annual reduction in GHG emissions throughreplacement with energy-efficient air conditioning in residential properties. Since 2016, SHR’s commercial
properties have also participated in Japan’s Ministry of Environment’s annual Lights-Down Campaign totake countermeasures against global warming. There are also several rooftop and wall garden
installments to promote Sekisui House’s biodiversity measures based on “Gohon no ki” (Five Trees)
Planning for living in harmony with nature.7
SHR has also introduced social initiatives in case of emergencies. Some examples include disasterprevention facilities such as emergency power generation equipment, comprised of solar batteries,
storage batteries, and emergency generators.8

Overall, Sustainalytics is of the opinion that SHR’s efforts to integrate sustainability within its sustainability
policies and operations is indicative of the priority that SHR assigns to achieving positive sustainability impact.
Well positioned to address common environmental and social risks associated with the projects
The potential environmental and social risks associated with green buildings include energy use, water use,
CO2 emissions, and human health concerns. SHR’s Sustainability Committee selects Eligible Green Projects
based on the classifications of credible third-party certifications. In addition, it has a Plan-Do-Check-Act(PDCA) cycle in place to identify and mitigate such risks by understanding the current performance, reportingand evaluating its progress, as well as planning future improvement plans. Overall, Sustainalytics believes that
SHR is well positioned to mitigate risks related to the projects financed by the green bond proceeds.

ESG Policy, Sekisui House Reit, Inc.: http://sekisuihouse-reit.co.jp/en/esg/index.html
Examples of Environmental Certification, etc. Acquired, Sekisui House Reit, Inc.: http://sekisuihouse-reit.co.jp/en/esg/external_case.html
6 2018 GRESB Real Estate Results, GRESB: https://gresb.com/2018-real-estate-results/
7 Environmental Measures, Sekisui House Reit, Inc.: http://sekisuihouse-reit.co.jp/en/esg/environment.html
8 Social Responsibility, Sekisui House Reit, Inc.: http://sekisuihouse-reit.co.jp/en/esg/society.html
458

Framework Overview and Second-Party Opinion

Sekisui House Reit Green Bond

Section 3: Impact of Use of Proceeds
Importance of green buildings towards achieving energy efficiency targets in Japan
In 2017, Japan’s Ministry of Environment set “Sustainable and Resilient Land Use & Promoting Quality
Infrastructure” as one of the Priority Areas that aligns with SDGs.9 In 2016, Japan’s building sector contributed
to approximately 28.5% of the total energy consumption in the country,10 and Japan’s Central Environment
Council estimated that an additional JPY 135 to JPY 163 trillion is necessary to promote low-carbon
investments such as energy efficient buildings. 11 Furthermore, Japan has committed to post-2020 GHG
emission reductions of ~26% by 2030 below the 2013 level as a part of their Intended Nationally Determined
Contributions (INDC) with an aim to increase energy efficiency at 35% by 2030.12
At the COP21 conference, in 2015, Sekisui House was one of the 70 global organizations that joined the Global
Alliance for Buildings and Construction (GABC) in order to scale up climate action in the sector. According to
its 2017 Annual Report, Sekisui House is aiming to reduce CO2 emissions by approximately 40% by 2030 below
the 2013 level,13 which Sustainalytics highlights is above national INDC commitments. Sustainalytics believes
that SHR’s green bonds will play a key role in financing green buildings and creating positive environmental
impact while supporting the country in meeting its own climate targets, including increasing energy efficiency
and reducing the GHG emissions.

Alignment with/contribution to SDGs
SDGs were set in September 2015 and form an agenda for achieving sustainable development by the year
2030. Green buildings are essential to advancing the SDGs and achieving transformational changes throughthe SDGs.14 SHR’s green bond advances the following SDG goal and target:
Use of Proceeds Category

SDG

SDG target

Green Buildings

11. Sustainable Cities andCommunities

11.6 By 2030, reduce the adverse per capita
environmental impact of cities, including by
paying special attention to air quality andmunicipal and other waste management.

Energy Efficiency

7. Affordable and Clean
Energy11.B By 2020, substantially increase the numberof cities and human settlements adopting andimplementing integrated policies and plans
towards inclusion, resource efficiency, mitigation
and adaptation to climate change, resilience todisasters.
7.3 By 2030, double the global rate of
improvement in energy efficiency.

