PRINCIPAL ADVERSE IMPACT STATEMENT
The following is the adverse sustainability impact statement of Japan Hotel REIT Investment Corporation(“JHR”) pursuant to Regulation (EU) 2019/2088 (“SFDR”). We have no employees in accordance with theprohibition on having employees under the Act on Investment Trusts and Investment Corporations of Japan, andrely on Japan Hotel REIT Advisors (the “Asset Manager”) to manage and operate the properties in our portfolio.
JHR and the Asset Manager are hereinafter referred to collectively as “we”, “us” or “our”.
1. Summary
We consider principal adverse impacts of our investment decisions on sustainability factors. The presentstatement is our consolidated statement of the principal adverse impacts on sustainability factors (“PAI”). The
statement covers the reference period from January 1, 2021 to December 31, 2021. The statement will bereviewed at least once during every six months.
We and the Asset Manager are making efforts to enhance the sustainability of our business through considerationof ESG (Environment, Social & Governance) issues, on the belief that sound management, which enables us toco-exist in harmony with society and our environment, will improve unitholder value over the medium to longterm. The Asset Manager established a Sustainability Policy in December 2017 and is pursuing a series of ESG
measures, including reduction of our environmental impact in consideration of all of our stakeholders. InDecember 2021, in order to further enhance our ESG initiatives, we identified the issues that we consider to be
most material and are promoting measures to address those issues.
We use the definition of PAI as described in Recital 20 of SFDR being “those impacts of investment decisionsand advice that result in negative effects on sustainability factors,” with sustainability factors referring toenvironmental, social and employee matters, respect for human rights, anti‐corruption and anti‐bribery matters
as defined in article 2 (24) of SFDR.
We believe that investment decisions that negatively affect climate or other environment-related resources, orhave negative implications for society, can have a significant impact to risk and value creation for our unitholders.
To this end, we consider PAI of our investment decisions throughout all major steps of the investment decisionand property management process throughout the lifecycle of the properties in our portfolio.
Please note that SFDR requirements, including the scope of their application to issuers outside the European
Economic Area, continue to evolve. We are therefore taking a principles-based approach to compliance with theSFDR disclosure standards, which are subject to change.
2. Description of principal adverse sustainability impacts
Nearly all types of economic activity have the potential to impact various PAI indicators, both positively andadversely. We aim to manage the risk connected to PAI from our investment decisions in several ways, including
general screening criteria, due diligence and our ESG initiatives. Some of the PAI indicators listed below are
currently already being monitored and reported. As the availability of data improves, it is our intention that moreindicators will be added.

Table 1
Principal adverse sustainability impacts statement
Indicators applicable to investments in real estate assets

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Adverse
sustainability
indicator

MetricImpact in2021

Impact in2020

Explanation

Actions taken

Fossilfuels

17.
Exposure
to fossil
fuels
through
real estate
assetsShare ofinvestments inreal estate
assets involvedin theextraction,
storage,transport ormanufacture offossil fuels

N/A

N/A

We do notinvest in realestate assets
involved in theextraction,
storage,transport ormanufacture offossil fuels.

N/A

Energyefficiency

18.
Exposure
to energyinefficient
real estate
assetsShare ofinvestments inenergyinefficient realestate assets

As ofDecember 31,
2021, 82.8%
of ourproperties
were not“EligibleGreenProjects” (asdefined to theright) basedon gross floorarea.

As ofDecember 31,2020, 85.3%
of ourproperties
were not“EligibleGreenProjects” (asdefined to theright) basedon gross floorarea.

To track theenvironmental
performance ofour properties,
we rely oncertifications
issued by thirdparty
organizations,such as theComprehensive
Assessment
System for
Built
Environment
Efficiency(“CASBEE”)
for Buildings
and BuildingHousing
Energyefficiency
Labeling
System(“BELS”)
Evaluation, andother equivalentcertifications.
We call our
property thatreceives any
suchcertifications a“GreenCertifiedAsset”. With
respect toCASBEE, weconsider aWe implement
as appropriate
measures toreduce theenvironmental
impact of ourproperties
followingacquisition,including by
obtaining
environmental
certifications
such asCASBEE orBELS.