Conclusion
SHR, through its green bond issuance, intends to acquire new and/or existing green buildings and to refinancethe existing loan/investment corporation bonds that have already been allocated to green buildings. By setting
the eligibility threshold to the top levels of credible third-party certifications (DBJ Green Building Certification
and CASBEE), SHR ensures a robust framework for creating a positive environmental impact. Additionally,

Annual Report on the Environment in Japan, Ministry of the Environment of Japan: https://www.env.go.jp/en/wpaper/2017/pdf/2017_all.pdf
Economic and Energy Outlook of Japan through FY2018, The Institute of Energy Economics, Japan: https://eneken.ieej.or.jp/data/7549.pdf
11 Summary of Environmental Finance Programs, Ministry of the Environment of Japan:
https://www.env.go.jp/en/policy/economy/efp/summary_EFP.pdf
12 Intended Nationally Determined Contributions (INDC): Greenhouse Gas Emission Reduction Target in FY2030, Ministry of Foreign Affairs of Japan:
https://www.mofa.go.jp/ic/ch/page1we_000104.html
13 Sekisui House Sustainability Report 2017:https://www.sekisuihouse.co.jp/english/sr/datail/__icsFiles/afieldfile/2017/09/08/all-A3.pdf
14 The United Nations Sustainable Development Goals: https://www.unglobalcompact.org/sdgs/17-global-goals
9

10

9

Framework Overview and Second-Party Opinion

Sekisui House Reit Green Bond

Sustainalytics believes that SHR can effectively identify and manage the potential environmental and social
risks commonly associated with its green building projects.
SHR has also established a Sustainability Policy to promote its ESG-related initiatives in real-estate investment
management. In this regard, Sustainalytics highlights that the Eligible Green Projects are aligned with Sekisui
House’s overall sustainability strategy. Furthermore, green buildings will promote energy efficiency in the built
environment and GHG emission mitigation, in line with Japan’s climate-related policies and strategies, andthus, will contribute to the advancement of SDG 7 and 11.
Based on the above, Sustainalytics considers that SHR is well positioned to issue green bonds and that the
SHR Green Bond Framework is credible, robust and aligns with the core components of the GBP as well asJapan’s Green Bond Guidelines 2017.

10

Framework Overview and Second-Party Opinion

Sekisui House Reit Green Bond

Appendices
Appendix 1: Overview of Real Estate Certification Schemes

Background

Certification levels

Areas of
Assessment:
Environmental
Project
Management
Areas of
Assessment:
Environmental
Performance of
the Building

Requirements

DBJ Green Building Certification15

CASBEE16

DBJ Green Building Certification
Programme was launched by
Development Bank of Japan in 2011
and is operated together with Japan
Real Estate Institute (JREI). The
programme is recognized as one of
the leading regional standards. The
certification is available for officebuildings, logistics, residential & retailfacilities.
1 Star
2 Stars
3 Stars
4 Stars
5 Stars
Evaluation of DBJ Green Building
Certification includes construction
specifications, environmental
features as well as social factors.

CASBEE (Comprehensive Assessment
System for Built Environment
Efficiency) represents a green building
management system from Japan,
evaluating and rating the environmental
performance of buildings and the built
environment. CASBEE is formed of four
assessment tools tailored to different
scales: housing, building, district andcity.
C (Poor)B- (Slightly Poor)
B+ (Good)A (Very Good)S (Excellent)
CASBEE assesses two main factors:
inside and outside the building site,which translate into Q (Built
Environment Quality) and, respectively,
L (Built Environment Load).
• Energy Efficiency• Resource efficiency• Local environment• Indoor environment

Assessment includes three areas.
Each area includes additional
subcategories:• Ecology• Risk management &amenities/diversity• Community & partnership
Score-based performance level
There are three main areas comprisedof additional subcategories a fullscore of 100 points.
In addition to the regular points, anadditional point system is employed.
In the final process, JREI will conduct
on the ground review of building
performance on the indicators above,
and a committee set in JREI will
decide the result of certification rank.

Score-based performance level
CASBEE uses the BEE (Built
Environment Efficiency) as its
assessment indicator, which is
calculated from Q (Built Environment
Quality) as the numerator and L (Built
Environment Load) as the denominator.
Q and L are obtained through theclassification and rearrangement of thefour areas of assessment. Buildings
may receive ranks ranging from C(poor) to S (excellent), in order ofincreasing BEE value.