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property to havesufficientenvironmental
certification if it
received B+
Rank or higher
out of theCASBEE
ranking system
featuring Rank
S (excellent),Rank A (verygood), Rank B+(good), Rank B(slightlyinferior) and
Rank C(inferior). With
respect to BELS
certifications,
we consider aproperty to havesufficientenvironmental
certification if it
received 2 starsor higher out of
BELS’ five-starranking system.

Table 2
Additional climate and other environment-related indicators
Adversesustainability
impactAdverse sustainability impact (qualitative or quantitative)

MetricIndicators applicable to investments in real estate assets

Climate change

18. GHG emissions
Total GHG emissions generated by properties leased to HMJ Group
hotels were 47,633 t-CO2 (in 2018), 51,547 t-CO2 (in 2019) and
36,185 t-CO2 (in 2020).

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Scope 1 GHG
emissions generatedby real estate assets
Scope 2 GHG
emissions generatedby real estate assets

We aim to reduce GHG emissions annually by 1% or more on averagefor our entire portfolio as well as for our individual properties in 5years from fiscal year 2018.
Note 1: The above amounts are calculated over the period from April
1, 2018 to March 31, 2021.
Note 2: The properties leased to HMJ Group hotels were 16properties, equal to 60.5% of our portfolio based on gross floor area,
as of December 31, 2021.

From 1 January 2023,
Scope 3 GHG
emissions generated
by real estate assets
Total GHG emissions
generated by realestate assets

Table 3
Additional indicators for social and employee, respect for human rights, anti-corruption and antibribery matters
SOCIAL AND EMPLOYEE, RESPECT FOR HUMAN RIGHTS, ANTI-CORRUPTION AND ANTIBRIBERY MATTERS
Adversesustainability
impactAdverse sustainability impact (qualitative or quantitative)

MetricIndicators applicable to investments to the Asset Manager or tenantsSocial andemployeematters

5. Lack of grievance/complaints handling mechanism related toemployee matters
The Asset Manager has established whistleblower rules and awhistleblowing hotline that allows its officers and employees(including contract and temporary employees) to report orconsult about potential harassment, fraud or other inappropriate
acts. In accordance with the Whistleblower Protection Act ofJapan, the rules protect whistleblowers by prohibiting
mistreatment upon whistleblowing, allowing anonymous reports
and keeping whistleblowers’ reports confidential, and stipulate
procedures to find and correct reported acts, including
investigation methods and disciplinary actions for those who arefound to have engaged in inappropriate behavior. In addition to
an in-house contact, a whistleblower may consult an outside
attorney who has no business relationship with the AssetManager.

Anti-corruption
and anti-bribery

15. Lack of anti-corruption and anti-bribery policies
The Asset Manager stipulates in its Code of Compliance andCompliance Manual that all of its officers and employees areprohibited from providing favors or benefits to civil servants ofJapan or other countries or persons deemed as such, inaccordance with Japanese and international laws. Furthermore,
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Share of investments ininvestee companies
without any
grievance/complaints
handling mechanism
related to employee
matters
All of the AssetManager’s officers andemployees are provided
whistleblower protection

Share of investments inentities without policies
on anti-corruption andanti- bribery consistent
with the United Nations
Convention against
Corruption

scope of courtesy that would be ordinary course based on sociallyaccepted conventions is prohibited whether any business-relatedtransaction takes place as a result.
Based on internal audits and other reviews that it has conductedto date, the Asset Manager has not found any favors or gifts that
contravene relevant laws. Moreover, there have been noviolations of corruption-related laws or administrative sanctions.
17. Number of convictions and amount of fines for violation ofanti-corruption and anti-bribery laws
Please see the item 15 above for the Asset Manager.
For tenants of our hotel properties, we conduct due diligence
review when entering into lease agreements and reject thosefound to have been fined for violations of anti-corruption andanti-bribery laws.