17

For authorization, a building mustreceive a report from the CASBEE
Certification system, which is

15 Certification Overview, Development Bank of Japan: http://www.dbj.jp/en/service/finance/g_building/outline.html
16 CASBEE, BASBEE: http://www.ibec.or.jp/CASBEE/english/
17

Process of certification (Japanese), DBJ Green Buildings: http://igb.jp/flow.html
11

Framework Overview and Second-Party Opinion

Sekisui House Reit Green Bond

afterwards assessed by the local
government.

Performance
display
18
19

Accreditation

JREI ‘s Certification Assessment
Committee

CASBEE Accredited Professional

Qualitative
considerations

In addition to LEED and CASBEE, DBJ
Green Buildings Certification
Programme is considered as one of
the green building standards inJapan.20 According to its website, asof Feb 2018, 499 properties in Japanare certifed by the programme.

In Japan, many local governments havemade CASBEE assessment resultsmandatory for building permits.
Compared to similar tools available
internationally, CASBEE displays aunique and simple structure.

18 DBJ Green Building, Development Bank of Japan: http://www.dbj.jp/en/pdf/service/finance/g_building/gb_presentation.pdf
19 Built Environment Efficiency, CASBEE: http://www.ibec.or.jp/CASBEE/english/beeE.htm
20 Japan sharpens its green building focus, Read Views: https://www.jllrealviews.com/places/japan-sharpens-its-green-building-focus/

12Framework Overview and Second-Party Opinion

Sekisui House Reit Green Bond

Appendix 2: Green Bond / Green Bond Programme - External Review Form
Section 1. Basic Information
Issuer name:Green Bond ISIN or Issuer Green Bond Framework
Name, if applicable: [specify as appropriate]
Review provider’s name:Completion date of this form:

Sekisui House Reit, Inc.
Sekisui House Reit, Inc. Green Bond Framework

Sustainalytics
November 29, 2018

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.

13

Framework Overview and Second-Party Opinion

Sekisui House Reit Green Bond

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.
1. USE OF PROCEEDS
Overall comment on section (if applicable):
The eligible categories for the use of proceeds, green buildings, is recognized by the Green Bond Principles 2018. SHR will
use the DBJ Green Building Certification or the CASBEE Certification Rank to determine the eligibility of green buildings.
Sustainalytics considers that the Eligible Green Projects will lead to positive environmental impacts and advance SDGs,
specifically SDG 7 and 11.

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):
Sustainability Committee will oversee SHR’s internal process in evaluating and selecting projects. The Committee will bechaired by the president and representative director and will consist of full-time directors from SHAM. This is in line withmarket best 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):

14

Framework Overview and Second-Party Opinion

Sekisui House Reit Green Bond

Information on Responsibilities and Accountability☒

Evaluation / Selection criteria subject toexternal advice or verification☐

Other (please specify):☒

In-house assessment

3. MANAGEMENT OF PROCEEDS
Overall comment on section (if applicable):
SHR has an internal process in place to track and monitor the amount of allocation of proceeds as well as outstanding
green bonds. The unallocated proceeds will be held in cash or cash equivalents. This is in line with market 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):
SHR commits to report on allocation of proceeds on its website on an annual basis. The allocation reporting will
include the total acquisition price of Eligible Green Projects, the total amount of the outstanding green bonds, andmanagement assertions with regards to the allocation of green bond proceeds. Sustainalytics considers this in linewith the market best practice. The impact reporting will include relevant metrics. Sustainalytics views SHR’s impact
reporting to be in line with market practice.

Use of proceeds reporting:☒

Project-by-project☒

On a project portfolio basis

15

Framework Overview and Second-Party Opinion

Sekisui House Reit Green Bond☒

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

Information reported:☒

Allocated amounts☒

Other (please specify): total☒

Green Bond financed share of total
investment☐

Semi-annual

amount of outstanding green
bondsFrequency:☒

Annual☐Other (please specify):

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): number of buildings,
levels of certifications
achieved, total amount offloor area, electricity
consumption, and water
consumption

Means of Disclosure☐☐☐

Information published in financial report☐

Information published in sustainability
reportInformation published in ad hoc☒ Other (please specify): Corporate
documents
websiteReporting reviewed (if yes, please specify which parts of the reporting are subject toexternal review):

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 issuer’s documentation, etc.)