The Asset Manager has
compliance policies
addressing anticorruption and antibribery that apply to allof its officers andemployees.
Numbers of convictions
and amount of fines forviolations of anticorruption and antibribery laws by investee
companies
None of the tenants ofour hotel properties have,to the best of ourknowledge, been
convicted of or fined forviolations of anticorruption and antibribery laws.

For descriptions of actions which JHR takes and will take with respect to the PAI indicators, please refer to ourESG website: https://www.jhrth.co.jp/en/esg/index.html.
3. Description of policies to identify and prioritize principal adverse sustainability impacts
Subject to data availability, we monitor the selected PAI indicators for the existing properties in our portfolio.
Prior to our investment in a property, we conduct due diligence review of the property, including ESG due
diligence, which includes selected PAI indicators. The due diligence findings related to selected PAI indicators
are reported and reviewed prior to the investment decision.
The Asset Manager tracks and monitors the property-level environmental performance indicators of ourproperties leased to HMJ Group (60.5% of our portfolio based on gross floor area) including the Green-certified
Assets, to assess the environmental performance of our portfolio. The Asset Manager’s ESG Promotion
Committee, which generally meets at least once every quarter, uses the data to assess progress made against
targets, and deliberates on necessary action plans in order to implement initiatives continuously andsystematically based on our Sustainability Policy. The ESG Promotion Committee consists of the AssetManager’s management and officers and employees chosen from various groups involved in promoting ESG,
with the President & CEO acting as the chair and the Director & Head of Finance and Planning acting as theoperating officer.
For further information, please refer to our ESG website: https://www.jhrth.co.jp/en/esg/index.html.

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4. Engagement policies
Due diligence and screening
Prior to our investment in a property, the Asset Manager conducts due diligence review of the property, including
the assessment of compliance with applicable environmental laws and ordinances, environmental performanceand environmental and disaster risks, as well as investigation into hazardous substances and soil contamination.
We do not consider investing in properties that do not meet the standards for soil contamination and otherenvironmental contamination in accordance with the Air Pollution Control Act and the Soil Contamination
Countermeasures Act of Japan and other environmental laws and ordinances. However, from time to time we
acquire properties not meeting the standards as long as they are deemed fixable promptly after acquisition.
Engagement
We implement, in collaboration with tenants and property managers, various environmental measures, includingenergy conservation at some of our properties. We have included in our leases with HMJ Group hotels Green
Lease provisions that require our tenants to collect energy consumption data and provide them to us (16properties, equal to 60.5% of our portfolio based on gross floor area, as of December 31, 2021). We analyze thedata provided by our tenants and consider renovation options to improve environmental performance andoptimize facilities management.
Hotel Nikko Alivila participates in Churaumi clean-up activities every year in Yomitan, hosted by YomitanVillage in Okinawa. Nirai Beach is located in front of Hotel Nikko Alivila, which is famous for having one of
the most beautiful ocean waterfronts on Okinawa’s main island. The hotel staff cleans the beach every morningand conducts beach preservation activities, and as a result, visitors are able to observe sea turtles laying eggs andeggs hatching on the beach. Hotel Nikko Alivila is a member of the Sea Turtle Association of Japan.
5. References to international standards
The Task Force on Climate-related Financial Disclosures (“TCFD”) was established by the Financial Stability
Board (FSB) to develop recommendations for more effective climate-related disclosures. In November 2021,
the Asset Manager expressed support for the TCFD recommendations, which are designed to help companies
provide better information to support informed capital allocation, and joined the TCFD Consortium, anorganization comprised of Japanese companies that support the recommendations and discuss initiatives aimed
at effective information disclosure by companies and linking of disclosed information to appropriate investment
decisions by financial institutions.

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