16

Framework Overview and Second-Party Opinion

Sekisui House Reit Green Bond

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

Consultancy (incl. 2nd opinion)☐

Certification☐

Verification / Audit☐

Rating☐Other (please specify):

Review provider(s):Date of publication:

ABOUT ROLE(S) OF REVIEW PROVIDERS AS DEFINED BY THE GBP
i.

Consultant Review: An issuer can seek advice from consultants and/or institutions with recognizedexpertise in environmental sustainability or other aspects of the issuance of a Green Bond, such as theestablishment/review of an issuer’s Green Bond framework. “Second Party Opinions” may fall into thiscategory.

ii.

Verification: An issuer can have its Green Bond, associated Green Bond framework, or underlying assets
independently verified by qualified parties, such as auditors. In contrast to certification, verification may
focus on alignment with internal standards or claims made by the issuer. Evaluation of the environmentally
sustainable features of underlying assets may be termed verification and may reference external criteria.

iii.

Certification: An issuer can have its Green Bond or associated Green Bond framework or Use of Proceeds
certified against an external green assessment standard. An assessment standard defines criteria, andalignment with such criteria is tested by qualified third parties / certifiers.

iv.

Rating: An issuer can have its Green Bond or associated Green Bond framework rated by qualified third
parties, such as specialised research providers or rating agencies. Green Bond ratings are separate from anissuer’s ESG rating as they typically apply to individual securities or Green Bond frameworks / programmes.

17

Framework Overview and Second-Party Opinion

Sekisui House Reit Green Bond

Disclaimer© Sustainalytics 2018. All rights reserved.
The intellectual property rights to this Second-Party Opinion (the “Opinion”) are vested exclusively in
Sustainalytics. Unless otherwise expressly agreed in writing by Sustainalytics, no part of this Opinion may be
reproduced, disseminated, comingled, used to create derivative works, furnished in any manner, madeavailable 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 or recordings, nor publicly released without
the “Green Bond Framework” in conjunction with which this Opinion has been developed.
The Opinion was drawn up with the aim to provide objective information on why the analyzed bond isconsidered sustainable and responsible, and is intended for investors in general, and not for a specific investor
in particular. Consequently, this Opinion is for information purposes only and Sustainalytics will not accept
any form of liability for the substance of the opinion and/or any liability for damage arising from the use ofthis Opinion and/or the information provided in it.
As the Opinion is based on information made available by the client, the information is provided “as is” and,
therefore Sustainalytics does not warrant that the information presented in this Opinion is complete, accurate
or up to date, nor assumes any responsibility for errors or omissions. Any reference to third party names isfor appropriate acknowledgement of their ownership and does not constitute a sponsorship or endorsement
by such owner.
Nothing contained in this Opinion shall be construed as to make a representation or warranty, express or
implied, regarding the advisability to invest in or include companies in investable universes and/or portfolios.
Furthermore, nothing contained in this Opinion shall be construed as an investment advice (as defined in theapplicable jurisdiction), nor be interpreted and construed as an assessment of the economic performance andcredit worthiness of the bond, nor to have focused on the effective allocation of the funds’ use of proceeds.
The client is fully responsible for certifying and ensuring its commitments’ compliance, implementation andmonitoring.
In case of discrepancies between the English language and translated versions, the English language version
shall prevail.

18

Framework Overview and Second-Party Opinion

Sekisui House Reit Green Bond

Sustainalytics
Sustainalytics is a leading independent ESG and corporate governance research, ratings and analytics firmthat support investors around the world with the development and implementation of responsible investment
strategies. With 13 offices globally, the firm partners with institutional investors who integrate ESG
information and assessments into their investment processes. Spanning 30 countries, the world’s leading
issuers, from multinational corporations to financial institutions to governments, turn to Sustainalytics forsecond-party opinions on green and sustainable bond frameworks. Sustainalytics has been certified by the
Climate Bonds Standard Board as a verifier organization, and supports various stakeholders in thedevelopment and verification of their frameworks. Global Capital named Sustainalytics the “Most Impressive
Second Party Opinion Provider in 2017. In 2018, the firm was recognized as the “Largest External Reviewer”
by the Climate Bonds Initiative as well as Environmental Finance. In addition, Sustainalytics received a Special
Mention Sustainable Finance Award in 2018 from The Research Institute for Environmental Finance Japan for
its contribution to the growth of the Japanese Green Bond Market.
For more information, visit www.sustainalytics.com
Or contact us info@sustainalytics.com

19